Market Snapshot
| Dow | 45400.86 | -220.43 | (-0.48%) | | Nasdaq | 21700.39 | -7.31 | (-0.03%) | | SP 500 | 6481.50 | -20.58 | (-0.32%) | | 10-yr Note |
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| | NYSE | Adv 1759 | Dec 997 | Vol 1.06 bln | | Nasdaq | Adv 2611 | Dec 1897 | Vol 8.44 bln |
Industry Watch
| Strong: Materials, Real Estate, Consumer Staples, Health Care, Communication Services |
| | Weak: Energy, Financials, Utilities, Industrials, Information Technology, Consumer Discretionary |
Moving the Market
September rate locked in following softness in August employment report
Increased probability of additional rate cuts in October and December
Sell the news action after rate cut hopes fueled record highs for S&P 500 and Nasdaq Composite
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Market weighs firm rate cut expectations against cooling labor market
05-Sep-25 16:30 ET
Dow -220.43 at 45400.86, Nasdaq -7.31 at 21700.39, S&P -20.58 at 6481.50
[BRIEFING.COM] The stock market retreated after an opening rally propelled the S&P 500 (-0.3%) and Nasdaq Composite (flat) to new record highs, with investors weighing a softer employment report against firmed rate cut expectations.
At its peak, the S&P 500 established an all-time high of 6,532.65, while the Nasdaq Composite set a record high around the same time at 21,878.81. Neither index would capture a record closing high, and the DJIA (-0.5%) trailed its counterparts for most of the session.
Smaller-cap indices such as the Russell 2000 (+0.5%) and S&P Mid Cap 400 (+0.5%) outperformed the broader market, benefitting from the cemented rate cut expectations.
Today's Employment Situation Report added nuance to the market's outlook. August payrolls came in softer than expected, with nonfarm payrolls rising just 22,000 (Briefing.com consensus: 78,000), while private payrolls increased by just 38,000 (Briefing.com consensus: 90,000). The unemployment rate ticked just slightly up to 4.3%, and average hourly earnings grew 0.3%.
While the data signaled a cooling labor market, it reinforced expectations for rate cuts. The CME FedWatch Tool now assigns a 100% probability of a 25-basis-point cut at September's FOMC meeting, with a 10% chance of a 50-point move. Expectations for further 25-basis-point cuts remain strong, with a nearly 80% probability in October and a 70% probability in December.
Though today's data was the main mover of rate cut expectations, it is worth noting that the probability of a 50-basis point cut at the September FOMC meeting and October and December expectations did move modestly lower following some hawkish commentary from Chicago Fed President Austan Goolsbee (FOMC voter). Mr. Goolsbee stated in a Bloomberg interview that he has not made up his mind about a September rate cut, citing a need to control inflation before turning focus entirely to the labor market.
While the opening advance was substantial, the broader market retreated sharply after an opening rally as investors engaged in some "sell the news" activity following the bolstered rate-cut outlook. Modest buying activity throughout the afternoon saw the major averages finish considerably above their session lows.
Six S&P 500 sectors ended the session lower, signaling that while monetary policy is supportive, concerns linger about the durability of economic growth and corporate earnings in a cooling environment.
Among the laggards, the financials sector (-1.8%) underperformed, as investors weighed the potential for weaker loan demand and tighter margins should economic conditions soften further.
The energy sector (-2.1%) was the top laggard, as crude oil futures settled today's session $1.59 lower (-2.5%) at $61.87 per barrel.
The real estate sector (+1.0%) finished as the best-performing sector, making up some losses from earlier in the week.
Elsewhere, none of the other eight S&P 500 sectors closed with a gain or loss wider than 0.6%.
