Stocks Rally as Fed Chair Warsh Vows to Tackle Inflation

The S&P 500 Index ($SPX) (SPY) is up by +0.37% today, the Dow Jones Industrial Average ($DOWI) (DIA) is up by +0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.18%.  E-mini S&P futures (ESU26) are up +0.40%, and September E-mini Nasdaq futures (NQU26) are up +0.20%.

Stock indices are moving higher today, with the S&P 500 and Nasdaq 100 posting 1.5-week highs, and the Dow Jones Industrials rising to a 2-week high.  Stocks found support today on comments from Fed Chair Warsh, who said he's impressed by the economy, which appears to have strengthened, and vowed to get inflation back down to the Fed’s 2% target.  Today’s upward revision to the University of Michigan’s US Aug consumer sentiment index is also bullish for stocks. 

On the negative side, chipmakers and AI-infrastructure stocks are weaker, led by a -7% slide in Marvell Technology after the company forecast Q3 adjusted gross margin below consensus.  Also, today’s economic news showed an unexpected downward revision to US 2026 nonfarm payrolls, suggesting the labor market was weaker than previously stated. In addition, the Aug MNI Chicago PMI unexpectedly fell -10.5 to 47.1, weaker than expectations of an increase to 57.9 and the steepest pace of contraction in 8 months.

The University of Michigan US Aug consumer sentiment index was revised upward by +0.7 to 51.7, stronger than expectations of no change at 51.0.

The University of Michigan US Aug 1-year inflation expectations were unexpectedly revised downward to 4.0% from 4.3% versus expectations of an upward revision to 4.4%.  The Aug 5-10 year inflation expectations were kept unrevised at 3.3%, right on expectations.

The annual benchmark revisions to 2026 US nonfarm payrolls showed an unexpected decline of -79,000 jobs, indicating a weaker labor market than expectations of a +183,000 increase.

Fed Chair Warsh said he's impressed by the economy, which appears to have strengthened, and said inflation data don't suggest the trend has meaningfully improved.  He added that policymakers must be confident inflation will return to their 2% target; otherwise, the Fed has "work to do."

Oct WTI crude oil prices (CLV26) are down nearly -1% today on signs of larger oil supplies leaving the Middle East. Goldman Sachs said oil exports from the Persian Gulf have risen to 15 million to 16 million bpd, about two-thirds of pre-war levels.  Crude prices also weakened today on reports that Venezuela is considering leaving OPEC, which could increase the chances of a price war as the remaining members of the cartel compete with one another for customers and market share.

The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.  So far, earnings results have been positive, with 86% of the 486 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 56% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets are mixed today.  The Euro Stoxx 50 is up +0.97%.  China's Shanghai Composite fell from a 1.5-week high and closed down -0.11%.  Japan's Nikkei-225 Stock Average closed up +0.41%.

Interest Rates

September 10-year T-notes (ZNU6) are down by -2 ticks today.  The 10-year T-note yield is up +0.4 bp to 4.674%.  T-notes are slightly lower today after hawkish comments from Fed Chair Warsh pushed the chances of a Fed rate hike at next month’s FOMC meeting up to 56% from 36% before he spoke.  T-notes were also pressured after the University of Michigan US Aug consumer sentiment index was revised higher.

Losses in T-notes are limited after annual revisions to 2026 US payrolls showed the labor market was weaker than initially reported.  Also, the Aug MNI Chicago PMI unexpectedly contracted by the most in 8 months, a dovish factor for Fed policy.  In addition, the University of Michigan US Aug 1-year inflation expectations were unexpectedly revised downward to 4.0% from 4.3%.

European government bond yields are moving higher today.  The 10-year German bund yield rose to a 15-year high of 3.286% and is up +1.2 bp to 3.265%.  The 10-year UK gilt yield is up +2.2 bp to 5.052%.

The Eurozone Aug economic confidence index rose +1.3 to a 7-month high of 98.4, stronger than expectations of 97.5.

