The Week Ahead - July 13th

Together With Arc

The Week Ahead Of Us 🔍

Welcome back!

Stocks were off slightly on Friday due to tariff pressure (35% on Canada and 25% on Japan & South Korea), but despite the tariff news and a recent profit-taking rotation out of some software names, we’re only slightly off the highs and some risk assets remain hot, with Bitcoin continuing to blow through records and briefly rising above $119k. S&P and Nasdaq futures are currently down 42bps and 44bps respectively following the 30% tariffs slapped on the EU and Mexico. These all go into effective Friday, August 1st, so we have a little under 3 weeks to see if the TACO trade will hold.

Earnings are kicking off and it’s time to see what the tariff fallout is going to be. We expect generally positive commentary from the Banks this week - excluding Jamie Dimon’s regular rants. There’s several tariffs set to go into place August 1st, but 2Q earnings season marks the start of companies managing the first set of tariffs that went live earlier this year.

One thing that’s on my eye lately are rate cut expectations - rate cuts were broadly expected to resume in September, but with solid job numbers, and incoming inflationary risks, we think the 100bps of rate cuts most people expect in 2H25 are at risk. PPI and Retail Sales are also front and center this week.

Tonight’s edition is in collaboration with Arc’s AI platform for private markets investors. Let’s get into it.

Here’s a look at earnings this week.

• Monday: Fastenal

• Tuesday: JPMorgan, Wells Fargo, Citigroup, Bank of NY Mellon, BlackRock, J.B. Hunt, Omnicom, Albertsons

• Wednesday: Johnson & Johnson, Bank of America, Morgan Stanley, Goldman Sachs, Progressive, PNC Financial, United Airlines, M&T Bank

• Thursday: Netflix, GE Aerospace, Abbott Labs, PepsiCo, Marsh & McLennan, Travelers, U.S. Bancorp, Citizens Financial

Here’s a look at economic data this week (estimates are in quotations).

• Wednesday: PPI (0.2%), PPI y/y (2.6%), Core PPI y/y (2.7%), industrial production (0.1%), capacity utilization (77.4%), Fed Beige Book (2pm), Fed Governor Barr and NY Fed’s John Williams speak

• Thursday: Initial jobless claims (233K), retail sales (0.2%), retail sales ex-autos (0.3%), import price index (0.3%), Philly Fed survey (–0.3), homebuilder confidence (33), business inventories (0.0%), Fed speeches (Kugler, Daly, Cook, Waller)

• Friday: Housing starts (1.30M), building permits (1.39M), consumer sentiment prelim (62.0)

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Earnings Corner 📈 📉

Delta (DAL) $DAL ( ▼ 0.23% ) Revenue came in line at $15.5B and EPS beat as strength in premium travel and corporate demand offset the weakness in the main cabin. Delta reinstated FY EPS guidance of $5.25–$6.25 after pulling it last quarter, signaling more confidence in demand trends despite it landing below the January outlook. While the report triggered a relief rally across the group, the gains were driven by high-margin segments and may not carry over to carriers exposed to price-sensitive flyers. The print reinforces a growing divide in the space; premium-focused names are holding up, but low-cost carriers may still be in for a bumpy ride.

Levi Strauss (LEVI) $LEVI ( ▲ 11.25% ) Levi’s beat across the board with sales of $1.45B vs. $1.37B and EPS of $0.22 vs. $0.13, lifted by strong DTC growth, fewer promos, and high-margin women’s apparel. The company raised its FY sales and EPS guide and said it expects to absorb most of the tariff impact for now.

Today’s Headlines 🍿 

• Tariffs on Canada will be at 35%, effective August 1st. Exemptions for goods under the nations’ free-trade agreement would still apply, according to the White House. This is up from the previous rate of 25%, with Trump saying Canada needs to do more to curb the fentanyl crisis

  • The EU and Mexico will receive 30% tariffs, with Trump listing trade deficits and border security as the respective causes. The EU is evaluating retaliating

  • Meanwhile, Blanket tariffs of 15%-20% are expected for most other trade partners as Trump continues to push for moving production to the U.S.

• Trump can “certainly” fire Powell for cause - this is according to NEC Director Kevin Hassett (who is a potential Fed Chair candidate) - stoking the flames once again on whether the President is going to try to remove the Fed Chair in favor of a puppet Chair who will push a low-rate agenda

• Immigration crackdown has created a void for U.S. companies: Both Amazon and Walmart have eliminated warehouse jobs after Biden-era immigration programs were cancelled. Changing immigration policy has left these companies short-staffed, and replacing these workers will potentially pressure costs

• Prime Day surged past record levels: At $24.1B of spend, “more than two Black Fridays,” Amazon hit a new high for Prime Day sales - defeating early concerns that the event would be a bust

• Superman had a strong $122mm domestic opening - with $217mm globally, launching a new era of DC superhero movies and marking the start of a potential studios rebound at Warner Bros Discovery

• WindSurf’s deal to OpenAI is off - and the top employees are off to Google: Google is not taking a stake in WindSurf, but is paying the company $2.4B to license its technology and hire its leading employees. The reverse-acquihire allows Google to continue its push in the AI race without drawing regulatory scrutiny, but critics are complaining that the employees not joining Google are stuck with a shell company. It’s also unclear how common equity investors are getting treated relative to the preferred equity

  • The sale to OpenAI reportedly fell apart over IP access rights, as Microsoft has the ability to access all of OpenAI’s software