On the earnings front, Broadcom (AVGO 334.89, +28.79, +9.41%) traded sharply higher after an impressive Q3 report, though the company's disclosure of an additional large AI partner (speculated to be OpenAI) weighed on competitors NVIDIA (NVDA 167.02, -4.64, -2.70%) and Advanced Micro Devices (AMD 151.14, -10.65, -6.58%). The PHLX Semiconductor Index finished with a 1.7% gain, while the broader technology sector retreated 0.2%.
U.S. Treasuries finished the week on a strong note in the wake of today's employment data. The 2-year note yield settled down eight basis points to 3.51% (its lowest close in three years), and the 10-year note yield settled down nine basis points to 4.09%.
- Nasdaq Composite: +12.4% YTD
- S&P 500: +10.2% YTD
- Russell 2000: +7.2% YTD
- DJIA: +6.7% YTD
- S&P Mid Cap 400: +5.6% YTD
Reviewing today's data:
- August Nonfarm Payrolls 22K (Briefing.com consensus 78K); Prior was revised to 79K from 73K, August Nonfarm Private Payrolls 38K (Briefing.com consensus 90K); Prior was revised to 77K from 83K, August Unemployment Rate 4.3% (Briefing.com consensus 4.3%); Prior 4.2%, August Avg. Hourly Earnings 0.3% (Briefing.com consensus 0.3%); Prior 0.3%, August Average Workweek 34.2 (Briefing.com consensus 34.3); Prior was revised to 34.2 from 34.3
- The key takeaway is that the overall report leaned to the softer side of things, which isn't great economically speaking, yet, because it leaned that way, it also fortified the market's belief that there will be a rate cut at the September FOMC meeting and its hope that there will be additional rate cuts at the October and December FOMC meetings—a view that is supportive for a market pining for rate cut
Major averages lower near session's end
05-Sep-25 15:35 ET
Dow -238.74 at 45382.55, Nasdaq -34.47 at 21673.23, S&P -26.47 at 6475.61
[BRIEFING.COM] As the market enters the final half hour of trading, the major averages are seated firmly beneath their opening lines.
President Trump commented on an EU ruling that will fine Alphabet (GOOG 234.56, +1.90, +0.82%) $3.5 billion, stating via Truth Social that "my administration will NOT allow these discriminatory actions to stand." Elsewhere in the post, the president stated his intentions to start a Section 301 proceeding in response to the penalties.
Separately, crude oil futures settled today's session $1.59 lower (-2.5%) at $61.87 per barrel, contributing to notable losses in the energy sector (-2.2%).
Market fully pricing in September rate cut
05-Sep-25 15:00 ET
Dow -229.15 at 45392.14, Nasdaq -46.31 at 21661.39, S&P -30.13 at 6471.95
[BRIEFING.COM] As the S&P 500 (-0.5%), Nasdaq Composite (-0.2%), and DJIA (-0.2%) slightly recover from session lows, only the DJIA currently holds a week-to-date loss of 0.3%.
Market focus today has centered around weakness in the labor market, with investors seeking to navigate a balance between solidified rate cut expectations and a potentially more cautious growth outlook.
Chicago Fed President Austan Goolsbee (FOMC voter) stated in a Bloomberg interview that he is unsure whether he will support a rate cut at the September FOMC meeting, citing a need to see inflation readings come down before turning full attention to the labor market.
Despite the hawkish comments, rate cut probabilities for the September, October, and December FOMC meetings have moved very little in response to the comments, with the CME FedWatch tool still fully pricing in cut of at least 25 basis points in September.
Financials sector lags
05-Sep-25 14:35 ET
Dow -240.57 at 45380.72, Nasdaq -57.32 at 21650.38, S&P -32.72 at 6469.36
[BRIEFING.COM] The major averages now move in a sideways fashion, little changed from previous levels that seat them above their session lows, yet well beneath their opening gains.
Seven S&P 500 sectors trade in negative territory, with the financials sector (-1.9%) among the worst performers.
The sector faces pressure amid concerns that weak job growth signals slower growth ahead, which will weigh on loan demand.