Markets are discounting a 96% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Most of the Magnificent Seven technology stocks, sans Tesla and Nvidia, are moving higher today, a bullish factor for the overall market.  Amazon.com (AMZN) is up more than +4%, and 

Apple (AAPL), Alphabet (GOOGL), Meta Platforms (META), and Microsoft (MSFT) are up more than +2%. 

Most software stocks are climbing today, supporting the broader market.  Workday (WDAY) is up more than +5%, and ServiceNow (NOW) and Atlassian Corp (TEAM) are up more than +4%. Also, Salesforce (CRM) is up more than +4% to lead gainers in the Dow Jones Industrials.  In addition, Adobe Systems (ADBE), Intuit (INTU), and Microsoft (MSFT) are up more than +1%. 

Chipmakers and AI-infrastructure stocks are under pressure today, led by a -7% decline in Marvell Technology (MRVL) after it forecast Q3 adjusted gross margin of 57.5% to 58.5%, the midpoint below the consensus of 58.4%.  The iShares Semiconductor ETF (SOXX) is down more than -1%.  Also, ARM Holdings (ARM) is down more than -3%, and Analog Devices (ADI), KLA Corp (KLAC), and Applied Materials (AMAT) are down more than -2%.  In addition, Nvidia (NVDA), Lam Research (LRCX), Microchip Technology (MU), and Texas Instruments (TXN) are down more than -1%.

Cybersecurity stocks are under pressure today, led by a -7% fall in SentinelOne (S) after forecasting 2027 adjusted EPS of 30 cents to 32 cents, below the consensus of 35 cents.  Also, Crowdstrike Holdings (CRWD) is down more than -5%, and Fortinet (FTNT) is down more than -4%.  In addition, Palo Alto Networks (PANW) is down more than -3%, and Okta (OKTA), Zscaler (ZS), and Cloudflare (NET) are down more than -1%. 

Cryptocurrency-exposed stocks are retreating today, with Bitcoin (^BTCUSD) down more than -1%.  Iren Limited (IREN) is down more than -10%, and MARA Holdings (MARA) and Riot Platforms (RIOT) are down more than -6%.  Also, Strategy (MSTR) and Galaxy Digital Holdings (GLXY) are down more than -3%, and Circle Internet Group (CRCL) and Coinbase Global (COIN) are down more than -2%. 

Elastic NV (ESTC) is up more than +17% after reporting Q1 adjusted EPS of 70 cents, stronger than the consensus of 59 cents, and raising its 2027 adjusted EPS forecast to $3.29 to $3.37 from a previous forecast of $3.21 to $3.29, above the consensus of $3.24. 

Gap (GAP) is up more than +13% after raising its 2027 adjusted EPS forecast to $2.35 to $2.45 from a previous forecast of $2.30 to $2.40. 

Affirm Holdings (AFRM) is up more than +8% after reporting Q4 revenue of $1.17 billion, better than the consensus of $1.11 billion, and forecasting Q1 revenue of $1.19 billion to $1.22 billion, stronger than the consensus of $1.17 billion. 

Take-Two Interactive Software (TTWO) is up more than +2% after a Netflix preview of the company’s new Grand Theft Auto VI video game drew positive reviews.   

PayPal Holdings (PYPL) is down more than -11% to lead losers in the S&P 500 and Nasdaq 100 after people with knowledge of the matter said a consortium of Advent and Stripe has decided to abandon its pursuit of the company. 

Autodesk (ADSK) is down more than -3% after forecasting Q3 adjusted EPS of $3.04 to $3.09, weaker than the consensus of $3.15.

Ulta Beauty (ULTA) is down more than -3% after reporting a Q2 gross margin of 39.1%, below the consensus of 39.2%. 

Earnings Reports (8/28/2026)

Domo Inc (DOMO), Hub Group Inc (HUBG), Liberty Live Holdings Inc (LLYVA), SR Bancorp Inc (SRBK).