Closing Recap

Friday, June 20, 2025

U.S. stocks saw another slow, low volume day, with the S&P going nowhere the last few weeks, feeling like the “dog days of summer” despite only just starting the season. After a massive surge from April tariff announcement lows (more than 20%), the S&P has leveled off the last few weeks, failing to break above all-time highs despite coming within 2% of its best, but also failing to break down/pullback despite what has been a flurry of negative macro headlines, weaker economic data and a Fed failing to cut deliver on rate cuts despite several months of slowing inflation data. Outside of Consumer Discretionary (XLY) -6% and Healthcare (XLV) down -3.5% on the year, the other nine S&P sectors are higher on the year, led by Industrials (XLI) +8.2% YTD, Utilities (XLU) +6.9% and Communications (XLC) +6.8% YTD. Tariff deadlines are coming (July 9), intense geopolitical concerns between Israel/Iran and Russia/Ukraine remain fluid, US deficits are soaring, economic data has show sharp deceleration in jobs, manufacturing and housing – so with so much “noise” why do investors continue to brush it off and why do stock markets keep climbing?

Few possible answers:

1) despite the tariff inflation fear impact, so far, no signs of a rise in prices impacting the economy (to this point) and while the July 9^th major tariff expiration deadline approaches, President Trump has shown his willingness to extend deadlines (lowering the fear for markets that tariffs will stay high).

2) the conflict headlines between Iran and Israel in an effort to prevent Iran from obtaining the ability to own nuclear weapons, the U.S. has remained out of the attack (thus far), oil prices have not skyrocketed, and the rhetoric between Iran and the U.S. still lead to hopes that an agreement can be reached. (easing fears)

3) Fears of U.S. debt surging amid the “One Big Beautiful Bill”, to this point still just remains talk as spending is up and Congress wants to go bigger – but the bond market has not shown any fears (yields have not risen – staying between 4.4%-4.5%), and stocks are following bonds lead (staying complacent).

4) Economic data remains weak with softer PMI readings, jobless claims remaining higher, and payrolls slowing, but numbers haven’t been drastic, keeping the so called “status quo” for markets.

5) The Fed has not helped President Trump thus far, not cutting rates despite slowing inflation readings after several cuts in 2024, but given comments from Fed Governor Waller today, shows signs the Fed may be changing their tune.

6) The market remains in an uptrend as every dip, shallow or moderately deep, has been snapped up in a day or two, with consistent follow-through so buying continues to be rewarded.  

–Overall, markets aren’t ignoring risk because the world is stable, and the noise has been just that. However, if we see a meaningful change in one or several of the above noted factors (yields surging, macro tensions worsening, debt surging, and tariffs staying high), we could see a change in the “buy the dip” everyday narrative.

Today, Federal Reserve Board Governor Christohper Waller was out with favorable market comments this morning saying, the Federal Reserve should consider cutting interest rates at its next meeting given recent tame inflation data and the fact that any price shock from import tariffs will be short lived. Wall said, “tariffs will not be completely passed through, a 10% tariff on all imports would not have much impact on overall inflation.” He also noted so far that data has been fine, with no reason to wait much longer to cut while noting the job market is solid but is starting to see things like high unemployment for recent graduates.

Following the FOMC’s 2-day meeting earlier this week, the Fed Funds target range was left unchanged at 4.25%-4.50%. The Dot Plot median outlook in the Summary of Economic Projections (SEP) was unchanged for 2025 at 3.75%-4.00%, while the 2026 outlook included one LESS rate cut, for a 2026 yearend projected range of 3.50%-3.75%. Possibly the largest takeaway from the SEP update was 7 members projecting no rate cuts in 2025, up from 4 in March. The committee lowered its projected GDP growth rate for a second consecutive SEP, while raising projected core PCE, also for the second consecutive SEP. Markets remain unphased still despite the changes by the Fed.

• Leading economic indicators (LEI) for May fell (-0.1%), in-line with consensus.

• August gold prices slip -$22.40 or 0.65% to settle at $3,385.70 an ounce, ending the holiday-shortened week lower, falling three out of the past four sessions and broke a two-week winning streak. This week’s interest rate decision from the Fed seemed to move the needle little for gold prices, as well as signs of improving talks between the U.S. and Iran.
• The 10-yr yield ends the day lower by 2.2bps on the day at 4.374%, down -4.8bps on the week (lowest yield since 6/12), off 42.8bps from the 1/13 52-week high (yields down 3 of last 4-weeks); the shorter term 2-yr yield fell -3.8bps to 3.907%, down 5bps on the week.

