Closing Recap

Wednesday, March 05, 2025

U.S. stocks got a late morning boost that carried into the afternoon as stocks erased a 2-day losing streak, with major averages bouncing off key technical levels as investors applaud news the White House gives the big three automakers (Ford, GM, STLA) a 1-month tariff exemption, which helped boost market sentiment and optimism.  Materials (XLB) were the biggest S&P sector gainers, led by chemicals and metals on China headlines overnight, while Energy (XLE) was the biggest drag in the S&P as oil prices hit multi-year lows. Technology stocks bounce but remain among the biggest drags in the S&P in 2025 (-4.8% YTD) after the Nasdaq Composite teetered around correction territory on Tuesday, down 10% from a recent high. Not only that, but the Nasdaq also extended a decline below its 200-day moving average (of 18,385) this afternoon before reclaiming, while QQQ’s also dipped below its 200dma of $492.40 before moving back above.

While US markets were active today on more data and tariff headlines, the big moves came in Europe and Asia following a massive shift in German fiscal policy and China announcing new measures. In Europe, the German DAX is surging 725 points or 3.24% to 23,051 back to record highs as the parties hoping to form Germany’s next government on Tuesday agreed to create a 500-billion-euro infrastructure fund and overhaul borrowing rules (sending bunds lower and boosting yields in biggest one day move in over 30-years). In China, the country State Planner said they still have room for implementing stronger macro policies; and sets 2025 GDP target at about 5% and 2025 CPI target at 2% though notes achieving GDP target of around 5% will be no easy task; China will facilitate breakthroughs in areas like VR, advanced computing and RISC–V; said will lower banks’ RRR and interest rates at right timing.

Regarding tariffs with Canada/Mexico: Donald Trump tweeted on Truth Social this afternoon noting: “Justin Trudeau, of Canada, called me to ask what could be done about Tariffs. I told him that many people have died from Fentanyl that came through the Borders of Canada and Mexico, and nothing has convinced me that it has stopped. He said that it’s gotten better, but I said, “That’s not good enough.” The call ended in a “somewhat” friendly manner! He was unable to tell me when the Canadian Election is taking place, which made me curious, like, what’s going on here? I then realized he is trying to use this issue to stay in power. Good luck Justin!”

Some highlights from last night’s President Trump speech to Congress: stated that tariffs will create disturbance and will require a period of adjustment; said he was looking to repeal the $52B Chips Act; he reiterated 25% tariffs for aluminium, copper, steel; also confirmed reciprocal tariffs for other countries starting on April 2nd; announced he was creating a new office for ship building in the White House with new tax incentives; spoke with top three automakers on Tuesday; wants to make interest payments on car loans tax deductible if made in US.

Lastly the Fed Beige Book was released showing contacts in most districts expected potential tariffs on inputs would lead them to raise prices, with isolated reports of firms raising prices preemptively. It showed prices increased moderately in most districts, but several districts reported an uptick in the pace of increase relative to the previous reporting period. Overall economic activity climbed slightly since mid-January and overall expectations for economic activity over the coming months were slightly optimistic. Eight Fed districts reported flat or slightly negative growth.

• Private payroll data disappoints as the U.S ADP nonfarm employment change for February reported at +77k, below the prior month reading o +183k previous and economist estimates of +140k.
• January Factory Orders rose +1.7% vs. consensus +1.6% and vs Dec -0.6%, while Jan Factory Orders ex-transportation +0.2% vs Dec +0.3%, Jan factory orders ex-defense +1.8% vs Dec -0.6%, Jan non-defense cap orders ex-aircraft unrevised at +0.8%; Jan shipments unrevised at -0.3%.
• US S&P Global Feb. Composite PMI at 51.6 vs 52.7 prior.
• US Mortgage Bankers Assoc reported US mortgage market applications index rose +20.4% in the latest week; purchase index climbs 9.1%, refinance index soars to 784.2 as the average 30-year mortgage rate falls 15 bps to 6.73% in Feb 28 week, lowest since Dec 2024.

