Mid-Morning Look

Tuesday, September 02, 2025

U.S. stocks off to a slow start as September trading kicks off, a negative period of seasonality generally, while markets eagerly await jobs data all week (JOLTs, ADP, and Nonfarm payrolls on Friday). The legal battle on tariffs adds uncertainty as gold prices hit record highs, the dollar and oil prices gain along with Bitcoin. August payrolls should rise by 90k, higher than consensus expectations, but all eyes will be on the July revision. Global stock markets were also pressured as a sell-off in government bonds spilled into the equity market, extending the recent wobble for tech shares. In other stock news, it was a busy morning for the biotech sector with lots of highflyers on data/news. MLYS shares surge around 80% after AZN presentation of baxdrostat’s Phase 3 BaxHTN results at ESC; UTHR another highflyer after highly anticipated TETON-2 data superiority over placebo with an absolute FVC 95.6 mL (INSM, LQDA, MNKD also moving on data); and IONS shares jimp on Ph3 CORE and CORE2 of Olezarsen in people with sHTG – with a highly stat sig 85% reduction in acute pancreatitis events among key updates in focus. There is also a heavy slate of sell-side conferences this week, including today and just gets busier. Market breadth favoring decliners by 5:2 as small caps outperform with IWM (-0.63%) versus SPY (-0.90%) and QQQ (-0.97%). All eleven S&P sectors are currently lower on the day with 1% declines for Financials, Tech and Industrials.

• ISM U.S. manufacturing activity index 48.7 in August (consensus 49.0) vs 48.0 in July; ISM U.S. manufacturing prices paid index 63.7 in August (consensus 65.3) vs 64.8 in July; ISM new orders index 51.4 in August vs 47.1 in July and employment index 43.8 in August (consensus 44.5) vs 43.4 in July.
• July construction spending -0.1% (consensus -0.1%) to $2.139 trln, vs June -0.4% (prev -0.4%). US July private construction spending -0.2%, public spending +0.3%.

• In Industrials: FTV was downgraded to Equal Weight at Morgan Stanley and lowered its tgt to $50 from $90 following the RAL separation, while simultaneously launching coverage of RAL (SpinCo) with an Overweight rating. While both sides of the Fortive entity have disappointed on targets, Morgan prefers RAL which is realizing a steeper 1H’25 trough and brings clearer signs of NTM cycle recovery. AYI upgraded from Equal Weight to Overweight at Wells Fargo citing increased earnings growth expectations for the upgrade. AME was upgraded to Hold from Sell at TD Cowen saying its downgrade thesis has largely played out while the Faro Technologies acquisition provides a good opportunity as costs are taken out.
• In Telecom Services: Goldman Sachs assumed coverage of AT, and VZ at Buy, Sell rated on CHTR, ATUS and Neutral on CCOI and LUMN. Goldman said they see companies leaning into wireless and wireline bundling (‘convergence’), network leadership and modernization efforts, along with price-value offerings including third party services (E.G., streaming, AI). In other news, TU reached a definitive agreement to acquire all remaining shares of TIXT for $4.50 per share, valuing the company at approximately $2.9 billion.
• In Security Software: ZS and SAIL were both upgraded to overweight from equal-weight at Morgan Stanley while the firm downgraded FTNT to underweight from equal-weight. SAIL was upgraded saying it is well-positioned to maintain 20%+ ARR growth as Identity remains in focus with expansion of NHIs and agentic computing providing new growth vector. ZS was upgraded (tgt to $320 from $280), leveraging its strong position in zero-trust, as a leader in the SSE market, and longer-term platformization strategy. FTNT was downgraded as believe maturity of firewall refresh opportunity not appropriately reflected in ’26/’27 Street estimates, providing a headwind to shares.

• BIIB +5%; and ESAIY said the FDA approved as injectable version of their Alzheimer’s disease drug Leqembi, allowing for an easier treatment option following an initial intravenous infusion.
• CYTK +37%; after late-stage study data shows the company’s drug is more effective for heart disease symptoms than standard-of-care. Stifel noted new data related to aficamten at the European Society Of Cardiology Congress 2025 was highly bullish for CYTK as detailed MAPLE data excellent, exceed Stifel’s bullish expectations, and detailed ODYSSEY-HCM data only increase Stifel’s confidence.
• IONS +25%; after announced that Olezarsen reduced triglycerides and acute pancreatitis events in Phase 3 studies for people with severe hypertriglyceridemia.
• MYTS +57%; after its competitor AZN presented results from baxdrostat’s pivotal Ph. 3 BaxHTN study in 3L+ uHTN/rHTN patients on two background anti-hypertensive therapies. Although BaxHTN met its primary endpoint for 1-2 mg QD doses, its placebo-adjusted SBP reduction and confirmed hyperkalemia >6.0 mmol/L were numerically worse than lorundrostat’s Launch-HTN results.
• PEP +3%; after the WSJ reported activist investor Elliott Management has built a roughly $4B stake in PepsiCo and plans to push the beverage and snacks giant to make changes to boost its sagging share price.
• TIXT +15%; TU reached a definitive agreement to acquire all remaining shares of TIXT for $4.50 per share, valuing the company at approximately $2.9 billion.
• ULCC +19%; was upgraded to Buy from Hold and $8 PT at Deutsche Bank saying they now see the low fare carrier as best positioned to be the biggest beneficiary of Spirit’s bankruptcy given their network overlap.
• UTHR +41%; after announced that its TETON-2 study evaluating the use of nebulized Tyvaso(R) (Treprostinil) inhalation solution for the treatment of idiopathic pulmonary fibrosis met its primary efficacy endpoint of demonstrating improvement in absolute forced vital capacity relative to placebo.

• ELF -3%; was downgraded from Buy to Hold at Deutsche Bank, noting shares have appreciated ~+25% since early August (surpassing the firm’s price tgt $121), so the firm moves back to the sidelines today and downgraded the shares to Hold.
• FTNT -3%; downgraded at Morgan Stanley as believes maturity of firewall refresh opportunity not appropriately reflected in ’26/’27 Street estimates, providing a headwind to shares.
• KHC -3%; said it will separate into two independent public companies; expects deal to close in 2H’26; anticipates up to $300 mln of dis-synergies from transaction; said the two resulting cos will be “Global Taste Elevation Co.” & “North American Grocery Co.”
• NVDA 2%; early weakness in Mag 7 stocks weighing on the market AMZN, META, MSFT, GOOGL
• STZ -6%; after lowering its FY26 comparable EPS view $11.30-$11.60 from $12.60-$12.90 prior (est. $12.65), sees enterprise organic net sales to decline (6%-4%), and lowered its FY26 free cash flow view $1.3B-$1.4B from $1.5B-$1.6B.