U.S. stock index futures and major benchmarks rose on Wednesday as bond yields fell after a softer-than-expected U.S. jobs report. The pullback in interest rates helped lift growth-heavy parts of the market, while several companies surged or fell sharply on quarterly updates and forward guidance.
At the same time, oil prices were steady as markets awaited developments around a potential Iran-Oman agreement affecting shipping through the Strait of Hormuz. Expectations for strong second-quarter earnings also provided a tailwind for equities, with analysts pointing to continued momentum from artificial intelligence-related spending.
Key takeaways
- Stocks rose: The S&P 500 gained 0.61%, the Dow added 0.25%, and the Nasdaq 100 climbed 1.00%; futures also moved higher.
- Primary catalyst: U.S. July nonfarm payrolls unexpectedly declined and wage growth missed expectations, pushing Treasury yields lower.
- Sector winners: Software and cybersecurity stocks led gains after several companies reported results and issued upbeat forecasts.
- Rates implication: Market pricing leaned toward the Federal Reserve having less pressure to raise rates in the near term.
- Energy focus: Oil remained supported by hopes for partial reopening of the Strait of Hormuz, though uncertainty remains around compliance and U.S. sanctions.
What drove the move
Equities extended gains after July jobs data reduced expectations for near-term Federal Reserve action. The report showed U.S. nonfarm payrolls fell by 23,000 versus expectations for an 80,000 increase, marking the first decline in five months. June payrolls were revised downward to a 20,000 increase from the previously reported 57,000.
Wage and labor-market signals also moved in the market’s favor. The July unemployment rate fell by 0.1 percentage point to a 13-month low of 4.1%, while average hourly earnings rose 0.1% month over month and 3.2% year over year—both weaker than consensus expectations.
Rates responded quickly. The 10-year Treasury yield dropped by about 4 basis points to 4.64%, reflecting reduced urgency for additional rate hikes. The reaction also aligned with remarks from St. Louis Fed President Alberto Musalem, who said policymakers should not tolerate higher inflation and emphasized the need for monetary policy to meaningfully restrain underlying inflation.
Market reaction across sectors and themes
Corporate results played a major role in stock-specific trading. Atlassian shares rose by more than 34% after forecasting stronger-than-expected first-quarter revenue. Cybersecurity names rallied as well, led by Cloudflare, which climbed by about 8% following quarterly earnings that beat expectations.
In semiconductors, Microchip Technology surged by more than 12% after forecasting stronger-than-expected net sales for the next quarter. The report-driven rally also lifted other chip-related stocks, including Marvell Technology, KLA Corp, and Analog Devices, alongside gains from NXP Semiconductors, Qualcomm, ASML, Applied Materials, ARM Holdings, and Texas Instruments.
Broader earnings expectations supported the index tone. Bloomberg Intelligence forecasts cited in the original report indicated second-quarter earnings could rise by 23%, close to the 30% jump reported in the first quarter. The report also pointed to AI spending as a key earnings driver, with AI infrastructure stocks expected to contribute nearly 60% of S&P 500 earnings-per-share growth in the quarter. Data referenced in the coverage showed 86% of the 440 S&P 500 companies that had reported second-quarter results had beaten estimates.
Oil holds steady amid Middle East negotiations
September WTI crude oil futures were slightly higher as investors watched an Iran-Oman agreement process related to partial reopening of the Strait of Hormuz. A joint statement from the two countries was reported as under review, with officials suggesting the route could remain active for two to four months—though it would not amount to a full reopening.
Iranian officials linked any normalization to U.S. actions, stating that the lifting of the blockade on Iranian ports would be required. Separately, negotiations reportedly remained “moving along” per President Trump, while the Wall Street Journal cited concerns among Arab negotiators that Iran’s diplomats may struggle to guarantee compliance, given internal pressure from hardline officials.
The coverage also referenced reports about possible restrictions for vessels connected to parties that have caused damage to Iran, a factor that could limit some regional oil export routes even under the proposed reopening framework.
Rates and global context investors are tracking
Treasury trading stayed firmly in focus. September 10-year T-note prices rose, with the yield down roughly 5.5 basis points to 4.623%. The move was attributed to the Fed-friendly payroll report and weaker-than-expected wage growth. Lower crude oil prices were also noted as a supportive factor for T-note prices.
European bonds moved lower as well. The 10-year German bund yield fell by about 2.0 basis points to 3.120%, while the 10-year UK gilt yield dropped by roughly 3.8 basis points to 4.900%. In addition, European data cited in the report showed Germany’s June exports and imports beating expectations, and industrial production rising modestly in line with forecasts.
Equity markets overseas were mixed, with the Euro Stoxx 50 reaching a new all-time high and the Shanghai Composite closing higher, while Japan’s Nikkei-225 ended slightly lower.
Markets also appeared to be pricing central bank risk with less intensity around the next steps. The report stated that investors were discounting a 43% chance of a 25-basis-point rate hike at the next FOMC meeting scheduled for September 15–16, while ECB expectations for the September 10 meeting showed an 84% probability of a 25-basis-point increase.
Notable movers on corporate news
- Atlassian surged after upbeat first-quarter revenue guidance.
- Cloudflare gained on better-than-expected quarterly results.
- Microchip Technology rose sharply after raising its next-quarter net sales outlook.
- Airbnb climbed after reporting second-quarter revenue that beat expectations and upgrading its full-year revenue growth outlook to at least mid-teens.
- Trade Desk fell after revenue and third-quarter guidance came in below consensus.
- Sweetgreen dropped after cutting its full-year outlook tied to customer behavior concerns during a cyclospora outbreak.
Looking ahead, investors will likely focus on whether today’s rate-sensitive reaction persists as additional earnings reports roll in and as the market digests the implications of weaker wage growth. Key upcoming developments include the next FOMC meeting on September 15–16 and further corporate updates scheduled throughout the week.
