August 28th Market Overview

Happy Friday

Quiet close on the screens, but today had a lot of macro stuff going on. Warsh finally said something at Jackson Hole, and the read was that a September rate hike is back on the table. Stocks barely blinked while the two year Treasury moved a lot. When the bond market and the stock market disagree that plainly, I usually side with bonds.

Chips gave back some of yesterday's Nvidia run, and wheat and corn are at three year highs on the Black Sea fighting.

Let’s dig in...

Today's Big Picture

1. Warsh Puts A September Increase In Play

Warsh said this summer's better inflation numbers don't convince him prices are really cooling. He added that borrowing still looks too easy, which is how a Fed chairman says rates aren't high enough yet. Traders moved fast, taking the odds of a September hike from about one in three on Thursday to better than a coin flip by midday. He didn't promise anything, and he doesn't plan to.

2. Marvell Shows How High The AI Bar Is

Marvell Technology $MRVL beat on sales and profit and lifted its 2028 revenue outlook to about $18 billion from $16.5 billion. The stock fell anyway. Its margin forecast landed right where analysts already had it, and the company said almost nothing about the Google deal worth up to $12.2 billion. Bank of America, UBS and Citi kept their buy ratings, but beating estimates isn't enough for an AI name right now.

3. Black Sea Attacks Push Grain To Multiyear Highs

Wheat at $7.72 a bushel and corn at $5.41 are the highest they've been since the summer of 2023. Soybeans at $12.79 are the highest since January 2024. Fighting in the Black Sea has stopped almost all shipping out of the ports that handle most of Russia's grain, and a bad US summer hurt the corn crop here. Wheat has gone up by half this year, and food costs take months to show up in the inflation numbers Warsh is watching.

Market Overview

Index Performance

Stock spotlight

PayPal $PYPL ( ▼ 12.7% )  
fell after Bloomberg reported that Stripe and private equity firm Advent walked away from a takeover that valued the company near $53 billion. Most of the gain built since the approach leaked is gone, and the turnaround is PayPal's to run alone now.

Gap $GAP ( ▲ 13.28% )  
hired Michael Francis to run Old Navy starting November 2, replacing Haio Barbeito. Second quarter adjusted earnings came in at 52 cents against the 48 cents Wall Street wanted.

Workday $WDAY ( ▲ 5.71% )  
earned an adjusted $2.75 a share on $2.65 billion in revenue, ahead on both lines.

Big name updates

Nvidia $NVDA ( ▼ 4.72% )  
gave back part of Thursday's post earnings run as chip names dragged on the Nasdaq.

Salesforce $CRM ( ▲ 3.12% )  
added a second day to its rally, helped by a $2.6 billion gain on strategic investments that include its stake in Anthropic.

Apple $AAPL ( ▲ 1.71% )  
hands over the CEO job Monday. Tim Cook's fifteen years took the company from roughly $350 billion in market value to more than $4 trillion.

Other notable company news

Affirm $AFRM ( ▲ 3.05% )  
posted $1.17 billion in quarterly revenue against the $1.11 billion expected, with next quarter guided higher too.

Autodesk $ADSK ( ▼ 3.91% )  
guided both the current quarter and the full year below estimates.

L3Harris $LHX ( ▲ 0.65% )  
is still without a permanent CEO after Christopher Kubasik's abrupt exit, and the stock has lagged its defense peers all year.

Blue Chips
MarketBeat names and lists “7 Blue-Chip Stocks to Add To Your Forever Portfolio”

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Sector Watch

Bond market

The two year Treasury yield rose about eleven basis points on the day while the 30 year slipped. Short end up, long end down. That combination says the market expects the Fed to move sooner and worries less about inflation years out than it did a week ago, which is roughly the outcome Warsh was going for. Watch whether the two year holds this level into next week.

Policy watch

Fed

Warsh wants a quieter central bank. He said you can call his approach an outline or a trail map, just not forward guidance. In practice that means less hand holding from the podium and more weight on the data itself, and his colleagues now have cover to back a hike if the numbers hold up.

• The 2 percent inflation target is firm and fixed.

• Short term rates are the main tool, and unconventional policy is for crises.

• The Fed's AI task force is encouraging to him but has no bearing on current decisions.

• Trump still wants rates lower and has revived his effort to remove Governor Lisa Cook.

Fiscal and trade

Trump said he is authorizing legal documents that would let farmers and ranchers process their own food, calling the four big meatpackers a monopoly. Tyson Foods $TSN and JBS both traded lower on it. Canada separately unveiled retaliatory tariffs covering about $20 billion of American goods.

International

• Japan spent a record $98.7 billion supporting the yen between July 30 and August 26, including a rare joint operation with the US Treasury.

• The yen hit a 40 year low near 164 to the dollar in late July and has clawed back to the mid 150s.

What to Watch

The AI Infrastructure's Backbone
10 Stocks Powering the AI Buildout

The September Meeting

Warsh gave no path, so every inflation print between now and mid September carries more weight than usual. Boston Fed president Susan Collins has already said an increase is warranted if the data disappoints. Watch how many colleagues line up behind him.

Iran And Crude

Brent sits near $88 after the White House said there are no talks underway with Iran. A credible path to a deal pulls prices down, and any incident near the Strait of Hormuz does the opposite.

Thanks for reading - you are now the more informed 🙂

- John

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