Closing Recap

Wednesday, August 20, 2025

U.S. stocks opened flat after modest overnight weakness, quickly faded on the open and extended prior day declines, especially in the Nasdaq which underperformed behind selling pressure in large cap tech/Mag 7/momentum stocks. The Nasdaq fell as much as-1.8% this morning, adding to the prior day drop as valuation concerns in the AI sector created a short-term sell-off, (hit 2-week intraday lows). However, following a 24-hour drop in tech, major averages clawed back this afternoon, finishing well off the lows as investors prepare for the Fed symposium in Jackson Hole, Wyoming starting Thursday, with Fed Chairman Powell speaking Friday morning. Given the recent spate of mixed economic data (weak jobs, in line/cooler CPI; as well as hotter PPI/better housing data), anything goes for Friday, though fed fund futures are still baking in a 25bps cut at the FOMC September meeting. Over the last 48 hours, Wall Street saw a rotation out of growth into defensives, utilities, and real estate. Back to tech, fresh concerns over the durability of the AI boom, after an MIT study highlighted weak corporate returns and comments from OpenAI’s Sam Altman cited excess buildout in the space, have added to the pressure. After all, Technology in general is up 40% from its April lows, and some selling into the Fed is not too surprising. With today’s losses, the Nasdaq 100 (QQQ) posted its first 5-day losing streak of 2025!

What led to the 2-day decline in Technology/Nasdaq? There was a report from MIT’s NANDA (Networked Agents and Decentralized AI) initiative, titled The GenAI Divide: State of AI in Business 2025, which states that 95% of organizations are getting zero return from their investments in generative AI. The report, based on 52 structured interviews with enterprise leaders, analysis of over 300 public AI initiatives, and a survey of 153 business professionals, highlights: MIT‘s NANDA report reveals 95% of companies see no ROI from generative AI investments, triggering tech stock selloffs. The study attributes failures to corporate “learning gaps” and flawed integration, not AI model quality. Successful AI projects focused on specific pain points and partnerships, with external tools showing 67% success vs. 33% for in-house systems. Market volatility highlights growing concerns about AI‘s commercial viability amid inflated tech stock valuations. https://tinyurl.com/33pzf6vf . Also note yesterday, a Bloomberg report discussed options traders increasingly purchasing “disaster” puts to hedge against a potential plunge in technology stocks. The article highlights growing nervousness among traders about a significant selloff in the tech sector, driven by concerns over market volatility. (https://tinyurl.com/3vd8tuzr ). Lastly, Sam Altman, the CEO of ChatGPT, made headlines last Friday when he stated that the A.I. sector was in a bubble – a story with legs as Friday’s decline extended this week.

In Fed News, the release of the Minutes from the July FOMC meeting showed the two Federal Reserve policymakers who dissented against the U.S. central bank decisions to leave interest rates unchanged last month appear not to have been joined by other policymakers in voicing support for lowering rates at that meeting. “Almost all participants viewed it as appropriate to maintain the target range for the federal funds rate at 4.25% to 4.50% at this meeting,” the minutes of the July 29-30 meeting said. Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller both voted against the decision to leave the benchmark interest rate unchanged, favoring instead a 25-bps reduction to guard against further weakening of the job market. It was the first time since 1993 that more than one Fed governor dissented against a rate decision. Also, ahead of the Jackson Hole symposium later this week, President Trump has told aides he is considering attempting to fire Biden-appointed Fed Governor after saying publicly earlier she should resign after a housing official alleged, she submitted what he called fraudulent information after one of his allies accused her of mortgage fraud.

• The U.S. Treasury sold $16B in 20-year bonds at high yield 4.876% vs. 4.877% when issued prior, with a bid-to-cover ratio (demand) at 2.54 as primary dealers take 12.88% of U.S. 20-year bond sale, direct 26.47% and indirect 60.64%. Overall, Treasury yields were little changed after edging higher over the last week heading into the FOMC symposium later this week (been climbing since the hot PPI last Thursday).

• In Auto Services & Retail: CTOS was downgraded at JPMorgan to underweight from neutral on expectations that vocational truck sales will soften over the coming quarters due to weak orders data. The firm said it expects CTOS to underperform its coverage in the next 6-12 months following its YTD gain.
• In Autos & Tires: GT was downgraded to Hold from Buy at HSBC and cut tgt to $9.50 from $15.50 saying the savings from the company’s restructuring have been less impact than expected, and the firm is less confident in Goodyear’s rerating story following its recent results.

