Closing Recap

Wednesday, April 09, 2025

At least today’s rally attempt ended better than yesterday’s. Following a second tariff hike from China in response to Trump’s new increase yesterday, the market’s well-warranted tariff tantrum continued as US equity futures faded again overnight. Headlines indicating the EU to adopt tariffs on US goods in metals dispute initially further pressured futures ahead of the open, though appears unrelated to the new Trump tariffs. As we witnessed yesterday and this afternoon, though, any indications of progress on tariff resolution can be met with a swift reversal to the upside. Further, the market continues to waffle between May and June for Fed cuts so there is much for investors to ponder. On a sentiment basis, the Fear and Greed Index stood at 4/100 (Extreme Fear) versus 3/100 (Extreme Fear) yesterday, 18/100 (Extreme Fear) last week and 17/100 (Extreme Fear) last month. That said, the sell-side upgrade/downgrade ratio hit 70% yesterday and 55% today compared to readings below 41% for the first four days of April last week, with the low of 29% on Friday. This remains a tariff headline-driven market for now, but maybe capitulation is near. Early breadth favored decliners by almost 3:2 as small caps were lower with IWM (-0.75%) versus SPY (+0.24%) and QQQ (+0.98%). Sector-wise, Technology, Consumer Discretionary and Consumer Staples were early outperformers among S&P ETFs, while Energy, Health Care and Utilities were all down around 2% early, leading the underperformers with only two sectors gaining versus nine declining.

In data of interest today, @bespokeinvest leads off noting at current levels (prior to the afternoon tariff pause headlines) this is the worst start for the market of any presidential term dating back to 1928 for the S&P. The current -17.3% is followed by -15.3% at this point for Bush in 2001. He also notes the Nasdaq’s 50dma dipped below the 200dma for the first time in more than two years. On the VIX, @charliebilello notes the VIX has risen 143% in the past four trading days, marking the 3rd largest four-day spike ever. Past spikes have tended to see stocks bounce with above-average returns over the next one-to-five years. He also noted only 6% of S&P 500 stocks closed above their 50dma yesterday, a more oversold reading that 98% of historical data.

Heading into the final hour of a rollercoaster session, stocks were roaring following President Trump’s 90-day tariff pause on non-retaliatory countries and lower reciprocal base-rate tariff. Breadth favored advancers by almost 13:2 with IWM (+9%) versus SPY (+10%) and QQQ (+12%). Technology (+14%), Consumer Discretionary (+11%) and Industrials (+9.5%) were outperformers among S&P sector ETFs, while Health Care (+4%), Consumer Staples (+4%) and Utilities (+4%) led the underperformers but still captured nice gains with all 11 sectors in the green. Growth led value higher with both also posting a strong rebound. The Russell 1000 Growth gained 11.1% versus its Value counterpart +6.9%. Traders continued to grapple with Fed cut probabilities with the base case settling back to less than 75bps of easing during 2025.

• US Feb wholesale sales +2.4%; U.S. Feb wholesale sales +2.4% vs Jan -0.9% (prev -1.5%); U.S. Feb stock/sales ratio 1.30 months’ worth vs Jan 1.32 months.

• May WTI crude futures followed stocks lower early with a slide to four-year lows in both Brent and WTI. But, as with stocks, one tariff headline was sufficient to undo today’s early roll plus some as hopes emerged the tariff battle would not escalate to all-out trade war and global recession. With those hopes underpinning the demand story, crude could once again climb and gained $2.77/bbl, or +4.65%, to settle at $62.35. What will happen from here is still anyone’s guess, so investors are likely to remain at least somewhat cautious following this relief rally. Brent similarly rallied +$2.66/bbl, or +4.23%, to $65.48.
• Treasury yields stayed higher despite the stock market rip. In just 3 days, bonds tumbled while the 10-year note yield surged 60 basis points (from low 3.88% to highs 4.52%). Kobeissi Letter notes this marks the LARGEST 3-day increase since 1982 and one of the largest divergences in history. The 10-yr finished around 4.35% up 10 bps while the 2-yr yield jumped about 20-bps to 3.935%.

