Trading Observations

• Futures are soft. Tech is lagging a bit

• Quite a statement yesterday in the middle of the worst seasonality of the year historically

• 14D RSIs now approaching overbought across the board

• Gold and breakevens are moving against the Fed as the probability of three additional cuts has receded this week

• Bears highlight stretched multiples, margin gains necessary at current prices

  • 2025 EPS looks ~$274, up 14% on rev growth of 6%

  • Current S&P 500 margin is 13.3%.  Post-covid highs were 16.2%

• Next Week: Flash PMIs Mon, Consumer Confidence and House Price Index Tues, New Homes Sales Wed, GDP, Durable Goods, Pending Home Sales, Weekly Claims Thur, Personal Income and Spending, PCE, Inventories, UofM Sentiment Fri

Today is triple witching option expiration in which $5.1 trillion worth of options tied to stocks, indexes, and ETFs will expire. $2.6 trillion of these are tied to indexes while $620B are linked to options on futures. Most of the futures interest in this level is focused on the S&P 500 index around the $5,500 level. $635B is tied to ETF options while $600B will be tied to single stocks.

Upgrades – AGNC, NLY, APTV, ASMB, BOKF, CNTA, TIGO, VC

Downgrades – ACRE, CMTG, DAN, DHT, FDX, FRO, INSW, NTBL, PARR, PBF, PEP, PB, RPD, STNG, VLO, VEL

Futures

DOW +21

S&P -5

Nasdaq -15

10-Year Yield

Gold

Consumer/Financial Healthcare

FDX – We see 4 downgrades. MS went to Underweight, $200 PT. Yes, it’s too late as the stock is down 14% and $40 already, but the $200 number is relevant ($300 going out, $260 last). The S&P has 6% revenue growth, and 14% EPS growth priced in for next year, and FDX is basically saying the opposite is happening, or its reminding us that the very capital intensive business that is FDX is a lousy one at times.

Fin Tech Acquirers Conference – FI, TOST, and SQ continue to gain share, and nobody called out share losers. Pricing was solid. V and MA are pushing emerging markets TAM as their next move.

Credit Cards/WMT: Walmart will partner w/Fiserv to offer customers the ability to pay instantly directly out of their bank account, bypassing traditional card networks like Visa and Mastercard (Bloomberg) (Visa and Mastercard shares underperformed during the Thurs session on back of this WMT/FI partnership)

NKE – Up 8% on a new CEO announcement. Everyone was in agreement this needed to happen, and any argument here would be that the new guy is an insider and not some CMG like super hire.

JPM – Said to be testing mobile app tied credit cards in the UK for the first time. They already have $26.4B in UK deposits.

CHWY – Down 3% on an announced secondary.

Technology

AI/ENERGY: MSFT GOING NUCLEAR - MSFT AI energy demand prompts three mile island revival

ASML: ADR -1.6% post MS downgrade; sees a balanced risk/reward for the shares given "late cycle share price dynamics." Risks include weak Intel capacity adds, a slowing DRAM cycle in 2025 and ongoing uncertainties surrounding China demand

Semicaps: Mizuho lowering PT across the group

OpenAI: $6.5B funding round is nearly complete, and was billions oversubscribed (Bloomberg)

PLTR: block 10M shrs @ MS, heard $35.90 to $36.83 range

META Connect 9/25-26: stock up 8 out of 9 (huge close >$550 level last night) .. heavily AI & Reality Labs focused (Llama updates, AI agents, MetaAI KPIs, new devices, etc

NVDA - is collaborating with United Arab Emirates-based AI company G42 to advance climate technology, with a focus on developing AI solutions aimed at boosting accuracy of weather forecasting globally.

SNAP shares edge lower, falling 0.2%, as B Riley Securities initiated coverage on the social media company with a neutral recommendation. Analyst Naved Khan says the stock is trading at a premium to its peers with a “full” valuation.

RDDT initiated with a recommendation of buy at B Riley Securities, with the analyst saying the social media platform offers a “differentiated value proposition to users, advertisers, and content licensees.”

Industrials 

Auto Suppliers – Wells Fargo upgrades APTV, VC and downgrades DAN – Aptiv (APTV) upgraded to overweight from equal-weight, Visteon (VC) upgraded to overweight from equal-weight and Dana Inc. (DAN) downgraded to underweight from equal-weight

FDX shares tumble 13% after the parcel carrier lowed its annual outlook for adjusted earnings per share and revenue growth, while posting a worse-than-expected quarterly profit. Morgan Stanley downgraded the stock and warned Fedex could be facing structural risks.FDX - Rough Quarter, but FY25 Plan Not Blown Totally Off Course – Baird is buyers on weakness.

JBLU - is introducing lounges at New York City's JFK Airport and Boston's Logan International Airport as part of the company’s strategy to capture premium customers and gain market share in an increasingly competitive landscape. Move to Mint | JetBlue [jetblue.com]

Notables