Closing Recap

Wednesday, June 04, 2025

U.S. stocks markets continue to climb the wall of worry as Wall Street continues to see a rebuild of sentiment and positioning back into technology these last few weeks, as the AI story which was shelved at the end of March/early April is alive and well. Mag 7 names, semiconductors, data centers and related AI power plays have been doing the heavy lifting to bring the S&P back within 3% of its all-time highs. Overall, it has been an incredible run since the middle of April, one of the most impressive rallies in recent decades in a sharp “V” shaped recovery since the “Liberation Day” in April and comes despite tariff/trade talks chaos, the bond market’s weakness lifting yields about the rocketing federal deficit, a Fed that appears unwilling to make rate changes given tariff uncertainty, weakening U.S. economic data and the war in Ukraine. The S&P 500’s 6.3% advance last month and the Nasdaq’s 9.56% jump were their best monthly percentage gains since November 2023, powered in part by huge returns for Mega cap tech stocks as noted above. In fact, the S&P 500’s 28-day rally, which peaked on May 19 at nearly 20%, was the fastest since 2009. Can this remarkable rally continue? Stocks slid late day to finish unchanged for the S&P.

In trade news today: Last night on Truth Social, President Trump said, “I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!” Separately, EU trade commissioner Maros Sefcovic said that he and his Chinese counterpart had agreed to clarify the rare earth situation as quickly as possible. Also, The tariff order increasing steel and aluminium imports to 50% are now in effect as of today. While tariffs on UK metals will remain at 25% for now, the order gives both countries until July 9 to finalize a new arrangement involving quotas or revised duties.

There also remains concerns in Washington about the rising debt as the nonpartisan Congressional Budget Office released a revised estimate of the cost of President Donald Trump’s tax-cut bill passed by the U.S. House of Representatives, concluding it will add $2.4 trillion to the federal government’s $36.2 trillion debt. An earlier CBO estimate predicted the Republican bill, which passed on May 22 with no Democratic support, would add around $3.8 trillion to Washington’s debt over the next decade. Elon Musk tweeted in response to the Bill, “Call your Senator, Call your Congressman, Bankrupting America is NOT ok! KILL the BILL” as tensions rise regarding the spending bill.

Barron’s reported APP, HOOD, LNG, IBKR top a list of potential additions to the S&P 500 when the index’s quarterly rebalancing occurs later this month (says LPLA, FCNCA, MKL are other possible additions). An announcement of any changes to the S&P 500 index components is likely to come around 5:15 P.M. ET on Friday. Any additions and subtractions to the index likely would take effect before the start of trading on Monday, June 23. – Barron’s

• ISM non-manufacturing sector shows PMI 49.9 in May (1^st time below 50 since June 2024) below consensus 52.0 and vs 51.6 in April; the service business activity index 50.0 in May vs 53.7 in April; prices paid index 68.7 in May vs 65.1 in April; new orders index 46.4 in May vs 52.3 in April; the employment index 50.7 in May vs 49.0 in April.
• The NY Fed survey showed most firms passed through to customers at least some of tariffs; one third of factory firms, about 45% of service firms passed on all tariff increases; three quarters of factory firms, service firms passed on some amount of tariffs; switching to domestic sources may have blunted some of tariff increase; firms were very uncertain about tariff outlook.
• S&P Global May final composite PMI at 53.0 (vs flash 52.1), while U.S. S&P Global May final services PMI at 53.7 (vs flash 52.3).
• May’s Harmonized Index of Consumer Prices, or HICP, a key measure of inflation among members of the bloc, fell to 1.9% on a year-over-year basis, below the 2% target set by the ECB, ahead of the ECB rate meeting Thursday. It’s the lowest HICP reading since September 2024 and could lead to an eighth consecutive 25-basis-point reduction in the policy rate, to 2%.

• Treasury yields sank throughout the day, with the 10-yr yield falling as much as -11bps to 4.35%, with weakness starting this morning after a round of softer economic data (ADP and ISM). The yield on the 10-year U.S. Treasury note posted its biggest one-day decline since April 14 after a pair of lackluster reports on the U.S. economy (ADP weak results and ISM into contraction territory, with respondents reporting difficulty in planning due to uncertain tariff policies.
• August gold settles +$22.10/oz, or +0.65% at $3,399.20, eyeing the $3431.71 record high from May 6 amid haven demand and an inflation hedge, with the weaker dollar adding to the upside. The U.S. dollar index (DXY) declined over -0.4% to 98.75 as the euro climbed back above 1.14. Note the US dollar has now tumbled by about 10% in just 12 weeks on White House policies/tariffs/tax bill.