• In Apparel Retail: GES shares jumped after Co-founders Maurice and Paul Marciano and CEO Carlos Alberini partner with Authentic Brands Group to take the retailer private as shareholders to receive $16.75 per share in cash in deal valued at $1.4B. In research, Citigroup with several ratings changes as they: 1) GAP was downgraded to Neutral as it views the risk/reward as more balanced in the current macro/tariff backdrop/anticipate a Q2 EPS beat driven by slightly stronger sales/GM; 2) URBN was downgraded to Neutral as risk/reward more balanced after the stock rose +86% since November; though expects a Q225 EPS beat driven by stronger comps/GM vs consensus; 3) ANF was downgraded to Neutral noting the stock is ~10% away from its tgt/is taking a more cautious view on the specialty apparel space.
• In Specialty Retail: SN was reiterated Buy and $140 PT at Bank America saying as Nielsen data implies strong quarter to date point of sale. According to point-of-sale data from Nielsen, SN sell through is up 15.2%/14.4% for the weeks ending 8/2 & 8/9 respectively, and up 16.5% Q3 QTD (vs. 16.1% y/y in Q2).
• In Off Price Retail/Discount: TJX shares bounced on results/raised outlook; posted a Q2 EPS/rev beat and said it sees Fy26 EPS $4.52-$4.57 above the previous expectations of $4.34-$4.43 and guided FY comp sales growth of 3%, at the high end of its prior 2-3% view.
• In Beauty & Consumer Staples: EL reported in-line Q4 results for EPS/revs ($0.09/$3.41B), but guided FY26 adj EPS $1.90-$2.10 below consensus $2.22 and sees FY26 GAAP net sales growth 2%-5%; sees adjusted sales growth 0%-3%; sees tariff headwinds impacting FY26 profit by ~$100M.
• In Food & Beverages: COCO was upgraded to Overweight at Piper with an unchanged price target of $39 citing valuation for the upgrade following the recent selloff; MKC was upgraded to Overweight from Underweight at JP Morgan and raised tgt to $83 as assumed coverage of 24 stocks in the food producers, food retail, and agricultural products sectors with top picks being MKC, ACI, HRL, SJM and is most cautious on BYND, GIS noting food producers are dealing with pressure from slower center store category growth and market share losses while food retailers should benefit from the continued inflationary environment.

• In Construction materials: JHX shares tumbled after its quarterly profit sank and it warned demand for repairs and new construction in North America remains challenging; Q1 EPS $0.29 was in-line with consensus and revs $899.9M missed the $958.5M estimate; said Q2 sales in its North American fiber cement business decreased 12% and adj profit fell -29% y/y to $126.9M.
• In Home Furnishing: LZB shares slumped on miss and lower guidance as Q1 adj EPS $0.47 missed the consensus estimate $0.55 on revs $492Mm vs est. $494Mm, adj op mgn 4.8%; guides Q2 revs $510-530Mm vs est. $531.67Mm and adj operating margin 3.4-6%.
• In Homebuilders: TOL beat Q3 profit and revenue estimates, but quarterly home orders fell 4% y/y owing to a 10% fall in the sales pace from a year ago; TOL also narrowed full-year 2025 deliveries forecast to 11,200 units, compared with earlier forecast range of 11,200 to 11,600 units.

• In Energy: Shares of NBR jumped after they announced it has entered into a definitive agreement to sell Nabors’ Quail Tools, LLC subsidiary to Superior Energy Services, Inc. Net consideration for the sale totals $600M plus adjustments for net working capital. Consideration is comprised of $375M cash and a seller note of $250M. NBR said deal reduces Nabors’ net debt by over 25%.
• In Solar: President Trump announces a halt on federal approval of all new wind and solar projects: In a post on social media platform Truth Social, President Trump said, “Any State that has built and relied on WINDMILLS and SOLAR for power are seeing RECORD BREAKING INCREASES IN ELECTRICITY AND ENERGY COSTS. THE SCAM OF THE CENTURY! We will not approve wind or farmer destroying Solar. The days of stupidity are over in the USA!!! MAGA”
• In E&C Engineering sector: DY shares slumped after Q2 revenue of $1.37B topped the $1.2B figure y/y but was below the consensus $1.41B, while EPS of $3.33 topped the $2.92 consensus; also guided Q3 revs $1.38B-$1.43B below the consensus of $1.46B.
• In Materials: Uranium stocks CCJ, UEC, UUUU declined a day after the KATKO joint venture, owned by France’s Orano Mining and Kazakhstan’s Kazatomprom, said it plans to ramp up uranium production at the Moinkum deposit to 4K metric tons/year starting in 2026, returning to 2021 levels after output was reduced to slightly more than 2K tons/year during 2017-24 due to falling global uranium prices
• In Aerospace & Defense: PLTR shares slipped for a 6^th straight day, pulling back off all-time highs (shares still up 108% YTD) following Citron Research short call on 8/13, saying Palantir is a great stock, but said valuation is absurd. Citron noted on 8/18 “OpenAI valuation of $500B puts Palantir at $40” https://tinyurl.com/y92vwttp ; TDG announced a special cash dividend of $90.00 per share and announces successful completion of incremental debt.
• In Airlines: Bernstein noted TSA airline screenings in 2025 remain higher than in 2024. While screenings are following the same seasonal downward trend observed in both 2023 and 2024, they have seen a positive YoY growth of 0.9% in screenings over the past four weeks. For the first time in 2025, total YTD weighted screenings have reached 0% y/y growth, moving out of negative territory. Frontier, UAL and JBLU continue to have the highest exposure to screenings, with an average y/y growth of 1.3% over the past seven days. LUV remains on the negative numbers, with screenings exposure down -0.9%.

