Closing Recap

Wednesday, February 19, 2025

U.S. stocks moved sideways most of the day, before a late day pop lifted the S&P 500 (SPX) to its second all-time high in as many days, as markets continue to exhibit zero concerns/fears about pushed out Fed interest rate cuts, recent higher inflation readings and tariff/trade concerns with other countries. The SPX closed at an all-time high for the third time this year on Wednesday, which follows 57 all-time closing highs in 2024, the 5th most of any year in history. Nine of eleven S&P sectors finished in positive territory, despite NYSE market breadth favoring decliners over advancers by 1.5:1 margin. U.S. President Donald Trump on Tuesday announced more plans for tariffs, saying that he intended to impose auto tariffs “in the neighborhood of 25%” along with similar duties on semiconductor and pharmaceutical imports, but the market has pushed tariff fears to the backburner for now. The market rally for 2025 has been broad based with more than 6% gains YTD for Materials, Communications, Energy, Financials and Healthcare, as all eleven sectors are up YTD.

Housing data was weaker today, with housing starts falling in January and Toll Brothers (TOL) reported a top and bottom line miss for the quarter, sinking homebuilders, while Transports and Materials/Metals declined as well. Financials remain a leader as massive gains in banks and consumer finance continue, while Energy got a boost from oil prices as well as better earnings results from OXY, DVN, MGY and EQT. Defense stocks fell late day (NOC, LMT, GD) on media reports about potential budget cut headlines. The Fed released their minutes from the January meeting, but there wasn’t much on rates, but more of a “wait-and-see approach” until there’s something to see, which is in-line with recent Fed member commentary. The Fed did discuss possibly pausing or slowing balance sheet runoff pending resolution of the debt limit given the potential for big swings in reserve balances. Tomorrow morning there is WMT earnings.

• US mortgage market index -6.6% to 214.9 in week ended Feb 14 according to the Mortgage Bankers Assoc data this week; the purchase index falls 5.9%, the refinance index falls 7.3% as the average 30-year mortgage rate falls 2 bps to 6.93% in Feb 14 week.

• Treasury yields were little changed as the 10-yr yield held around 4.55% most of the afternoon before slipping late day to lows of 4.53%. The U.S. Treasury sold $16B in 20-year bonds at high yield 4.830%, with bid-to-cover ratio 2.43, as primary dealers take 17.51% of U.S. 20-year bond sale, direct 19.51% and indirect 62.99%. Bitcoin prices rose 1% to $96,000 while the dollar index (DXY) was up slightly holding above 107.

• In Restaurants: WING shares tumbled after Q4 revenue of $161.8M was above $127.1M y/y but below consensus of $165M, offsetting a profit beat as EPS of $0.92 topped the $0.86 consensus; said Q4 same-store sales rose 10.1% and guides FY25 same-store sales to rise in the low to mid-single digits.

• In Home Furnishing: LZB reported Q3 results above the Street, posting stronger than anticipated sales and better gross margins while written comps accelerated sequentially, with Company-owned written comps +7% (from -1% in F2Q) – though issued mixed F4Q guidance, with EPS spanning consensus, but sales slightly below.

• In Lodging & Hotels: ABNB was upgraded to Buy at Argus with a $190 tgt saying with its strong brands, five million hosts, superior travel experience, and prospects for higher take rates, the company is well positioned for growth within the online marketplace for short-term homestays.

• In Solar & Utilities: a big short squeeze in shares of SEDG after earnings helped boost the solar sector today as Q4 revenue fell -38% y/y to $196.2M, but topped consensus of $187.8M while its adj EPS loss of (-$3.52) was larger than the (-$1.71 estimate) helped as operating expense $151.4M, fell -16% y/y, vs. est. $156.4M; guides revenue $195M to $215M, vs. est. $205M

• In Real Estate Services: COMP shares rallied after reported Q4 revenue of $1.38B, above analysts’ expectations of $1.34B and forecast Q1 2025 revenue between $1.35B-$1.475B, above estimate of $1.335B; CSGP printed a Q4 beat driven by lower expenses and slightly higher revenue while management guided 2025 revenue/EBITDA below the Street, largely driven by a weaker growth outlook for Multifamily and Residential.
• In Insurance: TRV was upgraded to Outperform at KBW Inc. and raised tgt to $286 from $275 as estimate that TRV’s GAAP loss and ALAE reserves were overstated by about $1,388M, mostly reflecting workers’ compensation, personal lines, and fidelity and surety redundancies that outpaced general liability deficiencies. PGR reported a combined ratio for January of 84.1% and Net income $1.117B. UNM announced a $1B share buyback.

• HRMY shares slide after receiving refusal to file letter from FDA for Pitolisant.
• IONS reported Q4 sales of $227M easily topping consensus of $137.6M on a smaller than expected EPS loss of (-$0.66) but guidance caps move as sees 2025 revs over $600M vs. ests $676M on Wall Street
• SUPN shares dropped after the company’s Phase 2b study of SPN-820 in treatment-resistant depression failed to meet its primary endpoint

• In Managed care: CNBC reported at midday that UNH is offering buyouts to certain employees in its benefits operations unit the option to accept buyouts if they quit by March 3, following a tumultuous year for the insurance giant, CNBC has learned. If the company does not meet a resignation quota through buyouts, it will lay employees off, two people familiar with the matter said, citing an internal resource site.
• In Medical Supplies: PEN delivered a Q4 beat on sales/EPS, and introduced 2025 guidance for sales/margins, while 2025 guidance was a little light on the topline, though a few analysts called it conservative, while the company looks to a second half 2025 Thunderbolt acceleration. GKOS was upgraded to Outperform at Mizuho and raised tgt to $200 from $140 saying they believes iDose has a "substantial lead" in the drug-device combo setting and can drive up to $7 in adjusted EPS by 2030. HIMS shares extends 2025 gains, rising over 20% midday and up 190% YTD; today acquires at-home lab testing serviceTrybe Labs, which offers at-home blood draws.

