Stock Market Update

The futures for the major indices are all lower this morning following yesterday's record-high move for the S&P 500. The S&P 500 futures are down 22 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 129 points and are trading 0.5% below fair value, and the Dow Jones Industrial Average futures are down 146 points and are trading 0.3% below fair value.

The negative disposition is owed partly to some profit taking and position squaring ahead of the extended holiday weekend (Happy Labor Day!) and to some tariff concerns that have bubbled up with Caterpillar (CAT) warning about higher-than-expected tariff costs for the year that will weigh on its adjusted operating profit margin and a Wall Street Journal report that Section 232 tariffs for a number of industries are likely to be expanded in coming months.

Separately, there is some buyer hesitation in front of the release of the July Personal Income and Spending Report at 8:30 a.m. ET. This report will provide a key input for Q3 GDP forecasts and key information on PCE inflation data that will factor into the Fed's deliberations over its policy setting. 

The fed funds futures market currently shows an 85.2% probability of a 25 basis point cut at the September 16-17 FOMC meeting, according to the CME FedWatch Tool. Fed Governor Waller (FOMC voter) said in a speech last night that he supports a 25 basis point cut in September and that the current range (4.25-4.50%) is 125-150 basis points above neutral; therefore, he anticipates additional cuts over the next three to six months.

In related news, there is a hearing scheduled for 10:00 a.m. ET today regarding Fed Governor Lisa Cook's legal claim that the president cannot fire her.

Ahead of this morning's key data, the 2-yr note yield is unchanged at 3.64%, and the 10-yr note yield is up one basis point to 4.22%.

In corporate news:

• Affirm (AFRM 92.40, +12.41, +15.5%) reports Q4 (Jun) results, beats on revs, GMV increased 43% yr/yr; guides Q1 revs in-line, guides for FY26 GMV of more than $46 bln
• Ambarella (AMBA 83.40, +12.77, +18.1%) beats by $0.10, beats on revs; guides Q3 revs above consensus; guides FY26 revs above consensus
• Autodesk (ADSK 316.23, +27.74, +9.6%) beats by $0.17, beats on revs; guides Q3 EPS above consensus, revs above consensus; guides FY26 EPS above consensus, revs above consensus
• Caterpillar (CAT 422.00, -12.91, -3.0%) expects the net impact from incremental tariffs introduced in 2025 will be between approximately $1.5-1.8 bln for 2025, up from prior $1.3-1.5 bln; now expects its full year adjusted operating profit margin to be near the bottom of the target margin range
  Including the net impact from incremental tariffs, the company now expects its full year adjusted operating profit margin to be near the bottom of the target margin range.
• Dell (DELL 125.50, -8.55, -6.4%) beats by $0.03, beats on revs; guides Q3 EPS mostly below consensus, revs above consensus; guides FY26 EPS above consensus, revs in-line
• Elastic (ESTC 101.00, +13.21, +15.1%) beats by $0.18, beats on revs; guides Q2 EPS below consensus, revs above consensus; guides FY26 EPS above consensus, revs above consensus
• Gap (GAP 21.75, +0.07, +0.3%) beats by $0.02, reports revs in-line, comps +1%; guides Q3 revs in-line; reaffirms FY26 revs guidance
• Marvell (MRVL 67.03, -10.20, -13.2%) reports EPS in-line, revs in-line; guides Q3 EPS in-line, revs in-line
• Ulta Beauty (ULTA 550.00, +19.37, +3.7%) beats by $0.68, beats on revs; comp sales of +6.7%; raises FY26 EPS and revs above consensus; raises FY26 comps

Reviewing overnight developments:

Equity indices in the Asia-Pacific region ended the week on a mostly lower note. Japan's Nikkei: -0.3%, Hong Kong's Hang Seng: +0.3%, China's Shanghai Composite: +0.4%, India's Sensex: -0.3%, South Korea's Kospi: -0.3%, Australia's ASX All Ordinaries: unch.

