Newsletter · · Ashutosh Agarwal

Stocks Freeze Ahead of Nvidia While the AI Plumbing Runs Hot - Daily Market Wrap - Wednesday, August 26, 2026

Daily Market Wrap for Wednesday, August 26, 2026: the headline indices barely moved as the whole Street waited on Nvidia's after-the-close print, while the optical and networking suppliers that feed the AI buildout ripped, retail earnings whipsawed on tariff refunds, and a core PCE revision up to 3.6% kept the Fed boxed in before Jackson Hole.

Daily Market Wrap

Wednesday, August 26, 2026: Stocks Freeze Ahead of Nvidia While the AI Plumbing Runs Hot

Stocks barely moved as the whole market waited on Nvidia's after-the-close earnings. Underneath the flat tape, the optical and networking names that feed the AI buildout ripped, retail earnings whipsawed on tariff refunds, and a sticky inflation reading kept the Fed boxed in heading into Jackson Hole.

Wednesday, August 26, 2026, US market close

The headline indices did almost nothing today, and that stillness was the story. Every desk on the Street was sitting on its hands ahead of Nvidia's quarterly report, due after the closing bell. When the biggest company on the planet reports in the same hour you are reading this, you do not take big swings beforehand.

Where things closed:

  • S&P 500: 7,674.55, -0.04%, a fraction below Monday's record-high zone (the 52-week high is 7,816.70)
  • Nasdaq Composite: 26,130.20, -0.08%
  • Dow Jones Industrial Average: 53,463.88, -0.21%
  • Russell 2000 (small caps): 3,005.90, -0.14%
  • VIX (the "fear gauge," which rises when investors buy protection): 15.21, down 1.6%, calm rather than fear
  • 10-year Treasury yield: ~4.67%, up about 3 basis points (a basis point is one-hundredth of a percentage point), the highest end of its recent range
  • Sector leaders: Energy +1.2%, Industrials +1.2%, Technology +0.9%
  • Sector laggards: Communication Services -1.2%, Healthcare -0.8%

A flat index masks a very active tape underneath. Here are the three stories that actually moved money.

Big Story 1: The market is a coiled spring, and the AI plumbing stocks already sprang

What happened. Nvidia (NVDA) reports its fiscal second quarter today after the close, and the entire session was built around it. With the stock riding a six-day losing streak into the print and the VIX pinned near 15, options traders are pricing a swing of roughly 6% in either direction, about a quarter-trillion dollars of market value, on the reaction alone. The bar is high: Wall Street expects revenue near $92 billion, up about 97% from a year ago, and adjusted earnings around $2.09 a share. But the number everyone actually cares about is the forward guidance, what Nvidia says about next quarter. Consensus there sits around $104 billion, with the most bullish desks whispering $107 to 108 billion.

Rather than bet on Nvidia directly, traders bought its suppliers, the picks and shovels of the AI buildout, the companies that make the optical cables and networking gear stitching the data centers together:

  • Lumentum (LITE): +6.0% to about $939, extending Monday's upgrade, when Barclays analyst Tom O'Malley moved it to Overweight (a buy rating) with a Street-high $1,000 price target, arguing a recent ~11% pullback overdid the fears.
  • Arista Networks (ANET): +5.9% to about $202 (a $255 billion company), riding hyperscaler demand for its data-center Ethernet gear.
  • Semtech (SMTC): +10.4%, the one hard catalyst of the group. It reported a blowout quarter: revenue $341.9 million, up 33%, adjusted earnings of $0.71 ahead of the ~$0.61 consensus, and a next-quarter revenue guide of $405 to 415 million that towered over Street estimates.
  • TTM Technologies (TTMI): +8.4%, the circuit-board maker, pulled along by the same AI-infrastructure wave.

Why it happened. These four are the highest-torque way to play Nvidia's report without owning Nvidia. If Nvidia's data-center and networking business keeps compounding, every rack it ships needs their optics, switches and boards. So desks loaded up on the derivatives of the trade, the leverage, while keeping the mothership itself flat into the number.

What people said. On CNBC's Fast Money (Aug. 21), Bernstein's senior semiconductor analyst Stacy Rasgon captured the setup, and the trap:

"I'll be honest, I think it's going to be a good print. I don't know what the stock is going to do in the near term... most of my coverage is reported earnings. By and large, they've all had very good prints. I barely had any stocks actually go up the day after the print."

On the real prize, the guidance, Rasgon flagged CEO Jensen Huang's own trillion-dollar marker:

"They said a trillion dollars, unbelievably, over a three-year period, which would suggest something close to $500 billion in data center revenues next year... I'd love to see if they would actually commit to that or not."

The bull case has heavyweight backing. On Squawk on the Street (Aug. 14), Trivariate Research's Adam Parker argued the buildout is nowhere near done:

"The core businesses are so awesome from the hyperscalers. They can fund a lot of the CapEx themselves... nobody really knew what AI was until Nvidia's first upward revision in May of 2023. We're three years, three months into that. It's probably a 10-year cycle. You want to sell stuff four years and nine months before the end? I don't."

But the skeptics are not hiding. Morgan Stanley's chief investment officer Mike Wilson, on the RiskReversal podcast (Aug. 7), was blunt that this ends badly, eventually:

"There will be a massive hangover. There will be malinvestment here. There will be disappointment."

His timing caveat is the whole ballgame: Wilson thinks we are in the equivalent of "'97, '98" of the internet boom, with "another couple of years before... a big hangover." Translation: cracks are coming, but not tonight. As of this writing, Nvidia's results are still pending, and the reaction will define tomorrow's tape.

