The Overnight Report: Record High For S&P500

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This story features ABACUS STORAGE KING, and other companies.
For more info SHARE ANALYSIS: ASK

US markets moved higher on Thursday on the latest earnings reports and inflation data.

The S&P500 closed at a new record high.

The Australian market fell for a second day on Thursday. ASX200 futures are pointing to a soft start to close out the week.

Good Morning,

August Reporting Season in Full Swing

With the August reporting season starting to ramp up, stay in touch with which companies are due to report with the FNArena Calendar https://fnarena.com/index.php/financial-news/calendar/

Some of the names on the calendar today are Abacus Storage King ((ASK)),  Baby Bunting ((BBN)), QBE Insurance ((QBEE)) and IPD Group ((IPG)).

Barrenjoey’s quick response on QBE’s update:

“QBE delivered a headline beat, driven by favourable weather claims and reserve releases. The underlying COR has missed expectations, impacted by Middle East claims and ongoing issues in A&H, along with a higher than expected expense ratio.

“As recently written premium earns through, these items should unwind in 2H26, but that assumes no new issues emerge. The headline does imply minimal (or small) downgrades to consensus forecasts, with enough mess in the result to see the share price down initially and unable to recover the recent weakness into the result.”

Don’t forget the FNArena corporate results monitor to track the earnings reports.

https://fnarena.com/index.php/reporting_season/

Today’s Big Picture, J.L. Bernstein extract

Records, And The Fastest Chip Recovery Since 2020

The S&P500 crossed $7,800 for the first time, the Russell2000 set an all time high, and chip stocks did most of the lifting.

The Philadelphia semiconductor index is about a fifth above its July 29 low and back on the edge of a bull market.

Downturns in that index normally run 54 trading days. This one ran nineteen.

Private Equity Is Bidding For Public Companies Again

Reuters says Silver Lake has spent months in talks to take Workday private, and the stock was halted for volatility before erasing its loss for the year.

Thoma Bravo agreed to buy Accelerant for more than four billion dollars, a 49 percent premium to Wednesday’s close.

Workday spent this year in the red on the worry that AI would eat enterprise software.

Buyout firms read the books before they bid, and today they paid up for the business the market had marked down.

Lower Income Wages Are Growing Fastest Again

Bank of America found that after-tax wage growth for lower income households beat higher income households in July, the first time since December 2024.

The share of households paying their credit card in full each month went up in every income group.

Wall Street has spent two years describing a K shaped economy where the top pulls away from the bottom.

July is the first month those two lines moved back toward each other.

ANZ Bank, Australian Morning Focus extract

US equities rose and bond yields fell sharply across the curve, as data continued to support the case for the Fed remaining on hold this year.

Lower oil prices reinforced that sentiment. The S&P500 was up 0.65%. The EuroStoxx50 ended its session up 0.2%, while the FTSE100 lost -0.6%.

The yield on the US 10y note fell around -3.2bp to 4.65%. WTI dropped -2.2% to US$81.3/bbl.

Gold was weaker at US$4349.4/oz.

US headline PPI was unchanged in July (0.0% m/m), while the core measure rose 0.2% m/m. Both outcomes were below market consensus.

Core goods PPI increased 0.1% m/m, marking the smallest monthly rise since December 2024, while services PPI rose 0.2% m/m.

Portfolio management fees, which feed into the core PCE deflator, rose 6.5% m/m, the largest increase since February 2025. Other components relevant to the core PCE deflator provided some offset.

Airfares fell, while healthcare-related components remained subdued. Overall, the CPI and PPI data point to a rise of around 0.2% m/m in the core PCE deflator in July.

More data support Fed pause:

The softer-than-expected July US PPI report supports the view that the Fed will remain on hold in September. Markets now assign around a 35% probability to a rate hike next month, down from around 60% prior to last week’s labour market report. There are, however, several key data releases still to come.

The July PCE deflator will be released later this month. The July PPI and CPI data point to a rise of around 0.2% m/m in the core PCE deflator, which we think would be sufficient to keep the FOMC on hold in September.

The committee will also receive August CPI and labour market data ahead of its September meeting.

The risk of a rate hike remains if upcoming data suggest a lack of further disinflation progress. However, recent releases have increased our confidence in the view that the Fed will remain on hold for an extended period.

Oil prices to ease as markets adapt to prolonged Hormuz disruption, Oxford Economics

The current pattern of stop-start conflict and fluctuating flows through the Strait of Hormuz reflects the underlying geopolitical stalemate.

Both the US and Iran have strong incentives to end the conflict and reopen the Strait: wars are costly, Iran has lost access to its main trade route, and the US faces domestic pressure from the conflict and sharply higher fuel prices ahead of the midterm elections.

However, substantial differences remain, with neither side willing to compromise on its core demands. Iran wants the right to charge for passage through the Strait, which the US rejects, while the two sides remain divided over Iran’s nuclear program. And as shipping disruption is Iran’s main source of leverage, it is likely to continue.

We therefore think the most likely outcome is a prolonged continuation of the current limbo, rather than either a durable peace deal or renewed full-scale escalation.

Our baseline no longer assumes that a US-Iran agreement leads to a full reopening of the Strait. Instead, we expect repeated periods of escalation and de-escalation, fluctuating Gulf exports, and volatile oil prices, with flows remaining significantly disrupted into 2027.

