Morning Briefing
Published
S&P 500 futures are up 0.8% ahead of the open, with semiconductors and AI infrastructure driving broad gains even as the Fed's rate hike and a tangled geopolitical backdrop keep the macro picture unsettled. The central dynamic is a collision between tighter monetary policy and relentless demand for AI-linked hardware, with technology leading every other sector by a meaningful margin.
The Fed raised its benchmark rate 25 basis points to a 3.75%-4% target range on a unanimous 12-0 vote, with the dot plot showing one additional hike this year and Chair Warsh stating that inflation has failed to pass the Fed's test, with too many categories still rising above 3%. The 2-year Treasury yield closed at 4.74%, the dollar index at 100.19, its strongest since July 31. Within hours of the decision, Trump posted that US rates should be "1% or less" and called for the Fed to act fast, while separately expressing continued confidence in Warsh and saying he wants him independent. Traders are now pricing roughly a 50% chance of another hike in October and have added to bets on two more hikes by year-end. DoubleLine's Jeffrey Gundlach said he sees virtually no chance the current rate is the peak.
On Iran, Trump said the country is not ready for a deal but that the war will end "very soon," and plans to hold talks with Gulf leaders next week. Iran's foreign minister spoke with Pakistan's army chief. US crude has extended its decline to below $100 a barrel this morning. Saudi Arabia is seeking to restore roughly half of its East-West Pipeline capacity within days, with a full return to normal expected in about six weeks. Energy Secretary Wright said 18 million barrels flowed out of the Persian Gulf on Monday, with the seven-day Hormuz average at 11 million barrels per day. The Strategic Petroleum Reserve has fallen to its lowest level since 1982. Russia-Ukraine tensions are escalating: Ukraine struck Russia's Yaroslavl refinery, a Russian drone attack on a Tanzania-flagged vessel killed one crew member, and Poland scrambled aircraft in response. The House passed sanctions and tariffs legislation on Russia 262 to 159, with Trump expected to sign. The Kremlin called it an unfriendly act.
On trade, China and the US are in discussions on tariffs, according to China's commerce ministry. US-Mexico trade talks have slipped another week. The EU is formalizing a deeper partnership with Canada, with Prime Minister Carney framing it as a functional alliance built on mutual benefit. Huawei holds a larger share of China's AI chip market than Nvidia, a Huawei executive says the software gap with Nvidia is narrowing, and the company is trialing its chips in select overseas markets.
The Bank of England held rates at 3.75% and outlined a plan to cut gilt holdings by £368 billion through 2034 via annual sales of £20 billion, while projecting UK inflation slightly above 4% in Q1 2027. The ECB's Makhlouf said nothing is off the table, every meeting is live, and inflation risks still skew higher. The ECB's Rehn said last week's ECB hike was warranted but signaled conditions have changed. The Bank of Canada said near-term inflation is likely to remain elevated, citing the Iran conflict as a factor raising oil price expectations.
Technology is the clear pre-market leader at +1.4%, with semiconductors doing the most work. Intel is up 3.3%, AMD 2.6%, Lam Research and KLA Corp each 2.5%, and Applied Materials 2.4%. Nvidia adds 1.4% and Broadcom 1.4%. The iShares Semiconductor ETF gains 2.1%. Clean energy names are also firm, with the clean energy ETF up 1.5%. Generac is the session's most dramatic mover at +31.1% after the company entered a transaction agreement with Amazon under which it issues Amazon a warrant to acquire up to 1,693,745 shares at $200.93 per share, tied to a long-term supply agreement for backup power generators for Amazon data centers with warrant vesting linked to gross payments of up to $8 billion and initial deliveries of $2.4 billion expected in 2027 and 2028. Energy is the weakest sector at +0.1%, with most exploration and production names flat to slightly negative and crude below $100 a barrel.
Company News
- Generac is up 31.1% pre-market after entering a long-term supply agreement with Amazon for backup power generators for Amazon data centers, alongside a warrant issued to Amazon to acquire up to 1,693,745 shares at $200.93, with vesting tied to up to $8 billion in gross payments and initial deliveries of $2.4 billion in 2027 and 2028.
- Nebius Group is up 9.0% and CoreWeave up 5.7%, continuing the AI infrastructure bid from yesterday's session. CoreWeave separately proposes a $3 billion convertible senior notes offering due 2033, which pulled its shares to a session low of -1.4% briefly before stabilizing.
- Salesforce discloses a $25 billion accelerated share repurchase, its largest ever, expects an average share price of $182 under the program, and forecasts fiscal 2030 revenue of $63 billion against consensus of $61.4 billion.
- Lennar is down around 1.2% pre-market after reporting Q3 revenue of $8.05 billion against consensus of $8.39 billion and EPS of $1.23 excluding items, $0.09 short of expectations. The company cut its full-year 2026 delivery target to 80,000 to 81,000 homes from 82,000 to 83,000, and guided Q4 deliveries to 22,000 to 23,000 against an expected 24,080.
- Exxon Mobil is nearing a preliminary agreement to invest in Venezuelan oil fields, with a memorandum of understanding with PDVSA potentially signed this month, according to the Wall Street Journal. Continental, controlled by Harold Hamm, is separately expected to reveal details of its own Venezuela oil deal.
- Arm Holdings is up 4.1% and Credo Technology Group up 4.5%, extending the connectivity and chip-adjacent rally.
- Moderna is up 4.1% in pre-market trade.
- Allstate reports estimated catastrophe losses of $748 million pre-tax for August, stemming from 21 events, with about half tied to a single wind and hail storm. Combined July and August catastrophe losses total $1.43 billion pre-tax.
- Novo Nordisk signs a drug partnership with Orbis worth up to $1.4 billion.
- Palo Alto Networks is down 1.7% and CrowdStrike down 0.9%, both moving against the broader tech tape.
Overseas Data
Singapore's electronics exports rose sharply in August, driven by continued AI-related demand.
The Bank of England held its benchmark rate at 3.75% and detailed a quantitative tightening plan involving annual gilt sales of £20 billion alongside maturing bonds, targeting a reduction of £368 billion in gilt stock by 2034. The BoE sees UK inflation slightly above 4% in Q1 2027, and traders are pricing 38 basis points of additional hikes by year-end. The UK 30-year gilt yield slid 10 basis points to 5.76%, the largest single-day drop since May. Switzerland's upper house postponed its vote on UBS capital rules to September 23. Sweden's center-left coalition is projected to win that country's election.