Closing Recap

Monday, August 18, 2025

U.S. stocks were little changed nearly the entire trading day, with the S&P 500 (SPX) trading in a narrow 18-point range (6,455 high and 6,437 low) – a true summer afternoon ahead of the Fed Jackson Hole event later this week (Powell speaks Friday). In fact, Bespoke Invest noted, the S&P 500 posted its narrowest intraday range since March 2024. After surging to record highs over the last few weeks, major averages have slowed up the last few days, holding those gains as stock marker volumes have dried up as we enter the “dog days of summer”, though global stock market performance remains strong. There remains some investor angst heading int the conference season in September, but all eyes on the Fed this week/their outlook on rates given the weaker payroll data of late, in-line CPI and much hotter PPI inflation reports last week. Wall Street believes a 25bps rate cut remains on track in September, and at least one more cut by end of year, but the latest round of data has changed things up a bit. Consumer Discretionary, Industrials and Technology paced gainers today while REITs, Energy, Materials and Communications declined the most in the S&P 500. Stock market news was VERY quiet today as macro headlines took center stage with President Trump speaking to Ukrainian President Zelensky and several EU leaders.

The most anticipated event will be Friday where Chair Powell is expected to make his pivot at Jackson Hole at 10AM est. While he may still remain steadfast on the impacts of inflation, weak jobs have to be acknowledged as does the in-line/cooler CPI, but he does have ammo to hold rates following the “hotter” PPI last Thursday even if the upside came mostly from services. Wednesday, we have the FOMC Minutes, Jobless claims Thursday. On the micro front we still leave a few important quarter reports this week in retail HD, WMT, LOW, TGT and Technology with PANW (tonight), ADI, BIDU, WDAY and ZM.

Mixed messages ahead of Jackson Hole Fed meeting: Bloomberg’s Lisa Abramowicz noted on “X”, Investment-grade credit spreads are the tightest since 1998, with investors accepting less and less extra yield over government rates as the year has gone on. This is part of the conundrum ahead of Jackson Hole. If the US economy requires substantial rate cuts, why are companies perceived to be the most creditworthy since 1998 relative to the US government? Why are stocks at all-time highs? Markets are sending conflicting signals.”

Earnings season is mostly behind us, on of best beats on record – With the Q2 2025 earnings season nearly complete, the quarter has been marked by one of the greatest frequency of earnings beats on record. 92% of S&P 500 companies representing 84% of market cap have reported. Of those companies, 60% have beaten consensus EPS forecasts by more than a standard deviation of analyst estimates, the highest rate in our 25 years of data history outside of 2009 and the COVID reopening – as per Goldman Sachs.

Markets remain expensive: the price-to-Book (P/B) value is higher today than during the Dot-Com bubble comes said Bank of America strategist, Michael Hartnett, as reported by CNBC. According to the report, Hartnett noted that the S&P 500 was trading at 5.3 times its price-to-book value in August 2025, surpassing the valuation levels seen at the peak of the Dot-Com bubble in March 2000. Also, @Barchart noted on “X”, S&P 500 trades at 22x earnings expectations for the next 12 months, one of the most expensive valuations in the last 35 years.

Stat of the day (shows market concentration): @KobeissiLetter notes on “X”, “The 5 largest stocks in the US are now 4.9x larger than all small-cap stocks COMBINED, a new all-time high. Since 2019, this ratio has TRIPLED, driven by an unprecedented surge in tech stocks. During this time, Nvidia, $NVDA, Microsoft, $MSFT, Apple, $AAPL, Amazon, $AMZN, and Meta, $META, have skyrocketed 5,109%, 435%, 463%, 203%, and 440%, respectively. By comparison, the Russell 2000 index of small-cap stocks has gained just 66%. To put this into perspective, at the 2000 Dot Com Bubble peak and before the 2008 Financial Crisis, the ratio was ~1.5x and 1.0x, respectively.

• WTI crude settles +$0.72/bbl, or +1.16% at $62.70.
• Brent Crude futures settle at $66.60/bbl, up 75 cents, 1.14%
• U.S. Treasury yields moved higher this afternoon, but little changed overall as investors held onto bets that the Federal Reserve would cut interest rates next month despite data last week showing stronger-than-expected producer price inflation in July. The yield on the benchmark U.S. 10-year note was up at 4.32%.
• Traders see an 84.2% chance of a 25-bps cut to the U.S. FOMC policy rate at its September 16-17 meeting, according to Fed funds futures. The Fed’s policy rate has been in the 4.25%-4.50% range since December.

• In Lodging/Online Travel: SHCO shares jumped after a group of investors led by New York-based MCR Hotels is taking members’ club operator Soho House private for a total enterprise value of about $2.7 billion, with shareholders to receive $9 per share.
• In Leisure Sector: FUN shares fell after the WSJ reported this weekend the theme park operator has had a "nightmare" of a summer following its merger with Cedar Fun due to severe thunderstorms and excessive heat, new rides being delayed, competition from new rivals, quality issues and economic uncertainty.

• In Energy: Morgan Stanley with several changes as they downgraded OXY, OVV to Equal Weight from Overweight, downgrade NOG to Underweight and initiated VNOM with an Overweight, $46 tgt. OXY was downgraded noting leverage is still well above peers, OVV now trades in-line on 2025 FCF/equity yield and shareholder returns relative to oil E&P peers, while carrying above-average net debt/EBITDAX; and NOG at Underweight after mgmt reduced growth expectations alongside Q2 results. In gas E&P producers, shares of EQT, AR, RRC were downgraded at Roth Capital as sees oversupply challenging natural gas prices.
• In Utilities/Nuclear: NNE was double downgraded to Sell from Buy at Ladenburg saying credibility has been eroded by missed timelines and broad strategic ambitions and given higher expected costs, significant dilution risk, and increasing competitive pressure, believes risk-reward is skewed to the downside.

