Closing Recap

Wednesday, April 16, 2025

Stocks spike the final minutes of the day to pare losses, but damage was done prior! U.S. stocks crumbled again on Wall Street with the Nasdaq falling as much as -4% led by weakness in technology and the S&P falling more than -3% late day while gold prices jumped over 3% to new all-time highs amid global economic uncertainty on tariffs/trade war concerns and their impact on supply chains and prices. Tech stocks led a slump after the Trump administration imposed new restrictions on NVDA and AMD chip exports to China amid deepening trade tensions. That was coupled by weaker orders from equipment maker ASML as the SOX index fell as much as -7% (before paring losses to -4%). Stocks remained weak heading into Fed Chairman Powell speech at the Economic Club in Chicago this afternoon, and the Fed Chair provided zero help to fading markets, talking about uncertainty and suggested hopes the central bank will step in to tamp down on market volatility are likely misplaced. Powell said, despite the tumult, “markets are functioning conditional on being in such a challenging situation, markets are doing what they’re supposed to do, they’re orderly and they’re functioning just about as you would expect them to function” given the uncertainty. So, the Fed has come to the rescue of market “temper tantrums” in the past, but this time appears to be “different”, taking an apparent “wait and see” approach. Gold surged, Treasury yields eased, Bitcoin prices jumped, and oil was higher. The VIX spiked as well as fear in the market grows.

Chip stocks tumbled hard on Wednesday after President Donald Trump’s administration has barred NVDA from selling its H20 chip in China, an escalation of Washington’s tech battle with Beijing, which will cost the company $5.5B in write-downs and AMD said it will cost them $800M in charges. The US government informed Nvidia on Monday that the H20 would require a license to export its H20 AI chips to China and other markets; the restriction also impacts AMD‘s MI308 artificial intelligence chips to China. Also, semi-equipment names fell after ASML Q1 net bookings missed estimates at 3.9B euros while saying said that tariffs were increasing uncertainty around their outlook for 2025 and 2026 (but maintained its annual guidance).

Stocks added to afternoon declines following comments from Fed Chairman Powell at a speech at the Economic Club in Chicago saying U.S. economic growth appears to be slowing, with consumer spending growing modestly, a rush of imports to avoid tariffs likely to weigh on estimates of gross domestic product, and sentiment souring. “Despite heightened uncertainty and downside risks, the U.S. economy is still in a solid position,” Powell said. But “the data in hand so far suggest that growth has slowed in the first quarter from last year’s solid pace.” “As we learn more, we will continue to update our assessment,” particularly about whether any price increases sparked by the tariffs appear to spark only a temporary or a more persistent rise in inflation. For now, he said, the Fed could keep its benchmark interest rate steady “to wait for greater clarity before considering any adjustments to our policy stance,” Powell said.

The World Trade Organization sharply cut its forecast for global merchandise trade from solid growth to a decline on Wednesday, saying further U.S. tariffs and spillover effects could lead to the heaviest slump since the height of the COVID pandemic. The WTO said it expected trade in goods to fall by -0.2% this year, down from its expectation in October of 3.0% expansion. It said its new estimate was based on measures in place at the start of this week. The WTO said that, if Trump reintroduced the full rates of his broader tariffs that would reduce goods trade growth by 0.6% points, with another 0.8% cut due to spillover effects beyond U.S.-linked trade.

One more trading day to the week tomorrow with US markets closed on Friday in observance of Good Friday holiday before the massive earnings barrage begins for Q1! CNBC notes Fed % probability of rate cuts as per futures mkts: June 1st cut 70%, 2nd cut July 58%, 3rd cut October 70% and 4th potential cut in December seen at 55% odds – this even after Fed Powell not giving any indications Fed intervention likely given the tariffs uncertainty!

• March industrial output declined -0.3% vs. consensus drop of -0.2%; the March capacity utilization rate was reported at 77.8% vs. consensus 78.0% and March manufacturing output +0.3% (in-line w/ consensus +0.3%).
• Feb Business Inventories rose +0.2%, in-line with consensus and vs January +0.3%; Feb inventory/sales ratio 1.35 months’ worth vs Jan 1.36 months; Feb business sales +1.2% vs Jan -0.6%.
• April NAHB Housing market index jumps to 40 vs. consensus 37 and above the 39 reading in March; April index of current single-family home sales 45 versus 43 in March (previous 43); April index of home sales over next six months 43 versus 47 in March (previous 47).
• The Atlanta GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.2% on April 16, up from -2.4% on April 9. The alternative model forecast, which adjusts for imports and exports of gold as described here, is -0.1%. After recent releases from the US Census Bureau, the US Bureau of Labor Statistics, and the Federal Reserve Board of Governors, nowcasts for first-quarter real personal consumption expenditures growth increased from 0.7% to 1.4%.
• China’s first-quarter GDP tops estimates at 5.4% as growth momentum continues amid tariff worries. The first-quarter GDP topped Reuters poll expectations for a 5.1% growth year on year, building on a recovery that began in late 2024, thanks to a broad policy stimulus push.
• China Retail sales in March rose by 5.9% year on year, sharply beating analysts’ estimates for a 4.2% growth. Industrial output expanded by 7.7% from a year earlier, versus median estimates of 5.8%.per CNBC.

