Mid-Morning Look

Tuesday, May 20, 2025

U.S. stocks are off to a slow start on the day, slightly pulling back after closing at this highs Monday afternoon as the S&P 500 and major averages overall continue to see strong return since the April lows. The S&P 500 extended its winning streak to six days on Monday as traders took cues from the bond market, with 10-year Treasury yields dropping throughout the session (off highs 4.56% for the 10-yr and 5.3% for the 30-yr), but climbed a bit this morning (10-yr bk to 4.49% from 4.43% earlier lows). Momentum has clearly been to the upside as the S&P 500 index (SPX) has gained 18 of the last 22 trading days in a massive move off the April “Liberation Day” tariff lows. Fiscal policy continues to get a lot of attention and House Republicans try to overcome divisions over Medicaid, SALT and IRA credits ahead of a possible Wednesday vote on the Tax bill. Earnings and data are quiet today outside of Home Depot (HD) results which were mixed/to weaker, but shares have bounced. Defensive sectors leading this morning with utilities, Consumer Staples the best while REITs and Energy are down the most. Travel and leisure stocks edge lower in the S&P following VIK and TCOM results. No recent news on trade/tariff deals after President Trump news last week with China and several nations in the Middle East. Oil prices slip while gold prices bounce.

• In Utilities: AES was downgraded to Underperform from Hold at Jefferies following the stock’s rerating up +15% in the past week post recent tax bill proposal. ED and Dominion (D) among utilities benefitting on news the Trump administration has lifted a month-old stop-work order on Empire Wind, a $5B wind farm project off the coast of New York, in a compromise with the state that could also see cancelled plans for a gas pipeline revived, officials said. SO announced a $1.25B convertible bond deal.
• In Aerospace & Defense: ACHR mentioned a new short call at Cupler Research; AL was upgraded to Buy at Citigroup saying after pivoting away from what seem to have been a long-held strategy of growing organically via direct purchases from aero OEMs, Air Lease now seems to be pursuing an AerCap-style capital allocation strategy; ATI was downgraded to Sector Weight from OW at Keybanc saying following Q1 results, discussion with management, and analysis, its estimates are raised for 2025 to reflect stronger aero engine and defense demand, but notes positive near-term catalysts have quickly played out since its April upgrade. Also, President Donald Trump is expected to announce he has selected the path forward for his ambitious Golden Dome missile defense shield later this afternoon.
• In Chemicals: CE was upgraded to Market Perform from Underperform at BMO Capital and raised PT to $55 saying while the co still has a reasonable amount of risk owing to macro/ end-market uncertainty, amplified by CE’s significant debt, both of these risks are a bit more muted. WLK downgraded to EW from Overweight at Wells Fargo, reducing its earnings outlook given industry operating rates for PVC and PE started Q225 lower than expected and cut tgt to $76 from $95.

• AS +19%; on results/guidance as Q1 adj EPS $0.27 topped consensus of est. $0.16 on better revs $1.47B and raises 2025 view to $0.67-$0.72 from prior $0.64-$0.69 (est. (0.69) and boosted its 2025 revenue growth view to 15%-17% from 13%-15% (est. $5.94B).
• HPE +2%; was upgraded to Outperform from In Line at Evercore and raised tgt to $22 from $17 saying the current risk/reward is fairly attractive, especially for investors that have some duration.
• PEGA +5%; will replace JWN in the S&P MidCap 400 effective prior to the opening of trading on Thursday, May 22. The Nordstrom family and El Puerto de Liverpool S.A.B. de C.V. are acquiring Nordstrom in a deal expected to be completed on May 20.
• QBTS +27%; announced the general availability of its Advantage2(TM) quantum computing system, a powerful and energy-efficient annealing quantum computer capable of solving computationally complex problems beyond the reach of classical computers.
• TRNS +12%; after results as Q4 adj EPS $0.64 tops estimate $0.37, adj EBITDA $12.7Mm vs est. $11.00Mm on revs $77.1Mm vs est. $76.39Mm.
• ULTA +2%; price tgt raised to $465 from $435 at Oppenheimer ahead of earnings on (5/29) saying believes management is still well positioned to deliver on FY25 targets.

• TCOM -5%; delivered Q1 rev growth of 16% y/y and better profitability while reaffirming its Q2 and FY25 guidance, targeting mid-teens growth, with international travel continuing to outperform as a core driver.
• TRML -15%; said its experimental antibody treatment demonstrated deep reductions in a measure of inflammation often tied to heart disease. When adjusted for placebo, Tourmaline’s drug cut hs-CRP levels by less than a similar antibody being developed by NVO.
• VIK -5%; Q1 adj EPS (-$0.24) vs. consensus est. loss (-$0.28) on revs of $897.1M rising 25% y/y and said expects to take delivery of one ocean ship & nine river vessels during remainder of 2025; said operating capacity is 12% higher for the 2025 season compared with the 2024 season.
• VIPS -3%; following quarterly results and guidance.