Why Markets Are Rising and Under Pressure

By Andrew Ross Sorkin, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Niko Gallogly, Brian O'Keefe, Sri Muppidi, Lauren Hirsch, and Ian Mount

Corporate earnings in the energy and technology sectors are expected to continue driving stock indices higher. But what is boosting their profits is weighing on the economy.

Andrew here. Despite all the concern about the economy and its outlook, the stock market reached another all-time high. Why? Earnings and expectations for future earnings continue to exceed estimates, even as interest rates slowly rise. The real question is no longer whether the bears are wrong, but how long the massive surge in corporate spending can defy the gravity of rising borrowing costs.

Additionally: Lauren Hirsch has the scoop on the sale of the Chrysler Building to Tishman Speyer, placing the famous skyscraper under the same ownership as Rockefeller Center. More below.

Concerns About the Status Quo

U.S. stock futures are pointing lower this Wednesday, after the S&P 500 hit another record on Tuesday.

Analysts still expect the major indices to continue rising. However, the economic risks that have affected the markets in recent weeks, including rising bond yields and energy prices, do not seem to be disappearing in the short term.

"This bull market is all about earnings growth," said Michael Purves, founder of the research firm Tallbacken Capital, to The Times. What is happening now is "the best earnings and margin growth of our lives," said Steve Chiavarone, head of equity investments at Federated Hermes, to The Financial Times.

That momentum should continue during the corporate earnings season, which begins next week: more than 70 companies in the S&P 500 raised their earnings estimates for the recent quarter, a record, according to FactSet.

Among them are energy companies that have benefited from rising prices and tech giants that are reaping huge profits from the AI boom. (In contrast, eight of the 11 sectors of the S&P 500 are down).

These two sectors are benefiting from the pain points in the economy. Higher energy prices, driven by conflicts in the Middle East, are putting pressure on other industries. Brent crude, the international benchmark for oil, traded above $101 per barrel this morning.

And the spectacular expansion of AI infrastructure --- which shows no signs of stopping, as evidenced by SpaceX's alleged plan to borrow $40 billion to buy Nvidia chips --- is helping to push bond yields higher.

The yield on the 10-year Treasury bond, which is tied to many mortgage and commercial loans, slightly exceeded 5.3% on Wednesday, around a multi-decade high.

Concerns about the status quo are growing. The president of the San Francisco Fed, Mary Daly, told Axios that she is worried that these two combined factors could further drive inflation, potentially forcing the Fed to raise rates.

Y Ray Dalio, founder of Bridgewater Associates, told Bloomberg Television that the growing debt of AI companies could further restrict other types of credit, and that even some tech giants are beginning to reach their debt limits.

Here’s What’s Happening

The trade deficit soars to a 17-month high. The gap between U.S. exports and imports widened sharply in August for the second consecutive month. (Total imports for the month reached a record $420.8 billion). Despite President Trump’s efforts to reduce the gap, including imposing heavy tariffs, many economists say there is currently no alternative to many foreign products, especially chips for artificial intelligence.

The U.S. presses Russia for information on a lab death. The State Department warned Moscow in a confidential diplomatic communication that it had not fulfilled its international health obligations by failing to disclose details about the death of a worker at a plague research center in Siberia, The Wall Street Journal reports. The mysterious episode has raised fears that a deadly infectious disease could spread internationally, just six years after the Covid pandemic. Trump said he would speak with Vladimir Putin, the leader of Russia, about the incident.

The EU is said to be considering new ways to tax U.S. tech giants. The European Commission, the executive arm of the bloc, is evaluating new taxes for companies like Apple, Meta, and Google that would not specifically target them and avoid provoking the Trump administration's ire, The Financial Times reports, citing unidentified sources. Brussels is considering a proposal that would require very large companies operating in the EU to pay a fixed annual tax, according to the FT.

Porsche cuts a quarter of its workforce. The German sports car manufacturer announced widespread layoffs and a retreat from China after its profit margins plummeted last year amid a decline in Chinese demand, U.S. tariffs, and a shift in its strategy regarding electric cars. Turning around Porsche is key for its parent company, Volkswagen.

Decreasing Odds for a California Billionaire Tax

The battle over the proposed billionaire tax in California continues to intensify as less than a month remains until the election.

The campaign against Proposition 40, which would impose a one-time 5 percent tax on the wealthiest in the state, has gathered a war chest that is making the fight over the initiative tighter than expected, Niko Gallogly reports.

The context: the state’s largest health workers’ union proposed the tax last fall as a way to offset cuts in federal funding for healthcare. This comes as support for more taxes on billionaires has grown nationally.

But critics, including Governor Gavin Newsom, argued that the measure would drive away innovators ---and their tax revenues---.

Its popularity seems to be declining. In March, polls showed it was more likely to pass.

But support fell to 45% in a recent Politico poll. Other polls tracked by The Times show a mixed picture.

In prediction markets: trades on Polymarket place the chances of approval for the initiative at around 29 percent; on Kalshi, they are around 32%.

It all could come down to money. More than $200 million has been spent on the campaign against Proposition 40, including about $100 million from Sergey Brin, co-founder of Google and the fourth richest person in the world. Brin moved his official residence to Nevada earlier this year to try to avoid the tax.

The campaign against the proposed tax has also funded two other electoral initiatives that could nullify Proposition 40.