• In Insurance: AHL shares advanced after Insurance Insider reported that Japan’s Sompo Holdings Inc. is in talks to buy the company, just three months after Aspen’s initial public offering. https://tinyurl.com/2fa7f5ck
• In Human Resources: DAY confirmed it was in talks to be bought by Thoma Bravo for $70 per share or $11B (confirms prior Bloomberg report on Monday August 18th). There can be no assurances as to whether an agreement for a transaction will be reached or as to the price or terms.
• In Financial Services/Business Support: JP Morgan with several ratings changes as they: 1) upgraded UPST to Overweight (from Neutral) saying they lean positive on the more seasoned fintech lenders, given a favorable macro backdrop and believes Upstart offers the best risk/reward among personal loan originators (over SOFI, LC); 2) CMPO was downgraded to Underweight noting shares have rallied ~25% following Q2 earnings, and growth has been choppy for several quarters; 3) RSKD was downgraded to Underweight noting revenue and volume growth (LSD-MSD) has trailed broader e-comm (HSD) growth and discretionary spend peers like SHOP and AFRM on the back of a large client loss in Q424 and pockets of weakness within luxury spend and tickets & travel.
• In Crypto: Reuters reported that China is considering allowing the usage of yuan-backed stablecoins for the first time to boost wider adoption of its currency globally, sources familiar with the matter said, in a major reversal of its stance towards digital assets.

• MDGL announced the European Commission granted Rezdiffra conditional market authorization for treatment of MASH.
• NVAX was downgraded from Neutral to Underperform at Bank America and cut tgt to $7 from $9 citing the recent share movement and "increasingly murky outlook" for Novavax’s key drivers.
• RKT shares rose after the FDA lifted its clinical hold on the company’s Phase 2 trial of its RP-A501 treatment for Danon disease; said the FDA confirmed it had satisfactorily addressed issues outlined in the clinical hold and authorized the pivotal study to resume first with a recalibrated dose in three patients.
• SLNO was initiated at Overweight and $123 tgt at Wells Fargo noting shares are down -23% MTD vs XBI’s +3% due to chatter on VYKAT’s safety (I.E. Scorpion report), competition and the Co’s recent financing which may signal M&A may not be a near-term event. WELLS says they believe these are overblown.

• Healthcare Facilities & Services: AGL was downgraded to Market Perform from Outperform at Bernstein citing 24/25 margin pressures; lower PT to $1.40
• Healthcare REITs: DOC was downgraded to Hold from Buy at Deutsche Bank and lowering its outlook on the biotech life sciences real estate space yet again given that its channel checks suggest ongoing challenges will likely lead to continued sluggish demand, and potentially more bankruptcies of smaller biotech companies that are running out of cash given the still difficult macro backdrop.

• In Software: SNOW was upgraded to Buy from Neutral and Bank America and raise tgt to $240 from $220 given three distinct proprietary data sources which point to momentum in Snowflake’s data warehouse and emerging Cortex AI and Snowpark developer businesses.
• In Video Games: SONY raised the prices, effective August 21, for the PlayStation 5 to $549.99, PlayStation 5 Digital Edition to $499.99, and PlayStation 5 Pro to $749.99. "Similar to many global businesses, we continue to navigate a challenging economic environment. As a result, we’ve made the difficult decision to increase the recommended retail price for PlayStation 5 consoles in the U.S. starting on August 21,
• In Data Center: the group was broadly weaker with VRT, DELL, SMCI, ETN others seeing weakness amid valuation concerns for the AI sector and MIT report overnight noting that its NANDA report reveals 95% of companies see no ROI from generative AI investments, triggering tech stock selloffs. In Research, VRT was initiated at new Neutral w/ $135 PT at Redburn saying as one of the world’s leading providers of equipment and services for data centre, enterprise and distributed IT markets, Vertiv is very well placed to capitalize on rising artificial intelligence (AI)-driven capital investments, but risk/reward balanced.
• In Quantum compute: HON and other backers of Quantinuum are considering raising money at a valuation of around $10B for the quantum computing company, people familiar with the matter told Bloomberg this morning.

• In Memory: Shares of MU declined after Jefferies reported Samsung passed NVDA’s HBM4 reliability tests, calling it a “sensational headline” and noting pre-production is set for late Aug, w/ mass production expected Nov-Dev, earlier than 2026 projections. If they start mass production in November, this will be incrementally more negative for MU.
• In Semiconductor Equipment: AMAT was downgraded to Neutral at Daiwa and cut its tgt to $170 from $185 saying the quarterly report is below Daiwa’s expectation and it now sees it taking some time before rebounding.
• PC/Mobile Semis: CRUS and GFS expand strategic investment to advance next-generation mixed-signal semiconductor manufacturing in the U.S. INTC chares remain extremely volatile, pulling back today after in CNBC reported the chip maker is in talks for equity infusion at discounted price.