• In Industrials: FLS shares stumble after earnings results as Q4 adj EPS $0.70 missed the consensus est. $0.77 on revs $1.180B below est. $1.208B and guides sales +5-7% vs est. +8.57%; ITW was upgraded to Hold from Sell at Deutsche Bank and raised tgt to $257 from $231 saying thesis for prior downgrade that the stock’s premium multiple was not justified, given the company’s below-average organic growth profile and plateauing operating margins has largely played out.
• In Chemicals: CE shares stumbled as posted Q4 beat (EPS $1.45/$2.4B above est. $1.20/$2.36B) but guides Q1 EPS $0.25-$0.50, well below consensus of $1.65 (but includes non-recurring costs) due to a combination of turnarounds, lower equity earnings, seasonality and soft demand. Pricing continues to be soft, with a 3% and 2% q/q price decline in Engineered Materials (EM) and Acetyls (AC), respectively, in Q4. IFF similar results as Q4 top and bottom line beat consensus but guides FY sales $10.6-10.9B vs est$11.158B on lower EBITDA outlook.
• In Metals & Mining: HBM Q4 net income attributable to shareholders of $21.2M vs year-ago profit of $30.7M and Q4 adj core profit of $257.3M vs. $274.4M y/y on in-line EPS of $0.18; reports Q4 revs of $584.90M vs est. of $588.28M; AU quarterly earnings and cash flow from operations jumped on rising gold prices, but EPS of $0.89 misses the $0.99 estimate as results reflect the 35% on-year increase in average gold prices received to $2,653 an ounce during the quarter ended Dec. 31. RIO reported its smallest full-year underlying earnings in five years (underlying earnings of $10.87 billion for 2024, compared with $11.76 billion a year ago) as lower prices for iron ore outweighed growth in its copper and aluminium businesses.

• In Semiconductors: ADI reported Q1 revs $2.42B, topping average estimate of $2.36B on an EPS beat of $1.63 vs. estimate of $1.54, issued Q2 revs guidance of $2.50B, plus or minus $100M, compared with estimate of $2.46B, its board approved an 8% increase in quarterly dividend and boosted share buyback by $10B (the results helped lift shares of TXN, MCHP among other analog semi names). Equipment stocks got a lift late morning after LRCX issued long-term guidance at its Investor Day event (KLAC, AMAT moved in reaction as well). SMCI extending gains, up 10 of last 11 days rising 140% during that stretch.
• Online Services: BMBL shares tumbled after Q4 revs fell -4.4% y/y to $261.6M vs. est. $2605.M but guided Q1 revs $242M-$248M, below consensus views of $256.9M; follows weaker Q1 forecast from bigger rival MTCH earlier this month; ETSY shares slip after saying Q4 revs rose 1.2% y/y to $852.2M, but misses expectations of $861.8M and said they anticipate consolidated Q1 GMS will decline at a rate similar to yoy performance reported for Q4. WIX Q4 net profit expectations due to price hikes and its artificial intelligence and Studio products for designing advanced websites and for sees 2025 revs up to $2B vs. analysts views for $1.5B (though Q1 revs were light).

• In EDA Software: CDNS reported a stronger 4Q backlog of $6.8B, which represents a $1.2B sequential expansion, while revs of $1.356B (26.9% y/y-growth) beat consensus expectations of $1.346B on slightly better operating margins of 46%; shares slipped as issued slightly lower revenue guidance of $5.140B-$5.2B vs. est. $5.24B
• In Software: WDAY was downgraded to Equal Weight from Overweight at Morgan Stanley saying a large potential market opportunity, best in class retention rates and room for margin expansion have kept them positive on Workday stock since 2020 – but now sees more risks than bullish signals on the horizon. PERI shares slide as Q4 revenue was in line and AEBITDA came in ahead of consensus, but 2025 guidance below estimates.
• In Video Game Software: TTWO was initiated at Buy and $250 PT at DA Davidson as thinks the company’s IP is extremely strong, its current release slate provides for a busy CY’25, and it is confident that TTWO can grow Net Bookings >40% Y/Y in FY’26. The firm also initiated EA at Neutral and $140 tgt.
• In Storage: NTAP was upgraded from Underperform to Neutral at Bank America (tgt to $128 from $121 saying they see an opportunity for increasing TAM driven by AI and demand for public cloud; improving macro and AFA market while winning share; stable GMs (71-72% range) after strong margin growth in F24.
• Quantum Compute names were volatile (IONQ, RGTI, QBTS) after CNBC reported MSFT’s Majorana 1 chip includes eight topological quantum bits. Majorana 1 won’t be available through Microsoft’s Azure cloud, but it opens the door to future models with greater capacity that likely will be, an executive told CNBC.