Stocks Settle Higher as Bond Yields Stabilize

The S&P 500 Index ($SPX) (SPY) closed up by +0.46% on Wednesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed up by +0.56%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +0.23%.  E-mini S&P futures (ESU26) rose +0.46%, and September E-mini Nasdaq futures (NQU26) rose +0.23%.

Stocks settled higher on Wednesday as T-note yields stabilized. The 10-year T-note yield finished little changed at 4.79% on Wednesday after a weaker-than-expected Aug ADP employment report eased Fed rate hike expectations slightly, boosting stocks.   Stock gains accelerated on dovish comments from New York Fed President Williams, who said inflation is continuing to trend down.

Wednesday’s US economic news was mixed for stocks after July factory orders rose more than expected, but the Aug ADP employment change rose less than expected.

Stock index futures initially moved lower in overnight trade as US-Iran hostilities pushed crude oil prices to a 6-week high and the 10-year T-note yield up to a 2.75-year high of 4.82%. 

The global bond sell-off generally continued on Wednesday, pushing bond yields to multi-year highs and undercutting stocks.  The UK 10-year gilt yield surged to a 19-year high of 5.29%, the German 10-year bund yield jumped to a 15-year high of 3.39%, the Japanese 10-year JGB bond yield surged to a 30-year high of 3.04%, and the 10-year T-note yield rose to a 2.75-year high of 4.82%. 

US MBA mortgage applications rose +0.8% in the week ended August 28, with the purchase mortgage sub-index up +2.2% and the refinancing mortgage sub-index down -1.1%.  The average 30-year fixed-rate mortgage rose +1 bp to 6.79% from 6.78% in the prior week.

The US Aug ADP employment change rose by +38,000, showing a slightly weaker labor market than expectations of +47,000.

US July factory orders rose +0.9% m/m, stronger than expectations of +0.7% m/m.  Also, July factory orders ex-transportation rose +0.6% m/m, stronger than expectations of +0.4% m/m.

New York Fed President John Williams said, "The data recently has been encouraging.  I am actually seeing the trend in inflation moving slowly down as some of the effects of the tariffs move into the rearview mirror."

The Fed Beige Book was positive for stocks as it stated that economic activity in the Fed's 12 districts in the period through August 24 "increased modestly," with prices accelerating moderately in most districts.  Also, “healthy labor demand was seen most frequently in manufacturing, construction and some service sectors, while retail and hospitality sectors saw falling labor demand."

Oct WTI crude oil prices (CLV26) climbed to a fresh 6-week high on Wednesday as fighting intensified between the US and Iran. The US carried out a second round of strikes in three days overnight, targeting radar systems and mine-laying capabilities along Iran's southern coast.  Iran retaliated with drone and missile attacks on US bases across the Middle East.  Also, Axios reported that the US attacked two Iranian tankers anchored off Iran’s north coast under a new “tanker for tanker” policy approved by President Trump to further deter Iranian attacks on tankers that move through the Strait of Hormuz.  Gains in crude were limited as supply concerns abated slightly after US Energy Secretary Wright said that over 17 million bbl of oil went through the Strait of Hormuz on Monday.

Q2 earnings results are 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 489 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 60% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets settled lower on Wednesday.  The Euro Stoxx 50 dropped to a 1-month low and closed down -0.11%.  China's Shanghai Composite closed down -0.97%.  Japan's Nikkei-225 Stock Average fell to a 4-week low and closed down -2.85%.

Interest Rates

December 10-year T-notes (ZNZ6) closed up by +1 tick on Wednesday.  The 10-year T-note yield fell -0.4 bp to 4.794%.  T-notes recovered from a 1.75-year nearest-futures low today and turned higher, and the 10-year T-note yield fell from a 2.75-year high of 4.816% and moved lower.  Short covering emerged and pushed T-notes higher after the Aug ADP employment change rose less than expected, and after New York Fed President Williams said inflation is continuing to trend down.  Gains in T-notes were limited after WTI crude oil climbed to a 6-week high, which boosted inflation expectations and is hawkish for Fed policy.

