Closing Recap

Tuesday, October 07, 2025

Afte hitting intraday record highs this morning, the S&P 500 index (SPX) pulled back, snapping its 7-day win streak, led by a decline in market leading technology stocks, while investors rotated into defensive sectors as consumer staples and utilities saw gains. Tech stocks, particularly those levered to AI/Data Centers and chips reversed lower around 11:00 am et following a media report in The Information that said internal Oracle (ORCL) data show financial challenge of renting out Nvidia chips, which led to a pullback in high flying semi stocks, nuclear names, and data centers. The article noted Oracle lost nearly $100M from rentals of Blackwell chips in most recent quarter and gross profit margin from rentals of servers averaged 16% in the past year (more details below). Also note helping today, especially given the dearth of economic data, as NY Inflation expectations are creeping up with 1-year 3.4% (prev 3.2%), and the 3-year steady at 3.0% and 5-year steady at 3.0% while NY Fed survey shows rising price fears + job-loss risk. Either way, given markets were at record highs coming into the day, and notable Wall Street figures (Paul Tudor Jones and Orlando Bravo) raising concerns about AI/market valuations, overall markets held up relatively well today as the S&P 500 (SPX) held 6,700 after a few tests today. Gold prices ended at a record high above $4,000 an ounce, while crypto assets slipped from highs.

The U.S. government shutdown drags on (now Day 7 of the gov’t closure) as the situation remains in a political stalemate after the Senate again failed to pass rival funding bills, while the House remains out of session. Democrats insist any deal must include an extension of Affordable Care Act (ACA) subsidies; a demand Republicans reject while the government is closed. President Trump has floated linking the subsidies to reopening but offered no details. With both sides entrenched and Senate votes falling short of the 60-vote threshold, the standoff threatens to extend well into next week. According to prediction markets Kalshi now sees the shutdown lasting for about 20 days. Earnings season is also around the corner starting next week.

• The Treasury auction of $58 billion 3 Year Notes was quite good as the yield at 3.576% is almost a full basis point lower than the market at the bidding deadline. The 10-year Treasury yield was 3 basis points lower at 4.12%, while the 2-year yield also fell 3 basis points to 3.57%.
• Oil prices ended little changed as WTI crude reversed early losses to finish slightly higher while Brent crude dipped ahead of API inventory data tonight and the EIA inventory report tomorrow.

• In Beverages: STZ reported Q2 EPS of $3.63 that bested Consensus at $3.39, led by better beer topline and margins than anticipated while lowered FY EPS ests for the year to $9.86-$10.16 a share, down from prior guidance of between $10.77-$11.07.
• In Food sector: MKC posted Q3 EPS and sales above consensus, boosted by ongoing demand for its products, though noted higher costs and continues to expect net sales to be flat to up 2%.
• In Restaurants: EAT was upgraded to Overweight at JP Morgan with $175 tgt as the stock has given up most 2025 gains despite a CEO clearly interested in continued reinvestment to finally differentiate Chilis in a long commoditized – yet very important bar & grill segment.

• In Building Products: Jefferies said based on their checks, although demand improved in September, competition remains high and has led to MSD price declines in fiberglass insulation. Jefferies is cutting estimates for OC to reflect the pricing pressure and weak storm demand in roofing but says BLD appear to be holding on to price reasonably well and should benefit from lower costs. JHX shares rose after guidance as sees Q2 adjusted EPS $0.27-$0.27 vs. est. $0.15 and sales $1.29B-$1.3B above consensus $1.19B and Q2 adjusted EBITDA $326M-$331M

• In Auto Retail: KMX price tgt cut to $60 from $75 at Benchmark noting shares dropped 20% recently on a weak Q2, with comps (-6.3%y/y), retail volumes (-5.4%), retail GPUs (-7.6%), and higher CAF provisions (+26% to $142M) pressuring results.
• In Online Sports betting (OSB): DKNG and FLUT shares extend recent declines on competition fears. Three major buckets of concern that have driven the sector lower include: (1) Impact/debate from prediction markets (Kalshi, Polymarket) (2) lower Q3 hold, and (3) higher Q3/Q4 promotional expense than expected as per Mizuho. Kalshi’s recent parlay launch has been further compounded by increases in prediction market trading volumes, raising fears that OSB operators are set to cede significant share.

