Mid-Morning Look

Friday, April 11, 2025

U.S. stocks whipsaw overnight and early this morning as all eyes on Washington DC and China as the tit-for-tat tariff headlines occurred again last night after China increased its tariffs on U.S. imports to 125% (from 84%) on Friday, raising the stakes between the world’s two largest economies. The move came after the White House said on Thursday that US tariffs on Chinese imports are now at least 145%, not the 125% that Trump had said previously. China did note they would not raise tariffs further while U.S. chipmakers outsourcing manufacturing will escape China’s tariffs; U.S. chipmakers which outsource manufacturing will be exempt from China’s retaliatory tariffs on U.S. imports, according to a notice by the main Chinese semiconductor association. The other item on the mind of investors is the sudden surge in Treasury yields and the recent plunge in the US dollar, with massive moves this week. The 10-year yield hit highs of 4.58% this morning in aggressive selling of US Treasuries all week while the dollar index (DXY) drops over -1% below 100 as the euro hits highest levels in 3-years. Low inflation readings failing to boost investor sentiment as PPI for March was well below expectations following a “cooler” CPI on Thursday. Big bank earnings mixed with JPM moving higher on results, while BK, MS, WFC slide on results. The Fed continues to say that given the potential inflationary nature of tariffs, that a “wait and see” approach more appropriate at this time (comments from Musalem, Collins, Goolsbee among most recent). Traders lighten bets on Fed rate cuts, forecast three policy rate reductions in 2025, starting in June.

• University of Michigan surveys of consumers sentiment prelim April fell to 50.8 from 57.0 in March and below consensus 54.5; the current conditions index prelim April 56.5 (consensus 61.5) vs final March 63.8; the expectations index prelim April 47.2 (consensus 50.8) vs final March 52.6
• University of Michigan surveys of consumers 1-year inflation outlook prelim April surged to 6.7% (highest since 1981) vs final March 5.0% while the University of Michigan surveys of consumers 5-year inflation outlook prelim April 4.4% vs final March 4.1%.

• Contract Research organizations (CRL, ICLR, NOTV) shares tumbled late Thursday after the FDA announced it would be reducing its animal testing requirements for the development of monoclonal antibodies and other drugs. The FDA’s animal testing requirement will be reduced, refined, or potentially replaced using a range of approaches, including AI-based computational models of toxicity and cell lines and organoid toxicity testing in a laboratory setting (boosting shares of ABSI, CERT, NUVB, RXRX, SDGR, SLP).
• In Defense: Goldman Sachs double upgraded HII and LHX to Buy from Sell; upgraded NOC to Neutral from Sell and downgraded BAH and PL to Neutral from Buy as the firm assumes a less cautious view on Defense as the medium-term defense budget picture looks better notably that the administration is planning for a FY2026 DoD budget near $1.0 trillion which should drive a higher-than-expected growth rate. For LHX, it believes it could be well positioned in a higher defense spending environment, given its exposure to faster growing parts of the budget. U.S. Defense Secretary Pete Hegseth has ordered the termination of IT services contracts, totally valued at $5.1 billion, with companies such as ACN and Deloitte, a memo showed. “These terminations represent $5.1 billion in wasteful spending … and nearly $4 billion in estimated savings,” Hegseth added.

• HII +4%; Goldman Sachs double upgraded HII and LHX to Buy from Sell saying a 4/9/25 executive order appears to lay the groundwork for the administration’s attempt to substantially increase investment in and improve the U.S. shipbuilding base
• JPM +2%; after results as Q1 profit rose 9%, helped by higher fees from dealmaking and a record performance in equities trading as EPS of $5.07 topped the $4.64 estimate and revs of $46B was above the $44.39B est.
• MSTR +3%; as Bitcoin prices jump over 3% to above $82,000.
• NEM +6%; as gold miners extend weekly and YTD gains as the price of gold surges to new record highs in flight to safe havens for investors; AUY, GOLD, AEM, other miners strong all week.
• RXRX +21%; along with several other companies working on biotech AI models (ABSI, CERT, SLP, SDGR, NUVB) gain after the FDA said it plans to phase out animal testing requirements for monoclonal antibodies and other drugs; JP Morgan noted CRL likely sees a negative impact to the news of reducing its animal testing requirements for the development of monoclonal antibodies and other drugs.
• THS +5%; shares jumped early after guides Q1 adjusted revenue at least $792M vs. consensus $789.66M and said is streamlining organizational and cost structures; actions span organizational changes as well as additional margin mgmt and cost control initiatives.

• KKR -4%; as shares of asset managers (APO, IVZ, BEN, BX) slip after China increases tariffs on US imports.
• ODFL -5%; amid weakness in truckers/logistics names JBHT on recession fears.
• STLA -2%; said global shipments fell 9% y/y in Q1 to an estimated 1.2M vehicles, it said on Friday, after a 12% drop in 2024; said the drop primarily reflected lower North American production; in the first three months of 2025, Stellantis’ shipments were down 20% in North America and 8% in its enlarged Europe area.
• TXN -7%; along with weakness in ADI, INTC, MCHP, ON among semis that operate their own US based fabs pressured and seen as subject to the higher tariff rate of 84% imposed by China overnight.
• WFC -4%; Q1 EPS beat but reported Q1 revs fell -3.4% y/y to $20.15B, missing the $20.72B est. due to weakness in consumer and commercial banking; Q1 consumer banking revenue slipped -2%, as auto and personal lending dropped, and commercial banking declined -7.2%