Closing Recap

Friday, May 23, 2025

U.S. stocks extended their losing streak to 4-days for the S&P 500, though a pullback to the 200-day moving average (DMA) of 5,770 for the SPX was all that Bulls would allow, as markets closed lower for the week. U.S. stock futures were flattish overnight before volatility set in after comments from President Trump his Truth Social media platform. The President around 7:20 am this morning threatened a 25% tariff on Apple (AAPL) saying, “I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else,” Trump said on Truth Social. “If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S.” The headlines took futures lower and pushed Apple down (for an 8^th straight day), dragged tech lower. The President was not done, later saying, U.S.-EU trade talks “are going nowhere” and so he’s “recommending a straight 50% Tariff on the European Union, starting on June 1, 2025.” The U.S. currently imposes a 10% tariff on all European goods, but the 25% sector tariffs on steel, aluminum and especially autos raised the effective tariff on European goods. That headline pushed major averages even lower, but markets have remained resilient the last 5 weeks and investors bought the morning dip, paring losses.

Outside of those comments, M&A deal news/headlines were rampant into the holiday weekend, with shares of US Steel (X) rising on President Trump comments with Nippon Steel and INFA shares jumped on media reports (Bloomberg) about renewed interest by Salesforce (CRM) – more below on both. Retailers were softer after DECK, ROST shares tumble on earnings results. One of the few outlier sectors to the upside in nuclear/uranium power after President Donald Trump announced executive orders to jumpstart the nuclear energy industry. Bitcoin prices slipped off fresh record highs but still posted strong gains on the week. AAPL shares and iPhone suppliers dropped on the tariff headlines earlier this morning. Gold prices surged, the dollar tumbled.

***Reminder that US bond and stock markets are closed on Monday for Memorial Day.

• In currencies, the Japanese yen gains broadly on haven buying after President Trump tariff threats vs. Apple, EU, while the dollar index (DXY) hits new May lows around 99 late in the day before paring losses, reversing yesterday’s gains vs both G10 and EM FX crosses. Behind the recent dollar weakness, the downgrade of the US credit rating by Moody’s last week has been digested but more recent moves are likely tied to economic data and US Treasury yield fluctuations. The Canadian dollar touched a seven-month high at 1.3724 per U.S. dollar.
• Overnight 10-year Treasury yields dropped as much as 15bps from yesterday’s highs to 4.45% this morning but partly reversed, ending the day around 4.5%, which is down about 5bps from yesterday.
• In Energy: WTI crude rose $0.33 or 0.54% to settle at $61.53 per barrel. Iran and the U.S. are aiming to set the parameters for a new deal on Tehran’s nuclear program while leaving important details still to be negotiated, people familiar with the talks said, the WSJ reported. Seeking a political framework on Iran’s nuclear program would in some ways mirror a 2013 interim agreement that preceded the 2015 nuclear deal Iran. The 2013 agreement provided some sanctions relief for Iran and some steps to curb its nuclear program. There is no indication the two sides would attach similar confidence building steps to a framework deal this time.

• In Off Price retail: ROST shares declined as the company reported healthy 1Q25 results, but disclosed that over half of its directly imported goods are originally sourced from China (more than Street expected it appears) and guided Q2 EPS $1.40-$1.55 below consensus $1.64; For 13 weeks ending August 2, 2025, comparable store sales now projected to be flat to up 3% on top of 4% gain in Q2 of last year.
• In Autos: CPRT reported Q3 revenue and net income below Wall Street estimates as weak vehicle sales and higher expenses offset growth in service segment; Q3 revs of $1.21B missed the estimates of $1.23B while Q3 net income of $406.6M was slightly below the estimates of $407.34M.
• In Food Distributors: PFGC was initiated with a Buy and $121 tgt at Citigroup, USFD Initiate with a Buy, $95 PT and initiate SYY with a Neutral and $78 tgt as views the industry backdrop favorably given, 1) Restaurant wallet share as a likely buffer to macro risks, 2) limited tariff-related risk, 3) Manageable commodity inflation and a stabilized labor environment, 4) a highly fragmented industry.

• In Solar/Coal/Utilities: HNRG shares fell after the company said its conversion transaction commitment agreement was being terminated by the counterparty. Hallador said it learned at the close of business on May 19 that the agreement with a leading global datacenter developer was being terminated. SWX upgraded from Underperform to Neutral at Bank America citing a balanced risk/reward profile with initial monetization action taken to reduce the overhang from the pending Centuri (CTRI) separation and its improving view of the regulatory construct in Arizona. Solar names (ENPH, FSLR, SEDG) paring weekly losses after a report saying the crippling clean-energy tax credits won’t fly, according to GOP Senators.
• In Oil Equipment and Services: the weekly Baker Hughes (BKR) rig count showed oil drilling rig count down 8 at 465 (down 32 vs year ago) in week to May 23 and the Nat gas drilling rig count down 2 at 98 in latest week. S weekly oil and gas rig count by basin: Permian -3 rigs vs week ago; eagle Ford -4; Williston -2; Niobrara unchanged; Haynesville unchanged; Utica +2 in week. US drillers cut oil and gas rigs for fourth week in a row.

