Closing Recap

Wednesday, July 02, 2025

U.S. stocks were in a super tight range all afternoon, as tariff/trade news, a weak private payroll report and a handful of sector movers failed to generate any action in the broader overall market, as stocks pushed higher all afternoon and closed near the highs. The S&P 500 and Nasdaq moved into all-time highs (rebounding from yesterday’s dip), while the Dow slowly approaches its record best. For a second straight day, the Russell 2000 outperformed large caps, rising more than 1.3% as overall leaders were Materials (XLB) for a second day and Energy (XLE) after a late day surge in oil prices, along with a bounce back in Technology (XLK) after large cap tech/AI names slipped yesterday, while Utilities (XLU) and Healthcare (XLV) were the biggest drags in the S&P. Financials were mixed with large cap banks outperforming as C, JPM, MS, WFC, BAC, SCHW, STT at 52-week highs. House lawmakers are voting today or Thursday on the Senate version of Trump’s tax bill, which squeaked through that chamber on VP JD Vance’s tiebreaker. The House can afford to lose only three Republican votes in the face of unified Democratic opposition (they lost 2 Republican votes in Senate yesterday). Other factors today were weak ADP private payrolls ahead of the Nonfarm payroll report tomorrow and trade/tariff news. Note tomorrow is a shortened trading day as The Nasdaq and New York Stock Exchange will close early at 1 p.m. ET on Thursday, July 3 and remain closed Friday while the U.S. bond market will also close early at 2 p.m. ET on July 3 and closed all day Friday.

In trade and tariff news, U.S. President Donald Trump said on Wednesday that he has struck a trade deal with Vietnam saying in a Truth Social post “the Terms are that Vietnam will pay the United States a 20% Tariff on any and all goods sent into our Territory, and a 40% Tariff on any Transshipping. In return, Vietnam will do something that they have never done before, give the United States of America TOTAL ACCESS to their Markets for Trade. In other words, they will “OPEN THEIR MARKET TO THE United States,” meaning that, we will be able to sell our product into Vietnam at ZERO Tariff”. Those trade headlines (retailers that manufacture in Vietnam such as NKE, W, ONON, RH saw a drop in price share initially on hopes of a lower tariff but later rebounded as the figure was less than the 46%, which could have gone into effect as soon as next week.). Still no news with Japan after Trump yesterday said he doubts we’ll have deal with Japan and suggests Japan could pay 30% or 35% tariff; though noted he expected a deal with India and said he is not thinking about extending tariff pause past July 9th.

Stats: Coming into today: 1) @ KevRGordon tweets: “% of S&P 500 members trading above their 50d moving average up to 81% … highest since last September; 2) big tech…is the stock market, as @KobeissiLetter notes, saying “The top 10 tech stocks reached a record market value of $20.5 trillion in June. Just 3 stocks, Nvidia, $NVDA, Microsoft, $MSFT, and Apple, $AAPL, reflect half of that total. This also marks a ~$3 trillion market cap recovery since April’s low. Collectively, the top 10 have gained over $12 TRILLION in value over the last 3 years. Since 2012, these stocks’ market cap has grown at an average annual rate of 23.4%.”

British government bond yields jumped sharply, and the pound tumbled a day after the government was forced to sharply scale back plans to cut benefits, and accelerating declines after finance minister Rachel Reeves appeared distressed in parliament.  The yield on the 10-year UK government bond, or gilt, rose more than 20 basis points at one point to 4.66%, as investors ditched UK debt.

• The U.S. dollar edged off multi-year lows against rival currencies though remained under pressure as traders considered the potential impact of President Donald Trump’s spending bill, and looming tariff deadlines. The euro was down 0.1% at $1.1797, but close to its highest since September 2021 hit Tuesday, and the pound was down 0.87% at $1.3624, after hitting a three-and-a-half year peak the previous day. The dollar was up 0.15% on the Japanese yen at 143.65. August gold settles +$9.90/oz, or +0.30% at $3,359.70.
• Treasury yields tick higher as markets wait for June’s jobs report amid bets that the Fed isn’t too far from cutting interest rates. Payrolls are expected to decline to 110,000 from 139,000, with the unemployment rate rising to 4.3% from 4.2% and wage gains slightly cooling. The 10-year rises 4bps to 4.290% and the two-year gains 1.2bps to 3.789%.

