Mid-Morning Look

Wednesday, July 09, 2025

U.S. stocks open in positive territory and push higher after the open on FOMO and more MOMO, led by Technology (XLK), Consumer Discretionary (XLY) and Industrials (XLI), while Energy (XLE) pulls back after good returns this week as well as defensive sectors Consumer Staples (XLP) and REITs (XLRE). In stocks news, NVDA becomes the first $4 trillion market cap company hitting all-time highs today in continued AI sector related push by investors since the April pullback. In healthcare, a $10B M&A deal announced as MRK acquires VRNA. Investors continue to show zero concerns about the economy, global landscape, rates/yields as the CBOE Volatility index (VIX) slumps further (now around 16%) and investors continue to chase winners (fear of missing out) as momentum names lead. Later today, investors will watch the $39B 10-year note auction at 1:00 and the FOMC Minutes from the June meeting at 2:00.

It has been a busy week of trade/tariff news thus far. Today, the European Union said it was working on sealing a trade deal with the U.S. by the end of the month, while U.S. President Trump promised that he would deliver further tariff notices on unnamed countries Wednesday. Speaking at a Cabinet meeting and via social media yesterday, Trump insisted “there will be no change” to the August deadline, dismissing speculation of further extensions despite Monday’s executive order that delayed implementation to allow continued talks. Trump also announced the U.S. will impose a 50% tariff on copper imports, citing national security and said pharmaceuticals and semiconductors were next, as Trump signalled duties of up to 200% on drug imports unless firms relocate production to the US within 18 months. Trump claimed progress in talks with the EU and India, he repeated that participation in BRICS would trigger an automatic 10% penalty. This all follows news of 13 countries that were given higher tariff levies starting August 1^st the President announced Monday which included Japan, South Korea, Malaysia, South Africa among others.

• US mortgage market index +9.4% to 281.6 in week ended July 4 according to the Mortgage bankers Association while the purchase index climbs 9.4%, the refinance index climbs 9.2% and the average 30-year mortgage rate falls 2 bps to 6.77% in July 4 week.
• China’s CPI inflation rebounded to 0.1% YoY in June, after staying negative for 4 months. Core CPI continued to be a major support, further increasing to a 14-month high of 0.7% YoY. Services’ inflation remained resilient at 0.5% YoY, and consumer goods inflation rebounded by 0.3ppt thanks to government subsidies.

• In Life Sciences: TMO was downgraded to Neutral from Buy at UBS with a view that a confluence of headwinds could pressure life sciences R&D (an end market that broadly comprises 50% of Thermo’s sales) longer than many expect. Citigroup upgraded CRL, HOLX to Buy and downgrade ILMN to Sell saying the 1H25 backdrop for the sector faced several headwinds including the US A&G funding policy changes and global tariffs, which impacted the vast majority of Citi’s coverage with an outsized impact on Tools. Outside of Tools, CRO sentiment leans more negative as cancellations are expected to remain elevated as well as from possible pharma tariff and MFN initiatives.
• In Containers & Packaging: BALL, SLGN, OI, and GEF were all downgraded from Buy to Neutral at Bank America in the container and packaging sector, saying earnings and/or volumes could decelerate into 2026, and the firm thinks it might be difficult for defensiveness and easy compares to drive performance in packaging, should the economy improve. The firm said their favorite Buys include AVY: valued at depressed growth outlooks and see pickup in econ activity helping fundamentals, valuations.

• BE +8%; shares advanced after being upgraded to Overweight at JP Morgan after fuel cells unexpectedly qualified for Clean Electricity Investment credits as part of the new tax bill.
• GOOGL +2%; among early leaders in the S&P and leading tech.
• LEN +2%; early strength in homebuilders with DHI, NVR among S&P 500 early leaders.
• NVDA +2%; hitting fresh all-time highs today amid strength in tech and semiconductors on continued AI momentum trades, as group extends 2 month rebound (becomes first $4 trillion mkt cap company today).
• RYTM +23%; said its experimental drug to treat a rare form of obesity helped patients reduce weight in a small study; Eight patients who got the highest dose of the drug showed a reduction of 9.3% in their body mass index.
• VRNA +20%; as MRK reached an agreement to acquire VRNA in a deal worth around $10B, paying $107 per ADS for Verona, which makes a drug for the maintenance treatment of chronic obstructive pulmonary disease.

• HSY -3%; declines following CEO changes/announcement; didn’t provide guidance.
• PVH -2%; downgraded to Hold from Buy at TD Cowen and cut tgt to $74 from $98 as the firm reduced estimates below consensus citing PVH’s rising inventory, the impact of tariffs, and weakening wholesale channel data.
• RXST -36%; after guides Q2 revs $33.6M vs. est. $39.8M as LAL trends deteriorated through Q2, and cuts FY25 revenue view to $120M-$130M from $160M-$175M (est. $167.56M) amid structural issues, I.E., workflow challenges, decreasing utilization.
• UNH -2%; after the WSJ reported that the Justice Department’s criminal healthcare-fraud unit is investigating UNH’s Medicare billing practices, including looking into how the company deploys doctors and nurses to gather diagnoses that increase its payment.
• WPP -16%; shares tumbled after lowering guidance saying it sees like-for-like revenue less pass-through costs this year to fall by between 3% and 5%, from a previous estimate of between a flat performance and a 2% decline; also said it sees a decline in operating margin of 50 to 175 basis points.