• In Broadline Retailers: WMT reaffirmed its Q1 sales guidance and widened its range for operating income growth to stay flexible on pricing as tariffs go into effect; said it expects sales growth to continue to be in line with the 3% to 4% guidance it has previously shared for the Q1, which it reports on May 15; the range of outcomes for Q1 operating income growth has widened due to a less favorable category mix, higher casualty claims expense and the desire to maintain flexibility to invest in price as tariffs are implemented, Walmart said.
• In Apparel & Accessories: BBWI was upgraded to Overweight from Neutral at Piper saying the business is fairly well-insulated from the various macro pressures relative to peers, with minimal OUS sourcing, a vertically integrated structure, and accessible price-points. In their teen survey, Piper said NKE was number 1, ADDYY number 2 and CROX three in survey in footwear for all teens.
• In Food & Beverages: CALM reported a top and bottom line Q3 miss as EPS of $10.38 missed est. $10.91 and Q3 revs of $1.4B vs. est. $1.43B; signed a definitive agreement to acquire Echo Lake Foods for approximately $258M and said received a civil investigative demand from the Department of Justice Antitrust Division into the causes behind the increase in egg prices nationwide; SMPL logged higher sales and earnings in Q2 as demand holds strong for high-protein and low-carbohydrate foods and beverages (EPS $0.46/$359.7M vs. est. $0.40/$354.6M) and said higher volumes and the inclusion of Only What You Need boosted gross margin. KDP was upgraded to Overweight at Piper on strong retail sales growth momentum in its USRB segment and an impressive showing in its Spring 2025 teen survey (raise tgt to $40).
• In Restaurants: SBUX was upgraded to Hold from Underperform at Jefferies as stock has quickly retreated -29% since the Feb market high (S&P -19%) and is near their PT of $76, pointing to limited n-t downside. KRUS Q2 results came below expectations due to the decline of comp sales, weather disruptions, and no IP collaboration; margins were pressured by labor costs and despite macro uncertainty and potential tariff headwinds, management reiterated FY25 guidance.

• Oil Services & Equipment: UBS moves Q125 estimates lower for the Big 3 Services, driven by weakness in US Land and Mexico. Additionally, UBS reduces its FY25/26 estimates, driven by an expected weak NAM activity environment post the tariff driven price decline. Lowers PTs for SLB to $44 from $51, BKR to $41 from $47 and HAL to $23 from $32.
• In Refiners: Raymond James lowered prices tgts in the sector, cutting DK to $23 from $24, MPC to $183 from $193, PSX to $140 from $150 and VLO to $155 from $165 saying they expect the Q1 earnings season for refiners will be challenged, and while margin indicators improved from Q4, it was not enough to overcome challenges to margin capture rates
• In Coal, Solar, Utilities: in utilities, CEG was upgraded to Buy at Citigroup saying the stock’s risk-reward profile looks more attractive after the sell-off, with upside in potential Co-location deals (it assumes ~1.0GW uprates & ~1.2GW existing), potential Texas gas builds, Calpine favorable stock issuance, and PTC downward protection from power price movements. In coal, BTU shares jumped after President Trump signed executive orders to expand the mining and use of coal in the US. Also, late Tuesday, Peabody said it is reviewing a deal worth up to $3.78 billion to buy Anglo American Plc’s steel-making coal business after a fire at an Australian mine.