• In Auto Suppliers: APTV was downgraded from Outperform to Peer Perform at Wolfe Research and fine-tuned estimates but long-term still believes that Aptiv is at the technological forefront of several key megatrends, including Electrification, ADAS / Autonomy, and Smart Vehicle Architectures. Wolfe upgraded VC from Peer Perform to Outperform saying sees compelling risk/reward here and looking ahead, does see several catalysts. Piper previewed the sector after comparing automotive sales and production trends versus current tier-1 supplier forecasts, Piper now expects suppliers to boost FY25 production guidance. Piper thinks this backdrop is positive for BWA, since 60%+ of revenue comes from North America and Asia (mostly China) and says other beneficiaries should include Neutral-rated MBLY and Neutral-rated APTV.
• In Online auto retail: CARG downgraded to Market Perform from Outperform in transfer of coverage at Citizens and maintain Outperform on CVNA with $440 PT saying they believe the auto macro is relatively stable today, though there was likely some pull forward earlier in the year following the announcement of auto tariffs, and interest rates remain stubbornly high as auto affordability has been challenging.

• In Retailers: ROST was upgraded to Buy from Hold at Jefferies and raised its tgt to $150 from $135, saying the retailer is well-positioned to outperform as comps should accelerate through the end of the year, and EBIT should expand by 170 basis points over the next three years. Goldman Sachs initiated on 3 footwear stocks with a cautious view as believe accelerating competition and shifting consumer preferences will provide a more muted near-term backdrop for the industry overall (sell DECK and CROX; Neutral on UAA).
• In Restaurants: ARCO was downgraded to Neutral from Overweight at JP Morgan as expects Arcos to continue facing margin pressures in Brazil, mainly on the back of higher-than-expected input costs (mainly beef) on top of the MFA fee adjustment. CAVA was initiated at Overweight and $100 PT by Keybanc saying with few direct competitors, CAVA is the leading brand in the fast-growing Mediterranean fast casual segment; after a recent rally in shares, CMG saw profit taking as did most of the group DRI, EAT, MCD.
• In Uniforms and Services: UNF Q3 revenue rises 1.2% to $610.8M but missed analyst expectations of $614.5M on sluggish organic growth while net income for fiscal Q3 increased 4.3% to $39.7M; maintains annual revenue guidance of $2.42B-$2.43B while raises diluted EPS guidance to $7.60-$8.00

• In Payments: XYZ was initiated at Buy and $80 tgt at Compass Point saying investors are willing to pay ~20x 2027 EBITDA for CHYM which they view as the closest publicly traded pure play that is comparable to Cash App. They believe Cash App should be valued at 15x EV/adjusted EBITDA (including stock-based compensation (SBC)), given Chime’s valuation and the Square segment valued at 12.1x on 2026 adjusted EBITDA.
• Information Services: Oppenheimer raised price tgts for SPGI to $592 from $552 and MCO to $567 from $523 saying they remain incrementally positive on their outlook despite having moved sideways since mid-May. This is predicted by 1) better debt issuance in late Q2; 2) a lower interest rate backdrop in 2026E; 3) improved M&A prospects; and 4) more stable capital markets.
• In REITs: NHI was upgraded to Buy, and both CUZ, HIW downgraded to Hold at Truist saying supply/demand and capital markets conditions are supportive of healthy multi-year growth for most healthcare REITs, and it is upgrading NHI to Buy from Hold. In contrast, Truist thinks most office REIT valuations appear fair, given the stocks’ sensitivity to the economic cycle, often relatively high financial leverage, below-average margins, a stalling physical occupancy recovery and AI’s threat to white-collar jobs.
• In Insurance: ALL has completed the sale of its group health business for $1.25 billion in cash, adjusted for the closing balance sheet. The deal, which was announced in January, is expected to generate a financial book gain of approximately $500 million.