• Kraft Heinz is evaluating breaking itself up: Demand has weakened since the 2015 merger, and the company is now planning to spin off a large chunk of its grocery business - prioritizing its faster-growing sauce and condiments unit

• Goldman’s AI agent: The bank is testing an autonomous software engineer from AI startup Cognition. The program’s name is Devin, and it will soon join the firm’s human developers as an assistant engineer

• Blackstone’s Private Credit expansion: Blackstone has announced a partnership with Legal & General Group, allowing Blackstone to originate Private IG Credit deals for L&G’s annuities business - with goals to grow the strategy to up to $20B over the next 5 years

• Will stablecoins replace treasury demand? This is what Apollo’s Torsten Slok is starting to contemplate, and is a potential risk as longer-dated rates continue to remain high

• Dimon says the EU is slipping behind: A falling GDP per person compared to the U.S. and a lack of strong single markets has left Europe behind the U.S. and China. Dimon stated the need to modify their regulations and guidelines to push faster growth

• Marjorie Taylor Greene has introduced the No Tax on Home Sales Act to eliminate the federal capital gains tax on selling a home, hoping to increase inventory and improve mobility amongst homeowners

• “U.S. Drone Dominance” - Defense Secretary Peter Hegseth sent drone companies higher after announcing reduced restrictions on production and plans to increase the use of drones in combat

• MP Materials enters partnership with the Department of Defense - The DoD agrees to buy $400mm of preferred stock in the rare earth miner, pushing shares of MP ~50% higher. Funds will be used to expand domestic production of rare earth magnets and reduce reliance on Chinese imports

• US Foods mulling acquisition of Performance Group: A deal would result in about $96B of combined annual revenue, making the two companies the number 1 food-service distributor in the U.S. Both stocks hit all-time highs on Friday

• Apollo is eying Lionsgate Studios: Apollo’s Legendary Entertainment LLC, the film and TV studio behind the Dune trilogy and A Minecraft Movie, is evaluating acquiring Lionsgate Studio, the recently spun off asset from Starz, which houses John Wick, Twilight, and The Hunger Games assets

• Earnouts are increasing: Middle-market M&A deals are increasingly needing to provide earnouts in order to bridge valuation gaps, according to Seward & Kissel

• Private Equity is coming for minor league baseball: Diamond Baseball Holdings, a Silver Lake backed company, now holds stakes in 45 minor league teams. DBH is seemingly looking to expand the non-baseball events in and around the ballparks

M&A Transactions💭 

Citadel has acquired Morgan Stanley’s options market maker.

WK Kellogg (NS: KLG), second largest cereal manufacturer, has entered into a definitive agreement to be acquired for $3.1B by Ferrero International. EV/EBITDA was 18.34x and EV/Revenue was 1.16x. Morgan Stanley and Goldman Sachs advised on the sale.

Space NK, retailer of health and cosmetic products, was acquired for GBP 350.0M by ULTA Beauty (NAS: UTLA). Raymond James advised on the sale.

Nova Biomedical, designer and manufacturer of whole blood, point-o-are, and critical care analyzers, was acquired for $2.2B by Advanced Instruments. Jefferies advised on the sale.

Infinity Fincorp Solutions, provider of integrated commodity and collateral management services, has entered into a definitive agreement to be acquired for $230.0M by Partners Group and Jungle Ventures. EV/Net Income was 41.38x. Avendus Capital advised on the sale.

HWG Sababa, operator of a security center, was rolled into a continuation fund from Investcorp Technology Partners Fund V through a EUR 240.0M LBO.

Grand Venture Technology (SES: JLB), a manufacturing solution and service provider, has reached a definitive agreement to be acquired for SGD 319.0M by Aalberts (AMS: AALB).

Manawa Energy, New Zealand’s fifth-largest electricity generator, was acquired for NZD 2.3 by Contact Energy (NZE: CEN). EVEBITDA as 46.32x and EV/Revenue was 4.78x.

Aetion, developer of a healthcare analytics platform, was acquired for $400.0M by Datavant. Centerview Partners advised on the sale.

About You (BER: YOU), a fashion e-commerce and technology group, was acquired for EUR 1.2B by Zalando (ETR: ZAL). EV/Revenue was 0.71x. Deutsche Bank advised on the sale.

Private Placement Transactions💭 

Main Post Partners announced a minority growth investment in Smoothie King.

SpaceX will be investing $2B into xAI as part of a $5B equity round

JEH Aerospace, developer of an aerospace manufacturing platform, raised $4.5B of venture funding from Indigo Ventures.

Harmonic, developer of mathematical reasoning engine, raised $100.0M of Series B venture funding from Paradigm, Ribbit Capital, and Sequoia Capital.

Galaxea AI, manufacturer of AI-powered visual inspection and traceability robots, raised over $100.0M of venture funding led by Dragonball Capital and Capital Today.

Neon, developer of a digital banking platform, raised BRL 720.0M of Series E venture funding from Banco Vizcaya Argentaria, International Finance, and DEG.

Bilt Rewards, developer r of a rewards platform, raised $250.0M of venture funding led by General Catalyst and GID Investment Advisers at a pre-money valuation of $10.5B.

Odds of the Day 🍒 

Kalshi traders are pricing in a 32% chance of Pam Bondi leaving the Administration.

*New Traders on Kalshi receive a $20 bonus of trading credit when depositing $100+ with the code “HYH”.

Noteworthy Chart 🧭

Meme Cleanser 😆 

Until next time!

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