Closing Recap

Tuesday, June 03, 2025

US equity futures faded modestly overnight as investors had no significant market-moving data or earnings and just awaited new tariff headlines. With no new economic news or other meaningful early headlines, equities hovered around flat at the open before notching some initial gains. Today’s Fear & Greed Index registered 56/100 (Greed) versus 65/100 (Greed) last week and 54/100 (Neutral) last month. On a sell-side upgrade/downgrade ratio basis, the month of May as a whole finished at 38.7%, the low point of the year thus far, and perhaps noting some of the “downgrade risk” has come out of the market to the extent that even is a thing. Thus far, the upgrade/downgrade ratio appears to be more of a contra indicator versus the S&P 20dma. By mid-morning breadth favored advancers by about 3:2 as small caps outperformed with IWM versus SPY and QQQ. Energy, Technology and Industrials were outperformers among S&P sector ETFs, while Communications, Consumer Staples and Real Estate led the underperformers with five sectors gaining versus six declining.

In data of note today, @bespokeinvest noted the OECD cut its global and US growth forecasts through 2026 on tariffs, uncertainty and weak sentiment. It sees the hit to the US from trade actions at almost 2% of GDP. On bonds, @CharlieBilello noted the US bond market has seen by far the longest drawdown on record, at 58 months. He also noted on ISM Manufacturing that the index dropped to its lowest since March 2009 while the exports component hit its lowest since May 2020. On the broader market, @DataTrekMB noted S&P 500 sector correlations to the index are well above average, indicating fragile investor confidence and suggesting the recent rally can continue as macro fears ease. Lastly, on housing, @KobeissiLetter noted the total value of US homes for sales jumped 20% yr/yr in April to a record $698B and the value of unsold inventory has doubled over the past three years. The total number of homes on the market in the US climbed 16.7% in April to hit the highest in five years.

It was a, no bad news is good news type of day and breadth had expanded to about 2:1, still favoring advancers, as the market entered the final hour of trading. Small caps continued to outperform with IWM (+1.55%) versus SPY (+0.5%) and QQQ (+0.7%) and Technology (+1.3%), Energy (+1.45%) and Materials (+0.8%) were outperformers among S&P sector ETFs, while Consumer Staples (-0.1%), Communications (-0.3%) and Real Estate (-0.5%) continued to pace the underperformers with eight of eleven sectors gaining. On a style basis, both growth and value enjoyed solid performance with growth the outperformer. The Russell 1000 growth gained +0.70% versus its Value counterpart at +0.54%. Tomorrow brings US mortgage applications data, ADP employment change and more Fed speakers, so stay tuned.

• April factory orders m/m fell (-3.7%) vs 4.3% previous and vs est. (-3.2%); factory orders ex-transportation (-0.5%) vs March (-0.5%); U.S. April factory orders ex-defense (-4.2%) vs March +3.9%; April nondurables orders (-0.9%) vs March (-0.7%); total manufacturing inventories (-0.1%) vs March +0.1%; U.S. April nondefense cap orders ex-aircraft revised to (-1.5%) from (-1.3%); April shipments unrevised at -0.1%

• WTI July crude futures gained overnight and extended to the upside as equities strengthened through the morning. Though there was some afternoon fade in oil following another round of more “peaceful” Iran nuclear deal headlines, futures still settled with a gain of $0.89/bbl, or +1.42%, at $63.41. Brent similarly gained $1.00/shr, or +1.55%, to settle at $65.63.