• BAX: The FDA has issued an urgent recall for Baxter’s infusion pumps (Spectrum v6 and v8) related to a software error. Specifically, the FDA recall highlights a critical software issue that could lead to potentially incorrect infusion rates.
• OGN said it will discontinue the development of its experimental drug, after it failed to reduce pain in women suffering from endometriosis in a proof-of-concept mid-stage study.

• Healthcare Services: OSCR shares fell after Barclays initiates coverage at underweight saying the stock presents asymmetric downside risk after shares gained more than 50% in June alone on speculative retail interest despite elevated policy risks (Centene withdrawing its 2025 guidance also potentially weighing).

• ENVX announced that its Board of Directors has authorized a share repurchase program under which the company may repurchase up to $60 million of its outstanding common stock.
• GBX shares jumped on results as day posted Q3 adj EPS of $1.86, above Wall Street estimates of $0.99 and revs rose 2.7% y/y to $842.70M above expected $785.72M.
• KBR was downgraded to Neutral from Buy at UBS saying it has had some negative developments recently in its MTS (gov’t) segment, and UBS doesn’t see enough visibility to positive catalysts at the moment.
• PWR was downgraded from Outperform to Market Perform w/ $354 PT at Northland noting Quanta trades with the basket of AI-related companies, and to be fair, the growing demand for its services is partly due to the increasing demand for electricity to run data centers. However, it is not a fabless semiconductor company; its growth scales with headcount and is augmented by acquisitions.

• TDG tgt was raised to $1,700 from $1,500 at Keybanc and maintained OW, remain confident on enduring tightness within the A&D aftermarket, supporting the firms’ Overweight ratings on AIR and TDG and strength within Space & Defense, supporting its Overweight rating on RKLB. The firm said post analysis, including its proprietary Q225 Plane Chain survey of aerospace suppliers, it is largely maintaining FY25-FY26 estimates.
• The Pentagon has halted some shipments of air defense missiles and other precision munitions to Ukraine over concerns that U.S. stockpiles are too low, Politico reported, citing people familiar with the issue

• AAPL was upgraded to Hold from Underperform at Jefferies saying they believe tariff-driven pull-in demand and share recovery in China would drive Jun Q REV/EPS growth of ~8%/~10%, roughly 5%/9% above consensus and above AAPL’s LSD rev growth guide. But it expects only flat iPhone unit growth in 2HCY25, due to pulled-in demand in Apr/MAY and lack of new features for iPhone 17.
• In Software: ADBE was downgraded from Neutral to Sell at Redburn and cut tgt to $280 from $420 saying Adobe’s moat is being eroded by GenAI, and low-end disruption is likely to intensify. In the near term, Redburn sees this continuing to put pressure on the multiple, as investors question terminal value. MSFT will lay off about 9,000 employees, affecting less than 4% of its global workforce across different teams, geographies and levels of experience, CNBC reported.
• In the EMS Sector: FLEX price tgt was raised to $60 from $50 and Reiterate Overweight at Keybanc saying it’s not an easy call as FLEX shares are trading at ATH price and valuation, but the EMS space has enjoyed multiple expansion as the industry has become more disciplined and gross margins have expanded. JBL was reiterated Buy and $245 tgt at Stifel saying believes we remain in the early innings of a long-tailed AI infrastructure investment cycle, and it believes that JBL is well-positioned to benefit
• In IT Services & Consulting: VRNT shares rose after Bloomberg reported private equity firm Thoma Bravo is negotiating the terms of a potential deal to acquire the company. The report follows a report by Semafor on Tuesday saying that Verint is seeking a buyer https://tinyurl.com/3p2kjysn
• In Semiconductors: MRVL shares tumbled off highs after a report in TheInformation said MSFT is revising its roadmap for its internally developed artificial intelligence server chips and will focus on releasing less ambitious designs through 2028; the revised roadmap has negative implications for Marvell, a specialized chip designer that Microsoft hired to work on some of the chiplets in Braga-R the report cited. INTC shares underperformed in a generally strong semi sector; KLAC hit all-time highs and NVDA back near its best levels.