• April gold edged higher $5.40 or +0.18%, to settle at $2,926 an ounce, getting a nice bump from a weaker US dollar and lower Treasury yields the last few weeks. Comex copper settles 5.28% higher at $4.7665, the largest one-day dollar and percentage gain since November 2022.

• In Footwear: ADDYY guided 2025 operating profit to between 1.7B euros and 1.8B euros ($1.8B and $1.9B), lower than the 2.1B euros estimate and anticipated sales growth will slow slightly from a strong 2024, and flagged increased volatility due in part to U.S. tariffs (weighed on shares of NKE); FL Q4 adj EPS of $0.86 topped the $0.72 estimate but sales of $2.24B missed the $2.32B estimate as sales fell -4.6% y/y while comp sales rose +2.6% and guided FY26 EPS $1.35-$1.65 vs. est. $1.72.
• In Food: CPB lowered its annual sales and profit forecasts as it now expects fiscal 2025 net sales to rise between 6% and 8%, compared with its previous forecast range of 9% to 11% growth; lowered its adjusted EPS forecast to between $2.95 and $3.05, from prior expectations of $3.12 to $3.22. ACI will replace AZPN in the S&P MidCap 400 effectively prior to the opening of trading on Tuesday, March 11. BF shares advanced on mixed Q3 results as EPS beat consensus while sales missed and guided FY25 organic net sales up 2%-4%.

• Leisure Products: RV and towable stocks were active after THO cuts FY25 EPS view to $3.30-$4.00 from $4.00-$5.00 (est. $4.48), while FY25 revenue view was narrowed to $9B-$9.5B from $9.0B-$9.8B (vs. est. $9.43B) and cuts FY25 consolidated gross profit margin view to 13.8%-14.5% from 14.7%-15.2%.
• In Lodging: Hyatt (H) was upgraded to Outperform at Evercore/ISI citing greater comfort with Playa deal and notes the post earnings selloff creates attractive entry point on shares.

• Oil refiners MPC, VLO, PSX among others underperformed the generally weak energy complex with XLE sliding over 2% again this morning as both Brent and WTI fell under $70 per barrel as investors worried about OPEC+ plans to proceed with output increases in April, and U.S. President Donald Trump’s tariffs on trade partners.

• In Insurance: HSBC upgraded shares if AIG to Buy from Hold ($93 tgt) and CB to Buy from Hold ($323 price target); UNM was upgraded to Strong Buy at Raymond James after the management meeting with CEO Rick McKenney and CFO Steve Zabel as they like UNM’s attractive insurance businesses and expect the company to re-rate on continued de-risking of the long-term care (LTC) insurance block.
• Financial Services: INTU upgraded to Overweight from Neutral at JP Morgan and raised tgt to $660 from $640 saying 3.5-year period of underperformance creates entry point (notes shares have underperformed vs the S&P 500 by ~3,700 bps (-14% vs +23%) in that time period)

• CMRX agreed to be acquired by JAZZ for $8.55 per share in a deal valued at about $935M to further diversify their oncology portfolio.
• MRNA shares rose after CEO Stephane Bancel bought ~160,000 MRNA shares at roughly $31 per share valued at over $5Mm, SEC filing showed late Tuesday and Paul Sagan, Director, bought 31,620 shares for $1,004,251 at $31.76/share on Mar 03 ’25.
• NVO said as part of its ongoing efforts to ensure patients who need Wegovy, or semaglutide, injection 0.25 mg, 0.5 mg, 1 mg, 1.7 mg, and 2.4 mg can access it, Novo Nordisk launched NovoCare Pharmacy, a direct-to-patient delivery option that offers cash-paying patients all dose strengths of Wegovy at a reduced cost of $499 per month.

