Macro Shifts and Micro Setups

The U.S. government has officially reopened after a prolonged shutdown, offering long-awaited relief to federal workers now receiving back pay. But the restart isn’t instantaneous. Much like powering up a grounded jumbo jet, agencies are slowly reactivating systems and services. Payroll processing, public-facing operations, and internal workflows are coming back online in phases. Officials warn that full functionality will take time, as departments work through backlogs and recalibrate staffing and infrastructure. In a quieter but symbolic shift, the U.S. Mint has produced its final penny at the Philadelphia facility. While the coin remains legal tender and will continue to circulate, the administration has ended production due to rising costs and declining usage. This marks the first time the U.S. has discontinued a coin since the half-cent was retired in 1857 – a reminder of how rare such decisions are in American monetary history. Meanwhile, Disney (DIS) shares fell sharply after the company reported that film studio expenses will weigh on earnings, despite solid results from parks and streaming.

Market volatility continues to create technical dislocations, especially during broad sell-offs when investor sentiment turns erratic. Today’s price action reveals several stocks trading well below their 50-day simple moving averages (SMA)—a potential signal of oversold conditions. Reddit (RDDT) dropped 6% and now sits 13% below its 50D SMA and 33% off its 52-week high. Arista Networks (ANET), Robinhood (HOOD), Sterling Infrastructure (STRL), Broadcom (AVGO), and Disney (DIS) also show signs of technical weakness. For investors with a disciplined approach, these setups may offer attractive entry points as the dust settles.

Mr. Powell’s Hippocratic Oath

Chair Powell shared cloudy comments about the US labor market in Philadelphia. According to Michael McKee of Bloomberg, Mr. Powell gave “his version of the Hippocratic Oath,” regarding the upcoming rate cut, highlighted uncertainties in the labor market, and discussed the lack of data due to the government shutdown. Link to video- https://youtu.be/Krvi7vDWDMo?si=p2mjSdv4Bxhnpt9t&t=1535. The word “data-dependent” gets thrown around in the world of investing, finance and economics semantics consistently. While the word data is self-explanatory, as an adjective the word dependent means contingent on or determined by. A continued government shutdown will create a lag in data and depending on one’s tribe affiliation, the pungency of Chair Powell’s reaction function will be different. In this contemporaneous moment, the lack of government data supporting FOMC’s decision will be alarming. However, if we pull forward further along the x-axis, this cloudy period can just be a  rounding error.

Optimistic regarding demand signals.

Arguments to be bullish-
1)Positive Momentum
2)AI Optimism and Data Center Cap Ex Spend
3)Rate Cut Expectations

Arguments to be bearish-
1)Ultra Mega Cap Valuation Concerns
2)Government shutdown
3)Tariff and Raw material uncertainty
4)Recession risk from slowing Global Growth

I remain cautiously optimistic regarding demand signals. Market participants continue to reward companies on future promises of top-line expansion from the inclusion of AI in business operations. Corporate leadership consistently point to the cap ex dedicated to AI and its future rewards. These upcoming earnings calls will be heavily scrutinized as at some point market participants will require promises to materialize on financial statements through margin expansion and increased profitability.

Chipotle shares disappoint after negative comp sales.

The fast-casual chain reported a second quarter of negative comp sales, its most significant decline since Q2 2020. TTM Revenue growth of 9% was below the trailing 12Q average of 14%. TTM Profit Margin of 13% was marginally higher than the trailing 12Q average of 12%. Speaking with CNBC, Scott Boatwright, CEO of Chipotle, talked about technology initiatives such as produce slicers and high efficiency equipment package that “includes a dual-sided plancha grill, three-pan rice cooker and a high-capacity fryer,” and cited better Consumer Sentiment, new restaurant offerings, engagement through rewards and expansion of the catering program as key drivers for performance in the second half of 2025. The stock closed at 46.76 on 7/26/25, a level last seen in early 2024. The 50-D and 200-D moving averages for the stock were 55.01 and 42.94, respectively. The stock can test its 200-day moving average level.

Costco shares consolidate after results.

Shares of Costco have been consolidating following its most recent earnings report. The big-box retailer reported 6% revenue growth and continued its trend of a 2.9% profit margin. At last close of 950.95, shares traded around 326 times their profit margin of 2.9%. The trailing 3-year average price-to-profit margin for COST was around ~249x (plus or minus 58). An actionable bottom for Costco Wholesale (COST) appears to be around 850 to 900.

Netflix- A two-standard-deviation story.

Netflix reported results for the month ending June 2025. TTM revenues of 41.6B were 15% higher than a year ago. UCAN and EMEA region revenues increased by 14% and 17%, respectively, compared to 23% in the APAC region. The streaming firm reported a 25% profit margin, 7% and 8% better than the trailing 3Y and 5Y averages of 18% and 17%, respectively. Profit Margin of 25% was two standard deviations better than the trailing 3-year average of 18% (plus or minus 4%). What grabbed my attention from the company’s commentary on its results was the emphasis placed on international, i.e, non-English content. The company noted that its “local for local” strategy of “developing shows and films that deeply connect with audiences in their home countries” has translated to non-English language series and films representing “more than one-third of all Netflix viewing in the first half of the year.” At the last close of 1209.24, shares traded ~49 times the price-to-profit margin, two standard deviations away from the trailing 3-year average of ~30 times (plus or minus 9). An actionable bottom for Netflix (NFLX) appears to be 1000.

Notes on June 2025 CPI Print

Headline YoY CPI for June 2025 was 2.7% compared to 2.9%, 0.7% and 0.2%, a year, five, and ten years ago, respectively. Taking a different perspective, the Median CPI and Sticky CPI measures provided by the Federal Reserve of Cleveland and Atlanta, respectively, suggest YoY readings of 3.6% and 3.3%. The Median CPI published by the Cleveland Fed excludes “all price changes except for the one in the center of the distribution of price changes, where the price changes are ranked from lowest to highest.” The Sticky CPI from the Atlanta Fed breaks down the various components of the Consumer Price Index into sticky and flexible categories, whereby the Sticky CPI index only includes “price changes for a particular CPI component occur less often, on average, than every 4.3 months.”  By comparing the larger dataset against a refined one, it allows for the removal of noisy data points. In general, the Median and Sticky CPI suggest a certain inelasticity in prices.

Palo Alto Networks Inc (PANW) and ServiceNow Inc (NOW) look interesting. 

Santa Clara neighbors Palo Alto(PANW) and ServiceNow(NOW) currently trade near their long term averages. Compared to the SP500, these California-based tech firms have gained ~60%. Considering the AI trend is repeated and reinforced in the market narrative, PANW and NOW do stand a chance to pick up their momentum one more time. ServiceNow(NOW) closed at 961.78, whereas Palo Alto(PANW) closed at 190.72 on 7/14/25.

Carlisle Companies Inc(CSL) range= 350 to 580.

Scottsdale, Arizona-based Construction Materials and Weatherproofing Technologies firm Carlisle Companies Inc(CSL) is down 4% on a 52-week basis, closing at 412.69. Not that long ago, the stock traded below its 100D and 200D moving averages. So far in 2025, the company completed the purchase of Bonded Logic and ThermaFoam, made new appointments to its Board of Directors, and restructured its leadership team. The stock appears to be on the move, and I find it interesting because it plays into the narrative that the “imminent” Fed rate cuts can “positively affect the construction industry,” as “lower borrowing costs make it cheaper for developers to finance new projects.”  A company like Carlisle(CSL) can benefit from this conceivable trend. Considering the company maintains a profit margin of 20-25% and the market rewards the stock with a 17-24x multiple, the stock can trade between 350 and 580.