Market Snapshot

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📉 Banana Bits

• S&P 500 and Nasdaq close at record highs as yields ease and investors turn toward earnings

• U.S. trade deficit widens to $105.6 billion as imports hit a record high

• U.S. software stocks hit fresh 2026 highs as AI disruption fears ease

• FICO cuts 15% of its workforce as part of an AI-driven restructuring

• AMD plans to substantially increase chip supply in 2027 as AI demand grows

Market News

Stocks Reach Records Ahead of Earnings

Stocks kept moving higher Tuesday as investors got some relief from the bond and oil markets. The S&P 500 rose 0.58% to a new record close, while the Nasdaq gained 0.45% for another record close. The Dow also climbed 0.49%.

Treasury yields finally pulled back after Monday’s bond-market selloff, with the 10-year falling about 3 basis points to 5.28% after hitting a 24-year high. Oil also stabilized after falling sharply earlier in the session. Brent briefly dropped below $100 before settling around $100.60, while WTI finished nearly flat at $89.44. The calmer moves in oil and yields helped ease some of the inflation worries that have been hanging over the market.

AI and chip stocks were once again a big part of the rally. Marvell gained 5.8% after raising its 2028 revenue forecast on strong data-center demand, while AMD rose 2.8% after CEO Lisa Su said the company plans to substantially increase chip supply in 2027. Nvidia continued trading near record levels and a nearly $6 trillion valuation.

There were also some big individual winners outside mega-cap tech. Constellation Energy jumped 12.3% after Google entered into a 3,590-megawatt power deal with the company, while Option Care Health surged 32.7% after agreeing to a $5.8 billion take-private deal with CD&R and McKesson.

Economic data also showed the U.S. trade deficit widened 13.7% in August as imports hit a record high, while capital-goods imports rose 4.4%. Even so, markets are now pricing only about a 19% chance of another Fed hike this month, down from roughly 51% a week ago.

Investors are also starting to turn their attention toward third-quarter earnings, which kick off in earnest next week. Analysts expect S&P 500 earnings to rise 30.6% from a year earlier, with especially strong growth expected from energy and technology companies.

That relief was already starting to fade Wednesday morning. The 10-year Treasury yield moved back above 5.30% earlier in the session, while Brent climbed back above $101 and WTI above $90 as investors weighed fresh supply risks. Markets are also looking ahead to the Fed’s latest meeting minutes and a key 10-year Treasury auction.

Peel Take: Stocks finally got a little help from the two things that have been causing the most trouble lately: oil and bonds. That relief didn’t last long, with yields and crude already moving higher again Wednesday morning. Still, investors clearly aren't tired of the AI trade yet, and now earnings will have to prove all that excitement is justified. If companies deliver, this rally could keep going; if not, record-high stock prices don't leave much room for disappointment.

What's Ripe

Constellation Energy (CEG) 12.25% 

• Constellation jumped 12.25% after Google agreed to buy 3,590 megawatts of power from the company, including 890 MW of new nuclear capacity under a 20-year agreement.

• Google also signed a separate 15-year agreement for another 2,700 MW, while Constellation plans more than $4.3 billion of new investment to expand capacity across its fleet.

• Peel Take: AI companies need chips, but those chips need a whole lot of electricity. Google’s massive agreement gives Constellation years of revenue visibility and reinforces the idea that nuclear power could be one of the biggest winners from the AI buildout. Apparently the AI trade has officially made its way from chips to power plants.

Marvell Technology (MRVL) 5.81% 

• Marvell jumped 5.81% after raising its fiscal 2028 revenue forecast to about $20 billion, above Wall Street expectations, as demand for its AI and data-center chips continues to grow.

• The company also laid out a much bigger long-term target, projecting $70 billion to $90 billion of revenue by fiscal 2031 as custom AI chips and networking become larger parts of the business.

• Peel Take: Nvidia may still own the AI spotlight, but Marvell is showing there’s plenty of money to be made supplying the infrastructure around it. Raising the near-term outlook was good enough, but putting a potential $70–90 billion revenue target on the board gave investors an even bigger number to get excited about.

What's Rotten

Seagate Technology (STX) 9.18%

• Seagate fell 9.18% after reports that it is competing with Toshiba to acquire TDK’s magnetic-head business, a key supplier to the hard-drive industry.

• The news added to concerns over Toshiba’s plans to significantly expand hard-drive production capacity, which could eventually put pressure on an industry that has benefited from tight supply and strong AI-driven storage demand.

• Peel Take: Seagate has been one of the biggest winners of the AI storage boom, so investors are hypersensitive to anything that could change the industry’s supply picture. Toshiba’s expansion plans were already making investors nervous, and now a multibillion-dollar fight over a key component supplier is adding another layer of uncertainty.

C.H. Robinson Worldwide (CHRW) 3.95%

• C.H. Robinson fell for a second straight day as investors continued digesting its $5.8 billion cash-and-stock deal to acquire freight broker RXO. The stock had already dropped sharply Monday following the announcement.

• Bank of America and Evercore lowered their price targets Tuesday, with investors focused on dilution, the cost and timing of the deal, and the additional debt needed to fund the acquisition.

• Peel Take: Wall Street isn’t necessarily saying the RXO deal makes no sense. It’s questioning the price of getting it done. C.H. Robinson sees scale, synergies, and a stronger logistics network, but investors see more debt, dilution, and a paused buyback before those benefits arrive.

🧠 Technical Trip

Interview Q&A from Goldman Sachs

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🦈 Deal Dispatch

M&A, IPOs, And Other Notable Transactions

• Uber agrees to acquire ezCater for $2.3 billion in an all-cash deal expected to close in the coming months, subject to regulatory approval

• McKesson and CD&R agree to take Option Care Health private for $5.8 billion, including debt, with the deal expected to close in the first half of 2027.

• SAP agrees to acquire workforce-data firm TechWolf for an undisclosed amount, with closing expected in the fourth quarter subject to regulatory approval.

• Nvidia-backed Lambda is reportedly raising up to $4 billion at a $14.5 billion pre-money valuation ahead of a potential 2027 IPO, with Blackstone and Coatue leading the round.

Student Success Corner

Banana Brain Teaser

Previous

A PE fund buys a company for $500 million using 60% debt. Five years later, it sells the company for $700 million and all debt has been repaid. What is the approximate MOIC on the fund’s original equity investment?

Answer: 3.5x MOIC

Today

A company increases annual revenue from $500 million to $600 million. Accounts receivable historically equals 10% of revenue. Assuming the ratio stays constant, how much additional cash is tied up in receivables?

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Happy Investing,
Elie, Mitchell, Fernanda, Nick, & Patrick

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