Mid-Morning Look

Tuesday, May 13, 2025

U.S. stocks with smooth sailing to kick off the week, extending their massive move off the “Liberation day” tariff April lows, as the Nasdaq makes it a 5^th straight day of gains with a massive surge in semiconductors again (SOX +2% after jumping 7% Monday) and Mag 7 mega cap tech names on cooler CPI data and improving trade/tariff headlines daily out of Washington. The S&P 500, Nasdaq and Russell 2000 are strong to start while the Dow Jones Industrial Average slides behind a sharp decline in shares of United Health (UNH), falling over -14% after its CEO stepped down and suspended its guidance for the year amid uncertainty. Healthcare (XLV) is the biggest drag in the S&P behind the weakness in drug and managed care stocks. Defensive REITs (XLRE), Consumer Staples (XLV) and Utilities (XLU) are also down notably as investors continue rotation into risker/higher return sectors such as technology (XLK) and Consumer Discretionary (XLY) – which both led yesterday as well. The CBOE Volatility Index (VIX) extends losing streak to 5-days, down another -3% after tumbling -16% on Monday, dropping to lows of 17.65, the lowest since 3-26 which was also the local low at 16.97 following the extend gains in U.S. stocks on improving trade/tariff headlines yesterday with China and cooler-than-expected CPI inflation data this morning. Treasury yields jump, oil rises and the dollar slips.

The new trade/tariff news for today came overnight as the U.S. cuts the “de minimis” tariff rate on small packages valued at up to $800. Will be cut from 120% to either 54% or a $100 flat fee. This comes as the US and China agree to pause most tariffs for 90 days, marking a significant de-escalation in their trade conflict. Then this morning, China finance ministry said the substantial reduction in tariffs between China, U.S. meets expectations of producers, consumers in both countries, is conducive to economic and trade exchanges between two countries. Meanwhile also in DC, House Republicans unveiled a tax plan that raises the state-and-local tax deduction, ends some taxes on tipped income and overtime pay and extends President Trump’s expiring 2017 tax cuts, partially paid for by rolling back tax breaks for electric cars and clean-energy production. Also, President Trump announced Saudi Arabia’s $600B commitment to invest in the U.S., “building economic ties that will endure for generations to come,” the White House stated. “The first deals under the announcement strengthen our energy security, defense industry, technology leadership, and access to global infrastructure and critical minerals,” the White House added in a press release.

Lots of Wall Street firms weighing in on Fed rate cuts/outlook for the year today: 1) Barclays expects Fed to deliver one 25 bps interest rate cut in December this year vs prior forecast of two cuts in July and September after US-China trade agreement and also expects the Fed to deliver three 25 bps cuts in March, June and September in 2026. 2)

JP Morgan weighs in as well, saying risk of U.S. recession is now below 50% and they see Fed rate cut in December vs prior view of September. JPMorgan now sees the unemployment rate peaking around 4.8% by Q2 of 2026. 3) Goldman Sachs said recession odds for the U.S. now cut to 35% from 45% and raised their S&P 500 year-end target from 5,900 to 6,100 (from 5,700 and 6,200 prior respectively), raised 2025 US GDP forecast from +0.5% to +1.0% and now sees three Fed cuts across 2025-2026 versus three in 2025 previously.

• April real earnings all private workers -0.1% vs March +0.6%. April CPI energy +0.7%, gasoline -0.1%, new vehicles 0.0%, food -0.1%, housing +0.5%, owners’ equivalent rent of primary residence +0.4%.

