Market Review: January 22, 2025

Closing Recap

Wednesday, January 22, 2025

Index

Up/Down

%

Last

DJ Industrials

130.92

0.30%

44,156

S&P 500

37.12

0.61%

6,086

Nasdaq

252.56

1.28%

20,009

Russell 2000

-14.24

0.61%

2,303

 

 

 

 

 

 

 

 

 

U.S. major averages extended gains on Wednesday as the S&P 500 (SPX) topped all-time highs, rising to 6,100.81 (just above the prior record 6,099.97 on 12/6/24), rising for the 6th time in last 7-days as large cap tech did most of the heavy lifting despite negative overall market breadth. Breadth modestly favored decliners over advancers by 1.3:1 margin, snapping a historic run for market breadth as Technology (XLK) and Communications (XLC) were the only S&P sectors in positive territory while utilities (XLU) and REITs (XLRE) were down the most. Recall yesterday, RyanDetrick tweeted, “today will be the 6th consecutive day with more than 68% of S&P 500 components higher. That is the longest streak ever.” Semiconductors (SOX) gained as much as 2.5% before paring gains, rising for the 6th straight day, among the top leaders as euphoria over AI investments boosted the tech space. After surging 1.85% on Tuesday, the Smallcap Russell 2000 underperformed today, ending lower as the focus remained on large cap tech all day.

 

The catalyst for today’s extended push higher was all about tech/AI after the White House last night announced an artificial intelligence (AI) partnership with Oracle (ORCL), OpenAI (private), and Softbank (SFTBY). The project will include $100B of investment in US AI infrastructure for the first year and up to $500B over the next four years. The project is to be called “Stargate,” and it will start with a data center project in Texas. The headlines boost several names across the AI complex such as chips (NVDA, AVGO, ARM), data center names (DELL, VRT, ETN), and nuclear names on needs/demands for more power (VST, CEG, NRG, TLN, OKLO, SMR). With a quiet week so far of economic data and no Fed speakers ahead of next week’s FOMC decision, no one is forecasting a rate cut and implied Fed funds futures show virtually no chance too. Currently, the market does not fully price in the next -25 bp easing until July.

Commodities, Currencies & Treasuries

  • U.S. WTI crude oil futures settle at $75.44/bbl, slipping -$0.39 or 0.51%, while Brent Crude futures settle at $79.00/bbl, down -$0.29 or 0.37%, pulling back from last week multi month highs. In metals, February gold prices rose $11.70 or 0.42% to settle at $3,770.90 an ounce amid market uncertainty related to Trump policies.
  • The U.S. dollar index (DXY) was up slightly around 108.15, while the buck rose vs. the Japanese yen ahead of the Bank of Japan policy meeting later this week. The dollar has pulled back from highs over the last week and a half as promises of tariffs to other countries have yet to materialize (thus far). Trump did say late on Tuesday that his administration was discussing imposing a 10% tariff on goods imported from China on Feb. 1, the same day that he previously said Mexico and Canada could face levies of around 25%. He also vowed duties on European imports, without providing further details. Bitcoin prices back below $104,000 but BlackRock CEO Larry Fink said in an interview that Bitcoin is a hedge against currency debasement/political instability and could hit $700,00.

 

Macro

Up/Down

Last

WTI Crude

-0.39

75.44

Brent

-0.29

79.00

Gold

11.70

2,770.90

EUR/USD

-0.0014

104.15

JPY/USD

1.03

156.54

10-Year Note

0.027

4.60%

 

Sector News Breakdown

Retail, Consumer Staples & Restaurants:

  • In Consumer Staples: Dow component PG Q2 organic revenue +3%, est. +2.35%, Q2 EPS $1.88 tops est. $1.86 and revs $21.88B above est. $21.55B; CELH was downgraded to Hold from Buy at TD Cowen and cut tgt to $29 from $40 saying data shows decline in sales growth in the last four weeks vs growth recovery in the energy drink category; in food, HRL was upgraded to Overweight from Equal Weight at Barclays saying its unique headwinds that negatively impacted its results in fiscal 2024 should dissipate in 2025.
  • In Restaurants: Bernstein said after a dismal 2024, the restaurants sector looks relatively inexpensive. The firm upgraded DRI to Outperform from Market Perform (tgt to $215 from $180) while downgraded YUM to Market Perform (tgt to $135 from $140). The firm said all the macro indicators that support food away from home demand are stabilizing or positively inflecting, with rise in Consumer Confidence improving the most for low-income consumers and restaurant inflation starting to close the Gap vs grocery inflation.
  • In Autos: Ford (F) was downgraded to Equal Weight from Overweight at Barclay’s and cut tgt to $11 from $13 as believes elevated volume headwinds in 2025 due to inventory destocking and continued modest price normalization will drive downside on earnings estimates. In Auto suppliers, APTV said it will spin off its electrical distribution systems (EDS) business into a new company. APTV’s shareholders will retain their current shares of Aptiv stock and receive a pro-rata dividend of shares of the new EDS company stock.
  • Donald Trump is threatening to put a 25% tax on Mexican imports that could spur sharp price hikes for the automotive industry while cutting into new sales, CarGurus’ Kevin Roberts said. The online marketplace for vehicles said in its 2024 report that 19% of new listings at year-end were built in Mexico. A 25% tariff could increase the average price of those Mexican-built cars to $49,600 from $39,700, Roberts says – DJ reported.