Additionally, investors have done some profit-taking after several large components reached fresh 52-week highs.
Charles Schwab (SCHW 92.23, -5.40, -5.53%) is the weakest performer in the sector, falling past its 50-day moving average (95.05) to its lowest level since mid-July.
Elsewhere, JPMorgan Chase (JPM 295.58, -8.24, -2.71%) hit a fresh record high before returning to its 50-day moving average (292.80).
Mega-cap names in line with broader market
05-Sep-25 14:00 ET
Dow -313.86 at 45307.43, Nasdaq -75.08 at 21632.62, S&P -40.43 at 6461.65
[BRIEFING.COM] The S&P 500 (-0.6%), Nasdaq Composite (-0.4%), and DJIA (-0.7%) trade in a stable range, modestly above their session lows.
Reuters reports that Alphabet (GOOG 234.26, +1.60, +0.69%) will face a 2.95 billion-euro fine over ad-tech practices that violated antitrust regulations.
The stock is little changed from the headline, continuing to move higher after a sharp rally on Wednesday that followed a favorable ruling in a domestic antitrust case that allows the comoany to keep its Chrome browser.
Mega-cap names are performing largely in line with the broader market today, with the Vanguard Mega Cap Growth ETF down 0.5%.
Tesla (TSLA 350.28, +11.75, +3.47%) is a standout among the group, while NVIDIA (NVDA 166.14, -5.52, -3.22%) is a notable laggard.
DocuSign Rebounds in Q2 with Bounce Back in Billings and IAM Momentum (DOCU)
DocuSign shares are bouncing back after an impressive Q2 (Jul) earnings report, featuring strong beats on EPS and revenue, along with a much-watched billings upside that eased investor concerns following a weak Q1.
- Revenue rose 8.8% yr/yr to $800.6 mln, beating estimates and marking one of the company's strongest growth quarters in two years.
- Billings surged 13% yr/yr to $818 mln, well above guidance of $757--767 mln.
- Full-year billings guidance was raised to $3.325-3.355 bln from $3.285-3.339 bln.
- Strength was led by the direct sales channel, particularly in eSignature, and growing momentum in IAM (Intelligent Agreement Management).
The sharp billings recovery followed a Q1 miss blamed on lower early renewals, so Q2's strength—fueled by increased direct demand, improved gross retention, early renewals, and more annual contracts—was well-received by investors.
IAM adoption continues to ramp, especially among commercial SMBs seeking faster sales cycles and better contract insights. Notably, over 50% of enterprise reps closed at least one IAM deal in Q2, suggesting early traction with larger clients.
Briefing.com Analyst Insight:
This was a much-needed rebound for DocuSign after Q1's billings stumble. While top-line growth and EPS were solid, investors were laser-focused on the sales pipeline—Q2 delivered on that front and more. With raised guidance, signs of improving retention, and growing IAM adoption across both SMB and enterprise, DOCU is beginning to regain investor confidence. Execution will be key, but momentum looks to be turning in its favor.
lululemon athletica tumbles as consumer and macro headwinds result in another EPS cut (LULU)
lululemon athletica (LULU) is under heavy pressure today after reporting its Q2 (Jul) results last night, despite a robust EPS beat, trading to a new 5-year low. Revenue came in on the soft side at $2.53 bln, and the 6.5% yr/yr increase was its slowest in over 4 years. The larger issue falls on its Q3 and FY26 EPS and revenue guidance; both were below consensus, with FY26 guidance being cut.. In particular, its FY26 EPS guidance has now been cut two consecutive quarters, with the cut this quarter much more significant (current guidance is now $12.77-12.97, down from $14.58-14.79).
- Its US business was particularly challenged. Premium athletic wear in the US continued its decline in Q2, and consumers are more selective, spending less on apparel overall, even more so in performance activewear, as noted by management. US revenue is now expected to decline 1-2% for the year.