• In Food, Beverages, and Restaurants: YUM upgraded to Buy from Neutral at Goldman Sachs given the company’s best-in-class unit growth trajectory and high franchise mix which builds relative resilience into the business, as well as improved digital integration across brands and at the enterprise and sustained value leadership. KO reported it has not seen a material impact from GLP-1 drugs.
• In Sporting Goods Retail: SPWH Q1 adjusted EPS loss (-$0.41) vs. est. loss (-$0.47); Q1 revs rose 2% y/y to $249.1M above consensus $238.25M; delivered first positive same store sales comp in nearly four years, rising +2%; backs FY25 revenue view down 1% to up 3.5%, reaffirms Fy25 adjusted EBITDA view $33M-$45M.
• In Specialty Retail: GCO raised its full-year sales outlook as it narrowed its Q1 loss and logged higher sales as Q1 revenue rose 3.6% y/y to $474M was above $458M last year and ests $463M (outlook incorporates current tariffs) and Same-store sales grew 5% across the company, led by Journeys, where the figure grew 8%.

• In Auto suppliers: ALV reiterates its medium-term target of a 12% adjusted operating margin. Said achieving this target depends on the continued execution of our structural and strategic initiatives, including automation, digitalization and footprint optimization; said did not currently have any production halts due to Chinese restrictions on rare earth magnets; raises quarterly dividend to $0.85 from $0.70.
• In Autos: TSLA deliveries of China-made Model 3 and Model Y vehicles, including both domestic sales and exports to Europe and other markets, fell 15% in May from a year earlier to 61,662 vehicles, after a 6% fall in April, data from the China Passenger Car Association showed. China-made EV deliveries were up 5.5% M/M. A large cargo ship transporting thousands of vehicles is adrift in the Pacific Ocean after a deck carrying EVs caught fire, forcing its crew to abandon the vessel. London-based Zodiac Maritime, the ship’s operator, said the vessel was carrying 3,000 cars, including around 800 electric vehicles.
• In Entertainment Sector: Bernstein initiates SPOT, LYV and DKNG at Outperform saying they are well positioned. LYV is their top pick as see upside to Ticketmaster volumes, sponsorship earnings, and concert margins; said expect SPOT to surprise on pricing and deliver a strong superfan product launch next year; said believe DKNG can leverage its lead in live betting toward strong handle growth.

• In Power & Utility: CEG was downgraded to Neutral from Buy at Citigroup while raising its tgt to $318 from $232 citing valuation following Constellation’s stock rally and META power agreement announcement. LEU outperformed in the nuclear/uranium sector after Bank America initiated Buy and $160 PT calling it out as "the world’s only publicly traded enriched nuclear fuel company at a time when the industry is poised for growth."

• In Insurance: Jefferies revised their top picks in the life insurance space, favoring co’s with leverage to our Return of Retail thesis. They remain constructive on the group as a whole but continue to believe annuity companies have the most upside on the disconnect between growth potential and valuation. EQH remains Franchise Pick on exposure to the US retirement value chain, product innovation and strong track record managing risk/capital. Now favor CRBG as well, as it will soon be the only annuity co with a top ten position in all four key product verticals. Additionally, now favor LNC due to a recent commitment of growth capital that endorses the quality of capital and reserves.
• In Exchanges: Oppenheimer raised its price tgt on CME to $300 from $282 as noted CME’s April and May monthly data showed higher than expected trading volume in interest rates, equities, and energy. But, the average rolling 3-month rate per contract in April was slightly lower than expected. We believe the main driver of this volatility and hedging activities is the uncertain tariff policy, which will likely continue in the near term.
• Financial Services/Technology: insurance-software provider GWRE shares rose as delivered F3Q ARR well above consensus ($960M vs. $945M) driven by 17 cloud deals, nine migrations, and growing momentum with InsuranceNow while FY25E ARR guidance was raised by $12M, accompanied by expectations to exit with high-teens fully ramped ARR growth

• CRVS announces full data from cohort 3 of placebo-controlled phase 1 clinical trial of Soquelitinib for atopic dermatitis.
• HQY reported a solid FQ1 beat with revenues coming in ~2.5% above consensus, driven by higher custodial revenues on higher assets + higher yields while adj. EBITDA of $140.2M handily topped consensus by 14%.
• MRUS 5.27M share Spot Secondary priced at $57.00.
• TRVI 17.4M share Secondary priced at $5.75.
• UNH raises quarterly dividend to $2.21 from $2.10 prior.

