S&P 500 Posts a Record High on Nvidia Earnings Optimism

The S&P 500 Index ($SPX) (SPY) on Wednesday closed up by +0.24%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up by +0.32%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +0.17%.  September E-mini S&P futures (ESU25) rose +0.20%, and September E-mini Nasdaq futures (NQU25) rose +0.13%. 

Stock indexes recovered from early losses on Wednesday and settled higher, with the S&P 500 posting a new record high and the Nasdaq 100 reaching a one-week high.  Strength in software stocks led the overall market higher as MongoDB surged more than +37% after reporting better-than-expected Q2 adjusted EPS and raising its 2026 adjusted EPS forecast.  

Also, optimism that Nvidia will report stellar earnings results after Wednesday's close boosted stocks.  Over the last five years, Nvidia has only missed on earnings in one quarter.  With a $4.4 trillion market capitalization, Nvidia has an 8.1% weighting in the S&P 500, giving it significant power to impact the index. 

Stocks extended their gains Wednesday afternoon after bond yields gave up an early advance and turned lower on expectations that the Fed would cut interest rates as soon as next month.  The 10-year T-note yield fell -2 bp to 4.24%. 

Comments today from New York Fed President Williams were neutral to slightly dovish, as he stated that the US economy is slowing, not stalling, and he remains optimistic about the economy's direction.  He added that every FOMC meeting is "live" for interest rates and that at some point, it will be appropriate for us to adjust rates downward as we remain in a "modestly restrictive" stance on policy.

US MBA mortgage applications fell -0.5% in the week ended August 22, with the purchase mortgage sub-index up +2.2% and the refinancing mortgage sub-index down -3.5%.  The average 30-year fixed rate mortgage rose +1 bp to 6.69% from 6.68% in the prior week.

Regarding tariffs, President Trump late Monday threatened to impose new tariffs and export restrictions on advanced technology and semiconductors in retaliation against other nations' digital services taxes that hit American companies.  Last week, Mr. Trump widened steel and aluminum tariffs to include more than 400 consumer items that contain the metals, such as motorcycles, auto parts, furniture components, and tableware.  The change went into effect last Monday and did not exclude goods already in transit.  

In other recent tariff news, Mr. Trump on August 13 extended the tariff truce with China for another 90 days until November.  On August 6, Mr. Trump announced that he will double tariffs on US imports from India to 50% from the current 25% tariff, due to India's purchases of Russian oil.  According to Bloomberg Economics, the average US tariff will rise to 15.2% if rates are implemented as announced, up from 13.3% earlier, and significantly higher than the 2.3% in 2024 before the tariffs were announced.

The markets this week will focus on any fresh tariff news or developments on ending the Ukraine-Russian war.  On Thursday, Q2 GDP is expected to be revised upward by +0.1 to 3.1% (q/q annualized).  Also, weekly initial unemployment claims are expected to fall by -5,000 to 230,000.  On Friday, July personal spending is expected to climb +0.3% m/m, and July personal income is expected to rise +0.4% m/m.   Also, the July core PCE price index, the Fed's preferred inflation gauge, is expected to climb +0.2% m/m and +2.9% y/y.  In addition, the Aug MNI Chicago PMI is expected to fall -0.6 to 46.5.  Finally, the University of Michigan's final-Aug US consumer sentiment index is expected to be unrevised at 58.6.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 88% at the next FOMC meeting on September 16-17.  The markets are discounting the chances at 51% for a second -25 bp rate cut at the following meeting on October 28-29.

Earnings reports indicate that S&P 500 earnings for Q2 are on track to rise +9.1% y/y, much better than the pre-season expectations of +2.8% y/y and the most in four years, according to Bloomberg Intelligence.  With Q2 earnings season winding down, over 95% of S&P 500 firms having reported Q2 earnings, about 82% of companies exceeded profit estimates. 

Overseas stock markets on Wednesday settled mixed.  The Euro Stoxx 50 rebounded from a 2-week low and closed up +0.17%.  China's Shanghai Composite closed down -1.76%.  Japan's Nikkei Stock 225 closed up +0.30%.

Interest Rates

September 10-year T-notes (ZNU5) on Wednesday closed up +6.5 ticks, and the 10-year T-note yield fell -2.4 bp to 4.238%. 

