I. Key Event: Nonfarm Benchmark Revision Surprises the Market—Bullish and Bearish Sentiments Diverge
On Tuesday, September 9, all three major U.S. indices saw modest gains. However, the release of the nonfarm payrolls benchmark revision data at 10 AM caused significant market volatility. The U.S. Bureau of Labor Statistics reported that nonfarm payrolls were revised down by 910,000 for the year ending March 2025, far exceeding the expected 682,000 downward revision (even higher than the Treasury Secretary Yellen's warning of 800,000). This marked the largest downward revision since 2009.
Details of the revision: Nearly all sectors saw downward adjustments in employment, with the largest cuts occurring in leisure and hospitality (-176,000), professional and business services (-158,000), and retail trade (-126,000). Following the release, markets saw a quick reaction with heightened rate cut expectations, pushing traders to price in a 50-basis-point rate cut in September. However, recession concerns also surfaced, causing a short-term rally followed by a quick reversal.
Despite the volatility, the VIX ended near 15, indicating that the overall market response remained relatively calm.
Institutional Viewpoints: Nomura believes the revision has limited impact on the Federal Reserve's monetary policy, while Goldman Sachs and Morgan Stanley highlighted that the initial data tends to overstate employment weakness and a rebound could follow. The focus now shifts to PPI and CPI data later this week, as they will shape market expectations.
II. Market Overview: Data and Sentiment Battle, Risk of Volatility Growing
Despite the nonfarm revisions, the U.S. market maintained a high-level consolidation. The technical and fund flow signals point to multiple dynamics at play:
- Indices and Technicals: High-Cross Star, Divergence Signals Risk
The S&P 500 closed with a doji for the second consecutive day, reflecting a consolidatory market. Volume was low and there was divergence between price action (new highs) and technical indicators, suggesting potential bullish fatigue. The market remains buoyed by the "rate cut support" logic, but any rate cut without a strong economic rebound could trigger valuation concerns. - Bond Market & Volatility: Early Tightening, Divergence in Stock-Bond Volatility
The bond market has started to show sensitivity to economic uncertainty. The ICE Bank of America MOVE Index (a measure of bond market volatility) spiked to its highest two-day increase since April. Additionally, the stock-bond volatility ratio has dropped to its lowest level since February, signaling bonds preparing for a potential uptick in market volatility. - Fund Flow: Retail Bearish, Institutions Focusing on Adjustments
Retail sentiment is at a 43.4% bearish level, signaling extreme pessimism. This could be a contrarian bullish signal in the short term as a rally might be triggered by institutional buying. However, institutional funds are shifting their positions with CTAs (trend-following funds) having increased their S&P 500 exposure from April lows, but starting to reduce positions in September as volatility risks rise.
III. AI Supply Chain Leading: NBIS Sparks Compute Infrastructure Demand
Despite volatility due to the nonfarm revision, the AI supply chain remains the dominant theme, with several stocks moving sharply due to AI-related developments:
1.NBIS: $19.4B Microsoft Deal Ignites Stock Surge
NBIS became the focal point after signing a $19.4 billion multi-year cloud computing deal with Microsoft (extending to 2031). The deal will require cash flow and debt financing, signaling a shift from "self-built" to "guaranteed financing expansion." The news propelled NBIS and the AI infrastructure sector:
- APLD (data center services) saw a rebound, with speculation of a potential NBIS partnership.
- CRWV (AI cloud services) rallied sharply, driven by strong AI demand but concerned about the missed opportunity of the Microsoft contract.
2.Oracle: Cloud Growth Surges, AI Sentiment Lifts Shares
Oracle's post-earnings surge (>10%) was partly driven by strong cloud infrastructure demand. The company reported a 12% y/y revenue increase and a 28% rise in cloud computing revenue. Despite the positive results, the post-earnings jump was primarily driven by AI sentiment, boosted by the NBIS deal.
3.Microsoft: The “Firefighter” of Market Sentiment
Microsoft's major deal announcement occurred just as markets were reacting to the nonfarm revisions, helping reignite AI enthusiasm. This strategy, seen in the past with Google's investment in NVIDIA, serves as a clear indication of how AI narrative stocks are steering market sentiment, pushing large-cap tech stocks higher.
IV. Divergence and Underlying Flows: Consumer, Finance, and Tech Split
Apart from the AI chain, other sectors exhibited significant divergence:
- Defensive Stock UNH: "Four-Star" Plan as Safe Haven
UnitedHealth (UNH) rose sharply due to the Four-Star Program and its expectation that 78% of members will join high-profit plans by 2025. This strategy drove risk-off funds into UNH, especially as investors await PPI and CPI data. - Humana (HUM) Slumps: Medicare Rating Risk
Humana (HUM) plunged 12% as concerns emerged regarding its Medicare Advantage program’s rating for 2026, which would impact future bonus income. Technically, HUM shows heavy selling pressure but may stabilize near $273 before moving lower. - Apple: Post-Event Disappointment; High Valuation Pressure
After the iPhone 17 launch event, Apple stock dropped due to lack of AI updates and high valuation concerns (P/E ~30x). Despite its strong brand, Apple faces a challenging growth narrative in the AI-driven market. - Fannie Mae (FMCC): Fed Cut + Privatization Buzz Drives Stock Surge
FMCC continued to soar based on policy speculation that Trump may declare a “housing emergency” to help with housing supply and cost issues. Moreover, rumors of a potential privatization of Fannie Mae fueled market optimism.
V. Macro View: AI and Rate Cuts as Twin Pillars of Market Sentiment
From a broader perspective, the market's core debate continues to center around AI dominance and rate-cut expectations.
- AI’s Core Position: Regardless of competition among underlying chipmakers (like NVIDIA), NVIDIA remains the primary beneficiary of the AI boom. This trend is supported by ASIC chips (e.g., Broadcom) designed as an extension of NVIDIA's GPU shortage.
- Institutional Strategies: As PPI and CPI data loom, institutions have been pushing index prices (especially AI-weighted stocks) to "soften the landing" in case data disappoints. This tactic insulates the market against downside shocks, while upside momentum continues if data aligns with expectations.
Conclusion
Navigating Through Data-Driven Volatility and AI Enthusiasm
September 9th’s market reflected a data-induced disruption and AI exuberance amidst escalating divergences. The nonfarm revisions created waves, but rate cuts and AI optimism quickly absorbed the shocks. Investors should focus on the upcoming PPI and CPI data for short-term sentiment cues. In the medium to long term, AI compute chains and rate-cut cycles remain key supports.