• In Utilities/Nuclear: for power names (PWR, MTZ, PRIM) U.S. power consumption will hit record highs in 2025 and 2026, the Energy Information Administration said in its short-term energy outlook on Tuesday. The EIA projected power demand will rise to 4,191 billion kilowatt-hours in 2025 and 4,305 billion kWh in 2026, up from a record 4,097 billion kWh in 2024. NNE said it will open a new manufacturing and research facility in Illinois, backed by a $6.8M state incentive. The company plans to invest $12M+ and create 50 jobs to advance its KRONOS microreactor system.
• Construction & Engineering: EME was upgraded from Sell to Neutral at Goldman Sachs and raised its tgt to $675 from $495 as hyperscaler CAPEX has been meaningfully revised upward, and EME’s data center revenues have accelerated well ahead of GSCO’s expectations (+112% YoY, including the Miller acquisition), prompting upward revisions to its organic growth and margin forecasts. Data centers now account for ~25% of revenues (vs. 16% at initiation).
• In Aerospace & Defense: ASTS was downgraded to Underperform from Sector Perform at Scotia saying the shares have formed a "valuation bubble" after doubling over the past month and says the stock could undergo painful corrections as AST faces significant competitive and operating risks.
• In Metals & Mining: shares of TMQ soared over 200% this morning after the U.S. federal government agreed to take a 10% stake in the small-cap mineral exploration company. Gold miners early move as gold prices hit the $4,000 an ounce level.

• In Crypto: IREN shares rise after saying it has signed additional multi-year cloud services contracts with leading AI companies for NVDA Blackwell GPU deployments. IREN recently expanded its AI Cloud capacity and remains on track to achieve >$500m in annualized run-rate revenue (ARR) from the 23k GPUs currently operating and on order by the end of Q1 2026. Wall Street initiated GEMI as quiet period over after IPO debuted at $28, popped up to $46, & now trades at $24 after post-IPO cooldown. But analysts just launched coverage featuring 6 Buys, 2 Holds, & an average PT $31.50 (+30%).
• In FinTech: PYPL shares bounced after unveiling PayPal Ads Manager, allowing the tens of millions of small businesses that use PayPal to become their own retail media networks and generate new revenue streams. With 99.9% of all businesses in the U.S. being small businesses, PayPal Ads Manager will help small businesses create billions of new advertising impressions for brands of all sizes by utilizing a fast-growing and highly profitable segment of digital advertising

• In Consumer Lending: The Trump administration weighs selling parts of $1.6T federal student loan portfolio to the private market, Politico reported citing three people familiar with the matter. The discussions are said to have taken place among senior Department of Education and Treasury officials (watch shares of SLM, SOFI, NNI, NAVI) https://tinyurl.com/mrxkxx9w
• In Consumer Finance: JP Morgan with several ratings changes as they OPRT to Underweight from Neutral saying it could face incremental headwinds as balance sheets for low-income consumers deteriorate; downgraded SYF to Neutral as prefers the relative defensiveness of GPCC issuers given SYF’s potentially lower position in the consumer payment hierarchy and higher DQ/NCO rates; cut SLM to Neutral from Overweight as remains bullish on the company’s long-term earnings potential but acknowledges its upgrade in July was too early given potential credit headwinds; downgraded ESNT and OMF to Neutral.

• LLY STAT news reported Peter Marks, the former head of vaccine regulation at the FDA, has joined Eli Lilly to lead its molecule discovery and infectious disease programs.
• LXEO shares rise after saying the FDA is open to letting the company combine results from its ongoing studies and a planned trial to seek accelerated approval for its experimental gene therapy, LX2006, for Friedreich’s ataxia cardiomyopathy.
• NVAX continues to deliver on SNY partnership, completing Nuvaxovid® EU marketing authorization transfer and triggering $25M milestone payment.
• SLNO Initiated at Buy and $125 tgt at Goldman Sachs as sees Vykat XR becoming a mainstay treatment for Prader-Willi syndrome (PWS); attractive entry point given recent volatility.