- Management feels it has missed opportunities in new product launches, most notably in social and lounge, with product cycles running too long and failing to create new trends. It intends to increase new styles of its overall assortment to 35% from 23% by next spring. With many new players entering the performance activewear market, the heightened competition underscores the need for stronger differentiation.
- This is evidenced in its US comp of -4% (-3% CC), decelerating from -2% (-1% CC) in Q1 (Apr). Its international business accelerated with a comp of +15% (+13% CC), compared to +6% (+7% CC) in Q1, though still lower than the +22% comp in Q4 (Jan).
- There are growing concerns surrounding its business in China, its second largest market, with Q2 revenue coming in at the low end of its expectations and beginning to see signs of macro-driven headwinds in Tier 1 cities.
Briefing.com Analyst Insight
LULU's struggles highlight how exposed it is to the softening US consumer and to an increasingly competitive athletic wear landscape. The EPS cuts, particularly two consecutive downward revisions for FY26, are raising doubts about whether management's growth strategy is on track. Also, this marks the third steep drop in the stock on earnings in 2025, underscoring investor concern over recent performance. While international growth remains a bright spot, it is not enough to offset the weakness in its core US market, where trends in premium apparel are deteriorating. The missteps on innovation and product cycles underscore execution risks, and with new initiatives not expected until 2026, the near-term setup for the stock remains challenging.
Broadcom Crushes Q3 on AI Strength, Adds Fourth Major Customer, Bullish on FY26 AI Demand (AVGO)
Broadcom is trading sharply higher (+10%) after delivering a strong Q3 (Jul) earnings report, fueled by accelerating AI semiconductor growth and bullish long-term commentary. The company topped EPS and revenue expectations and guided Q4 (Oct) revenue above consensus.
- Total Q3 revenue grew +26% yr/yr to $9.17 bln, beating prior guidance of ~$9.1 bln.
- AI semiconductor revenue surged +63% yr/yr to $5.2 bln, ahead of $5.1 bln guidance. Broadcom expects AI semiconductor revenue to rise further to $6.2 bln in Q4 (+66% yr/yr).
- Backlog hit a record $110 bln, driven by strong AI bookings.
- While AI demand boomed, non-AI semiconductor revenue (~$4 bln) was flat sequentially, with mixed trends across segments.
Management did not offer specific FY26 guidance but stated AI growth in FY26 will accelerate meaningfully vs FY25. A major driver: the addition of a fourth large customer—speculated to be OpenAI—joining the three existing XPU clients. Production orders from this customer contributed to the $10 bln in AI racks already secured.
In corporate news, Broadcom announced that CEO Hock Tan will remain through at least 2030, signaling leadership stability during this high-growth AI phase.
Briefing.com Analyst Insight:
Q3 results were solid, but the real story is the growing AI tailwind and management's confidence in even stronger AI momentum into FY26. The addition of a possible fourth marquee customer and a record $110 bln backlog give Broadcom rare visibility into long-term demand. With AI custom silicon and networking at the core of its growth story, AVGO remains a critical name in the AI supply chain. That said, non-AI demand remains sluggish, which could weigh if AI momentum slows.
Ciena soars to multi-decade highs as AI-driven optical boom fuels beat-and-raise Q3 report (CIEN)
Ciena (CIEN) delivered a resounding beat-and-raise 3Q25 earnings report that has propelled shares to multi-decade highs. As a premier fiber optics equipment maker, the company is reaping substantial benefits from the relentless buildout of data centers and underlying infrastructure to accommodate the explosive expansion of AI technologies, where hyperscalers and emerging AI players are pouring billions into high-bandwidth, low-latency connectivity to support generative AI and machine learning workloads.
This tailwind is evident in the quarter's revenue of $1.22 bln, up 29.4% yr/yr -- CIEN's strongest revenue growth in over five years -- and adjusted EPS of $0.67 that handily beat analysts' estimates. Bolstering the bottom line, CIEN repurchased approximately 1.0 mln shares for $81.8 mln during the quarter under its $1 bln three-year authorization, accretively shrinking the share count and enhancing EPS.
