Market Snapshot

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📉 Banana Bits

• Private hiring stalls as U.S. private employers add just 38,000 jobs in August, the weakest since January.

• Beige Book stays cautious as growth remains modest, hiring slows, and price pressures persist.

• Treasury yields stay near multi-year highs as inflation fears and heavy government borrowing pressure bonds.

• Google avoids an ad-tech breakup after a federal judge rejects forced AdX divestiture.

• Uber cuts 10% of staff as roughly 3,300 jobs go and management ranks are trimmed.

Market News

Stocks Bounce, Yields Stay High

The S&P 500 snapped a three-day losing streak on Wednesday, rising 0.46% to 7,666.60. The Dow added 295 points (0.56%) to 53,061.95, the Nasdaq gained 0.45% to 26,217.83, and the Russell 2000 led with a 1.13% advance. The VIX fell nearly 7% to 15.24. Technology and financials, the two groups hit hardest by the recent jumps in yields, did most of the recovering.

The bounce came despite another round of U.S.-Iran exchanges. U.S. forces struck IRGC radar and missile sites along Iran’s southern coast on Tuesday in what one official called a “mow the lawn” operation to protect shipping in the Strait of Hormuz, and Iran answered with missiles and drones aimed at U.S. facilities in Jordan, Kuwait, Bahrain and Iraqi Kurdistan. President Trump warned Iran would be hit “at a much harder and higher level” if it kept retaliating. Brent traded near $95 and WTI near $90, both around six-week highs, though Energy Secretary Chris Wright noted 17 million barrels moved through Hormuz on Monday, the most in a single day since the war began in February. 

For equities, the bigger story is still the bond market. The 10-year Treasury yield touched 4.81% intraday, its highest since November 2023, before finishing at 4.79%, while the 30-year held at 5.27%. The driver is oil-fueled inflation risk layered on a Fed that has turned hawkish. Chair Kevin Warsh's Jackson Hole speech, plus three dissents in favor of a hike at July's 9-3 hold, have futures pricing roughly a 60% chance of a 25 bp increase at the September 15-16 meeting, which would lift the target range from 3.50%-3.75%. July CPI ran 3.4% year over year, with energy up 14.7%.

Wednesday's data didn't make that call any easier. ADP reported just 38,000 private jobs added in August, below the 47,000 expected and the weakest since January. The Beige Book described modest growth, only slight employment gains and moderate price increases in eight of twelve districts, with contacts citing "heightened uncertainty surrounding the effects of higher energy prices, policy, and international conflict." Friday's jobs report is expected to show 58,000 payrolls added and a 4.1% unemployment rate after July's loss of 23,000 jobs.

Under the surface, the AI trade did the heavy lifting. Dell surged 15.8% on record AI server orders, Nvidia rose 3.2% on a Bloomberg report that it is nearing a $14 billion deal for Hugging Face, and Oracle (+3.1%) and Meta (+2.5%) rallied. Software and cybersecurity went the other way: Palo Alto Networks fell 9.3% despite strong results as investors questioned the pace of organic growth, MongoDB dropped 13.5% on a soft outlook, and CrowdStrike, Fortinet and Datadog fell between 4.5% and 6.5% in sympathy.

Peel Take: Here’s what we keep coming back to. The stock market rose half a percent on a day the U.S. and Iran were trading missiles, the 10-year touched 4.8%, and private hiring slowed to just 38,000. Investors are still willing to look through a difficult macro backdrop when corporate results are strong enough, and Dell’s AI numbers certainly were. But the bond market is sending a different memo, and we'd read it. A Fed hike while private hiring is this soft is an unusual setup. Friday's payrolls probably won't change the Fed's mind (BofA says as much), because it's energy doing the inflating, not wages. So stay selective.

What's Ripe

Dell Technologies (DELL) 15.81% 

• Fiscal Q2 revenue came in at $47.0B, up 58% year over year and well above the roughly $44.9B consensus; non-GAAP EPS of $7.04 tripled from a year ago.

• AI server orders hit a record $60.9B in the quarter, pushing the AI backlog to $95B, while AI server revenue doubled to $16.4B.

• Dell raised its full-year revenue guide by $25B to $192B (from $167B) and now targets $74B in AI server revenue, up 200% year over year and above its previous $60B forecast. Q3 guide: $49.0B in revenue and $6.50 in EPS.

