Closing Recap

Tuesday, September 02, 2025

US equities faded again overnight coming out of the long weekend as confusion swirled around tariff rulings and legality. With no significant economic data today, equities extended declines into the open in an inauspicious start to a notoriously volatile and challenging month for the markets. Mid-morning saw some movement off the early lows but breadth favored decliners by 5:2 as small caps outperformed in the broad decline with IWM (-0.63%) versus SPY (-0.90%) and QQQ (-0.98%). Health Care (-0.09%), Energy (-0.14%) and Consumer Staples (-0.33%) were outperformers among S&P sector ETFs, while Financials (-1.06%), Industrials (-1.12%) and Technology (-1.24%) paced the underperformers with all 11 ETFs in the red. Despite Friday’s decline and an uncertain month ahead, today’s Fear and Greed Index registered 62/100 (Greed) versus last week’s 60 (Greed) and last month’s 49 (Neutral).

In data of interest today, @KevRGordon noted after four consecutive months of underperformance, the equally-weighted S&P 500 beat the cap-weighted index in August. On bonds, @charliebilello noted the US bond market has been in a drawdown for a record 61 months. Lastly, @KobeissiLetter noted in two weeks the Fed likely will cut rates and “blame” the weak labor market with the US unemployment rate for 16–24-year-olds up to 10%. With the labor market weakening into rising inflation, he concludes stagflation is here.

Heading into the final hour of trading, stocks remained lower with breadth expanding to 3:1 in favor of decliners as small caps continued to outperform in a sloppy tape with IWM (-0.65%) versus SPY (-0.85%) and QQQ (-0.95%). Sector performance continued to show losses across the board with Health Care, Energy and Consumer Staples as outperformers, while Industrials, Technology and Real Estate led the underperformers. Let’s hope the month improves from here. Note, September is comfortably in first place as the worst month of the year for the S&P 500 with an average return of -1.17% looking back to 1928. 2H September is the worst two-week period of the year with an average return of -1.38% looking back from 1928. However, the first half of September is more moderate with smaller chops which is a trend we believe will dictate this month’s early trading due in large part to current positioning – Goldman Sachs.

• 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%.

• WTI crude futures posted strong gains overnight and held the majority of the upside for the remainder of the day. Traders accounted for the rise as dip-buying, adding to positions ahead of OPEC+ meetings where no further production increases are expected, and support from US sanctions imposed on Iran’s oil revenue stream. Separately, a draw is expected when US crude stocks are reported later this week. October WTI futures settled +$1.58/bbl, or +2.47%, at $65.59, while Brent settled + $0.99/bbl, or +1.45%, at $69.14.
• U.S. Treasury yields were higher, with the 10-yr yield up around 5-bps to 4.276% as investors looked ahead to a key jobs report on Friday and monitored the latest tariff developments. The 2-year Treasury moved nearly 3 basis points higher to 3.652%. The 30-year bond yield climbed over 5 basis points to 4.97% Up 10 of the last 13 trading days). A selloff in global government bonds spooked investors and prompted a broader risk-off move, hitting equities and lifting the dollar. UK 30-year yields earlier rose to the highest since 1998 with the Autumn budget approaching. French 30-year yields also topped 4.5% for the first time since 2011.

• In Food & Beverages: PEP shares rose 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. KHC 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." STZ shares fell 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.
• In Consumer Products: ELF 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. In tobacco, BTI was downgraded to Underperform from Sector Perform at RBC Capital saying profit expectations for British American’s new categories are "seriously overblown." RBC expects a lack of scale in the individual categories.
• Food Distribution & Restaurants: PFGC was upgraded from Neutral to Overweight at Piper and raised tgt to $114 from $90 as particularly likes the risk-reward here. MCD celebrates the return of extra value meals with $5 sausage McMuffin with egg meal and $8 Big Mac meal.

• In Autos & Suppliers: AXL was upgraded to Outperform and tgt raised to $8 from $6 saying given its strong exposure to the US auto market, which is experiencing stronger-than-expected vehicle sales demand, peer multiples have re-rated higher. RACE was upgraded to Buy from Hold at Deutsche Bank with a price target of EUR 520, up from EUR 430 as believes the company’s October capital markets day will bring "ambitious" mid-term targets, including adjusted EBIT margins potentially exceeding 30% and an EUR 3B share buyback.
• In Transports/Online Travel: ULCC 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. Currently, 35% of Frontier’s network overlaps with Spirit for the September quarter.

