Stocks closed higher Wednesday as rising hopes for a September rate cut continued to lift sentiment, though the latest batch of earnings reports had two of the three main indexes finishing well off their season highs.
Another red-hot initial public offering (IPO) also kept Wall Street engaged today, with Peter Thiel-backed Bullish (BLSH) nearly doubling in its market debut.
According to CME FedWatch, futures traders are pricing in a 96% chance the Federal Reserve will lower the federal funds rate by a quarter-percentage point at its next meeting in September – up from 57% one month ago.
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And following Treasury Secretary Scott Bessent's calls on Bloomberg TV for the Fed to lower by half a percentage point, the odds of a more aggressive rate cut have risen to 4.1% from zero just one day ago.
At the close, the tech-heavy Nasdaq Composite was up 0.1% at 21,713 and the broader S&P 500 was 0.3% higher at 6,466 – new record highs.
The blue chip Dow Jones Industrial Average gained 1.0% to 44,922 on strength in UnitedHealth Group (UNH, +3.9%) and Nike (NKE, +3.1%).
Bullish becomes the latest hot crypto stock
The IPO market remains hot as evidenced by today's market debut from Bullish, the Peter Thiel-backed crypto platform that owns CoinDesk.
After pricing the Bullish IPO at $37 per share Tuesday night – above the previous range of $32 to $33 per share – shares opened today at $90. BLSH stock hit an intraday high of $118, before settling at $68.
CoreWeave crashes on margin concerns
In other IPO news, artificial intelligence (AI) cloud company CoreWeave (CRWV) reported its quarterly results – the second time it has done so since it went public in March.
CoreWeave disclosed higher-than-expected Q2 revenue of $1.21 billion – more than triple the year-ago period – thanks to an expanded partnership with OpenAI. It also forecast third-quarter revenue that's above analysts' estimates and raised its full-year forecast.
Still, the tech stock plunged 20.8% today on concerns over its aggressive investments.
"Management emphasized that 'powered shells' and 'access to power' remain the bottleneck to AI growth and disclosed a target of exiting calendar year 2025 with more than 900 megawatts of active power," says Needham analyst Matt Calitri (Hold). This is up roughly 90% from Q2, he adds.
Calitri says that while the significant increase in capacity and associated capital expenditures "is a strong leading indicator for revenue generation," it also "serves as a margin headwind in the interim while introducing execution and supplier risk."
Cava Group slides after earnings
Elsewhere on the earnings calendar, Cava Group (CAVA) dropped 16.6% after the Mediterranean fast-casual restaurant chain missed on the top line for its second quarter.
The company also reported lower-than-anticipated same-store sales of 2.1% and cut its full-year same-store sales forecast. In addition, CAVA anticipates higher pre-opening costs for new restaurants in 2025.
"In what has proved to be a tough quarter in fast-casual, CAVA's second-quarter comps missed expectations on slower trends in June," says William Blair analyst Sharon Zackfia. "Still, two-year comp and traffic trends both accelerated sequentially against a much tougher comparison."
Zackfia maintained an Outperform (Buy) rating on the consumer discretionary stock "given robust new unit productivity and good visibility on annual EBITDA [earnings before interest, taxes, depreciation and amortization] growth of 25%-plus through 2027."
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