Mid-Morning Look

Friday, March 28, 2025

Stocks open in negative territory and have declined in a straight line down without a bounce in first 60 minutes of trading following a convergence of disappointing market factors weighing on sentiment to close out the week. First, inflation edges higher again as the February core PCE inflation report (Fed’s preferred measure of inflation), came in a tad “hotter” than estimates and prior month readings. Also, the University of Michigan sentiment reading edged higher as well for both 1-yr and 5-yr expectations (pushing out hopes of Fed rate cuts). Second, trade war fears in place as tariff concerns remain prevalent ahead of the April 2^nd U.S. reciprocal tariffs to foreign countries (follows a 25% levy on autos announced this week that crushed global auto names). Note nearly half of all vehicles sold in the U.S. are imported, a figure that equates to about seven million cars. The EU said it plans concessions for Trump after reciprocal tariffs hit. Third, tech stocks, particularly AI, data centers, and semiconductors remained weak after Cloud-computing provider CoreWeave (CRWV) raised $1.5 billion Thursday, in an IPO that met weaker-than-expected demand. The company initially hoped to raise at least $2.3 billion at a price of $47 to $55 a share but instead scaled back its ambitions, pricing the 37.5M share deal at $40. Meanwhile, gold prices surged to a new record high above $3,100 an ounce as investors flocked to the safe-haven asset amid fears of global trade and Treasury prices jump as yields tumble. Bitcoin prices also went down sharply amid a decline in stock prices. Nasdaq was down 300 points off morning highs and S&P (SPX) down over -1.4% approaching 5,600 to the downside.

• Little hotter readings in core PCE as Feb core PCE price index rises +0.4% above consensus +0.3% and vs January +0.3% while the core PCE y/y rose +2.8% above consensus +2.7% and vs Jan +2.7%; Feb PCE services price index ex-energy/housing +0.4% vs Jan +0.2%.
• February Personal income climbs 0.8% m/m, topping the +0.4% estimate while Personal Spending climbs 0.4% m/m vs. est. +0.5%; Feb real consumer spending +0.1% vs January -0.6% (previous -0.5%); February personal saving rate 4.6% vs January 4.3%.
• University of Michigan surveys of consumers sentiment final March 57.0 (consensus 57.9) vs preliminary March 57.9 and final Feb 64.7; current conditions index final March 63.8 vs prelim March 63.5 and final Feb 65.7; and consumers expectations final March 52.6 vs prelim March 54.2 and final Feb 64.0.
• University of Michigan surveys of consumers 1-year inflation outlook final March 5.0% vs prelim 4.9% and final Feb 4.3% and 5-year inflation outlook final March 4.1% vs prelim 3.9% and final Feb 3.5%.

• In the Semiconductor-equipment sector: Jefferies upgraded AMAT to Buy (PT to $195 from $185) while downgrading KLAC to Hold (PT to $725 from $875) while raised PT for LRCX to $100 from $95, while lower CAMT PT to $85 from $120 and ONTO to $175 from $245. The firm is refreshing its WFE outlook ahead of Q125 EPS season to account for the rapidly changing landscape at the leading edge as well as China. Jefferies raises its WFE estimate for 2025 to $105B (from $103B) as better DRAM and TSMC CAPEX help offset a weakening China outlook and leading-edge CAPEX cuts from Intel and Samsung. DRAM continues to be strong, driven by HBM and DRAM for HPC. NAND is starting to see a recovery driven by the upgrade market for 200 layers.
• In REITs: CPT was upgraded to Buy and FRT downgraded to Neutral at Citigroup saying given the favorable supply backdrop, dynamic macroeconomic background, and disparate valuations, the firm sees unique opportunities across its coverage. The firm said its team determined the “winners” that would move on to each round with the Fabulous Four comprised of AMH, PLD, SBAC, and WELL. Separately, SKT upgraded to Buy at Goldman Sachs driven by SS NOI growth staying higher for longer and successful acquisitions, and downgrade KRC to Neutral as believes a recovery in office markets, particularly San Francisco, is not likely in near-term.

• CVAC +6%; after saying the European Patent Office had upheld the mRNA patent at the center of its legal battle with BNTX.
• RKLB +2%; after the U.S. Space Force’s Space Systems Command awarded contracts to Rocket Lab USA and Stoke Space as each receive a $5M order to conduct initial capability assessment.
• WRB +8%; after Japan’s Mitsui Sumitomo Insurance unveiled plans to take a 15% stake in the insurance holding company; said Mitsui Sumitomo will build the stake through open-market purchases or private transactions.
• X +3%; after Semafor reported that the company is in active talks with Nippon Steel about a deal that would preserve their proposed merger citing unidentified people familiar with the matter.

• LULU -15%; shares tumbled after Q4 results topped expectations, but FQ125 and FY25 guidance were set below expectations, prompted by lower U.S. traffic in Q1 due to an uncertain consumer
• MIST -61%; after the FDA declined to approve its nasal spray to treat a heart condition and had called for an inspection of the facility that performs the testing of the drug.
• ORCL -2%; along with weakness in LDOS after report that the U.S. Department Of Defense to terminate plan to use co’s software to manage civilian workforce. https://tinyurl.com/bdzcjtxs
• OXM -4%; downgraded to Sector Weight from Overweight at Keybanc after earnings saying although Q4 revenue and adj. EPS were better than the Street’s expectations, the FY25 guide assumes sales growth within Lilly and Emerging Brands, and declines for both Johnny and Tommy alongside pressure from tariffs.
• PYPL -2%; shares slipped after a senior European lawmaker said the European Union could charge fees on the company as part of a tariff dispute with the United States.
• VOYA -2%; downgraded to Underperform at Bank America and cut tgt to $71 from $79.
• WOLF -47%; announced CEO change yesterday morning.