Markets Hit Records
The S&P 500 and Russell 2000 reached all-time highs. The S&P 500 and NASDAQ 100 are on three-week winning streaks after strong numbers over the past three weeks, making for a solid August. Several forces feed this risk-on move. Inflation is falling, with year-over-year CPI and PPI data starting to come in, which may point to a trend. Interest rates are easing, with the 10-year yield near 4.65%, back below the 4.7% level, which supports stocks. Oil is up about 5.8% for the week but starting to steady, adding some support.
The biggest driver has been earnings season. Over 90% of the S&P 500 has reported, with a large beat rate on both revenue and EPS. Year-over-year growth tops 50% per Factset. Even taking out Amazon (AMZN) and Alphabet (GOOGL), two big contributors, growth is still about 32% year over year - a blowout season. The NASDAQ 100 sits just over 2% below its record high, and the Dow is off its record by just over 1.5%.
The main caveat is geopolitics. Tensions are rising, which could add volatility to crude and the broader market. Weekend talk may cover more economic sanctions on Iran. A blockade remains in place and traffic through the Strait of Hormuz is starting to pick up.
Applied Materials (AMAT) Pulls Back
Applied Materials (AMAT) had risen 108% this year going into its print, then slipped below its 50-day moving average, even after already pulling back about 28% from recent highs before the report. The pattern repeats with big tech names that made large parabolic runs: they report good earnings, but the good news is already priced in. AMAT beat on EPS and revenue and guided higher for the current year and fiscal 2027.
Semiconductor systems revenue grew to $7.04 billion from $5.56 billion a year earlier. DRAM rose to about 26% of sales versus 22% a year ago, and DRAM memory is the main growth driver ahead. Recent Taiwan Semi (TSM) figures keep growing over 30% year over year on a month-over-month read, and its backlog keeps rising. AMAT, Lam Research (LRCX), and KLAC (KLAC) supply that demand. Hyperscalers are not cutting capex spend, which is good for the whole industry. A moderate pullback after this year's runup is not surprising.
SanDisk (SNDK) Upgrades
SanDisk (SNDK) rose on sell-side calls. At its investor day, the CFO said adjusted gross margins stay around 80%, matching the year-ago period, and laid out a multi-year framework tied to committed customer volumes. Under its new business model, SanDisk has signed deals with eight customers, including three US hyperscalers, covering about half of its storage output for 2027 into 2028.
This sector used to be boom and bust. That has shifted; NAND has become a commodity-based supply-and-demand market. Firms including Micron (MU), SanDisk, Western Digital (WDC), and Seagate (STX) are extending guidance out to 2028, 2029, and even 2030 for Micron, as the AI infrastructure buildout continues at this pace. On price targets: Morgan Stanley (MS) set $1,750, citing SanDisk continuing to lead the industry. JP Morgan (JPM) set $2,250, initiating with an overweight rating after lifting a restriction tied to SanDisk's spin-off from Western Digital. Wells Fargo (WFC) raised its target to $1,550 from $1,400 and keeps a hold rating. The open question is whether this is a structural change into growth momentum, given the parabolic move already made.
Reddit (RDDT) Joins the S&P 500
Reddit (RDDT) climbed as much as 12% as it joins the S&P 500, after the Avalon Bay (AVB) and Equity Residential (EQR) deal cleared the way. Index funds now have to buy the shares, which drives the pop. Shares start trading on the 18th, replacing Avalon Bay Communities in the index.
Its last quarter was choppy. Late-July results showed a straight quarter of sales growth topping 60%, but the stock fell after the company said search referrals were choppy, raising concern about its reliance on Google/Alphabet (GOOGL). Index inclusion helps shareholders through forced fund buying, but it tends to be isolated, short-term volatility rather than a straight move up. It does bring institutional support.