Energy

  • In Utility & Power: GEV shares fell after Q4 revs rose 5.1% y/y to $10.56B but missed ests $10.7B; wind orders sank 41.2% to $2.031 billion, citing lower onshore wind equipment. The results don’t include the impact of President Trump’s executive order signed on Monday that temporarily withdraws leasing for wind projects. Nuclear/energy stocks (SMR, CEG, VST, TLN, OKLO, NRG, CCJ) after the WSJ reported South Carolina to reboot giant Nuclear project to meet AI Demand. Santee Cooper is working with bankers to solicit interest in V.C. Summer station https://tinyurl.com/z46866xw ; the sector also getting boost on news of AI investment last night and power needs.
  • In Oil Services: HAL shares fell as Q4 revs fell -2.2% y/y to $5.61B, below the consensus est. $5.65B; says expects 2025 to be sequentially softer in North America (weighed on SLB, BKR shares). In the LNG sector, shares of LNG, GLNG, GTLS after Venture global IPO valuation get cut in half to $65.3 billion vs. $110.4 billion earlier and said is looking to raise up to $1.89 billion vs prior target of $2.3 billion.

Banks, Brokers, Asset Managers:

  • CMA slips as Q4 adj EPS $1.20 misses est. $1.26 while said Net interest income fell to $575M from $584M but exceeded analyst expectations of $561M; provisions for credit losses were $21M up from $12M.
  • HWC Q4 EPS $1.40 vs est. $1.28 on NII $276.3Mm, revs $165.2Mm vs est. $365.1Mm; NIM 3.41% CET1 ratio estimated 14.14%.
  • IBKR Q4 EPS $2.03 tops consensus $1.86 on revs $1.387B vs. est. $1.37B; Q4 customer accounts increased 30% to 3.34M, customer equity increased 33% to $568.2B, total DARTs2 increased 61% to 3.12M, customer credits increased 15% to $119.7B and customer margin loans increased 45% to $64.2B.
  • FULT Q4 EPS of $0.36 ex items vs. est. $0.38 as Piper noted higher NII ($0.02), higher fee income ($0.01), and lower core expenses ($0.02), partially offset by higher provisioning ($0.01) and a higher tax rate of 20.4% vs 17.5%.
  • PNFP Q4 core Revenue beat by $0.11 per share with NII contributing $0.09, and fee revenue taking credit for the remaining $0.02. This NII strength came as deposits rose by ~18.4% LQA and EOP loans grew by 13.7%.
  • SFNC core Q4 EPS of $0.39 beat consensus on better NII (+$0.02) while provision was slightly lower than expected (+$0.01); NIM beat expectations by 7 bps at 2.87% (up 13 bps q/q), primarily driven by lower deposit and borrowing costs.
  • ZION posted operating EPS of $1.35 that was above consensus of $1.26 due to stronger fees (EPS: +$0.08) and a lower tax rate (+$0.05) partly offset by a higher LLP (-$0.07) and NIE (-$0.01), as per Piper.

Insurance & Services:

  • In Consumer Finance: COF Q4 adj EPS $3.09 vs. est. $2.80; Q4 revs rose 2% y/y to $10.2B, in-line with consensus $10.22B; Provision for credit losses increased $160M to $2.6B; Q4 net charge-offs of $2.9B; Net interest margin of 7.03 percent, a decrease of 8 basis points; Credit Card period-end loans increased $5.9 billion, or 4%. ALLY Q4 adj EPS 78c tops est. 55c on in-line revs of $2B and entered into a definitive agreement for CardWorks, and its wholly owned bank subsidiary, Merrick Bank, to acquire Ally’s credit card business, including a portfolio of $2.3 billion in credit card receivables with 1.3 million active cardholders as of Dec. 31, 2024.
  • In Insurance: TRV reports Q4 core EPS $9.15 well above consensus $6.63 and revs $12B, consensus $10.75B; Net written premiums rose 7% in the quarter to $10.74B and hit a full-year record of $43.36B; Net investment income came in at $955 million pre-tax, up 23%; Catastrophe losses, net of reinsurance, rose to $175M from $125M y/y.

Biotech & Pharma:

  • Dow component JNJ reported Q4 adj EPS $2.04 vs. consensus $2.02 while Q4 revenue rose 5.3% y/y to $22.52B vs. est. $22.45B; sees FY25 adjusted EPS $10.75-$10.95, vs. consensus $10.60; sees FY25 operational sales growth of 2.5%-3.5%; Quarterly sales of J&J’s cancer drugs rose 19% worldwide.
  • ABT Q4 adj EPS $1.34 on revs $11B, both in-line with Street consensus; guided Q1 EPS $1.05-$1.12 vs. est. $1.12 and FY25 midpoint of $5.05-$5.25 misses the $5.16 estimate; says strong demand for its medical devices will continue to drive growth; forecasts 2025 organic sales growth between 7.5% and 8.5%.
  • CRSP shares jumped late day after Stat News reported RFK Jr stock holdings. “disclosures give the clearest view to date of RFK Jr.’s investments, employment, and potential conflicts of interest. They show that he plans to divest stock holdings, including stakes in biotech firms CRISPR Therapeutics AG and Dragonfly Therapeutics. He’s also stepping down from roles at his law firm and at the anti-vaccine nonprofit Children’s Health Defense. Shares of other crisper stocks EDIT, NTLA also moved in reaction.
  • ELV was downgraded to Equal Weight from Overweight at Stephens and cut tgt to $440 from $520, in managed care ahead of earnings this week.

