Morning Note

Calendar

This Week – Largely devoid of earnings. CAH, CSCO, DE, AMAT and PANW if you’re squinting. CPI Tuesday is the lead dog.

Thursday – PPI, Jobless Claims (watching these more closely after bad NFPs)

Friday – Retail Sales, Trump with Putin.

Trading Observations

• PPI came in HOT after inline CPI.  How long does that take to be absorbed into the system and effect CPI?

• Futs slapped with IWM -160bps versus QQQ -60bps and just like that, rate cut optimism dinged a bit

• Small caps were outperforming this week, this will give them a right hook to the chin

• Notable 2nd straight 80% breadth days for first time since April with momentum meaningfully underperforming

• RSP outperformed SPY by over 1% https://tinyurl.com/33bw588u [tinyurl.com]

• Any dip in smalls gets bought quickly?

• DE + COHR lower, CSCO flat on numbers

• S&P levels remain the same: 6500 resistance vs. 6400 support

• Oscillators pushing to overbought

• AAII Bulls DROP to 29.9% from 34.9% despite being at new highs

• Bears up to 46%! Time for mean reversion? (supports broadening) https://tinyurl.com/yhb4k827 [tinyurl.com]

• Healthcare has been hated, but fwiw https://tinyurl.com/43swpej8 [tinyurl.com]

• Housing starting to percolate? https://tinyurl.com/2anut82n [tinyurl.com]

• Upgrades – ALB, ALLE, ABG, DLO, DOW, FDX, HBI, KOD, KTOS, MAA

• Downgrades – ACHC, AVB, COHR, FTV, HD, IBTA, ITW

Futures

DOW -182

S&P -28

Nasdaq -120

Charts/Sentiment

Financials / Consumer / Healthcare

TPR – Down 12% on poor forecasts. Think Coach and Kate Spade. The company had run hard into earnings despite weakness at Louis and some other like cos. Tariffs being blamed. Honestly, the numbers don’t look that bad, but given the run into the quarter, we think supply/demand did this one in.

XYZ – Announced a $1.5B debt offering, which is odd given FCF is so strong. Market won’t love it.

WULF (Bitcoin Miner) – Up 30% on a deal with Google.

DLO – Up 23% - This is a social media darling, and it is yet another payments firm, this time out of Uruguay. That said its up 23% on amazing growth and probably fits in the moonshot motif right now that does not care about valuation.

BLSH – IPO yesterday went well. Think Coinbase clone. Issued at $30, traded to $110, $75 this morning. The more IPOs, the more likely this bull market breaks down on supply outpacing demand.

SCHW - Schwab reported Core net new assets brought to the company by new and existing clients for July of $46.9 billion vs. $42.6 billion m/m.

ULTA / TGT - Ulta Beauty and Target will wind down their shop-in-shop partnership when the current agreement ends in August 2026, ending a joint effort launched in 2021.

Technology

Software: conviction here remains extremely low .... leaderboard ystrdy during market rip hardly inspiring - ie AI, ASAN, FIVN, FSLY, PRO, ESTC, CFLT, MDNY, ADBE, MNDY, etc ... DDOG, MDB, INTU, AXON all closed in the red .... ORCL/MSFT/PLTR/NET highlighted the unwind of the long infrastructure SW trade

AAPL: +16% off Aug lows ... from Wed: Co preparing a slew of AI-enabled products, including a tabletop robot, a new version of Siri, home security devices, and a “smart speaker” (Bloomberg)

AI BUILD: GOOGL said Wed it will invest an additional $9 billion in Oklahoma over the next two years to expand its cloud and artificial intelligence infrastructure

AMD/NVDA: AMD outperformed NVDA by 630bps ystrdy post those Fubon checks (which many skeptical on the Nvidia part + Co denied). Def uptick in frustration from clients on those Fubon 'checks' of late

CSCO: -1% solid results/guide (#1 crowded Hardware name againgst some AI angst not helping) ... for the qrtr, beat driven by slightly higher margins while sales weren’t that far from the consensus ($14.67B vs St $14.632B). Networking rev was a bright spot while they fell short in Security, Services, and Observability (Collaboration was about inline). Product order growth of 7% was below est ~10%. AI infrastructure orders rose ~1/3 q/q to >$800M (the F25 total for AI infrastructure orders was >$2B, more than double the original $1B target)

EBAY: fresh ATH again ytrdy; up six in a row

MU: shrs gave back some of positive pre pop as Edgewater cautious (again some checks showing HBM oversupply concerns in '26)

Palantir CEO says 3 front war with Russia, China & Iran very likely… https://thewinepress.substack.com/p/world-war-iii-palantir-ceo-alex-karp [thewinepress.substack.com]

Foxconn anticipates higher Q3 revenue, driven by strong AI server demand and 27% profit growth – FT

RDDT: +5% to fresh highs for move; blasted thru $230 level

DELIVERY/GROCERIES: stocks linked to the grocery retailing industry (CART, DASH, KR, TGT, WMT, etc.) were hit on Wed following the Amazon announcement (the company will offer free delivery of fresh groceries off its main website, adding to its existing Fresh and Whole Foods grocery initiative)

LENOVO: -6% disappointment with margin pressure (GMs contracted 190bp Y/Y to 14.7%), although revenue performed well (sales jumped 22% to $18.8B vs. the Street $17.5B)

Industrials 

DE in the main event this am… stock -6% pre mkt after numbers… watch AGCO and CAT this am.. Deere reported a lower third-quarter profit, hurt by muted demand and headwinds from U.S. tariffs.

Albemarle (ALB) raised to buy from hold at Pekao Investment Banking; PT $114.20

Allegion (ALLE) upgraded to equal weight from underweight at Barclays; $163 PT

ArcelorMittal (MT) initiated equal weight at Wells Fargo; $33 PT

AZZ Inc (AZZ) initiated overweight at Wells Fargo; $128 PT

Cleveland Cliffs (CLF) initiated equal weight at Wells Fargo; $10 PT

Commercial Metals (CMC) initiated overweight at Well Fargo; $61 PT

Dow (DOW) raised to neutral from underweight at BofA; PT $25

FedEx (FDX) raised to buy from hold at DBS Bank; PT $275

Fortive (FTV) downgraded to equal weight from overweight at Barclays; $54 PT

Illinois Tools Works (ITW) downgraded to underweight from equal weight at Barclays; $243 PT

Kratos Defense (KTOS) upgraded to buy from neutral at BTIG

Nucor (NUE) initiated equal weight at Wells Fargo; $145 PT

Reliance (RS) initiated equal weight at Wells Fargo; $296 PT

Steel Dynamics (STLD) initiated overweight at Wells Fargo; $143 PT

Ternium (TX) initiated underweight at Wells Fargo; $30 PT

Latest Media

$ZM - Left for dead now extremely attractive valuation

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