• Ford (F) said May total vehicle sales rose 16.3% to 220,959; May U.S. SUV sales 94,595, up 25%; May U.S. F-150 Lightning Sales 1,902, down -41.7%; May U.S. Truck sales 121,354, up 11.2%; May U.S. Electric Vehicle Sales 6,723, down -25%; May U.S. Hybrid Vehicle sales 22,719, up 28.9%
• NIO reported a wider-than-expected Q1 loss of (-$0.45) vs. est. loss (-$0.35) on in-line sales of $1.7B partly due to rising competition, which has been pressuring prices for new EVs and profit margins for EV makers. NIO delivered 42,094 vehicles in the first quarter, up from 30,053 delivered a year earlier. Deliveries grew by about 40%, while sales increased by about 22%.
• Volkswagen (VWAGY) said about 20,000 employees will voluntarily leave the company by the end of the decade as the carmaker restructures its German operations to cope with uneven demand for its vehicles.
• Goldman Sachs assumed coverage of automative service stocks. Upgrade VVV to Buy as it is a best-in-class operator in a highly fragmented market that benefits from non-discretionary, needs-based demand, and also remains insulated from tariffs and assumes MCW at Sell rating as see rising headwinds from increased competition in both the near and intermediate term along with downside risk from operating a discretionary service and raising prices during a potentially softening macro environment. Also, upgrade BYDDF to Neutral and assume DRVN and LAD at Neutral.

• In Specialty Retail: SIG shares jumped after the jewelry retailer raised its annual adjusted EPS forecast to between $7.70-$9.38, from the previous forecast range of $7.31-$9.10 and guides year sales $6.57B-$6.8B from prior $6.53B-$6.8B view after beating Q1 sales, profit estimates. VSCO said it sees Q1 preliminary EPS $0.09, which is above the Street consensus $0.04 and sees Q1 revenue $1.35B, vs. consensus $1.33B saying net sales, adjusted operating income, and adj diluted EPS for the first quarter are expected to be near or exceed the high-end of previously issued guidance ranges.
• Education stocks slumped (LRN, ATGE, PSO, UTI) after peer Australia’s IDP Education forecast a drop in annual profit on Tuesday saying tighter student visa rules have reduced demand at IEL, which jointly owns the IELTS English language exam with British Council & Cambridge University Press & Assessment. The company forecast fiscal 2025 adjusted operating earnings of A$115–A$125 million, nearly halved from last year and below a consensus estimate of A$166.3 million according to Reuters.

• In Utilities/Nuclear Power/Uranium sectors: nuclear stocks getting a bounce today after META signed an agreement to buy power generation of a CEG nuclear plant in Illinois under a 20-year deal (boosting shares of VST, OKLO, SMR, LEU, NRG). Under the terms of the deal, Meta will buy around 1.1 gigawatts of power from Constellation’s Clinton Clean Energy Center starting in June 2027. The news also boosted the uranium sector (CCJ, UEC, UUUU). UUUU said after its Pinyon Plain mine in Arizona produced nearly 260,000 pounds of U(3)O(8) in May, representing a 71% increase from last month. UUUU add that it is advancing permits on important uranium pipeline projects; UEC was initiated Outperform and $7.75 tgt saying the uranium producer is a N.A. focused portfolio of assets that is poised to become a key provider of U.S. domestic production.
• In Metals: Copper prices/stocks (FCX, TECK, SCCO) were weak early as factory activity in top metals consumer China missed expectations. Chinese May Caixin Manufacturing PMI (final) was 48.3 below the 50.6 consensus; RIO was downgraded to Hold from Buy at Jefferies saying of the major diversified miners under coverage, they prefer Glencore (GLNCY), Anglo and VALE over RIO and BHP based on geopolitical factors, capital allocation and capex risks, strategic risks, and, at the margin, valuation.
• In Industrials: OSK was upgraded to Buy from Hold at Truist and raised tgt to $127 from $93 calling it the cheapest name within its machinery coverage universe, trading at 8.3-times consensus forward earnings. Jacobs Technology, a division of Jacobs Solutions (J), has been awarded a U.S. Air Force contract with a ceiling of $4 billion for work with the U.S. Space Force.
• In Aerospace & Defense: KTOS and GE announced a formal teaming agreement to advance propulsion technologies for the next generation of affordable unmanned aerial systems and Collaborative Combat Aircraft-type aircraft; RTX was awarded $536M US navy contract for spy-6 family of radars; RKLB announced successful launch of Electron mission for BlackSky (also price target raised to $27 from $24 at Deutsche Bank); WWD was upgraded to Buy from Hold with $291 tgt at Deutsche Bank saying they have the exposure to the right submarkets of engine aftermarket and guided munitions; JOBY and Abdul Latif Jameel agree to explore opportunities for electric aircraft in Saudi Arabia with potential delivery of up to 200 electric aircraft and related services valued at approximately $1 billion over coming years.