European government bond yields moved higher on Wednesday.  The 10-year German bund yield climbed to a 15-year high of 3.395% and finished up +3.2 bp to 3.376%.  The 10-year UK gilt yield jumped to a 19-year high of 5.289% and finished up +1.0 bp to 5.230%.

ECB Governing Council member and Bundesbank President Joachim Nagel warned that "inflation isn't close to our medium-term target" and said, "markets are pricing in a probability of more than 95% that we'll raise interest rates at our September meeting, and I'd say that the markets have a rather good understanding of how we're likely to respond at this stage."

Markets are discounting a 99% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Strength in chipmakers on Wednesday supported the broader market.  Nvidia (NVDA) closed up more than +3% to lead gainers in the Dow Jones Industrials.  Also, NXP Semiconductors (NXPI), Micron Technology (MU), and Qualcomm (QCOM) closed up more than +2%.  In addition, Intel (INTC), Microchip Technology (MCHP), and ASML Holding NV (ASML) closed up more than 1%. 

Airlines and cruise line operators moved higher on Wednesday after crude oil prices stabilized.  United Airlines Holdings (UAL) closed up more than +3%, and Alaska Air Group (ALK), Delta Air Lines (DAL), Southwest Airlines (LUV), and Carnival (CCL) closed up more than +2%.  Also, American Airlines Group (AAL) and Norwegian Cruise Line Holdings (NCLH) closed up more than +1%.  

Palo Alto Networks (PANW) closed down more than -9% to lead cybersecurity stocks lower and losers in the S&P 500 and Nasdaq 100 after reporting Q4 subscription and support revenue of $2.67 billion, below the consensus of $2.68 billion.  Also, CrowdStrike Holdings (CRWD) closed down more than -5%, and Cloudflare (NET), SentinelOne (S), and Fortinet (FTNT) closed down more than -4%.  In addition, Zscaler (ZS) closed down more than -3% and Okta (OKTA) closed down more than -2%. 

Dell Technologies (DELL) closed up more than +15% to lead gainers in the S&P 500 after reporting Q2 total net revenue of $46.97 billion, well above the consensus of $44,78 billion, and raising its 2027 revenue forecast to $192 billion from a previous forecast of $165 billion to $169 billion, stronger than the consensus of $173.76 billion.

Gitlab (GTLB) closed up more than +9% after boosting its 2027 revenue forecast to $1.13 billion from a previous forecast of $1.11 billion to $1.12 billion, better than the consensus of $1.12 billion.

SiriusXM (SIRI) closed up more than +7% after Deutsche Bank upgraded the stock to buy from hold with a price target of $45.

Brown-Forman (BF.B) closed up more than +3% after reporting a Q1 gross margin of 60.2%, better than the consensus of 58.6%. 

Credo Technology (CRDO) closed down more than -20% despite reporting better-than-expected Q EPS as the company failed to exceed its Q1 adjusted gross margin estimate of 68%. 

MongoDB (MDB) closed down more than -13% despite reporting better-than-expected Q2 EPS as revenue growth in the company’s Atlas product didn’t accelerate in Q2 versus Q1. 

G-III Apparel Group Ltd (GIII) closed down more than -11% after reporting Q2 net sales of $554.1 million, weaker than the consensus of $570.3 million, and forecasting Q3 net sales of about $870 million, below the consensus of $899 million.

Edison International (EIX) closed down more than -6%, and PG&E (PCG) closed down more than -5% after analysts said it is unlikely that California legislators will hold a special session to pass a wildfire liability bill favorable to utilities.

Earnings Reports (9/3/2026)

Campbell's Company/The (CPB), Ciena Corp (CIEN), DocuSign Inc (DOCU), Guidewire Software Inc (GWRE), Lululemon Athletica Inc (LULU), Planet Labs PBC (PL), Samsara Inc (IOT), Toro Co/The (TTC), UiPath Inc (PATH), Zscaler Inc (ZS).