After holiday, Broadcom leads Q2 earnings into the home stretch

Updated 2:15 a.m. EDT Tuesday

August went out on Friday with, well, a whimper. September's open on Tuesday looks more like a modest loss for most stocks.

It's understandable. The second-quarter earnings season is just about over, with a few sizable exceptions. But Friday's worries haven't gone away:

💵💰Don't miss the move: Subscribe to TheStreet's free daily newsletter💰💵

One could see the unease in early Tuesday trading. Futures trading suggested the major indexes will start with moderate losses.

Here's why:

• An economy that seems to be softening. The concern will hit a climax with Friday's jobs report.
• An appeals court decision Friday that declared most of President Trump's tariffs unconstitutional. Next likely stop: the Supreme Court.
• About the president's move to fire Federal Reserve Governor Lisa Cook and increasingly put the Federal Reserve under White House control: A court hearing is set for Tuesday.

Earnings season: Basically solid

About 81% of S&P 500 companies reported earnings that beat on both earnings and revenue, according to FactSet.

All the so-called Magnificent 7 companies (Apple , Alphabet , Amazon.com , Meta Platforms META, Microsoft , Nvidia and Tesla ) reported earnings that beat estimates.

That compares with 81% of all the stocks in the Standard & Poor's 500 Index.

In the aggregate, FactSet says, the Mag 7 companies' earnings beat estimates by 10.5%; the rest of the S&P 500 companies beat estimates by 7.7%.

Nvidia, Microsoft, Meta and Amazon were among the top six contributors to S&P 500 earnings growth for the quarter, along with Warner Bros. Discovery and Vertex Pharmaceuticals .

Nearly 38% of the market cap of the S&P 500 was taken up by all the Mag 7 stocks, plus Broadcom and Berkshire Hathaway and . By Standard & Poor's valuations, all but Broadcom and Berkshire have market caps above $1 trillion.

By other measures, it's all of them.

Nvidia's market cap, if you're wondering, is nearly $4.25 trillion.

The major averages' returns for August:

• S&P 500, up 1.9%.
• Nasdaq Composite Index, up 1.6%.
• Nasdaq-100 Index, up 0.9%.
• Dow Jones Industrial Average, up 3.2%.
• Russell 2000 Index, up 7%.

Broadcom and Salesforce are this week's headliners

Artificial intelligence is still a big deal, to Wall Street anyway. Two of the biggest companies reporting this week are knee-deep in it: Broadcom and Salesforce .

Salesforce reports after Wednesday's close. The software provider is expected to report earnings per share of $2.77, up 8.2%. Revenue expected at $10.1 billion, up 8.7%. The leader in customer-relationship management systems is using AI to automate as many tasks for its customers as possible.

If there's a risk, it's that the market for its products may be softening. The shares are down 23.3% on the year but were little changed in August.

Broadcom reports Thursday afternoon. It is a top player in application-specific integrated circuits used for AI applications in data centers. In other words, its chips help all the operations in a data center work together.

The stock is up 28.3% this year and added 1.26% in August. It has more than doubled (up 103%) from the April tariff tantrum.

There's a reason for the bullish moves on the stock. For the quater the company is expected to report a 21% increase in revenue to $13.2 billion with earnings up 24.2% to $1.54 a share.

Others reporting this week include:

• Cloud-security company Zscaler , after Tuesday's close
• Dollar Tree before Wednesday's open
• Used-car auctioneer Copart , after Thursday's close
• Lululemon Athletica , after Thursday's close
• Management consultants Korn-Ferry , before Friday's open

More Wall Street Analysts:

• These Reports Should Signal What's Ahead for Jobs, Prices and Rate-Cut Possibilities
• Morgan Stanley analysts surprising take on stocks after record run
• Veteran analyst names 30 AI stocks shaping future of technology
• Amazon analysts turn heads with surprising take on grocery plan

Going into the last third of 2025

So far, financial markets have survived the tariff tantrum in April, sliding employment since late winter, the stress of ICE removing illegal residents and sluggish problems in a key industry: housing.

For most in the market the hope is, of course, that the Fed will use softness to cut its key Federal Funds Rate, now at 4.25% to 4.5%, at its Sept. 16-17 meeting.

Also in the optimism category: that the bond market will push yields on longer-term bonds, especially the 10-year Treasury note, lower. That would at least help the housing market.

The yield was at 4.23% on Friday, where it's hovered for the past few months. Its 2025 peak was 4.809% on Jan. 14. The 30-year mortgage rate was 6.56% on Thursday, down from 7.04% on Jan. 16.

That said, there are worries that President Trump's demand that the Fed follow his orders will destabilize the dollar's preeminent position in global finance and push U.S. bond yields higher.

While the stock market is up this year, many are worried that complacency has set in again.

Wall Street analysts are starting to push their year-end S&P 500 projections higher again. If, the bulls say, the index doesn't hit 7,000 before New Year's, it will top 7,000 in 2026.

Meanwhile, The Wall Street Journal noted Saturday that the S&P 500 is trading at 3.23 times the projected sales of the 503 components. That's a record.

And the projected 12-month price-to-earnings multiple of the index is now 22.4, according FactSet. The five-year average forward p/e is 19.9. The 10-year average is 18.5.

Maybe the complacency is just confidence. Certainly, the April selloff abruptly put the brakes on the giddy complacency afoot after Trump won the presidency again.