Big Story 2: Retail earnings deliver a blowout, a stumble, and a tariff-refund windfall

What happened. Retail reporting season served up huge dispersion, big winners and big losers in the same session.

  • Abercrombie & Fitch (ANF) was the day's standout, soaring roughly 41%. Second-quarter adjusted earnings came in at $4.17 a share versus about $1.99 expected, more than double the estimate, on revenue of $1.27 billion. Management raised full-year earnings guidance to $13.10 to $13.60 from $10.20 to $11.00.
  • Williams-Sonoma (WSM) fell 2 to 5% despite beating: adjusted earnings $2.10 versus ~$2.07, revenue $1.96 billion, up 6.7%, and same-store sales ("comps") up 6.2%. The stock sold off on worries about margins, freight and tariff costs.
  • J.M. Smucker (SJM) rose about 5% after adjusted earnings of $3.24 blew past the $2.22 estimate, though $0.84 of that came from a tariff refund, and it lifted its full-year outlook.

Why it happened. A common thread ran through the beats: refunds of previously paid import tariffs flowed back into earnings this quarter, flattering the headline numbers. The market's job was to separate the one-time cash windfall from real operating strength, which is exactly why two companies that both "beat" went in opposite directions. Abercrombie convinced investors the strength was real; Williams-Sonoma's cost commentary spooked them.

What people said. Abercrombie CEO Fran Horowitz made a point of pre-empting the "it was just the refund" critique, saying the margin and earnings upside was "in excess of the tariff refunds benefit." Williams-Sonoma CEO Laura Alber leaned on the operating story: "We delivered a very strong second quarter... an operating margin of 17.3% with earnings per share of $2.10." The stock's reaction suggests investors wanted more.

Big Story 3: Sticky inflation keeps the Fed boxed in, right before Jackson Hole

What happened. The macro data was a two-sided coin. Orders for durable goods (big-ticket manufactured items) rose +1.1% in July versus +0.5% expected, a clean beat that helped lift Industrials. But the second estimate of second-quarter GDP held at a sluggish 1.5% annualized, and, the part the bond market fixated on, the Fed's preferred inflation gauge, core PCE, was revised up to 3.6% annualized, still well above the Fed's 2% goal. The 10-year Treasury yield ticked up to about 4.67%.

Why it happened. Growth is soft and inflation is sticky, the worst combination for anyone hoping for quick interest-rate cuts. With the Fed's policy rate parked at 3.50 to 3.75%, that sticky 3.6% print pushes back against the case for cutting soon, and rising yields nudged rate-sensitive corners of the market. It also explains the day's low-drama, wait-and-see feel: no one wants a big macro bet 48 hours before the Fed's marquee event.

What people said. Fed officials were silent by design, in the traditional quiet period ahead of the Jackson Hole symposium (Aug. 27 to 29), this year themed on financial innovation and payments. The main event is Chair Kevin Warsh's keynote on Friday, Aug. 28, where markets will parse every word for hints on the rate path. Expectations are that he avoids committing to any cut timeline, leaving the sticky-inflation, higher-yields backdrop firmly in place.

Quick Hits

  • Zoom (ZM) -7.0% to ~$94. A classic beat-and-raise that was not enough: adjusted earnings $1.55 versus $1.48, revenue $1.28 billion (+4.9%), and it lifted full-year guidance, but next-quarter earnings guidance of $1.46 to $1.48 landed below the Street's ~$1.50, and its consumer-facing "Online" business decelerated to about +1% growth. CEO Eric Yuan: "Total revenue grew 4.9% year over year, anchored by 7.8% growth in Enterprise revenue, its strongest growth rate in three years."
  • Moderna (MRNA) -5.8% to ~$150. Pure profit-taking after the stock ripped +13% the prior day on strong late-stage melanoma-vaccine data with Merck. Deutsche Bank and Barclays both raised targets to $125 but stayed on the sidelines, saying the good news is now priced in.
  • M&A: Victory Capital (VCTR) +4.5% on a deal to acquire First Eagle Investments for ~$7.0 billion, combining into a manager overseeing roughly $571 billion in client assets. Victory expects it to be ~35% accretive to 2027 earnings.
  • Meta (META) roughly flat to +0.5% even as it agreed to a settlement of up to $16.68 billion with 29 state attorneys general over teen-safety claims. Investors treated the deal as clearing an overhang rather than a fresh hit.
  • Alphabet (GOOGL) about -1.4% was the single biggest drag on Communication Services, the day's weakest sector.
  • Intuit (INTU) about -9% continued to weigh on software after its own guidance reset the prior evening, a reminder that not every AI-adjacent name is riding the wave.
  • Madrigal Pharmaceuticals (MDGL) +5.2% after a disclosure that Paulson & Co. built a new ~$719.5 million stake, its largest single position.
  • IREN (IREN) -6.2%, a bitcoin-miner-turned-AI-data-center name, as investors de-risked ahead of its own earnings tomorrow. Bitcoin traded around $78,000 to $80,000.
  • Boston Scientific (BSX) fell on news of a cybersecurity incident, adding to Healthcare's soft day.
  • Overnight backdrop: Asia leaned green into the Nvidia print (Nikkei +0.6%, Hang Seng +0.6%, Alibaba +3%); Europe was flat (Stoxx 600 unchanged, FTSE 100 -0.1%). Brent crude slipped about 2.6% to the mid-$80s on reports of Oman and Iran talks over a Strait of Hormuz shipping corridor.
  • On deck tonight after the close: alongside Nvidia, a heavy software slate reports, including Salesforce (CRM), CrowdStrike (CRWD), Synopsys (SNPS), Okta (OKTA), Veeva (VEEV) and HP (HPQ). Tomorrow's open will be busy.