T-notes recovered from early losses on Wednesday and rallied to a 1.5-week high, and the 10-year T-note yield fell to a 1.5-week low of 4.234%. Short covering emerged in T-notes to push prices higher after New York Fed President Williams said that at some point, it will be appropriate for us to move rates down, as we are still in a "modestly restrictive" stance on policy.

T-notes initially moved lower on Wednesday due to rising inflation expectations, following the 10-year breakeven inflation expectations rate's rise to a 6-month high of 2.456%.  Weak demand for the Treasury's $70 billion auction of 5-year T-notes on Wednesday was also bearish for prices, as the auction had a bid-to-cover ratio of 2.36, below the 10-auction average of 2.38.  In addition, T-notes are under pressure due to President Trump's move to fire Fed Governor Cook, which exacerbates investor concerns about the Fed's independence and fuels inflation fears if politics forces interest rates below the neutral rate. 

European government bond yields on Wednesday moved lower.  The 10-year German bund yield fell to a 1.5-week low of 2.686% and finished down -2.3 bp to 2.700%.  10-year UK gilt yield fell -0.5 bp to 4.736%.

The German Sep GfK consumer confidence survey unexpectedly fell -1.9 to a 5-month low of -23.6, weaker than expectations of no change at -21.5.

Swaps are discounting the chances at 3% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

MongoDB (MDB) closed up more than +37% to lead software stocks higher after reporting Q2 adjusted EPS of $1.08, well above the consensus of 65 cents, and raising its 2026 adjusted EPS forecast to $3.64-$3.73 from a previous forecast of $2.94-$3.12, stronger than the consensus of $3.20.  Also, Atlassian (TEAM) closed up more than +4% to lead gainers in the Nasdaq 100, and Salesforce (CRM) closed up more than +2% to lead gainers in the Dow Jones Industrials.  In addition, Datadog (DDOG) closed up more than +4%, Cloudflare (NET) closed up more than +3%, and Snowflake (SNOW) closed up more than +2%. 

Kohl's (KSS) closed up more than +23% after reporting Q2 EPS of $1.35, well above the consensus of 31 cents, and forecasting full-year EPS of 50 cents-80 cents, better than the consensus of 49 cents. 

nCino (NCNO) closed up more than +13% after reporting Q2 subscription revenue of $130.8 million, better than the consensus of $125.6 million, and raising its 2026 subscription revenue estimate to $513.5 million-$517.5 million from $507 million-$511 million. 

American Eagle Outfitters (AEO) closed up more than +8% after releasing a collaboration with Travis Kelce's AE x Tru Kolors clothing brand in an attempt to capitalize on Taylor Swift's popularity.

Elanco Animal Health (ELAN) closed up more than +3% after S&P Dow Jones Indices announced the company will replace Sarepta Therapeutics in the S&P MidCap 400 before the opening of trading on Tuesday, September 2.

Dynatrace (DT) closed up more than +3% after Oppenheimer initiated coverage of the stock with a recommendation of outperform and a price target of $65.

Okta (OKTA) closed up more than +1% after reporting Q2 revenue of $728 million, stronger than the consensus of $696.9 million, and raising its full-year revenue estimate to $2.88 billion-$2.89 billion from a previous estimate of $2.85 billion-$2.86 billion, above the consensus of $2.86 billion. 

J M Smucker (SJM) closed down more than -4% after reporting Q1 net sales of $2.11 billion, below the consensus of $2.12 billion. 

SBA Communications (SBAC) closed down more than -4% after Bank of America downgraded the stock to neutral from buy. 

Williams-Sonoma (WSM) closed down more than -2%, despite reporting better-than-expected Q2 revenue, when it said it expects its outlook to be pressured by incremental tariff costs. 

PayPal Holdings (PYPL) closed down nearly 1% after the Suddeutsche Zeitung reported that several banks had blocked direct debits in the wake of payments that appeared to be suspicious or fraudulent. 

Earnings Reports(8/28/2025)

Affirm Holdings Inc (AFRM), Autodesk Inc (ADSK), Bath & Body Works Inc (BBWI), Best Buy Co Inc (BBY), Brown-Forman Corp (BF/B), Burlington Stores Inc (BURL), Dell Technologies Inc (DELL), Dick's Sporting Goods Inc (DKS), Dollar General Corp (DG), Elastic NV (ESTC), Gap Inc/The (GAP), Hormel Foods Corp (HRL), Marvell Technology Inc (MRVL), Ollie's Bargain Outlet Holding (OLLI), SentinelOne Inc (S), Ulta Beauty Inc (ULTA).