• Peel Take: Dell used to be the company your dad’s office bought laptops from. It is now, functionally, a utility for the AI buildout, and the buildout does not care about your priors. A $95B AI-server backlog is equivalent to roughly two quarters of Dell’s current company-wide quarterly revenue. The caveats are the ones that always apply to hardware: this is pass-though-ish revenue with hardware margins, orders are lumpy, and the customer list is short and powerful.

Reddit (RDDT) 9.31% 

• Baird's Colin Sebastian argued the stock already reflects a near-worst-case outcome for its AI data-licensing renewals, with his base and bull cases implying $10 and $20 per share of upside. He kept a Neutral rating and a $185 target.

• The Google ($60M a year) and OpenAI ($70M a year) contracts, both signed in 2024, expire next year, and CEO Steve Huffman has signaled higher fees and usage-based pricing on renewal.

• Even after Wednesday's pop, shares sit about 44% below their 52-week high of $282.95 and were down 37% year to date coming into the session.

• Peel Take: A 9% rally on a Neutral rating is less a vote of confidence than a confession of how washed out the stock got. But the setup is interesting. Reddit's 26 billion posts and comments are the closest thing on the internet to a corpus of actual humans talking, which happens to be exactly what model builders are running out of.

What's Rotten

Credo Technology (CRDO) 20.04%

• Fiscal Q1 revenue of $479M rose 115% year over year and beat the $471.8M consensus; adjusted EPS of $1.20 topped the $1.17 estimate.

• GAAP gross margin slipped to 64.5% from 68.2% in the prior quarter, and Q2 guidance implied further compression. The Q2 revenue guide is $525M-$535M.

• Management still expects revenue growth above 85% this fiscal year and optical revenue above $600M; shares had gained roughly 44% year to date heading into the print.

• Peel Take: Twenty percent, for a 370-basis-point margin dip, on a quarter that grew 115%. Welcome to the AI trade in September 2026, where growth is assumed and margins are the entire story. The uncomfortable read is that Credo's customers (a handful of hyperscalers) have the leverage, and leverage shows up in gross margin first.The generous read is that mix is shifting as optical ramps and the market just shot the messenger. We lean toward the second, but we're not catching this knife on day one.

MongoDB (MDB) 13.54%

• Q2 revenue grew 30% to $771.8M, beating the roughly $733M consensus, and adjusted EPS of $1.90 topped the $1.61 estimate; Atlas revenue rose about 29% to $565.9M.

• The full-year revenue guide was raised to $2.99B-$3.03B, while Q3 guidance of $756M-$761M implies growth slowing to roughly 20%-21%.

• Stock-based compensation totaled $153M, equivalent to roughly 94% of reported non-GAAP net income, while RBC cut its price target to $465 from $515. At Wednesday's close, the stock traded at roughly 58x the midpoint of MongoDB's FY27 adjusted EPS guidance.

• Peel Take: MongoDB beat the headline estimates, raised the year, and lost 13.5%. Palo Alto did a version of the same thing (-9.3%) on the same day. The software tape is a hostage to the second derivative right now: 30% growth is great; following it with a Q3 guide implying roughly 20%-21% growth is apparently a sell. Investors also wanted Atlas growth to accelerate and instead got another quarter around 29%. At roughly 58x adjusted earnings, the market doesn't grade on a curve.

🧠 Technical Trip

Interview Q&A from IMC Trading

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🦈 Deal Dispatch

M&A, IPOs, And Other Notable Transactions

• Nvidia nears a $14B Hugging Face deal as Bloomberg reports advanced talks around a $12.9B acquisition plus roughly $1B in employee retention.

• Delivery Hero backs Uber’s $15B takeover bid as its boards recommend shareholders approve the deal.

• SB Energy files for an estimated $5B Nasdaq IPO as the SoftBank-backed AI and data-center infrastructure developer plans to list under ticker SBE.

• Lottomatica to buy Blackstone-backed Cirsa in a €2.8B all-share deal as Cirsa holders get 0.668 Lottomatica shares per share at a 21% premium, with Blackstone owning about 24% of the combined group.

Student Success Corner

Banana Brain Teaser

Previous

A company has $500 million of revenue and a 20% EBITDA margin. If revenue grows 10% while the EBITDA margin stays constant, what is the new EBITDA?

Answer: $110 million

Today

A portfolio is 70% invested in stocks returning 12% and 30% in bonds returning 4%. What is the portfolio return?

How Would You Rate Today's Peel?

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

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