This extraordinary income is financing a tsunami of messages against the tax. "You turn on the television and it’s just ads and more ads against Proposition 40," said Gabriel Zucman, an economist at the University of California, Berkeley, and author of the proposal, to DealBook.

"There is a lot of demand to tax billionaires," Zucman added. But he admitted that the amount of money opposing the effort "makes the victory of Proposition 40 far from assured."

Supporters of the tax are not giving up. Senator Bernie Sanders, an independent from Vermont, spoke Monday at an event in Los Angeles in support of the initiative.

"Scott Cannot Fail"

Treasury Secretary Scott Bessent has taken on an increasingly broad role in the Trump administration.

He increased bond buybacks in an attempt to reduce yields that underpin mortgage rates; advised on trade policy with China; and designed an economic pressure package aimed at ending the war with Iran. ("Scott cannot fail," an unidentified Trump administration official told The Wall Street Journal).

In this high-pressure situation, Bessent has earned a reputation for a hardline style that led to the departure of a number of key officials, The Journal reports.

More information from inside the Treasury Department under Bessent, according to The Journal:

In June 2025, a day after the Treasury sanctioned three Mexican financial firms, the country’s president, Claudia Sheinbaum, demanded evidence at a press conference that the firms had been laundering money in connection with illegal opioid trafficking. "We are not anyone's piñata," Sheinbaum said.

Bessent began reprimanding his staff and urged them to respond publicly to her comments. Treasury staff in Mexico received emails from Bessent's aides in Washington outlining the secretary's frustrations.

"The secretary is losing control," one of Bessent's aides said at the time, referring to Bessent losing his patience, according to a person who received one of the emails.

But President Trump seems to appreciate Bessent's aggressive style. In April, during an event in Nevada, Trump described him as tough, claimed to have turned the Treasury Secretary into a "rock star," and joked that he had "created a monster."

It’s official: Warner Bros. Discovery and Paramount are now owned by media giant David Ellison, the newly rebranded Skydance.

"We did it!" Ellison and his co-CEO, Ynon Kreiz, wrote to employees on Tuesday, promising to invest in both content and technology as Skydance competes with larger rivals like Netflix and Disney. (Ellison and Kreiz also acknowledged that they will have to make "difficult decisions affecting our workforce" --- that is, layoffs.)

Investors did not seem as enthusiastic: Skydance's shares fell 2.5% on Tuesday.

The Chrysler Building Has a New Owner

The Chrysler Building, the art deco skyscraper that has helped define Manhattan's skyline since 1930, has new managers. Tishman Speyer and other investors are buying the building for $235 million, Lauren Hirsch first reports.

The deal includes future lease payments to Cooper Union, the owner of the land beneath the building. It is expected to pave the way for a major renovation of the interiors of the famous building.

"We are going to modernize the entire infrastructure of the building, whether by doing a complete renovation of the elevators or polishing the stainless steel of the building's crown to make it shine," said Rob Speyer, CEO of Tishman Speyer, to DealBook.

The previous owners were accused of neglecting the building's maintenance. This left it with vacant spaces, even as the high-end office real estate sector is booming.

Among Tishman Speyer's plans: converting the 61st floor, known for its stainless steel eagle gargoyles, into a club with an outdoor terrace open to all tenants of the building, and adding wellness amenities to the gallery space beneath the building's lobby. (Tishman Speyer made similar moves after buying 30 Rockefeller Plaza in 2000).

The deal represents a sort of round trip for Tishman Speyer. The firm originally bought the Chrysler Building and other properties in 1997 for $220 million. It sold most of its investment in 2008 to an Abu Dhabi investment fund for $800 million.

Signa, an Austrian real estate company, and RFR, a New York-based development firm, bought the property in 2019 for about $150 million, a purchase price that partly reflected the competition from newer buildings and a significantly higher rent charged by Cooper Union.

Signa declared bankruptcy in 2023 and, by 2024, RFR had fallen behind on its lease payments. A judge rescinded its lease last year.

Speyer said he had closed a "new deal" with Cooper Union, although he declined to provide details. "It’s a structure that will be sustainable for both Cooper Union and us," he said.

Cooper Union has used the lease payments to help provide financial aid to students.

Quick Reads

Deals

Media mogul Steven Newhouse said his family will not sell Condé Nast, the publisher of Vanity Fair, Vogue, and The New Yorker. (FT) The EuroLeague, Europe's premier professional basketball league, is said to have rejected a takeover offer from the NBA. (Bloomberg)

Technology and Artificial Intelligence

"This is what the rise of data centers looks like from the sky" (NYT) In news from Palmer Luckey: the entrepreneur's Erebor Bank has attracted over $7 billion in deposits since its launch in February, while his defense company, Anduril, received a federal contract worth $2.9 billion to manufacture parts for nuclear submarines at a shipbuilding facility in Baltimore. (FT, NYT)

The Best of the Rest

Sam Bankman-Fried will participate in a new Amazon documentary series about his rise and fall, along with a list of controversial tech figures who will appear on screen this fall. (The Hollywood Reporter) A man who pleaded guilty to fraudulently obtaining over $8 million in royalties by using bots to stream songs he created with artificial intelligence billions of times was sentenced to 18 months in prison. (Billboard) Warren Buffett is famous for spending a lot of time reviewing financial reports of companies. He also spends hours watching YouTube. (WSJ)

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