• In Financial Services: FDS said CEO Phil Snow is retiring after a decade at the helm, and the financial-data provider has hired JPMorgan Chase veteran Sanoke Viswanathan to succeed him.
• In Banks: UBS was upgraded to Buy from Hold at Jefferies saying they see a potential turning point on capital given likely more clarity on 6 June. This would arrive at same time as earnings are set to inflect, supporting ROTE expansion to 15% by 2027.
• In Crypto: MARA said 950 Bitcoins produced in May, a 35% increase m/m as record high 282 blocks earned in May, 38% increase M/M; CLSK said it increased our month-end hashrate to 45.6 EH/s, up 7.5% sequentially, while improving average fleet efficiency while produced 694 Bitcoins and sells 293.5 Bitcoins in month; RIOT said mined 514 Bitcoin in May, up from 463 in April and 215 y/y; HOOD shares hit all-time highs.

• AMLX receives U.S. FDA fast track designation for AMX114 for the treatment of amyotrophic lateral sclerosis; the company phase 1 lumina trial underway, data expected in 2025.
• AXSM was initiated at Outperform and $185 tgt as views the co as a uniquely attractive mid-cap biopharma company in neuroscience, based on multiple differentiating advantages such as accelerating revenue growth with three approved products led by Auvelity for MDD, and its KOL discussions support strong adoption, a broad pipeline, several upcoming catalysts and a strong balance sheet.
• BEAM announces U.S. FDA orphan drug designation granted to beam-101 for the treatment of sickle cell disease; Beam-101 safety profile consistent with busulfan conditioning.
• MLTX shares rise after the Financial Times reported MRK has held talks over an acquisition of more than $3 billion for the Swiss biotechnology company. Merck submitted a nonbinding offer for MoonLake earlier this year, the Financial Tines reported. https://tinyurl.com/57cyyvd8
• Healthcare Services/Facilities: HIMS agreed to acquire Zava, a digital health platform in Europe that they say will expand its footprint into the United Kingdom and officially launch the company into Germany, France and Ireland. Exact terms of the deal weren’t disclosed, but Hims said it would be funded solely with cash.
• In Drug Distributors: CAH was upgraded from Equal Weight to Overweight at Wells Fargo and raised its tgt to $179 from $136 saying they think the improvement in valuation and tighter spread vs peers is justified by a combination of a strong industry backdrop, improving business mix, and impressive execution. COR was also upgraded to Overweight at Wells Fargo saying the improvement in valuation is justified by a strong industry backdrop and relatively low exposure to macro / policy risks.

• In Semiconductors: the Philadelphia Semi Index (SOX) surged over 2.4%, well above its 200dma of 4,864 amid strength in the chip names (NVDA, ARM, AMD) on more upward momentum, and strength in AVGO ahead of earnings this week. ASML was downgraded to Equal Weight from Overweight at Barclays and cut its tgt to EU650 noting the firm sits 8% below consensus for 2026 revenues, lack positive catalysts and see a tough setup over the coming months. CRDO shares jumped after beat and raise quarter as Q1 revs +25.9% q/q to $170M topping the $160M estimate on better EPS of $0.35 (vs. est. $0.28) and raised outlook, w/ rev guidance mid-point of $190.0M implying +11.7% q/q growth and well above the consensus $162.4M. ON shares jumped after presenting at the Bank America Conference where the CEO expressed optimism about the company’s outlook, stating he feels "good" about the second half of 2025