The recent Houthi threat to Red Sea shipping adds another source of volatility. As the Houthis are aligned with Iran, renewed US-Iran tensions could threaten both Hormuz and the Red Sea at the same time, disrupting Saudi Arabia’s main alternative export route.

Despite this instability, we expect Gulf exports to gradually recover and oil prices to trend lower. This reflects both a gradual easing in lost Gulf supply, as well as the market’s demonstrated resilience to the disruption.

Refined product markets remain comparatively tight, and we expect transport fuels to fall more slowly than crude, keeping upward pressure on inflation. 

Given the significant uncertainty, our baseline sits between a clear downside and upside risk.

A durable peace deal would push prices lower, while renewed escalation could further disrupt regional supply and shipping.

Record earnings are masking the market’s biggest risk, Nigel Green, deVere Group extract

Claims this week that this is the strongest corporate earnings environment in history, with barely a case for caution, are being directly challenged.

As global spending on AI infrastructure heads toward US$650bn this year, corporate earnings hit fresh records, and the S&P500 pushes past 7,700, even as the accounting, financing and valuation assumptions underneath that strength draw mounting scrutiny.

Calling this the best earnings environment in history, and saying that a bear case takes creativity, gets it backwards. The real risk is hiding inside the numbers everyone is celebrating, not outside them.

Start with how these profits are being produced. Hyperscale tech companies are depreciating AI hardware over five to six years. Independent estimates put the real replacement cycle closer to two or three years, given how fast this equipment is being superseded.

Stretch the depreciation schedule and today’s expense shrinks, which flatters today’s profit. If that gap is even half right, a meaningful slice of this year’s record earnings is a timing choice, not organic strength, and the bill still comes due.

“Right now that payback timeline is an assumption rather than a demonstrated fact, and betting a record earnings season on an unproven assumption is not strength, it’s exposure dressed up as confidence.

Layer on how a growing share of this spending is financed. Suppliers of the infrastructure are investing directly in the companies buying it, who are committing spending straight back into the suppliers in return.

This circularity doesn’t automatically signal anything improper, but it does mean a portion of the revenue and profit being applauded right now is the industry partly funding itself, which is far more fragile than the headline growth figures suggest.

There is also a popular argument that persistent scepticism is itself bullish, the theory being that doubters eventually capitulate and buy in, and that capitulation fuels the next leg higher.

I would treat that theory with real suspicion. Scepticism that refuses to break is not evidence it’s misplaced, it may simply mean the sceptics are seeing something the rally has not priced in yet.

Stack stretched valuations on top of all of this and the picture gets harder to defend, not easier.

Multiples of 40 to 55 times revenue are being justified almost entirely by the strength of the earnings story just described.

Pull on any one thread, the depreciation assumptions, the financing circularity, the payback timeline, and the valuation sitting on top of it starts to look far less secure than the headline numbers suggest.

None of this means investors should panic or walk away from the AI trade altogether, because the underlying technology and demand are genuinely real, but the claim that this is the safest, strongest earnings environment in history, with no credible case for caution, simply does not hold up.

Corporate news in Australia:

• EQT Infrastructure has offered $9.4bn to acquire Cleanaway Waste Management ((CWY)), with the board intending to recommend the $3.13 per share takeover
• FleetPartners ((FPR)) has granted SG Fleet ((SGF)), Element and Orix due diligence access
• EQT is in advanced talks to acquire a controlling stake in Melbourne Storm, marking the private equity group’s entry into NRL club ownership
• Locality Planning Energy Holdings ((LPE)) has agreed to acquire 100% of PowerHub for up to $5.803m, expanding its embedded energy network into Tasmania and South Australia
• Eureka Group ((EGH)) will acquire Mandurah Coastal Holiday Park in WA for $18.4m
• Austco Healthcare ((AHC)) has completed its acquisition of South Australian reseller Medical Communications Systems for $2.24m upfront
• PSP Investments has hired Barrenjoey to assess a potential bid for Inghams Group ((ING))
• Macquarie Asset Management ((MQG)) is considering a bid for Stack Infrastructure’s APAC data centres and has engaged UBS to assess the business
• Bell Potter expects a stronger pipeline of ASX IPOs, with a growing number of companies, including Winning Group, preparing to list after a slow start to 2026
• Li-FT Power ((LFT)) has completed a CA$23m bought deal public share offering to fund Renard care and maintenance costs and working capital
• WA Kaolin ((WAK)) has appointed voluntary administrators to pursue a recapitalisation or asset sale following financial difficulties

On the calendar today:

-NZ July Mfg PMI

-NZ June Net migration

-AU RBA Bullock testimony

-CH 2Q Current A/C

-EZ 2Q Employment

-EZ 2Q GDP

-EZ June Trade Bal

-US Aug Uni Mich sentiment

-US July retail sales

-BABY BUNTING GROUP LIMITED ((BBN)) FY26 earnings report

-DICKER DATA LIMITED ((DDR)) ex-div 11.50c (100%)

-QBE INSURANCE GROUP LIMITED ((QBE)) 1HFY26 earnings report

-VIVA LEISURE LIMITED ((VVA)) FY26 earnings report

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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