Industrials & Materials

  • In Transports: UAL earnings beat for Q4 in airlines (following lead of DAL recently) while guides Q1 adj. profit per share to be between $0.75-$1.25, vs analysts’ ests $0.54 as company says they enter 2025 with demand trends continuing to accelerate.
  • In Aerospace & Defense: TXT shares slipped as Q4 revs $3.61B missed the $3.81B estimate and guided 2025 EPS $6.00-$6.20 vs. analysts’ estimates of $6.40 and revs ~$14.7B vs. ests $14.75B while noting they delivered 32 jets during Q4, down from 50 a year ago, and 38 commercial turboprops vs. 44 last year. LDOS wins $120M cybersecurity and cryptographic key management contract.
  • In Metals & Mining: MP said it has launched domestic production of a rare-earth magnet it intends to mass produce for General Motors and other U.S. customers; ZEUS upgraded to Overweight at Keybanc in carbon steel preview and remains overweight on RS, WS as maintains a balanced view on carbon steel equities, with its note offering largely lower estimates and the likely conclusion of sector EBITDA normalization in 2025.
  • In Agricultural Chemicals: MOS, NTR shares active after Belarusian Potash Company (BPC) announced a large maintenance round at its Soligorsk 4-mine on January 21st, and it is expected to impact about 0.9-1mT of production, equivalent to just over 1% of global effective potash MOP capacity.

Internet, Media & Telecom

  • In Internet/Media: NFLX shares surged following a massive subscriber beat in Q4, as Q4 global streaming paid net additions of 18.91crushed ests of 9.6M, driven by broad strength across our content slate, improved product/market fit across all regions and typical Q4 seasonality (compared to 13M sub adds in Q4’23 and 5M in Q3’24); also posted Q4 EPS/sales beat and slightly raised year rev guidance and approved $15B buyback.

Hardware & Software movers:

  • ORCL added to yesterday’s gains as Oracle, Softbank, OpenAI, and President Trump confirmed/announced the Stargate Project, a new company that intends to deploy $100B immediately and then invest up to $500B over the next four years building new AI infrastructure for OpenAI in the United States. Several sectors and names benefitting from the news overnight including AAOI, ARM, NVDA, SMCI, VRT, MSFT and many others.
  • AGYS shares tumbled after Q3 results and FY25 guidance missed Street expectations, driven by a revenue shortfall from elongating cycles in the POS business and not enough Services resources; said most see continued impacts on wind down of heavy lift of significant development efforts related to large projects.
  • CRNC shares surged after Needham upgraded to Buy with $16 PT based on 1) first-rate management; 2) adept debt actions; 3) stronger cash flow assumptions (due to Deferred Revenue dynamics); 4) higher confidence in PPU increases; 5) normalized fixed contract balance by December 2026; 6) OpEx estimates near-term are likely conservative; and 7) compelling valuation.
  • PRGS delivered solid 4QFY24 results ahead of expectations behind broad-based demand and a steady environment. Positively, OpenEdge, DataDirect, MarkLogic, and DevTools performed better than expectations, but guidance weighed on shares early as forecasts Q1 adj EPS $1.02-$1.08 vs. est. $1.44.
  • RDDT was downgraded to Neutral from Buy at Roth MKM as they believe the near-term risk/reward is fairly balanced at current levels (notes since going public in Mar ’24 at $34 IPO price, Reddit shares have gone up ~450% vs. S&P 500 +15%).
  • WK shares tumbled after Bloomberg reported that France is preparing to release a formal proposal to limit the scope of ESG reporting requirements.

Semiconductors:

  • More outperformance for semiconductors, especially in AI land with ARM, NVDA, SMCI, AVGO jumping following the Oracle, Softbank, OpenAI, and President Trump confirmed/announced the Stargate Project, a new company that intends to deploy $100B immediately and then invest up to $500B over the next four years building new AI infrastructure for OpenAI in the United States.
  • STX shares jumped in HDD space after reported a strong DecQ at $2.33B/$2.03 (est. $2.31B/$1.87) and guided MarQ to $2.10B/$1.70 (in line vs cons $2.19B/$1.68), with DecQ GMs up 220bps q/q to 35.5% (positive for WDC); said nearline cloud revenue up ~2x y/y, enterprise/OEM demand remains strong.
  • STM was downgraded to Underweight from Equal Weight at Barclays saying the U.S. is restricting its access to technology, and there is increasing risk that the global semiconductor industry "splits in two."

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Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.