• In Transports: in LTL, ODFL said revenue per day fell -5.8% y/y in May, hurt by continued softness in the domestic economy and lower fuel prices; said that the decrease in revenue per day stemmed from an -8.4% decrease in less-than-truckload tons per day, as both shipments per day and weight per shipment y/y. declines were partially offset by an increase in less-than-truckload revenue per hundredweight. The US Dept. of Transportation said this morning there is no viable path forward for California high-speed rail project, warns it may rescind $4B in federal funding.
• In Aerospace & Defense: there were reports overnight that China is considering buying hundreds of Airbus (EADSY) planes as soon as next month which would be a clear message to the Trump administration (as selects over BA); ERJ was upgraded to Buy, PT to $57 from $45 at HSBC saying strong deliveries in Executive and Defense, and EVE’s first full-scale prototype flight to embark in 2025 and says likely limited impact from the new US tariffs. RDW receives NASA approval to advance cutting-edge manufacturing technology for building infrastructure on moon and Mars.
• Homebuilders: sector saw strength with DHI, LEN, KBH, PHM rising as Treasury yields fell, reducing mortgage rates as well.

• In Cyber Security: CRWD shares slumped, pulling back from all-time highs after reported solid Q1 results to kick off FY26, with ARR growing 22% y/y to $4.44B and net-new ARR landing at $212M — roughly flat y/y, announced a new $1B share repurchase program, but only reaffirmed FY26 revenue guidance of $4.74–$4.81B (while raised year EPS view) as high expectations after a great in shares weighed on the stock (the stock was downgraded by several firms including Bank America, Canaccord, Evercore).
• In Communications, Optical & Networking: LITE raised its Q4 EPS view to $0.78-$0.85 from prior $0.70-$0.80 and consensus $0.75; raises Q4 revenue view to $465M-$475M from $440M-$470M (est. $457.5M) and boosts its Q4 operating margin view to 14%-15% from 13%-14% (COHR, LASR, VIAV, CIEN were among names to watch in the sector).
• In Internet: YEXT shares rallied on earnings while B Riley upgraded to Buy to reflect a) Q/Q improvement in KPIs (retention, ARR) accompanied by modestly better Q1 results and outlook, and notes a track record of strong execution by management. AMZN said on Wednesday it is planning to invest $10 billion in North Carolina to expand its cloud computing and artificial intelligence infrastructure. The WSJ reported META has talked to DIS and A24 as well as smaller production companies, in the hopes the content will attract people to the VR device it plans to launch next year that would compete with Apple’s Vision Pro.
• Software movers: BASE delivered better-than-expected 1QFY26, showcasing steady execution, strong ARR growth (+21% YoY), and Capella also continues to show gains and is now 17.4% of total ARR, but Q2 was below Street expectations and macro continues to be a headwind. ASAN shares fell as the company signed its largest deal in history in the quarter, a three-year 100M total contract value deal, but Keybanc noted the expansion deal that extended the contract term from one to three years, came at a cost in a lower average annual contract value (ACV); SNOW upgraded to Buy at UBS, said stock still has room to run despite being up 35% year to date, based on industry checks and recent results (raised tgts on PLTR, DBRK as well).

• Shares of NVDA, CRWV, SMCI, ORCL, NBIS advanced late morning after news Nvidia is working with companies worldwide to build out AI factories — speeding the training and deployment of next-generation AI applications that use the latest advancements in training and inference. Beyond the submission with CoreWeave and IBM, other compelling submissions were from ASUS, Cisco, Dell Technologies, Giga Computing, Google Cloud, Hewlett Packard Enterprise, Lambda, Lenovo, Nebius, Oracle Cloud Infrastructure, Quanta Cloud Technology, ScitiX and Supermicro.