• In Transports/Airlines/Trucking/Freight: XPO posted its mid-1Q25 Less-than-Truckload (LTL) update, with February Tons/Day down 8.1% y-y, slightly improving from -8.5% in January. XPO’s Jan-Feb tonnage combo average was -8.3%. ODFL reported -7.1% YoY decline in tons/day in February, at the low end of our -6%-7% expectation. Tons/day increased 1.9% MoM in Feb, outperforming normal seasonality by ~40 bps after underperforming in Jan, implying a limited impact of weather in Jan vs. Feb. Shipments/day declined 5.9% YoY in February. Airlines DAL, UAL, AAL, JBLU advanced following the sharp decline in oil prices.
• In Industrials: CARR was upgraded to Overweight from Neutral at JP Morgan saying there is a high degree of uncertainty in HVAC and JPMC does not view the guidance as conservative, but it should be doable, which means the revision cycle is over, and after the tariff related pullback, valuation here is now at its record relative lows.

• HII shares rallied after President Trump comments last night in his unofficial State of the Union speech to create office of shipbuilding, offer tax incentives.
• PLTR shares advanced after William Blair upgraded to Market Perform after the 33% DOGE driven selloff from $125 to $84 over the past three weeks; said while valuation is still frothy with potential downside risk of greater than 40% on government contract delays, there have been positive developments.
• Citigroup comments on the defense sector saying it’s time to buy shares (CW, GD, HII, LDOS, LHX, LMT, NOC, RTX, SAIC, TXT) saying over the past two years, Citi has assessed the growth in FCF being priced into Defense stocks – concluding that 1% to 3% looked cheap to them relative to the projected mid-single digit growth of US and ally weapons budgets. However, since November 2024, defense stocks have de-rated significantly given uncertainty about the potential impacts of DOGE and intentions of the new Administration, and they are now pricing in -1% to +1% growth. Citi thinks defense spending in Europe is likely headed significantly higher and points out the U.S. Congress recently passed budget resolutions that add upward of $300B in spending over the next ten years.
• Wells Fargo commented on government defense services as maintain Overweight ratings on BAH, CACI, LDOS, SAIC saying savings data provided by the Department of Government Efficiency (DOGE) shows a fairly immaterial impact to Well’s companies so far, and recent commentary also suggests a relatively limited impact.

• In Chemicals: Sector higher in general (CE, LYB, DOW, FMC) after China unveiled its growth targets overnight and signaled plans to ramp up spending. MOS was upgraded to Equal Weight at Barclays noting since their downgrade to Underweight in January on relative unattractive valuation levels at that point in time, shares have since corrected by ~15% (vs. NTR -5% and the S&P500 Index by -5%) and sees a relatively attractive entry point. Seaport Global downgraded a handful of chemical names, lowering ASH, FUL and PPG to Neutral from Buy reflecting several concerns including that tariff policies could drag on Industrial Coatings demand in particular, and that competitive dynamics in Specialty Additives remain very challenging in the Chinese coatings market.

• In Internet: GOOGL said YouTube launches $7.99 per month “premium lite” subscription tier in U.S.; new paid tier $6 less than premium tier, removes ads except for music. US listed China names BABA, BIDU, PDD, JD rising China unlocked more fiscal stimulus on Wednesday, promising greater efforts to support consumption and said they are determined to grow by another 5%-or-so this year
• In Communications & Networking: ANET was upgraded to Buy at UBS with $115 PT supported by its view that investments in data center CAPEX will remain strong growing at ~a 25% CAGR through 2027.
• In Gaming Software: APP is nearing a $900M deal to sell its games unit to mobile games developer Tripledot Studios, Business Insider reported. https://tinyurl.com/y45bdred
• In Security Software: CRWD shares slipped after reported a solid FQ4 beat on top- and bottom-line metrics but shares slipped following mixed FY26 guidance as revenue was guided above, but margins were guided below due to investments in platform resiliency, AI efficiencies; ARR grew 23% YoY to $224M of net new ARR, leaving existing or renewed ARR flat versus 3Q at roughly $4B.