- The sharp acceleration in revenue growth was fueled by surging demand for high-speed optical solutions amid the AI boom, with direct cloud provider revenues nearly doubling yr/yr to 40% of total sales and non-telco customers comprising 53% of the mix. This improved trajectory is primarily a function of CIEN's Optical Networking segment, which rocketed 64% to $815.5 mln (66.9% of total revenue), up from $606.8 mln a year ago, as hyperscalers ramped deployments of packet-optical platforms like the 6500 series and Waveserver interconnects critical for AI data center backbones.
- Key drivers include landmark wins such as a major hyperscaler order for 400ZR+ pluggable optics, establishing CEIN as the primary supplier, alongside innovations like the WaveLogic 6 Extreme (WL6e) platform that enabled world-record trials, including 1.6 Tb/s over a single wavelength in South Africa and 1.3 Tb/s across the transatlantic Marea subsea cable.
- While less spectacular than its optical counterpart, the Routing and Switching segment still posted healthy revenue growth of nearly 10% to $125.9 mln (10.3% of total), reflecting steady adoption of coherent IP routing solutions like the 8192 platform and WaveRouter, which integrate high-capacity optics for efficient metro and edge connectivity in AI-driven networks.
- CEO Gary Smith emphasized during the earnings call that CIEN now has visibility well into 2026, providing the confidence to continue expanding operating leverage as the company scales. On that front, CEIN guided for Q4 adjusted gross margin of 42-43%, an improvement from Q3's 41.9% (which dipped due to product mix favoring lower-margin pluggables and reconfigurable line systems), on revenue of $1.24-$1.32 bln -- comfortably exceeding the consensus and implying 25% yr/yr growth at the midpoint.
CIEN's impressive beat-and-raise Q3 performance was propelled by explosive 29% revenue acceleration, led by the Optical Networking segment's 64% surge on AI-fueled hyperscaler demand and WL6e innovations, complemented by healthy Routing and Switching growth amid converged networking tailwinds. The company's diversification to 53% non-telco revenue, robust cash generation, and extended 2026 visibility underscore its entrenched moat in coherent optics, justifying the stock's rally to multi-decade highs.
Hewlett Packard Enterprise higher on Q3 beat, supported by record revenue and Juniper boost (HPE)
Hewlett Packard Enterprise (HPE) is trading nicely higher after reporting its Q3 (Jul) results last night that featured record revenue and the first contribution from its newly closed Juniper Networks acquisition. The IT solutions company beat expectations on both EPS and revenue.
- Revenue rose 18% yr/yr to $9.1 bln, with broad based demand across AI, Networking, and Hybrid Cloud. Excluding Juniper, revenue was still a record, up 11% yr/yr, surpassing the high end of HPE's outlook. ARR increased 75% yr/yr (40% excluding Juniper).
- Networking revenue of $1.7 bln jumped 54% yr/yr, supported by Juniper's July contribution. The networking market continues to recover, while the company is seeing strong demand in campus and branch driven by wired and wireless refresh, SASE, and data center switching. Segment operating profit of $360 mln increased 43% yr/yr, with the new combined networking business (Intelligent Edge and Juniper Networks) accounting for nearly half of consolidated operating profit.
- Server revenue hit an all-time high $4.9 bln, up 16% yr/yr and 21% sequentially, boosted by a large AI system shipment. AI systems revenue of $1.6 bln was also a record, while net new AI system orders totaled $2.1 bln, leaving HPE with a record $3.7 bln AI backlog exiting the quarter.
- Hybrid Cloud revenue grew 11% yr/yr to $1.5 bln, marking a fourth straight quarter of double-digit growth, supported by triple-digit gains for Alletra MP storage.