• In Education: DUOL was upgraded to Overweight from Sector Weight with $460 PT at Keybanc saying the AI backlash was a bump in the road, and a combination of viral marketing efforts creates upside risk to estimates over the next 12 months. Citigroup also initiated at Buy and $400 tgt as believes Duolingo is still early in its journey toward being a broad educational technology product.
• In Financial Services: RDDT was initiated at Buy and $250 tgt at Argus saying the company has an impressive record of growth and has recently turned profitable. Argus says on the fundamentals, the shares are not cheap, but believes RDDT’s growth runway is promising, justifying the premium.
• In Crypto: BMNR is the #1 ETH Treasury in the world, now 2nd largest crypto Treasury globally and the 10th most liquid US stock, trading $6.4B per day on average. BTDR shares active on earnings. WULF announces proposed private offering of $400M of convertible notes saying the proceeds to finance data center expansion and corporate purposes; shares fell initially but reversed higher after GOOGL to boost its stake to ~14% from ~8% as the two expand its Lake Mariner DC campus in Western NY. APLD hits new 52-week highs after says to break ground on $3 billion Polaris forge 2 campus in September 2025, expanding North Dakota’s role as a national ai infrastructure leader. BLSH shares have hit new lows since recent IPO.

• CVS was upgraded to Buy from Neutral at UBS and raised tgt to $79 from $67 noting the company has posted to strong quarters of execution and early signs are emerging that its healthcare benefits segment fixes are on track; sees a "compelling valuation" at current share levels.
• FGEN announces approval of sale of FibroGen China to AZN by the China state administration for market regulation; the sale is on track to close in Q3 2025.
• GDRX shares rise as announces collaboration with NVO to expand access to Ozempic® and Wegovy® for $499-per-month.
• LLY was downgraded to Neutral from Outperform at Daiwa
• NVO shares advanced after its blockbuster weight-loss drug Wegovy received US approval to treat a serious form of liver disease (shares of MDGL slipped on headlines).
• SNGX shares rise as the FDA grants Soligenix orphan drug designation for the treatment of Bechet’s disease after reviewing recent phase 2 clinical study results.
• TNXP said late Friday the FDA approved its drug to manage pain related to a type of chronic condition called fibromyalgia. The non-opioid drug, to be sold under the brand Tonmya will be available by Q4.
• UNH rises again, extending the 12% rally on Friday, after Warren Buffett’s Berkshire Hathaway Inc. and other investors bought shares in the health insurer.

• In Industrials: PNR announced it has entered into a definitive agreement to acquire Hydra-Stop, a provider of specialty valve solutions, for approximately $290M in cash, subject to customary adjustments, from Madison Industries.
• In Transports: CSX was downgraded to MP from Outperform at BMO Capital as M&A upside likely priced in. The firm said after a 20% appreciation in the stock since speculation about potential deal started, BMO now views the risk/reward profile as more balanced and are downgrading CSX to Market Perform.
• In Homebuilders: Redfin Reports Homes Are Selling at the Slowest Summer Pace in a Decade. The typical home that went under contract in July was on the market for 43 days. That’s up from 35 days a year earlier and is the longest span for any July since 2015, according to a new report from Redfin, the real estate brokerage powered by Rocket (RKT).

• In Semiconductors: INTC shares fell after Bloomberg reported midday that the Trump administration is in discussions to take a 10% in Intel by converting some or all of the company’s grants from the Chips and Science Act into equity. Intel is set to receive $10.9B in Chips Act grants for commercial and military production, which is close to the amount needed for the 10% stake.
• In Telecom & Equipment: CCOI was double upgraded to Overweight from Underweight at Wells Fargo saying Cogent has reached a turning point, with most of the unprofitable Sprint-related revenues now behind it and the firm expects growth to pick up in 2026 as Cogent completes its network integration.
• Hon Hai Precision Industry will operate a US factory owned by SoftBank Group, setting up what’s in the running to be the first manufacturing site in the Japanese company’s $500 billion Stargate venture with OpenAI and Oracle Corp.
• In Media: Cable network MSNBC will rebrand as My Source News Opinion World, or MS NOW, ahead of the planned spinoff of the bulk of CMCSA’s NBCUniversal cable networks later this year, the Wall Street Journal reported. CNBC will keep its name, which originally stood for Consumer News and Business Channel, and is working on a new logo.

• In IT Services & Consulting: EPAM was upgraded to Buy from Neutral at TD Cowen saying the company’s share price gives little to no credit for the company’s recovering growth trajectory & meaningful completion of its global delivery reorganization.
• In Online Services: YEXT shares got a bounce early after CEO Walrath submits proposal to acquire company at $9.00/shr for value $1.1B.
• In Electrical Equipment & Parts: APH said it would acquire Trexon for $1B in cash. Trexon is a leading provider of high-reliability interconnect and cable assemblies primarily for the defense market. Headquartered in Boston, Massachusetts and with facilities in the U.S. and the U.K., Trexon is expected to have 2025 sales and EBITDA margins of approximately $290 million and 26%, respectively.