🕟 Higher bar

Good Afternoon. On this day in 1993, NASA’s Galileo spacecraft flew within roughly 1,500 miles of asteroid Ida while traveling toward Jupiter.

Scientists didn’t recognize the mission’s biggest surprise until months later: the images contained Dactyl, the first confirmed moon orbiting an asteroid. The encounter was a useful reminder that the most important detail isn’t always the first one people notice.

Markets had their own second look today. Federal Reserve Chair Kevin Warsh kept the door open to higher rates if inflation doesn’t improve fast enough, pushing bond yields higher and stocks modestly lower. Underneath that reaction, earnings from chip, software, beauty, and apparel companies showed why investors now need more than growth—they need evidence that demand, margins, and guidance can hold together.

—Rosie, Wyatt, Evan & Conor

🔥 What’s Hot: 🔥

🥶 What’s Not: 🥶

🔢 Big number: 4.9% — That’s roughly where the 10-year Treasury yield moved after the Fed chair stressed that inflation remains above target, making borrowing costs the day’s most important market signal.

Federal Reserve Chair Kevin Warsh said policymakers need to be confident that inflation is moving toward 2% clearly and fast enough, or they still have work to do. He didn’t promise an immediate rate increase, but the message was firm enough to lift Treasury yields and pull major stock indexes modestly lower.

The news: Warsh argued that several measures still show inflation running above the Fed’s goal even as artificial intelligence, payment technology, and changing supply chains complicate the outlook. The distinction matters: he committed to a policy discipline instead of a specific decision, preserving room to react to new data while warning markets not to assume the next move must be easier.

Bottom line: Investors shouldn’t treat a single speech as a rate forecast, but they can prepare for a higher burden of proof before policy turns supportive. Longer-term yields will keep influencing mortgages, corporate borrowing, and stock valuations, so companies with distant profits or heavy refinancing needs have less room for execution mistakes.

Source: Federal Reserve

Marvell Technology reported record quarterly revenue of $2.74 billion, up 37% from a year earlier, as data-center sales increased 46%. The result topped the midpoint of management’s prior guidance, but expectations had risen quickly after Nvidia’s report and new custom-chip optimism.

The news: Cash flow from operations reached $606 million, and non-GAAP gross margin was 58.9%. Management guided the next quarter to roughly $3.15 billion of revenue, which would mark another step up. Yet the company’s opportunity in custom accelerators, connectivity, and optical components now carries an unusually demanding valuation test: strong growth has to keep arriving without sacrificing profitability.

Big picture: AI infrastructure isn’t one market, and Nvidia’s strength doesn’t guarantee identical economics for every supplier. Marvell’s record quarter proves demand is real across more of the stack, but investors should watch how much incremental revenue converts into cash and whether customer concentration makes future quarters less predictable.

Source: Marvell Technology

Ulta Beauty raised its full-year outlook after quarterly sales grew 8.9% to $3.04 billion and comparable sales increased 3.8%. Operating income rose 10.1%, showing that the beauty retailer didn’t have to trade away profit to keep customers visiting and spending.

The news: Higher transactions and average ticket both contributed to comparable growth, while gross margin held near 39.1%. Ulta now expects annual sales growth of 6.7%–7.2% and lifted its planned share repurchases to $1.8 billion. The stronger forecast suggests product launches, loyalty, and store experience are supporting demand even when shoppers aren’t spending freely elsewhere.

What’s next: Beauty can be resilient because small indulgences fit into tighter household budgets, but that doesn’t make the category automatic. Ulta still has to protect traffic while investing in convenience and new stores. Watch whether comparable growth remains balanced between visits and ticket instead of relying on price alone.

Source: Ulta Beauty

Gap reported quarterly net sales down 2% and comparable sales down 1%, yet it exceeded its own operating-margin expectations and raised the full-year earnings outlook. That split tells a useful retail story: demand wasn’t strong, but inventory and expense control kept a modest sales miss from becoming a larger profit problem.

The news: Management credited gross-margin strength and operating discipline for the better bottom line, while returning $726 million to shareholders through repurchases and dividends during the first half. It’s also named new leadership for Old Navy, its largest brand, adding an operating transition to a period when consumers are already making careful apparel choices.