Briefing.com Analyst Insight
This was a strong quarter for HPE. The company is firing on all cylinders, with Networking now its largest profit contributor, Servers benefiting from AI demand, and Hybrid Cloud extending its growth streak. A key takeaway is HPE's ability to both convert AI backlog into revenue and add new large-scale AI orders, resulting in a record backlog that underscores sustained demand. Also, the Juniper acquisition is already proving accretive, driving scale in networking and boosting profitability despite initial integration costs.
The Big Picture
Last Updated: 05-Sep-25 14:27 ET | Archive
Labor market cracks point to slower growth... and rate cuts
Briefing.com Summary:
*Payroll growth is limping along, flashing warning lights the Fed can't ignore much longer.
*The Treasury market is pricing in a weaker growth outlook.
*The labor market isn't broken, but there are cracks.
The Employment Situation Report is aptly named because the Federal Reserve, the Trump administration, and the U.S. economy have an employment situation on their hands. That situation hit home with the release of the July employment report, and, unfortunately, it didn't get better with an August employment report that also carried another downward revision to June nonfarm payrolls.
The funny thing is, the stock market greeted the August report with open arms initially, only it wasn't angling to hug the report itself so much as it was angling to hug the rate cuts it sees coming.
It was a patented "bad news is good news" reaction. And you knew it was bad news based on the Treasury market's reaction. Yields shot lower across the curve, with participants pricing in rate cuts at the front of the curve and—this may just be the kicker—weaker growth at the back of the curve.
Objectively Speaking
We can be concise with our supposition that this employment report provided another clear picture that the labor market is weakening. The following details make our objective case:
- Nonfarm payrolls were up just 22,000 in August (Briefing.com consensus: 78,000). Nonfarm private payrolls were up only 38,000 (Briefing.com consensus: 90,000).
- The 3-month average for nonfarm payrolls, after accounting for another downward revision to June nonfarm payrolls that showed a loss of 13,000 positions, was a scant 29,000 (versus 82,000 in the same period a year ago).
- Manufacturing payrolls declined by 12,000.
- Professional and business services payrolls declined by 17,000, including a 9,800 decline in temporary help services.
- Persons unemployed for 27 weeks or more accounted for 25.7% of the unemployed versus 24.9% in July. Excluding the COVID crisis, that is the highest since June 2016 and reflects the heightened challenge in finding a new job.
- The U-6 unemployment rate, which accounts for unemployed and underemployed workers, increased to 8.1% from 7.9% in July. Excluding the COVID crisis, that is the highest since October 2017.
- Average hourly earnings growth is decelerating.
- There was no increase in average weekly hours, which held steady at 34.2 for the third straight month.
Briefing.com Analyst Insight
To be fair, the labor market is not weak per se. The objective data also suggest as much, particularly an unemployment rate that sits at 4.3%. Nevertheless, there is a weakening trend that isn't conducive to an acceleration in discretionary spending.
That is most likely why the market is guiding the Federal Reserve to a rate cut. Following the August employment report, the fed funds futures market was quick to price in at least 75 basis points worth of cuts before year-end, whereas before the report the prevailing expectation was for 50 basis points worth of cuts.
The stock market's initial reaction to the report, then, was rooted in the notion that the Fed will be more aggressive in altering its restrictive monetary policy, but at the same time its enthusiasm was tempered by the consideration that the Fed is late to this game and that economic and earnings data will suggest as much in the coming months.
That outcome doesn't match at all with the Trump administration's outlook, and frankly, it hasn't been the stock market's default view either. Both the administration and the stock market could be right, but a sense of urgency is building with respect to the all-important labor market.
Hiring activity has weakened noticeably; average hourly earnings growth on a year-over-year basis is decelerating; and the ranks of the underemployed are rising. It is an employment situation that isn't broken entirely but still needs fixing.
-- Patrick J. O'Hare, Briefing.com |