• In Oil Refiners: VLO was upgraded to Buy from Neutral at Goldman Sachs and raised tgt to $154 from $127 as they are incrementally positive on the outlook for refining and oil supply and thinks consumer oil demand outlook is better than many fear. PBF was upgraded to Buy from Neutral at UBS and raised tgt to $26 from $20 citing strong improvement in refining fundamentals for the upgrade saying surplus heavy barrels drive wider heavy light spreads and lower crude prices drive higher demand for refined products. Lastly, Mizuho upgraded DINO and DK to Outperform in broader energy commentary today.
• In Internet Security: CYBR reported a top and bottom line beat for Q1, raised its FY25 EPS outlook while backed its revenue outlook; RPD reported Q1 ARR that missed street expectations by $4M, resulting in a sequential decline in ARR as multiple 7-figure deals pushed out of the quarter and macro uncertainty impacted mid-market customers, leading to a reduced view on the full-year top-line outlook and reiterated op. income guide (guided 2025 ARR to $865M (+3% y/y) at the midpoint vs. consensus $877M (+4% y/y)).
• In Utilities and Alternative Energy: PLUG reported 1Q earnings in line with guidance and expectations, with improving gross margins of -55% and said continues to see growing electrolyzer deliveries and demand in the EU, but the picture in the U.S. could turn murky yet again with the provisions in the new Budget Bill that recommend 45V credits to expire at the end of 2025. OKLO said Tuesday that it had finished drilling to gather information about the proposed location of its first nuclear plant in what the company called a “pivotal step” toward the production of commercial power. AEE announced ~5.6M shares at $94.00 for total deal size of ~$521.7M as part of forward sale; offering priced at 1.5% discount to stock’s last sale. SMR the latest nuclear related name jumping on better earnings (followed better NRG results the day prior).

• FSLR +19%; Wolfe upgraded earlier to Outperform citing better clarity on 45X credits for the first time since election year politics started in early 2024 for the upgrade. While the proposed rules shorten the 45X runway by a year, First Solar stands to earn $10B from 45X, or $92 per share.
• GCT +14%; shares jumped on results/guidance as Q1 adj EPS $0.83 vs est. $0.52, adj EBITDA $33.2Mm vs est. $26.25Mm, on revs $271.9Mm vs est. $259.8Mm, though guidance midpoint below.
• IAS +3%; Q1 results were ahead of expectations on both the top/bottom line, with solid guidance (midpoint of FY25 raised for both rev and EBITDA), though the Q2 EBITDA guide came in a little lighter than the Street.
• LUNR +31%; reported Q1 sales $62.5M missing the $63.4M estimate (and down from $73.2M y/y) but maintained its year outlook and said it expects to produce positive earnings before interest, taxes, depreciation, and amortization, or Ebitda, in 2026.
• ONON +9%; reported Q1 sales rose 43% y/y to 726.6M Swiss francs vs. est. 681.2M and EPS of 0.21 Swiss francs vs. est. $0.22; raised its full-year 2025 net sales growth of at least 28% on a constant currency basis, up from previous expectation of 27%.
• SE +6%; Q1 revenues rose 29.6% y/y to $4.84B vs. est. $4.89B; Sea’s e-commerce segment, which accounts for more than two-thirds of the company’s total business, reported a 28.3% jump in revenue in Q1.

• ENPH -6%; after both Barclays and BMO Capital downgraded the shares citing concerns over potential elimination of Section 25D in the solar energy market; section 25D is a tax credit for homeowners who buy solar energy systems with cash or a loan. Barclays said they believe residential solar market will shift towards third-party owners next year, which could reduce demand for ENPH’s products.
• HTZ -18%; Q1 adj EPS loss (-$1.12), vs. consensus loss (-$0.98); Q1 revenue fell -13% y/y to $1.81B vs. est. $2.01B; says on track to achieve positive adjusted corporate EBITDA by 3Q25.
• RGTI -7%; as the quantum computing firm’s 1Q revenue missed expectations ($1.5M vs. est. $2.55M) and posted Q1 operating income (-$21.6M) s. est. (-$16.4M); shares of IONQ, QUBT, QBTS move in sympathy.
• UNH -14%; announced the appointment of Stephen J. Hemsley as its chief executive officer (CEO), effective immediately, following Andrew Witty’s decision to step down as CEO for personal reasons and suspended its 2025 outlook/said medical costs of many Medicare Advantage beneficiaries remained higher than expected.
• XENE -15%; announced Phase 3 topline results from its most advanced program has been pushed to early 2026 from originally planned 2H25. Additionally, an investigator-sponsored study (IST) of azetukalner in major depressive disorder (MDD) failed to meet the primary endpoint based on fMRI.