Morning Note

Trading Observations

• Lot of talk of three black crows (down days) signaling a change in short-term trend

• And while certainly possible, how comfortable are you really if a bear? After the run we've had, only 1.5% off the highs, have more tariff announcements after the close and futures flat, and weight of rebalance into quarter end

• Could have (should have?) been more carnage and dips got bought yday

• Notable QQQ highest volume since mid-August, so the bull/bear battle seems to be at these levels

• I do think given the short-term headwinds a test of 6475-6500 support zone more likely than not, but we see

• PCE was inline

• 6650 first resistance if they try and run them

• More equity demand than supply (need A LOT of IPOs) https://tinyurl.com/yc52mskh [tinyurl.com]

• Tech bond issuance up massively over last few years https://tinyurl.com/kh8z8fpb [tinyurl.com]

• Get back in the Office (please?) https://tinyurl.com/4a4tpmtw [tinyurl.com]

Futures

DOW +206

S&P +23

Nasdaq +81

Charts/Sentiment

Financials / Consumer / Healthcare

COST – Down 1% on same store sales +5.7% vs 5.9% expected. The stock also carries a 47x P/E, which is most of the problem in our opinion. COST up just 2% this year, underperforming the SPX.

JPM on retail – They scraped beautiful bill for winners and losers and came up with top picks BBY, HD and W with a second tier of AZO, ULTA and WMT.

Baird Marine Checks – Retail down 9% y/y in Powerboat segment. Expectations for softness continue.

LLY – Rated new buy at NYKREDIT (not sure what that is).

Shares of US drugmakers (LLY +1.3%, ABBV +1.1%, MRK +1.2%, PFE +1.1%) are inching higher in premarket trading Friday after President Donald Trump announced a plan to impose a 100% tariff on branded and patented drug imports and included exemptions for companies with US manufacturing.

TARIFF ROULLETE – W/Wayfair (-3.5%), RH (-4%), WSM (-2.5%) furniture tariffs

CART – MSci saying GTV tracking below street by weaker orders and share losses

Technology

INTC – +4% and GlobalFoundries (GFS +7.2%) rally in premarket trading after the Wall Street Journal reported that the Trump administration is weighing a new plan to reduce US reliance on chips made overseas

AAPL – Evercore bullish - "annual survey of nearly 4,000 U.S. consumers around iPhone purchase intentions points to the start of a better-than-expected iPhone refresh cycle, led by a strong lineup of products; thinks Apple's core strength remains concentrated in the Pro tiers, but adds that the iPhone 17 appears to have exceeded initial expectations, noting reports of strong first week sales"

AMZN – some ?s on weakness Thurs; data remains mixed / many want stronger evidence for AWS accel

APP – Piper PT hike to $740 ... excited about the Axon Ads Manager soft launch on October 1st. UBS sees bull case raised to $1,000

CIEN – +1.7% upgraded @ Rosenblatt - "Co has an oppty to network multiple AI data centers into clusters. Ciena has won one such deal with a hyperscaler thus far, an est $200M rev opportunity; also a "call option" on Ciena's move inside the Data Center and into components"

INTC – +3% extending gains .... Lip taking advantage of US stake; will cont to shake cup to get investors. for the WH, domestic chip manufacturing #1 priority, and they wont leave it just to TSMC / dont UNDERESTIMATE sovereign support ... TXN +1% decent US footprint

MSFT – MS elevates to top pick in software - " understands the concerns around Microsoft from OpenAI's contract with Oracle, but says the deal contract likely points to Microsoft's capacity constraints and its preference to serve a higher margin enterprise customer. Azure's growth acceleration is not only driven by OpenAI, as its AI strength is backed by broader products and customers"

TIKTOK – US ops are valued at ~$14B, JD Vance said, as Trump signed an exec order bringing American investors closer to control of the app. The low-ball price tag stunned investors after previous projections that scaled closer to $40B

Industrials 

KTOS - Baird - The Wins Keep Coming Domestic and Abroad, Raising PT to $87

• We are raising our price target to $87 on higher growth assumptions for the Unmanned segment, which now reflects new developments with the Mighty Hornet drone for Taiwan.

• We reiterate our bullish stance on KTOS, with franchise program wins stacking up, coupled with 3-4 growth drivers set to emerge in 2026+, with the current Administration focused on highly capable, low-cost weapon platforms.

BA ticking up 1% after Turkish Airlines announced orders of up to 75 787 Dreamliners and intentions to purchase up to 150 more 737 MAX airplanes

Building Products - MBC/AMWD both trading up 6% after the Trump administration announced a 50% levy on kitchen cabinets, bathroom vanities and associated products

Commercial Vehicles – PACCAR (PCAR) trading up 6% after the Trump administration announced a 25% tariff on heavy truck imports

FUL – upgraded to buy from neutral at Seaport Research Partners; $80 PT

MTRN – initiated buy at Freedom Capital; $136 PT

MIR – initiated overweight at JPMorgan; $28 PT

ROL – initiated overweight at JPMorgan; $70 PT

VMI – initiated overweight at JPMorgan; $480 PT

Latest Media

$SNAP - We think there could be value!

P/S: 30x to 3x, why?

Stock based comp = 27% of rev since IPO!