• In news:
  • Japan's Nikkei (-0.3%) traded inside a narrow range despite the release of a big batch of that that included below-consensus Retail Sales (0.3%; expected 1.5%) and Industrial Production (-1.6%; expected -1.1%) for July and cooler-than-expected Tokyo CPI for August (2.6%; expected 2.9%).
  • South Korea's government will issue bonds to pay for its largest budget increase in four years.
  • China Securities Daily warned against speculation on risky stocks under "special treatment" or "probationary" status due to their risk of being delisted.
• In economic data:
  • Japan's July Retail Sales 0.3% yr/yr (expected 1.5%; last 1.9%), July Industrial Production -1.6% m/m (expected -1.1%; last 2.1%), July jobs/applications ratio 1.22 (expected 1.23; last 1.22), July Unemployment Rate 2.3% (expected 2.5%; last 2.5%), July Housing Starts -9.7% yr/yr (expected -9.9%; last -15.6%), July Construction Orders -19.0% yr/yr (last 22.5%). August Tokyo CPI 2.6% yr/yr (last 2.9%) and Tokyo Core CPI 2.5%, as expected (last 2.9%). August Household Confidence 34.9 (expected 34.2; last 33.7)
  • South Korea's July Industrial Production 0.3% m/m (expected 0.4%; last 1.7%); 5.0% yr/yr (expected 3.5%; last 1.6%). July Retail Sales 2.5% m/m (last 0.7%). July Service Sector Output 0.2% m/m (last 0.5%)
  • Singapore's July Bank Lending SGD854.0 bln (last SGD853.3 bln)
  • India's Q1 GDP 7.8% yr/yr (expected 6.6%; last 7.4%)
  • Australia's July Private Sector Credit 0.7% m/m (expected 0.6%; last 0.6%) and Housing Credit 0.5% m/m (last 0.5%)

Major European indices are on track for a lower finish to the week. STOXX Europe 600: -0.4%, Germany's DAX: -0.2%, U.K.'s FTSE 100: -0.3%, France's CAC 40: -0.3%, Italy's FTSE MIB: -0.5%, Spain's IBEX 35: -1.1%.

• In news:
  • Flash August CPI readings from France (0.4%), Italy (0.1%), and Spain (0.0%) were cooler than expected while Germany's CPI report that will be released at 8:00 ET is expected to show a reading of 0.0%.
  • FT reported that British Chancellor Reeves is considering a surcharge on bank profits or a new bank levy to plug a GBP20 bln budget gap.
  • Weapons manufacturer Rheinmetall outperforms after German Chancellor Merz said that there will be no meeting between presidents of Ukraine and Russia.
• In economic data:
  • Germany's July Import Price Index -0.4% m/m (expected -0.3%; last 0.0%); -1.4% yr/yr (expected -1.2%; last -1.4%). July Retail Sales -1.5% m/m (expected 0.0%; last 1.0%); 1.9% yr/yr (expected 2.6%; last 2.4%). August Unemployment Change -9,000 (expected 10,000; last 2,000) and Unemployment Rate 6.3%, as expected (last 6.3%)
  • France's flash August CPI 0.4% m/m (expected 0.5%; last 0.2%); 0.9% yr/yr (expected 1.0%; last 1.0%). Q2 GDP 0.3% qtr/qtr, as expected (last 0.1%); 0.8% yr/yr (expected 0.7%; last 0.6%). Q2 nonfarm payrolls 0.2% qtr/qtr (expected 0.0%; last -0.1%). July PPI 0.4% m/m (last -0.1%); 0.4% yr/yr (last 0.3%). July Consumer Spending -0.3% m/m, as expected (last 0.4%)
  • Italy's Q2 GDP -0.1% qtr/qtr, as expected (last 0.3%); 0.4% yr/yr, as expected (last 0.7%). August CPI 0.1% m/m (expected 0.2%; last 0.4%); 1.6% yr/yr (expected 1.7%; last 1.7%)
  • Spain's flash August CPI 0.0% m/m (expected 0.1%; last -0.1%); 2.7% yr/yr (expected 2.8%; last 2.7%). July Retail Sales 4.7% yr/yr (last 6.2%)