To The Moon

3 September 2026

U.S. equities rebounded, led by technology stocks, as weak ADP employment data eased some interest-rate pressure. However, escalating U.S.–Iran tensions, elevated oil prices and Broadcom’s volatile after-hours reaction continued to limit risk appetite.

S&P 500 rose 0.46% to 7,666.63

Dow Jones rose 0.56% to 53,061.89

Nasdaq rose 0.45% to 26,217.83

Reuters

U.S. 2-year Treasury yield was unchanged at 4.39%

U.S. 10-year Treasury yield was unchanged at 4.79%

U.S. Treasury

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News

1) U.S. and Iran engage in their largest exchange of attacks in months, raising risks around the Strait of Hormuz

* The U.S. launched a new round of strikes against Iran’s southern coast, targeting air-defence and radar systems, maritime assets, communication facilities and mine-laying capabilities.

* Iran retaliated by launching missiles and drones at U.S.-linked facilities in Jordan, Bahrain, Kuwait and Iraq, marking a significant escalation in the conflict.

* Iran’s Revolutionary Guard claimed that several U.S. personnel were killed, but the claim has not been confirmed by the U.S. or Iraqi authorities. U.S. officials said there were no casualties at facilities in Jordan.

* Iran said a U.S. strike hit a wedding gathering in the country’s south and caused civilian casualties. The U.S. has not confirmed this account.

* President Trump warned that the U.S. could launch a substantially larger attack if Iran continued to retaliate, reducing the likelihood of a near-term ceasefire.

* Trump also claimed that the Strait of Hormuz was under U.S. control and proposed renaming it the “Trump Strait”, further intensifying political tensions.

* Before the war, the Strait of Hormuz handled around one-fifth of global oil shipments. Any mining activity, tanker attacks or disruption to the shipping route could raise energy and freight costs. Reuters Reuters

Market impact: An escalation could increase the geopolitical risk premium in oil, worsen inflation concerns and pressure airlines, transportation companies, consumer sectors and the valuations of long-duration technology stocks.

Positive counterpoint: The U.S. specifically targeted Iran’s mine-laying capabilities, suggesting that maintaining freedom of navigation remains a key objective. If the conflict remains contained and tanker traffic is not further disrupted, the geopolitical risk premium could fall quickly.

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2) ADP employment misses expectations, leaving the Fed caught between a cooling labour market and elevated inflation

* U.S. private-sector employment increased by only 38,000 in August, below expectations of approximately 47,000–48,000 and July’s upwardly revised increase of 46,000.

* This was one of the weakest monthly increases in 2026, signalling that companies are becoming more cautious about hiring.

* Education and healthcare added 45,000 jobs, leisure and hospitality added 16,000, and construction added 12,000. Manufacturing lost 17,000 jobs, while professional and business services lost 16,000.

* Small businesses added only around 3,000 positions, while employment at medium-sized firms was unchanged. Most of the new jobs came from large companies, indicating that hiring strength was not broad-based.

* The Federal Reserve’s Beige Book showed that economic activity increased slightly, employment edged higher and prices rose moderately. Energy, raw-material and healthcare costs continued to pressure businesses.

* New York Fed President John Williams said recent inflation data had been encouraging, but inflation remained above the 2% target. He described the current interest-rate setting as being in a “good position” to respond to changes in the economy.

* Williams also said higher long-term bond yields partly reflected the strength of the U.S. economy and AI investment. The Fed will need to assess Friday’s nonfarm payroll report before determining its September policy stance. ADP Federal Reserve Reuters

Market impact: Cooling employment is supportive of bonds and growth stocks, but elevated energy prices and continued cost pressures in the Beige Book mean that the risk of a September rate hike cannot be completely ruled out.

Positive counterpoint: The data currently point to slower hiring while the economy continues to grow, rather than a severe recession. If Friday’s payroll growth is moderate and wage pressures ease, the Fed may have greater flexibility to keep rates unchanged.

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3) Broadcom revenue jumps 86% as AI chip sales surge, but margin guidance triggers sharp after-hours volatility

* Broadcom reported third-quarter revenue of US$29.6 billion, an increase of 86% year on year and slightly above market expectations.

