Market Close
All major U.S. indices ended lower. The S&P 500 (SPX) fell close to 0.6% to 7,591.79. The NASDAQ dropped more than 1% to 29,103.51. The Dow fell 0.6%, shedding more than 300 points, to 52,644.6. The Russell 2000 lost more than 1% to 2,899.995.
By sector: technology down 1.4%. Communication services rose. Consumer discretionary fell; consumer staples closed green. Utilities down 1%, real estate down close to 1%. Home sales fell despite supply hitting a record. Industrials lower, materials down 1.25%. Financials down a third of a percent. Energy down despite WTI oil at $102.75. Healthcare down half a percent.
Mega-cap tech was mixed. Apple (AAPL) rose 3.5% on a good reaction to its foldable phone release, AI updates, and other products from its "surprise and shine" event. Amazon (AMZN) fractionally lower. Alphabet (GOOGL) up 0.6%. Microsoft (MSFT) up. Meta (META) down, giving back some gains from the prior day after announcing its Muse AI agent. Nvidia (NVDA) closed 2.3% lower.
Yields, the Dollar, and Technicals
Weakness continued on geopolitical risk and the bond market. Yields kept moving higher. The session looked similar to the prior day: the market faded from a key moving average, the volume weighted average price (VWAP), which acted as resistance overnight. Futures used that level as support, then started failing near the equity open as news headlines hit.
Until a technical trend shift shows up, staying cautious makes sense. The market is stuck in consolidation with heavy selling under the surface, especially in defensive and less-loved sectors. In the morning, about 95% of E-mini S&P 500 volume was on down ticks, and that did not improve much through the day. The trend is turning down, but the S&P 500 looks the best of the three major indices tracked daily.
Some traders keep an eye on 7,100 to the downside for the S&P. The first key level is 7,500, the negative gamma exposure area for the next couple of weeks through September options expiration - a quarterly event that moves markets, with institutional traders readjusting into December contracts. The market held a key support area but faced heavy selling at resistance near the VWAP. A move to 7,100 would be a big pullback and lines up with other technical trends.
A chart of the 10-year Treasury against the dollar shows a breakdown in their usual correlation. Normally the dollar and 10-year rate move together. Now they are diverging: the dollar is moving lower while the 10-year moves higher. That divergence usually lasts about 3 weeks, but it has run about a month and a half, almost two months. This suggests more to digest or more pullback before moving higher. The 10-year is near 4.96%, a level not seen since 2023.
The Fed meets next week and could break the divergence.
What will it take to break the divergence? Either the Fed signals it is willing to raise rates or take other quantitative tightening (QT) action - rates are not the only lever the Fed controls - or the Treasury backs off some of its buyback program talk. A lower dollar with higher yields makes it more expensive for consumers to spend and for the government to finance its debt, plus equities are falling. All three moving toward weakness in the same direction is something you do not want to see for long.
Adobe (ADBE)
Third quarter results:
- EPS $6.13 vs. $6.08 estimate - a beat.
- Revenue $6.76 billion vs. $6.7 billion estimate - a slight beat.
- Full-year adjusted EPS guidance raised to $24.45-$24.50 from $24.35-$24.45, a 5-cent increase.
- Full-year revenue guidance raised to $26.58-$26.63 billion, a very small bump.
- Fourth quarter EPS guidance $6.30-$6.35, at the low end of the $6.30 estimate.
- Remaining performance obligations (RPO) $22.16 billion, missing estimates - likely the reason shares fell about 1.3%.
- AI-first ARR grew more than 150% year-over-year, exceeding $650 million.
- 1 billion monthly active users across creativity and productivity products.
A new CEO starts December 1st, announced last week to a poor reaction because the street wanted an outside hire. The stock move was small despite the significant RPO miss.
This is a mixed report against a very low bar - over roughly the last two years Adobe has missed on the top or bottom line or given weaker guidance. There is a small upward guidance revision alongside the RPO miss. Adobe says it is trying to re-energize its premium strategy. On the call, the market wants to hear how Adobe will make money beyond subscriptions - whether it can place ads or build a more diversified model - because many free AI products now do what Adobe offers as well or better. The stock meandering around current levels is not shocking.
On ARR: in nominal terms it is not a big mover on overall revenue yet, more icing on the cake. If Adobe outlines a real strategy to expand that metric, it could help. Much is already baked into the stock. Technically, holding these levels is a win for shareholders because the stock has bounced off lows and made higher lows, so it is trying to regroup. If there is no big breakdown - meaning 5%, 7% or more down by the next morning - that counts as a win given recent post-earnings reactions. Options traders priced in about a 7.1% move in either direction.
What does management need to say on the call? Tone may matter more here since guidance numbers are already out. Management needs to say it is not losing subscriptions or seats, especially in enterprise, and is in fact seeing that reaccelerate, with room to recover revenue through more pricing power. The big concern: an economic slowdown plus new competition would mean less seat usage and pressure on the top line - similar to the fear around Microsoft three to four quarters ago, which Microsoft overcame with new products and a re-energized portfolio. Adobe has to do the same.
Oracle (ORCL)
Oracle reported about 5 minutes late. First quarter results:
- Revenue $19.35 billion vs. $19.13 billion estimate - a clean beat.
- EPS $1.92 vs. $1.75 estimate - a clean beat.
- Operating income $8.15 billion vs. $7.81 billion expected.
- Operating margins 42%, better than expected.
- Cloud infrastructure revenue $7.39 billion, better than expected.
- Software support revenue $4.9 billion - a beat.
- Software licensing revenue $655 million vs. $718.8 million consensus - a slight miss.
- Second quarter (current quarter) EPS guidance $1.85-$1.93, in line with the ~$1.90 ($1.89) consensus, perhaps a touch low at the midpoint.
- Full-year EPS and revenue estimates raised slightly above consensus.
- Delivered 850 megawatts of additional data center capacity in Q1.
Shares rose more than 9% initially, settling around 5%-5.5% gains. There had long been questions about Oracle's capex, debt, and free cash flow.
The big risk is another shelf offering or a capital raise to fund more capex. If management says it is done with that on the call, the stock could keep running. The $200 calls across the next three months of monthly expirations drew a lot of attention today, and the call could push the stock over the top. The softness in software - the second quarter of software weakness - needs explanation.
Oracle has a working relationship with OpenAI, which announced a personal AI agent today alongside Meta's; Oracle may be part of that, and mentioning it on the call could help. What the market does not want to hear is any more capital raises this quarter, or Oracle pulling back its future capex expectations. A capex guidance update is expected on the conference call, not in the report, and could be a major mover.