• In Coal: The Trump administration announced plans on Tuesday for competitive coal lease sales this year in Alabama, Montana, and Utah as part of a broad government effort to bolster domestic coal production. The sales are part of President Donald Trump’s push to revitalize U.S. coal mining despite global efforts to transition to cleaner energy sources to cut planet-warming carbon emissions.
• 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 Aerospace & Defense: AL announced it has entered into a definitive merger agreement to be acquired by a consortium of investors for $65.00 per share in cash, valuing the aircraft leasing company at approximately $7.4B. HUBB was upgraded to Overweight from Equal Weight at Wells Fargo (tgt to $490 from $445). HXL was upgraded to Buy from Neutral and raise PT to $80 from $65 at UBS saying inflecting widebody production in 2026 should drive mid-teens revenue growth and 300bps margin expansion for Hexcel and a re-rate in the stock. UBS sees 5% upside to consensus in 2026 with 300bps expansion.

• In Crypto: Gemini is aiming to raise up to $316.7M in its U.S. initial public offering, the Cryptocurrency exchange said on Tuesday. CANG said mines 663.7 Bitcoin in August, boosts holdings to over 5,190 BTC; IREN was downgraded to Hold from Buy at jones. BMNR said it’s Crypto + Cash Holdings of $8.98 billion, including 1.87 million ETH Tokens; MSTR buys 4,048 Bitcoin Aug. 26 to Sept. 1 for aggregate purchase price $449.3M; strong gains in handful of miners with IREN, CIFR among leaders.
• In FinTech/Payments: Swedish fintech firm Klarna (KLAR) is looking to raise up to $1.27 billion in its long-awaited U.S. initial public offering (IPO), according to an official filing out. Klarna plans to offer 34.31M ordinary shares priced between $35 and $37 each. Klarna will offer 5.56 million of those shares, while the remaining roughly 28.8 million will be put forward by existing shareholders who are selling their stock.
• In Private Equity: APO plans to launch a $5 billion sports investment vehicle, the Financial Times reported on Tuesday. Apollo will hire new employees to lead the strategy, which will focus on lending to sports leagues and teams, and buying stakes in clubs
• In Insurance: KBW Inc noted for insurers (ALL, TRV, GSHD top picks) homeowners rate increases stay at +6.3% in August. Most homeowners’ insurers are still raising rates, reflecting still high (but declining) reinsurance costs, stable attachment points, and ongoing significant weather-related losses, with the combined impact (as is typical) varying materially by individual insurer.
• In Lending & Services: ALLY was upgraded to Equal Weight from Underweight at Wells Fargo (tgt to $45 from $37) saying they now see less interest rate tail risk and says the company’s auto credit is trending positive while Ally’s book value should continue to grow and share buybacks are on tap for 2026.

• CYTK shares rise 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.
• IDYA and Servier announced an exclusive license agreement to bring darovasertib, a promising treatment for a rare eye cancer, to patients worldwide.
• IONS said results from phase 3 CORE and CORE2 studies Of Olezarsen for severe hypertriglyceridemia, Olezarsen demonstrated a highly-statistically significant reduction in fasting triglycerides of up to 72% and acute pancreatitis events of 85% with favorable safety and tolerability: sending shares higher.
• MRK said its oral drug met the main goal of reducing bad cholesterol in patients in a late-stage trial; In the 24-week trial, the drug showed meaningful reductions in LDL cholesterol, when compared to placebo.
• MYTS shares jumped 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.
• UTHR shares surged 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. (
• The UTHR news also lifted shares of MNKD, which recently collaborated with UTHR to develop the dry powder inhalation formulation of Tyvaso (Tyvaso DPI), leveraging MannKind’s Dreamboat device. INSM is developing Treprostinil palmitil inhalation powder (TPIP), a dry powder formulation of Treprostinil for PAH and PH-ILD, which competes directly with UTHR’s Tyvaso. LQDA’s Yutrepia, a dry powder Treprostinil inhalation product, is in development for PAH and PH-ILD, positioning it as a direct competitor to Tyvaso DPI. Potentially watch shares of ATYR (Developing efzofitimod, a phase 3 candidate for pulmonary sarcoidosis with potential applicability to IPF).
• ZBIO and RPRX announced that Royalty Pharma will provide up to $300M in funding in exchange for a royalty on sales of obexelimab. This financing will support obexelimab development and a potential IgG4-RD commercial launch in the first half of 2027, subject to approval.
• ZYME to discontinue clinical development of ZW171, a mesothelin-directed T cell engager

• In Managed Care: CI announced it was making a $3.5B investment in Shields Health Solutions via preferred stock. The deal is not expected to have a material impact to CI’s previously issued EPS guidance, which the confirmed also reaffirmed this am ahead of meetings.

• 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.
• In Optical/Comm Services: GLW was upgraded to Buy from Neutral at UBS and raised tgt to $84 from $65 as expects the company’s artificial intelligence-driven fiber growth to continue exceeding market expectations, driving sustainable higher growth and a stock re-rating.