• In Retail: SWBI shares fell after Q4 revenue missed expectations, falling -12% y/y to $140.8M (below consensus above $152M) as firearm demand remains soft as CEO said Q4 proved more difficult than we anticipated largely due to macroeconomic and industry trends. NKE price target was lowered to $53 from $60 at Barclays ahead of earnings next week saying they remain cautious heading into FYQ425 as expects ongoing "franchise life cycle management," return to wholesale, tariffs, and China risk will weigh on FY26 performance.
• In Restaurants/Dining: DRI reported Q4 sales $3.3B topping consensus vs. est. $3.261B on slightly better earnings and Q4 same-restaurant sales growth 4.6%; saying sales grew thanks to a mix of growing same-restaurant sales, sales from its acquisition of 103 Chuy’s Tex Mex restaurants and 25 net new restaurants; forecast FY26 sales growth between 7% and 8%, same-restaurant sales growth between 2% and 3.5%; JACK was downgraded from Buy to Hold at Stifel and cut its tgt to $20 from $32 as recognized the biggest risk to its thesis was SRS weakness, which could blunt the positive impact of the company’s strategic financial moves.
• In Food & Beverages: In grocers, KR posted a mixed top and bottom line as Q1 EPS beat but sales $45.11B just missed the $45.18B estimate while raising its annual identical sales forecast growth of 2.25% to 3.25%, compared with its prior target of 2% to 3% growth. MDLZ was upgraded from Equal Weight to Overweight at Wells Fargo and raised tgt to $78 from $68 citing price execution, evolving inflation and says is relatively superior – into 2026, it sees prospects for 2x EPS growth vs peers despite 2-10x P/E discount, w/ a bull case; CPB was downgraded to Hold from Buy at Argus.

• In Cruise lines: UBS looks at the set-up and expectations for the quarter and for FY outlook for CCL while flagging downside risk to NCLH guide. CCL has been guiding to above-average yield growth for ’25 and UBS believes they can achieve that guidance, but it is concerned that NCLH may have downside risk.

• In Building Products: HD made an offer for building-products distributor GMS, kicking off a potential bidding war after QXO on Wednesday said it submitted an unsolicited proposal to buy GMS for about $5B, offering $95.20 per share in cash. The exact price Home Depot has privately discussed paying for GMS couldn’t be determined according to reports – WSJ reports https://tinyurl.com/3pxvzb4j ; BLDR price tgt was cut to $145 from $190 at Wedbush and lowered its revenue and AEBITDA outlook believes weaker OSB  pricing since the end of FQ125 (March) and double-digit percentage declines in South and West starts will weigh.
• In Metals & Mining: Industrial steel, copper and aluminum stocks saw broad weakness on the day with CLF, CENX, FCX, STLD, VALE all weak.
• In the HVAC Industry: Oppenheimer said within their HVAC sector coverage outperforming key benchmarks QTD (+25.8% vs XLI 8.5% and S&P 6.6%), it is revisiting focus topics: (1) strengthening data center demand indicators and overall resilient CHVAC pipeline; (2) easing tariff pressures; (3) light commercial recovery prospects; and (4) resi impacts from refrigerant transition and weather dynamics. The firm downgraded JCI to Perform (from Outperform) following its recent re-rating and tweaking estimates as it awaits further details on the company’s strategic review; increases its VRT FY25-26 orders outlook and raised its PT to $132 (from $116) and said top ideas LII (contrarian play benefiting from easing tariffs, stronger underlying res. demand, BCS gains) and MOD (catch-up play, recent positive catalysts).

• In Crypto/Payments: Stablecoin issuer CRCL added to weekly gains, rising over 75% this week, along with gains in COIN in continued upward buying momentum after the U.S. Senate approved a milestone stablecoin bill dubbed the GENIUS ACT, fueling hopes for broader adoption.
• In REITs: PSA was downgraded to MP from OP at BMO Capital saying while remains positive on PSA’s long-term fundamentals, it downgrades after outperformance; BMO upgraded CUBE to OP from MP, raising its ’25 SS Rev expectation to +0.3% Y/Y (+50bps from prior) and expect management to raise guidance (-1.0% Y/Y) with a solid acceleration of in-place rates. Stifel upgraded EPR to Buy after recently making an extensive visit to its corporate headquarters and met with a few teams within the organization.

• EVH reaffirmed its Q2 adjusted EBITDA view $33M-$40M and also backs its FY25 adjusted EBITDA view $135M-$156M; the co announced that based on leading indicators and paid claims data through May, it continues to experience oncology cost trend below expectations coming into 2025.
• MDGL announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) has adopted a positive opinion recommending approval of resmetirom (Rezdiffra) for the treatment of adults with noncirrhotic MASH with moderate to advanced liver fibrosis.
• PRTA said late Wednesday it reduced its workforce by ~63% to cut costs as the company will have around 60 full-time employees after the restructuring takes place.; Prothena expects net cash burn to be around $170-$178M in 2025, which puts the company on pace to end 2025 with ~$298M in cash.

• In Semiconductors: the sector was strong to start before fading mid-morning after the WSJ reported a U.S. official told top global semiconductor makers, he wanted to revoke waivers they have used to access American technology in China, a move that could inflame trade tensions. Currently, South Korea’s Samsung Electronics and SK Hynix as well as Taiwan Semiconductor Manufacturing enjoy blanket waivers that allow them to ship American chip-making equipment to their factories in China without applying for a separate license each time. Equipment stocks AMAT, LKAC, LRCX underperformed in the SPX.
• In Software: BASE shares rallied after it announced that it has entered into a definitive agreement to be acquired by Haveli Investments, a technology-focused investment firm, in an all-cash transaction valued at approximately $1.5 billion, as stockholders will receive $24.50 per share in cash.
• In IT Services & Consulting: ACN shares slumped after reporting a top and bottom-line beat result but Q3 bookings of $19.7B was down sharply from the $20.9B last quarter, signaling cautious enterprise spending; the company did raise its FY26 EPS and revenue outlooks citing AI-led transformation (shares of CTSH were weak in sympathy).