• In Life Sciences/Tools sector: Citigroup sees estimate upside for EXAS, GH, downgraded QDEL to Neutral from Buy believe the China Dx overhand/debate is likely to persist. The firm notes sentiment across coverage has notably swung positive in recent weeks following the Trump Administration/PFE agreement removing (or at least significantly easing) the MFN/pharma tariff overhang. Within Tools, continues to favor routine instrumentation (A) and bioprocessing names (DHR) and remain more cautious on high-end academic instrumentation names (BRKR, ILMN).
• In Hospitals: Cantor said they are incrementally confident ahead of HCA, THC, UHS prints following our 3Q25 Hospital Executive Survey which screens incrementally more positive vs. their 2Q25 survey on key volume metrics, signals a positive ’26 outlook & supports fundamental stability in labor results. Policy remains a key determinant of sentiment & respondents are more mixed on the HIX subsidy outcome than public peers, but the ’26 DPP outlook sustained the possibility of Y/Y increases.

• In Hardware: IBM announces new AI software + infrastructure updates at its TechXchange 2025 conference in Orlando; IBM and Anthropic announced a strategic partnership to accelerate the development of enterprise-ready AI by infusing Anthropic’s Claude, one of the world’s most powerful family of large language models (LLMs), into IBM’s software portfolio.
• In Data Center/AI: ORCL shares fell a report in the Information said internal documents show the fast-growing cloud business has had razor-thin gross profit margins in the past year or so, lower than what many equity analysts have estimated. That could raise questions about whether the AI cloud expansions undertaken by Oracle and its rivals https://tinyurl.com/2t2xktnm ; DELL provided outlook long-term annual rev growth of 7% to 9% (up from prior 3%-4%) and outlook long-term annual adj diluted EPS growth of 15% or better (vs. 8% prior); said they reaffirms financial outlook for Q3 2026 & FY and projects AI CAPEX investment in 2025 of $400B plus.
• In Software: APP shares rebound after falling -14% late Monday following press reports of an SEC probe into the firm’s data collection practices. The regulator has not officially accused AppLovin of wrongdoing. GTLB was downgraded to Neutral from Outperform at Mizuho while saying they see the greatest opportunity in Agentic AI for CRM and TEAM. Stifel said they are buyers on weakness in BRZE, HUBS, KVYO after OpenAI’s announcement of Tailor Assist sent shares of various MarTech names lower over the last week, including Braze (-10.2%), Klaviyo (-17.0%), and HubSpot (-10.8%). While certainly an item to monitor, the core moats of BRZE, HUBS, and KVYO remain in-tact in Stifel’s view.
• OpenAI Dev Day recap: Cantor said application software investors collectively let out a small, albeit temporary, sigh of relief in response to OpenAI’s DevDay event. At the event, OpenAI (Private) highlighted four product announcements, including: 1) App SDK; 2) Agentkit; 3) GA of Codex; and 4) API updates (including Sora 2 now available in the API). The lack of any specific application-related product announcements was viewed positively. Shares in front-office app providers, such as HUBS, BRZE, KVYO, CRM popped, as OpenAI highlighted that HUBS uses ChatKit to power their Customer Support Agent.
• Quantum Compute: RGTI price tgt was raised to $50 from $20 at Benchmark as momentum across the quantum sector accelerates and execution continues to validate its long-term strategy. Benchmark believes the company’s scalable superconducting architecture, improving qubit fidelity, and growing base of government and private-sector contracts position it as a credible contender in the race toward quantum advantage.

• AMD adds to prior day gains, upgraded to Buy at Jefferies and raised tgt to $300 after announced a long-term deal to become a key supplier to OpenAI’s artificial-intelligence infrastructure buildout.
• AMKR said it has begun work on new outsourced semiconductor advanced packaging and test facility in Arizona; also raises investment into the facility by over $5 billion to total $7 billion.
• Philly semi-index (SOX) shares jumped initially before the group pared gains/reversed lower late morning after the ORCL story (see above).