Morning Note

Trading Observations

• Disappointing to see things fade late and breadth fall back below 2/1 Adv/Decl at day end

• TRUMP 1PM EVENT TO BE ABOUT DRUGS, PHARMACEUTICALS: LEAVITT

• Opex maybe playing some havoc, expiry today largest in history at over $7.1T notional

• Tech up again to start on back of ORCL/TikTok deal (is it real this time and does it hold?)

• Away from tech, FDX flat on numbers after initially being higher last night, NKE gapping lower

• BOJ not really shifting the narrative

• 6820 first resistance with 6900 above vs. 6760 support and 6650 potential support zone below

• BofA Bull/Bear back above 8.0 https://tinyurl.com/ye2a2cbs [tinyurl.com]

• This chart starting to make the rounds on valuation https://tinyurl.com/3xcxsnw9 [tinyurl.com]

• Another on sales multiples https://tinyurl.com/y4nm7afr [tinyurl.com]

• Some counters, Fund managers may be all-in but households still sitting on piles of cash https://tinyurl.com/3e32pcae [tinyurl.com]

• Inflation below Fed 2% target over last 3 months, with the lagging shelter component just starting to come down https://tinyurl.com/s5u3p9f4 [tinyurl.com]

Futures

DOW -30

S&P +3

Nasdaq +51

Financials / Consumer / Healthcare

NKE – Down 11% - Missed on China and the guide. I’d blame the non-growth against a 33x P/E coming in. Market multiple seems fair to us.

ACN – Defended across the board as a good name at a decent price. Moderate guidance sets up a better chance for outperformance in 2026.

WGO – Up 16% - RV’s winning or is it just short interest? They did guide higher across the board, so execution here is great.

KBH – Down 7% on profit miss. New home sales definitely slowing with fewer addons, although it’s a melting ice cube, not a cliff jump.

LW – Down 13%. Frozen potato sales underwhelming.

FOLD – Up 30% on BMRN takeout deal.

WFC is the subject of a bullish WSJ profile article focused on how the firm’s years-long effort to bolster its investment bank is yielding dividends as it works on several majors M&A deals 

LULU - Lululemon’s Burgoyne Sells $2.76 Million of Shares

Technology

LYFT: -2.4% Wedbush / Devitt downgrading in 2026 outlook note. "In our view, Lyft is most at risk to the impact of AV disruption given the company’s exposure to the US ridesharing market and undiversified offering mix. While the company could carve out a specialized focus as the industry evolves, we think AV operators will opt for more 1P distribution.

META/AI: working on a new image and video-focused AI model dubbed Mango to accompany its next text-based model, dubbed Avocado (WSJ)

NVDA: US launches review of advanced Nvidia chip sales to China” article on Reuters (it was already announced that the H200 could be sold in China, so the fact the White House is now formally approving such sales isn’t that critical)

NVDA - Nvidia shares have underperformed in recent months, but the chipmaker at the heart of the AI trade is trading at an extremely rare discount relative to the Philadelphia Stock Exchange Semiconductor Index, according to Bernstein

ORCL: +5% few positives ... (1)near term bear case for ORCL/hyperscaler capex out the window) - OpenAI $100B/$830B fundraising/valuation article in the WSJ; vs $100B/750B report from Wed night .... (2)TikTok CEO Shou Chew said in an internal memo that the company and ByteDance have signed binding agreements to create a US join venture majority owned by American investors including Oracle

THE CIRLCUAR TRADE - > Amazon in talks to invest $10B in OpenAI, which could increase the ChatGPT maker's valuation above $500B…Comes on top of previous agreement where OpenAI committed to spend $38B on Amazon servers over seven years. – FT

ORCL/OAI Bankshots: CoreWeave +6%, Iren +4.1%, Fermi +3%, Nebius +3.8%, Applied Digital +3.9% .... SOFTBANK +6% overnight

Industrials 

FDX/Macro read: FedEx Q2 revenue rises on higher package volumes; raises the low end of FY outlook. Sell side mostly positive on 2Q results that are boosted by peak season demand, cost reductions and customer wins in B2B health care. The non-core freight division that’s scheduled to be spun off remains under pressure ... note NIKE cited China headwinds as issue

AECOM (ACM) downgraded to equal weight from overweight at Barclays; $100 PT

AGCO (AGCO) Cut to Underweight at Barclays

Air Products (APD) Cut to Equal-Weight at Wells Fargo; PT $250

Celanese (CE) downgraded to equal weight from overweight at Wells Fargo; $45 PT

Cummins (CMI) upgraded to overweight from equal weight at Barclays; $546 PT

Eagle Materials (EXP) Cut to Hold at Truist Secs; PT $210

Generac (GNRC) upgraded to overweight from equal weight at Wells Fargo Securities; $195 PT

IMSR - Terrestrial Energy Rated New Overweight at Cantor; PT $12

Kratos Defense & Security Solutions (KTOS) initiated overweight at KeyBanc; $90 PT

Lockheed Martin (LMT) downgraded to neutral from overweight at JPMorgan; $515 PT

Paccar (PCAR) Raised to Overweight at JPMorgan; PT $133

Parsons (PSN) initiated overweight at Barclays; $70 PT

ZIM Integrated Shipping (ZIM) Raised to Hold at Fearnley; PT $20

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