* Adjusted earnings reached US$3.32 per share, ahead of expectations of approximately US$3.25 and almost 96% higher than a year earlier.

* AI semiconductor revenue surged 221% year on year to US$16.7 billion, exceeding the company’s earlier guidance of approximately US$16 billion.

* Semiconductor Solutions revenue reached approximately US$20.8 billion, up 127%, showing that custom AI accelerators and networking chips have become Broadcom’s principal growth engines.

* Broadcom expects fourth-quarter revenue of approximately US$34.8 billion, with AI chip revenue potentially growing by around 236%.

* The company projects AI chip revenue of approximately US$115 billion in FY2027, potentially doubling to around US$230 billion in FY2028.

* Management said custom chips designed for specific AI workloads could deliver performance comparable with general-purpose GPUs at roughly half the overall cost. However, fourth-quarter margin guidance came in slightly below expectations, causing the shares to fall as much as approximately 6% before fluctuating sharply. Barron’s Broadcom Investor Relations

Market impact: The softer margin outlook and concerns about intensifying competition in custom chips could weigh on Broadcom’s near-term share price and trigger profit-taking across the AI semiconductor sector.

Positive counterpoint: Broadcom’s AI revenue, order visibility and FY2027–FY2028 growth targets all strengthened considerably, indicating that major technology companies’ capital-expenditure cycle for AI computing, custom accelerators and high-speed networking remains robust.

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4) Meta and Google upgrade their AI models as competition shifts towards coding, AI agents and cybersecurity

* Meta released Muse Spark 1.3, focusing on stronger performance in coding, complex reasoning and autonomous agent tasks.

* Meta AI chief Alexandr Wang said the model would help lay the foundation for personal AI agents capable of assisting users around the clock.

* Muse Spark 1.3 is being introduced through Muse Code and Meta’s API, with pricing unchanged from the previous version.

* Meta said the model had moved closer to frontier competitors such as OpenAI, Anthropic and Google, while the company continued to increase its investment in safety and model alignment.

* Google launched Gemini 3.8 Flash only weeks after its previous model, using additional reasoning steps and repeated tool calls to improve coding and complex-task performance.

* Google also introduced Gemini 3.8 Flash Cyber for governments and trusted partners, with the ability to identify and autonomously repair software vulnerabilities.

* Gemini 3.8 retains pricing of US$0.75 per million input tokens and US$3.75 per million output tokens. However, because it may use more tokens to complete each task, the actual cost per task could rise. Axios The Verge

Market impact: Rapid model upgrades could increase research, development and computing expenditure at Meta and Google, while greater pricing competition may put near-term pressure on profit margins.

Positive counterpoint: AI capabilities are expanding beyond basic chatbots into monetisable areas such as coding, enterprise agents and cybersecurity. This should support cloud, software and AI application revenue while sustaining demand for chips and data-centre infrastructure.

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Daily | Today’s Focus

Major developments

* Federal Reserve Governor Christopher Waller will participate in a Reuters NEXT interview, with markets watching his views on a potential September rate hike and the inflationary risks from oil prices.

* Federal Reserve officials Beth Hammack and Austan Goolsbee are scheduled to speak.

* Markets will continue monitoring the U.S.–Iran conflict, shipping conditions in the Strait of Hormuz and movements in global oil prices.

Major U.S. data releases

* Revised second-quarter nonfarm productivity and unit labour costs

* July U.S. trade balance

* Weekly initial jobless claims: consensus approximately 205,000

* Final August U.S. Services PMI

* August ISM Services Index: consensus approximately 54.1

MarketWatch Economic Calendar

U.S. technology earnings

* Before market: Ciena (CIEN)

* After market: Zscaler (ZS)

* After market: Samsara (IOT)

* After market: Guidewire Software (GWRE)

* After market: DocuSign (DOCU)

Key focus today: If services activity remains expansionary, employment data are moderate and unit labour costs decline, this would support the soft-landing narrative. Conversely, if services-sector prices and labour costs are both stronger than expected, markets could raise the probability of a September rate hike.