• In the Mortgage Insurance sector: Compass Point updated models, estimates, price targets, and ratings for the Mortgage Insurance (MI) sector post 1Q25 earnings. They downgraded RDN to Neutral from Buy; (but raise PT to $37 from $34; raised PTs for ESNT to $69 from $62, MTG to $28 from $27 and NMIH to $47 from $36 saying as a general theme, with higher mortgage rates—recently rising to ~7.00%—Compass expects industry NIW will remain muted through FY25 and potentially into FY26.
• KBW Inc. provided a list of potential/likely S&P 500 index additions in the upcoming rebalance. Notes historically, the Q2 and Q3 rebalances have had the greatest number of changes. Financials remain the second-most underweight sector in the 500 relative to the S&P Total Market Index (TMI) and over 40% of all eligible names are financial with HOOD and ARES are the third- and fourth-largest 500-eligible names and have a mid-to-high likelihood of getting added. Also says, XYZ, TW, LPLA, OWL, TOST, FCNCA and MKL are among the other 500- eligible financials. IBKR is the second-largest name in the 400 and has a mid-likelihood of getting added to the 500 while TPG, SOFI and AGNC have a mid-to-high likelihood of getting added to the 400.

• Goldman Sachs noted abstracts for the American Society of Clinical Oncology (ASCO) were released last night ahead of their May 30 to June 3 meeting. A wide range of names in focus – among highlight names: MRUS, BCAX, KURA, ARVN, PFE, JAZZ, SNDX, ALLO, AZN, GMAB, BNTX, JNJ, EXEL, MRSN, RVMD, REPL, RCUS, BCYC, INCY, LEGN, IMTX, NVCR, ABBV, BMY, GILD, MRK, REGN, ALLO

• In Airlines: JP Morgan adjusted names within the Mexican airports sector, downgrading OMAB to Underweight (from Neutral) and upgrading PAC to Neutral (from Underweight) and ASUR remains their relative top pick with an Overweight rating. These rating changes are primarily driven by stocks’ performance, as OMA has outperformed its peers over the past six months by 26 p.p., nearly aligning its valuation with GAP, which historically traded at a premium.
• In Waste sector: WM was upgraded to Overweight at JP Morgan, downgraded GFL to Neutral and stayed Overweight WCN and Neutral RSG saying this defensive growth sector is positioned attractively near term should the US macro growth slow or inflation pick up due to tariffs. Longer term, WM’s valuation gap vs peers should narrow as JPM expects ~HSD% topline and HSD-LDD% EBITDA growth targets in the next five years (at the high end in the earlier years) at the June Analyst Day driven by revenue and cost synergies in Healthcare Solutions/Stericycle and sustainability projects gaining traction; it also recommends owning WCN.
• In Aerospace & Defense: BAH shares tumbled after the gov’t service co reported in-line Q4 EPS results (weak revs), but guided FY revs $12B-$12.5B (vs. ests $12.86B), EPS $6.20-$6.55 vs. est. $6.41, and guided FY26 free cash flow $700M-$800M below estimates above $900M. The U.S. Justice Department said it has struck a deal in principle with BA to allow it to avoid prosecution in a fraud case stemming from two fatal 737 MAX plane crashes that killed 346 people.

• ADSK delivered Q1 revenue, operating margin, EPS, and CFFO/FCF above Street expectations and Billings above Autodesk expectations, as underlying CC billings growth (+22% Y/Y-CC) and revenue growth (+11% Y/Y-CC) improved sequentially.
• INFA shares spiked late in the day after Bloomberg reported CRM is in talks to buy the company. If a deal is reached, it could be announced as soon as next week, though no final decision has been made and talks may still falter, or another buyer could emerge according to the report.
• ORCL will purchase around 400,000 of NVDA’s GB200 chips for $40B, the Financial Times reported this afternoon.
• WDAY shares slipped as reported Q1 revenue slightly above on better operating margins and while headline cRPO growth of 15.6% is solidly ahead of consensus of 15.1%, it notably includes 0.5 points of contribution from ST tenant contracts, which were not previously included in the cRPO definition or guidance (according to Keybanc) and similarly, the FQ2 cRPO growth guide of 15-16% includes a 1-point contribution from tenants.
• XRX shares slumped after the company lowered its quarterly dividend to 2.5 cents per share ahead of the Lexmark deal closing late yesterday.