Morning in New York: The Jackson Hole Mountains Stand in the Way of the AI Rally

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

Participants at the upcoming session will focus on the first major speech by the new Fed Chair, Kevin Warsh, at the Jackson Hole symposium. Investors will be looking for signals regarding the regulator’s assessment of inflation risks, the stability of the economy, and the future path of interest rates, especially against the backdrop of rising yields on long-term Treasuries and the lack of clear guidance from the Fed.

The market estimates the probability of a rate hike at the regulator’s September meeting at approximately 34%. An increasing number of institutional market participants, including Apollo Global and JPMorgan, are calling on Warsh to demonstrate firm resolve in combating high inflation. This could lead to a revision of rate hike expectations for the upcoming FOMC meetings. Ultimately, however, his decision will be dictated by macroeconomic data for August and September. At the same time, to stabilize the long end of the Treasury yield curve, the central bank must provide assurance of that very “firm resolve” to rein in inflation. Such statements would help 30-year Treasuries find support, while the stock market’s reaction would be muted. We consider a sharp softening of Warsh’s rhetoric unlikely.

The conflict in the Middle East continues to shape the dynamics of the commodities market. The Trump administration still does not appear to have a detailed and feasible plan for resolving the conflict. Contacts through intermediaries have not yet led to diplomatic progress, and the reliance on economic pressure is not accompanied by a clear mechanism for achieving a political outcome. Difficulties in resolving the situation could increase pressure on Republican poll numbers as the November midterm congressional elections approach. At the same time, oil prices continue to reflect a high geopolitical premium. Uncertainty in the energy market is exacerbated by media reports of Venezuela’s plans to leave OPEC.

A federal court in the Northern District of California has blocked the Pentagon's attempt to blacklist Anthropic due to risks to supply chains. This decision reduces the likelihood that regulatory restrictions will hinder the further development and scaling of cutting-edge artificial intelligence models. This is important for the market not only in the context of Anthropic itself: maintaining high competition among the largest developers supports an accelerated cycle of releasing new models and expanding their capabilities. The faster models become more accurate, cheaper, and more functional, the faster the number of consumer and corporate use cases grows. This, in turn, lays the groundwork for expanding the user base and subsequently monetizing services.

Before the main session opens, Frontline Ltd. (FRO), Hafnia Limited (HAFN), BW LPG Limited (BWLP), and MINISO Group Holding Limited (MNSO) will report their quarterly results.

Futures on U.S. indices are trading with virtually no significant movement: only Nasdaq-100 contracts are down 0.3%. We assess the risk outlook for the upcoming session as neutral, with moderate volatility. The main source of uncertainty remains Kevin Warsh’s communication style with the investment community. Meanwhile, the AI sector maintains positive momentum, though gains are limited to shares of specific companies capable of demonstrating strong revenue and earnings growth.

— Marvell Technology (MRVL) shares are down about 8%, despite strong quarterly results and an upward revision to its guidance. The company’s revenue grew 37% year-over-year to $2.74 billion. Guidance for this metric for fiscal years 2027–2028 has been revised upward. The new guidance also calls for revenue from custom AI solutions to more than double next year. However, the key question ahead of the earnings report centered on the pace of monetization of a major deal with Alphabet (GOOGL). The most significant financial impact is expected starting in fiscal year 2029. Against this backdrop, many market participants chose to take profits on MRVL shares.

— PayPal (PYPL) shares plummeted by about 13% on news that Advent and Stripe had withdrawn their bid to acquire the company. The group had previously offered approximately $60.50 per share, valuing PayPal at more than $53 billion. The company’s board of directors rejected the offer, deeming the price too low. Negotiations were complicated by regulatory and financial issues.

— Affirm Holdings (AFRM) shares are rising by about 12%. The company’s quarterly results exceeded Wall Street’s consensus estimates, but the main reason for the positive reaction was the forecast for fiscal year 2027 regarding GMV—a key metric for the company representing the volume of purchases financed through its platform—which exceeded market expectations.

— Workday (WDAY) is seeing a mixed reaction to the release of its earnings report, which confirmed the commercial benefits of implementing AI in enterprise software. More than 25% of new ACV in the second quarter came from AI solutions, and the number of customers using Workday’s proprietary AI agents exceeded 5,500. The company raised its full-year guidance for subscription revenue and non-GAAP operating margin.

— Gap (GAP) shares soared 13% following the release of its quarterly earnings report and the appointment of a new head of the Old Navy brand. Management changes at the company's largest division provided additional support for the stock price.

— Autodesk (ADSK) reported second-quarter adjusted earnings per share of $3.30, compared with a consensus estimate of $3.12. The company’s revenue grew 16% year-over-year to $2.05 billion, and its own guidance for the next three months exceeded average market expectations. Nevertheless, the company’s stock is down about 4% due to market participants’ doubts about Autodesk’s sustainable competitive advantages in the AI sector.

— Ulta Beauty’s (ULTA) revenue for the quarter rose 8.9% year-over-year to $3 billion, beating expectations, while earnings per share came in at $6.55, compared to the consensus estimate of $6.17. However, the retailer’s stock price reacted to the earnings release with a correction of about 3%: investors focused on the expected slowdown in comparable sales and the limited potential for gross margin growth in the second half of the year.

Trading on August 27 on U.S. stock exchanges ended in positive territory. The S&P 500 gained 0.72%, the Nasdaq 100 rose 1.43%, the Dow Jones rose 0.2%, and the Russell 2000 rose 0.28%. Meanwhile, the Invesco S&P 500 Equal Weight ETF (RSP), which tracks the equally weighted S&P 500, fell 0.3%. This points to a narrow base of growth and a concentration of demand among the largest technology companies.

Nvidia’s (NVDA) strong quarterly results and a revenue growth forecast of 70% in fiscal year 2028—instead of the 45% expected by the market—fueled risk appetite in the tech sector, easing investors’ concerns about the strength of the momentum behind investments in artificial intelligence infrastructure. Nvidia’s stock rose 8.7%. This provided a boost to semiconductor manufacturers’ stocks, including Broadcom (AVGO), Intel (INTC), and Texas Instruments (TXN), as well as companies in the computing infrastructure ecosystem such as Synopsys (SNPS), Oracle (ORCL), and Microsoft (MSFT). Management comments regarding the ongoing supply shortage and the expansion of the customer base beyond hyperscalers reinforced the investment community’s confidence in the sustainability of the investment cycle in the artificial intelligence sector.

Against this backdrop—and driven by the performance of companies in the software and cybersecurity sectors, particularly Salesforce (CRM: +22.6%), CrowdStrike (CRWD: +20.5%), and Palo Alto Networks (PANW: +12.8%), was the IT sector (XLK: +3.16%). The other sectors ended the session in negative territory.

CrowdStrike (CRWD) shares soared following the release of its quarterly earnings report, which showed that the company’s revenue increased 26% year-over-year to $1.47 billion, while annual recurring revenue (ARR) rose 25% year-over-year to $5.84 billion. The company posted record net annual recurring revenue growth of $333 million amid increased demand for cybersecurity solutions. The proliferation of agent-based artificial intelligence systems is increasing both the number and complexity of cyber threats. This means that the addressable market for data and cyber infrastructure protection will expand as AI tools are adopted.

The number of initial unemployment insurance claims for the week ending August 22 fell by 4,000 to 203,000, compared with a consensus estimate of 208,000. The number of continuing claims for the week ending August 15 fell by 18,000 to 1.78 million. The data indicate that layoff activity remains low, despite a slowdown in hiring. This confirms the resilience of the labor market.

This article was AI-translated and verified by a human editor