The S&P 500 Index ($SPX) (SPY) closed down by -0.25% on Friday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.02%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -0.70%. E-mini S&P futures (ESU26) fell -0.25%, and September E-mini Nasdaq futures (NQU26) fell -0.69%.
Stock indices gave up early gains on Friday and settled lower as bond yields rose after Fed Chair Warsh vowed to bring inflation back to target, bolstering the chance of a Fed rate hike next month. The chance for a Fed interest rate hike at next month’s FOMC meeting jumped to 57% from 36% before he spoke on Friday. The 10-year T-note yield rose +5 bp to 4.72%.
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Chipmakers and AI-infrastructure stocks also retreated on Friday, weighing on the overall market, led by a -10% slide in Marvell Technology after the company forecast Q3 adjusted gross margin below consensus. In addition, Friday’s economic news showed an unexpected downward revision to US 2026 nonfarm payrolls, suggesting the labor market was weaker than previously stated. Finally, 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.
Stocks initially moved higher on Friday, 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 after Fed Chair Warsh 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. Friday’s upward revision to the University of Michigan’s US Aug consumer sentiment index was also supportive for stocks.
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) posted modest losses on Friday amid 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 57% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.
Overseas stock markets settled mixed on Friday. The Euro Stoxx 50 closed up +0.95%. 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) closed down by -15 ticks on Friday. The 10-year T-note yield rose +4.8 bp to 4.724%. T-notes retreated on Friday after hawkish comments from Fed Chair Warsh pushed the chances of a Fed rate hike at next month’s FOMC meeting up to 57% 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 were 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 moved higher on Friday. The 10-year German bund yield rose to a 15-year high of 3.286% and finished up +2.6 bp to 3.279%. The 10-year UK gilt yield rose +3.3 bp to 5.063%.
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 94% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.
US Stock Movers
Chipmakers and AI-infrastructure stocks moved lower on Friday, led by a -10% 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) closed down more than -3%. ARM Holdings (ARM) closed down more than -6%, and Lam Research (LRCX) closed down more than -5%. Also, KLA Corp (KLAC), and Applied Materials (AMAT) closed down more than -4%, and Nvidia (NVDA) closed down more than -4% to lead losers in the Dow Jones Industrials. In addition, Analog Devices (ADI) and Microchip Technology (MU) closed down more than -3%, and Advanced Micro Devices (AMD), ASML Holding NV (ASML), Intel (INTC), and Texas Instruments (TXN) closed down more than -2%.
Cybersecurity stocks were under pressure on Friday, led by a -5% 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) closed down more than -4%, and Palo Alto Networks (PANW), Fortinet (FTNT), and Okta (OKTA) closed down more than -3%. In addition, Cloudflare (NET) closed down more than -2%, and Zscaler (ZS) closed down more than -1%.
Cryptocurrency-exposed stocks retreated on Friday after Bitcoin (^BTCUSD) tumbled more than -3%. Iren Limited (IREN) closed down more than -12%, and MARA Holdings (MARA) closed down more than -10%. Also, Riot Platforms (RIOT), Galaxy Digital Holdings (GLXY), and Circle Internet Group (CRCL) closed down more than -8%, and Strategy (MSTR) closed down more than -7%. In addition, Coinbase Global (COIN) closed down more than -6%.
Most of the Magnificent Seven technology stocks, sans Tesla and Nvidia, moved higher on Friday, a bullish factor for the overall market. Amazon.com (AMZN) closed up more than +3% to lead gainers in the Dow Jones Industrials, and Apple (AAPL), Alphabet (GOOGL), Meta Platforms (META), and Microsoft (MSFT) closed up more than +1%.
PayPal Holdings (PYPL) closed down more than -12% 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.
PG&E Corp (PCG) closed down more than -7% and Edison International (EIX) closed down more than -4% after KCRA reported that California lawmakers have blocked Governor Newsom from pursuing his plan to prevent insurance companies in California from recouping their losses from investor-owned utilities that cause a catastrophic wildfire.
Autodesk (ADSK) closed 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) closed down more than -3% after reporting a Q2 gross margin of 39.1%, below the consensus of 39.2%.
Elastic NV (ESTC) closed up more than +19% 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) closed 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.
HP Inc (HPQ) closed up more than +2% after analysts raised their price targets on the stock by an average of 23% since the company reported earnings on Wednesday.
Take-Two Interactive Software (TTWO) closed up more than +1% after a Netflix preview of the company’s new Grand Theft Auto VI video game drew positive reviews.
Earnings Reports (8/31/2026)
Critical Metals Corp (CRML), Science Applications International Corp (SAIC).
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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