US stock futures steady as Alphabet boost fades; rate cuts, payrolls in focus

U.S. equities advanced on Wednesday, with the S&P 500 gaining 0.5% and the NASDAQ 1% as Alphabet (GOOGL) surged over 9% following a federal court ruling that was less punitive than feared, also benefiting Apple (AAPL). This positive sentiment was reinforced by increased expectations for a September Fed rate cut, fueled by softer JOLTS data ahead of Friday's payrolls report, with markets pricing a 94.6% chance of a 25 bps cut. Conversely, aftermarket trading saw Salesforce (CRM) decline over 5% after reporting underwhelming earnings and a weak Q3 revenue forecast, raising questions about AI monetization, despite announcing a $20 billion share buyback. Futures were mixed, with Salesforce's drop pressuring indices, while broader market uncertainty persists from trade tariffs.

Analysis

U.S. equity markets exhibited a divergent performance, with the tech-centric NASDAQ Composite and S&P 500 advancing 1.0% and 0.5% respectively, while the Dow Jones Industrial Average posted a slight decline. The primary catalyst for the gains was a more than 9% surge in Alphabet (GOOGL) shares following a federal court ruling that was perceived as less severe than feared, allowing the company to retain its Chrome browser and Android OS. This outcome also positively impacted Apple (AAPL), whose stock rose nearly 4%, as the ruling permits the continuation of its lucrative default search engine agreement with Google. Conversely, the enterprise software space faced headwinds after Salesforce (CRM) shares declined over 5% in aftermarket trading due to underwhelming earnings and a weak third-quarter revenue forecast. This performance raises material concerns about the near-term monetization of AI platforms across the industry, despite Salesforce's attempt to support its stock with a $20 billion increase to its share buyback program. Broad market sentiment remains underpinned by strong expectations for a Federal Reserve rate cut in September, with markets pricing a 94.6% probability of a 25 basis point reduction, fueled by softer JOLTS job openings data ahead of the pivotal nonfarm payrolls report.

Key Decisions for Investors

• The favorable court ruling for Alphabet represents a significant de-risking event, potentially justifying a re-evaluation of its valuation now that a major legal overhang is reduced and its critical partnership with Apple is secured.
• Salesforce's weak guidance and subsequent after-hours stock decline serve as a warning for the enterprise software sector, suggesting the path to AI monetization may be longer and more challenging than currently priced in.
• Given that a September rate cut is almost fully priced in at 94.6% probability, investors should be cautious of heightened volatility around the upcoming nonfarm payrolls data, as any surprisingly strong figures could sharply reverse market sentiment.
• Consider Salesforce's $20 billion buyback announcement as a defensive capital allocation measure to support its share price, which does not address the fundamental concern regarding its slowing revenue outlook and delayed AI monetization.