The Big Three
Strong jobs data raises the odds of a September hike
After months of a cooling labour market, US job growth accelerated sharply in August, catching markets off guard. Nonfarm payrolls surged by 162,000, nearly three times the 56,000 economists had forecast, with an additional 55,000 in upward revisions to June and July.
The private sector contributed 127,000 of the total, led by a 62,000 rebound in leisure and hospitality after two down months, alongside gains in healthcare, construction and local government education. Wage growth remained benign at 3.1% year-on-year, offering little evidence of the kind of inflationary pressure that would alarm policymakers on its own. The market implies a 59% (04/09/26) chance of a Fed hike at the September meeting, up from about 55% beforehand. Fed Chair Kevin Warsh has already described the economy as being at full employment, and this report reinforces that view, shifting the committee's attention to inflation.
The reaction has been a case of good news translating to bad news for markets. A resilient labour market removes one of the Fed's main reasons to hold rates steady. That leaves the CPI print on the 11th September as the key remaining factor.
US corporate earnings strength
The current earnings season is shaping up as the strongest in years. With 99% of large-cap US companies having reported, earnings excluding one-off items were up 33%, comfortably ahead of the 23.1% consensus that stood as of the end of June. It marks the best quarter since 2021, extending a run of resilience that has repeatedly wrong-footed analysts.
The beat rate tells a similar story. Companies topped estimates 87% of the time, the highest share since the same period in 2021. Crucially, the strength wasn't confined to a handful of mega-caps. The "Magnificent Seven" grew earnings by 43.2%, but the other 493 S&P 500 companies still managed 31.8% on their own, their best showing since late 2021.
The results are showing up in the macro data too. US corporate profits hit an all-time high of $3.92tn in the second quarter, up 8.2% from $3.62tn in the first quarter, according to the Bureau of Economic Analysis, the sharpest quarterly rise in years. Regional business surveys have echoed the improvement, with the Philadelphia Fed's manufacturing index nearly tripling in August, alongside sharp gains in the region's readings on business conditions, employment and capex intentions.
Taken together, the breadth and pace of this earnings season help explain why equity markets have kept climbing even as bond yields and oil prices have risen.
Hyperscalers reshape the Treasury curve
AI is reshaping how the world's largest tech companies fund themselves. Alphabet, Amazon, Meta, Microsoft, Oracle and SpaceX have issued over $180bn in USD-denominated bonds so far this year, with year-end volumes expected to reach $250bn, or around $400bn once broader AI-related borrowing is included.
What stands out is not just the volume but the maturity these companies are choosing. Alphabet's century bond, the first from a tech company since Motorola in 1997, drew £9.5bn of orders, while Amazon has pushed dollar issuance out as far as 2076 and Meta and Oracle have both printed paper running to 2066. Across 2025 and 2026, hyperscalers have placed 41% of their issuance beyond 15 years, against just 16% for the broader corporate bond index, turning AI capex into a genuine new source of long-duration corporate supply.
Sources: FactSet Earnings 28/08/26 & 04/09/26, Reuters 04/09/2026, FT 07/09/2026, TwentyFour 03/09/2026, Trading Economics 07/09/2026, ING Think 04/09/2026
