Mid-Morning Look

Wednesday, July 02, 2025

U.S. stocks are struggling for direction for a second straight day, holding just below recent record highs for the S&P 500 and Nasdaq after surging all last week while the Dow remains 1% away from its December best, as investors shake off a very weak ADP private payroll report ahead of tomorrows jobs report. The weaker-than-expected jobs data (payrolls fell -33K in June vs. est. +97K) fueled expectations that the Fed may cut rates sooner than expected. US Fed funds futures raise chances of a July rate cut to 27.4% after ADP data vs roughly 20% pre-data release. In stock news, managed care names hit (MOH, ELV) after CNC withdrew its guidance as the company now sees a sharp negative revision to its ACA Marketplace results, TSLA rises on Q2 deliveries, China stocks moving lower, large banks rise on buybacks/dividend increases following stress test, and crypto assets moving higher with Bitcoin moving back to $108,000 (lifting crypto complex).

Outside of data, President Trump’s signature OBBBA tax/spending bill passed the Senate by the tightest of margins on Tuesday, as VP Vance casting the deciding vote after a 50-50 split, while a House vote is expected as soon as Wednesday, but the bill faced pushback from some Republicans. On trade, Trump threatened to raise tariffs on Japan Tuesday and cast doubt that a trade deal would be reached. Trump threatened Japan with tariffs of up to 35% and also said he is not considering delaying his July 9 deadline and impose duty rates on several nations. Treasury yields are moving higher as well as the US dollar.

Volatility in Europe as the yield on the 10-year UK government bond, or gilt, rose more than 20 basis points on the day at one point to 4.66%, as investors ditched UK debt. 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.

• In Industrials: 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. BV shares fell after the commercial landscaping company cut its revenue guidance to $2.68B-$2.73B from $2.75B-$2.84B (est. $2.78B), while narrowing FY25 adj Ebitda to $348M-$362M from $345M-$365M. 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.
• In Managed Care: CNC shares tumbled after withdrawing its 2025 EPS guidance as the company now sees a sharp negative revision to its ACA Marketplace results after reviewing its marketplace data with actuarial firm Wakely. The data covers 22 of CNC’s 29 Marketplace states – about 72% of CNC’s exchange membership. Mizuho said they would not be buyers on weakness and look for increased clarity on CNC’s ability to reprice HIX for 2026 and increased visibility on the extent of Medicaid MLR pressures (both JP Morgan and UBS downgraded the stock on the news, dragging MOH, ELV lower). CNBC’s David Faber said CVS, CI are not exposed.

• ENVX +11%; 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 +16%; shares jumped on results as day posted Q3 adj EPS of $1.86, above Wall Street estimates of $0.99 and revenue rose 2.7% y/y to $842.70M above expected $785.72M.
• HUT +14%; seeing strength in Bitcoin miners (WULF, CLSK, MARA, RIOT) on the back of Bitcoin strength which is rising back around $108,000.
• ROST +1%; 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.
• TSLA +3%; shares jumped after delivering 384,122 vehicles in Q2, down -13.5% from 443,956 units a year ago, but not far between est. ranges of 370-394K; separately, June China-made EV sales +0.8% y/y, 1st rise in 9 months; Q2 China-made deliveries fall 6.8% y/y, third such fall in a row.
• VRNT +7%; after Bloomberg reported private equity firm Thoma Bravo is negotiating the terms of a potential deal to acquire the company. The Bloomberg report follows a report by Semafor on Tuesday saying that Verint is seeking a buyer. https://tinyurl.com/3p2kjysn

• BABA -2%; as US listed China stocks (JD, PDD, BIDU) open the day weaker.
• BV -14%; after the commercial landscaping company cut its revenue guidance to $2.68B-$2.73B from $2.75B-$2.84B (est. $2.78B), while FY25 adj Ebitda narrowed to $348M-$362M from $345M-$365M.
• CNC -38%; after the managed care co withdrew its 2025 EPS guidance as the company now sees a sharp negative revision to its ACA Marketplace results after reviewing its marketplace data with actuarial firm Wakely. The data covers 22 of CNC’s 29 Marketplace states – about 72% of CNC’s exchange membership (shares of MOH, ELV tumbled in sympathy).
• OSCR -14%; 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 on shares).
• RIVN -3%; produced 5,979 vehicles in Q2 and delivered 10,661 vehicles in quarter, reaffirms 2025 delivery guidance; said received $1 billion equity investment from Volkswagen group at $19.42per share.