• In the Insurance sector: LNC shares jumped after Bain Capital said it will acquire 9.9% stake for about $825M, the insurer announced, and Bain will also become LNC’s investment manager across asset classes including private credit. LNC will sell about 18.8 million shares at $44 apiece, a 52% upside to stock’s last close. Wells Fargo upgraded TRV to Equal Weight from Underweight (tgt to $247 from $225) saying its analysis of the statutory reserve triangles including prior-year development and current picks by accident year and line make it more positive on Travelers. The firm also downgraded WRB to EW from Overweight noting shares have outperformed of late following Mitsui Sumitomo Insurance taking a stake in the company, which causes the firm to move to the sidelines.
• In Banks: Earnings season around the corner with JPM, MS, BK, WFC all expected to report on Friday before a slew of large and midcap banks next week. In Research, ASB, BPOP and FBP were all upgraded at Wells Fargo to Overweight from Equal Weight while downgraded OFG to Equal Weight.

• XBI (Biotech) extending losses, falling more than 4% yesterday and is now down -13% since the announcement of President Trump’s tariff policy and overall, is down -22% for the year.
• In Medical Equipment: NEOG cuts FY25 revenue forecast to about $895M from prior view $905M-$925M after Q3 revs of $221M missed the $224.9M estimate saying uncertainty primarily related to global trade policies contributed to results being below expectations; also announced CEO John Adent will be stepping down. HBIO was downgraded to Sector Weight at Keybanc as it believes financing risk and outsized academic market exposure are likely to weigh on shares. Notes HBIO is currently operating under a waiver from its lenders, following the violation of a consolidated net leverage ratio covenant.
• In Life Sciences: KeyBanc downgraded TECH to Sector Weight from Overweight saying with federal government funding cuts in NIH/academic research, sees increased risk stemming from TECH’s high exposure to this market

• In Shipping: The WSJ reported the Trump administration is revising its plan to impose steep port fees on Chinese-built vessels to lessen the impact on U.S. exports, according to people familiar with the matter, the WSJ reported. The Trump administration’s new plan is to base the fees largely on vessel capacity, resulting in lower fees for smaller ships coming into ports like Los Angeles, New York, Savannah, Ga., and Oakland, Calif., the people said. The U.S. Trade Representative is also looking to ease the charges on ships carrying agricultural exports like soybeans and timber, the people said. Reuters earlier reported on the USTR’s revised port-fee plan.
• In Chemicals: LYB was downgraded to Sector Perform at RBC Capital saying growing concerns around US PE margin compression from tariff impacts are a risk to earnings in 2025; the firm upgraded EMN to Outperform saying the chemicals company could see headwinds from Tariffs/retaliation and potentially weaker Durables, but likely less than peers as EMN is not a major plastics exporter.

• In Internet: Piper said its “teen survey” results showed TikTok improved its lead as the favorite app materially to ~47% of Teens, while #2 Instagram and 3 Snapchat both moved lower; RBLX active users declined versus Fall ’24 but remain up versus the prior surveys; teen shopping at TikTok Shops is most resilient among China based retailers; teen usage of the gig economy is improving across all verticals, with UBER and DASH most dominant; sees results positive for TikTok, AMZN, UBER, DASH, mixed for GOOGL and negative for SNAP.
• In Software: PTC was downgraded to Neutral from overweight at JP Morgan saying they prefer PCOR (OW) to ADSK (Neutral) and BSY (Neutral); notes sentiment shock caused by the anticipation of a trade war prompts a reassessment of fundamentals across covered Industrial and Construction software sub-segment of Vertical SaaS; downgrades PTC to Neutral relative to the rest of its Vertical SaaS universe.
• In Hardware: AAPL was upgraded to Hold from Underperform at Jefferies and cut PT to $167.88 from $202.33 noting given the stock has fallen ~23% since Trump announced sweeping tariffs on April 2 it stills assume AAPL would be exempted from US tariffs. Jefferies Last week said it expects $500B U.S. investment may help secure exemptions for its products imported from other countries.
• In the PC Sector (DELL, HQ, MSFT): PC shipments grew 9.4% to 62.7M units, the fastest increase since the spring of 2021, driven by companies hastening product deliveries before tariffs hit. The surge was especially pronounced in the US, but researchers warned that end-user demand is largely stable, and the current quarter will take a hit due to tariffs and inventory normalization. Subsequent quarters are likely to see a slowdown.