Bottom line: Cost control can buy time, but a retailer can’t shrink its way to lasting relevance. Gap needs Old Navy and its other brands to create more full-price demand while keeping promotions and inventory contained. The higher earnings forecast is encouraging; the next cleaner proof point will be positive comparable sales that don’t require margin concessions.

Source: Gap

Workday’s quarterly revenue rose 12.8% to $2.65 billion, while subscription revenue increased 13.9%. More important for a mature software platform, non-GAAP operating margin expanded to 31.1% from 29.0%, showing that growth didn’t require expenses to rise at the same pace.

The news: Twelve-month subscription backlog reached $9.03 billion, up 14.2%, and total subscription backlog was $27.4 billion. Workday lifted its full-year non-GAAP margin outlook to 31.0%, although operating cash flow and free cash flow didn’t match a year earlier. That combination gives investors a strong contracted-demand signal alongside a cash-conversion item worth monitoring.

Big picture: Enterprise AI becomes valuable when it improves workflows customers already pay to run, not when it sits beside them as an experiment. Workday’s backlog and margin suggest its products remain embedded, but cash flow needs to follow. If collections and investment timing normalize, the company can show that AI features deepen operating leverage rather than merely decorate the sales pitch.

Source: Workday

Canada’s economy grew at a 3.3% annualized rate in the second quarter, its fastest pace in more than three years, while real GDP per person increased 1.0%. Exports, residential investment, and business spending helped turn a fragile start to the year into a much stronger quarter.

The news: Exports increased 3.6%, led by a rebound in passenger cars and light trucks, while June output rose 0.3%. Earlier first-quarter data were also revised higher, so the economy isn’t carrying the technical-recession narrative that had surrounded it. Household income grew faster than spending, lifting the saving rate and giving consumers a little more cushion.

What’s next: One strong quarter doesn’t erase trade uncertainty, especially when vehicle production can create large swings. The more durable signal would be continued gains in business investment and income without a renewed inflation problem. For borrowers, better growth may also give the Bank of Canada less urgency to cut rates quickly.

Source: Statistics Canada

Economic sentiment improved in both the European Union and euro area during August, with the euro-area indicator rising 1.3 points to 98.4. Employment expectations also increased, but they haven’t pushed either measure above its long-run average of 100.

The news: The improvement suggests businesses and households are becoming less pessimistic, but consumer confidence remained below its historical norm. That gap matters because stronger hiring expectations can support income before households feel comfortable increasing discretionary spending. It’s progress, though it isn’t yet a broad demand surge.

Bottom line: Europe’s recovery can become more self-sustaining if better employment expectations translate into consumption and corporate investment. Businesses should still plan around a gradual improvement, not a sudden boom. Confidence below average means pricing power and inventory commitments need to remain measured until orders confirm the survey’s direction.

Source: European Commission

Tokyo’s headline consumer prices rose 1.9% from a year earlier in August, while the measure excluding fresh food increased 1.8%. A narrower gauge excluding both fresh food and energy rose 2.0%, showing that underlying price pressure hasn’t disappeared even as energy costs eased.

The news: Food, rent, transportation, and services contributed to the increase, while lower electricity, gas, and gasoline prices softened the headline. Tokyo’s figures arrive before the national report and are closely watched for direction. The latest release also moved Japan’s consumer-price series to a new 2025 base, improving the weights used to reflect current household spending.

Big picture: The Bank of Japan doesn’t have a simple signal. Energy relief argues for patience, but firmer service and housing costs keep another rate increase possible. Companies exposed to the yen or Japanese borrowing costs should prepare for gradual normalization and avoid assuming that headline inflation just below target has ended the policy debate.

Source: Japan Statistics Bureau

Q: How do you know if a joke is a dad joke?

A: It becomes apparent.

Reinvestment risk: the chance that cash from a maturing investment must be reinvested at a less attractive rate. In a sentence: Today’s yield jump doesn’t eliminate reinvestment risk, because bondholders can’t know what rates will be available when future principal or interest payments arrive.

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