• U.S. WTI crude oil futures settle at $62.47/bbl, up $1.14, or 1.86% while Brent crude rose $1.18 or 1.82% to settle at $65.85 per barrel as the market took a bullish view on China’s stance on potential trade talks with the United States, though gains were capped by continuing fears that the trade war will curb energy demand.

• In Retailers: TGT was downgraded from Buy to Neutral at Goldman Sachs and cut tgt to $101 from $142 saying given the macro backdrop getting more volatile, it is concerned about seeing a recovery in growth for discretionary categories, which was a key tenant to its original Buy thesis. Also says possible top line deleverage, along with the risk of tariffs point to more downside risk in EPS than upside. Watch maker MOV advanced after Q4 sales of $181.5M topped prior year comp $175.8M as margins rose to 54.2% from 53.5% y/y and said it will raise some prices at wholesale and retail levels to mitigate impact of tariffs.
• For Restaurant Sector (MCD, CMG, SHAK, DPZ, JACK, YUM): Deutsche Bank said they are trimming numbers across most of their coverage following a slow start to the year and modestly more conservative outlook for the remainder of 2025. When companies guided in late January/early February, the firm believes they generally embedded an improvement through the rest of the quarter, though February actually weakened, and while March improved from lows, Q1 traffic trends are still down vs Q4 (traffic: January -1.3%, February -5.7% & March -2.3% vs Q4 -1.6%).

• In Airlines: UAL reported Q1 adj EPS $0.91 above consensus est. $0.74 and revs rose 5.4% y/y to $13.21B vs. est. $13.19B as Q1 passenger revenue rose 4.8% y/y to $11.86B; still forecasts FY adj EPS $11.50-$13.50 if bookings stable while saying under ‘recessionary’ scenario, sees year EPS $7.00-$9.00; guides lower capex below $6.5B vs. prior $7B; put up over $2B in free cash flow.
• In Truckers: JBHT shares slide as Q1 profit falls 7.6% on higher costs, contract service weakness, though EPS and revs did top consensus (Q1 EPS $1.17 vs. est. $1.14; Q1 revs fell -1% y/y to $2.92B vs. est. $2.9B); results were slightly better than expected on stronger than anticipated results in the intermodal segment.
• In Rails: UNP was upgraded from Neutral to Buy at Redburn with $259 tgt noting Union Pacific has made material progress over the past 18 months, improving service, trimming headcount and growing volumes. A rare feat when achieved in conjunction. Redburn believes UNP’s idiosyncratic qualities will limit further tariff-derived downside while supporting its typical ‘V- shape’ recovery.
• In Ride Hailing: LYFT entered into a definitive agreement to acquire FREENOW, a leading European multi-mobility app with a taxi offering at its core, from BMW Group and Mercedes-Benz Mobility for approximately €175M or $197M in cash. FREENOW will continue operating as it does today, with its leadership team and employees in place to drive growth across 9 countries and over 150 cities in Europe.

• In Insurance: Dow component TRV reported adj EPS $1.91, handily topping the $0.79 consensus as revs rose 5% y/y to $11.8B above the $10.84B estimate as net written premiums rose 3% to $10.515B; noted Catastrophe losses came to $2.266 billion pre-tax, which weighed on adj income. PGR reported Q1 net premiums earned $6.79B and net premiums written $9.04B.
• In Mortgage REITs: JP Morgan lowered tgts for AGNC, BXMT, KREF, NLY, RWT, TWO saying lower short-term rates provide incremental credit relief for borrowers in the form of lower financing costs, but may signal an elevated risk of recession, which could pressure occupancy and rent growth rates and make final resolution of troubled assets more difficult. The firm says elevated macro uncertainty and a more two-sided risk/reward outlook tempers its conviction on the MREITs.

• The U.S. Centers for Disease Control (CDC) and Prevention’s vaccine experts are expected to vote on expanding access to respiratory syncytial virus shots in the second round of their meeting on Wednesday. Guidelines from the Advisory Committee on Immunization Practices help physicians decide what vaccines to recommend to patients and are also used for determining insurance coverage in the U.S. The country’s health regulator has approved three vaccines for RSV by PFE, GSK, and MRNA.
• ABT Q1 adj EPS $1.09 above est. $1.07 and sales $10.36B vs. est. $10.4B); the co reaffirms FY guidance as still sees FY adj EPS $5.05-$5.25 vs. est. $5.15 and Q2 adj EPS $1.23-$1.27 vs. est. $1.25.
• In Medical Devices: BSX was upgraded to Buy from Hold at Needham with a $113 price target saying the firms latest electrophysiologist survey shows the threat of pulsed field ablation competition appears less severe than previously anticipated, while they also see potential for nearer-term upside for Watchman sales from concomitant use and longer-term upside from Boston Scientific’s CHAMPION trial.
• In Life Sciences/Tools: Sartorius’ (SOAGY) shares rise in Life Science tools space after posted Q1 results above market expectations; underlying EBITDA came in at 263M euros ($298.98M), above analysts’ estimates of 234.4M euros; said sees full year sales revs to rise by about 6%; said order intake: book to bill ratio well above 1 (note shares of $TMO $DHR $WAT $RGEN $AVTR have moved in the past in reaction to results)

• In Defense sector: Morgan Stanley upgraded LMT to Overweight from Equal Weight and downgraded GD to Equal Weight (from OW) and named NOC as their top pick in defense. The firm upgraded Defense to Attractive from In-Line as contemplate a $1 trillion US Defense Budget and potential for increased international exports. The firm said they prefer Defense primes to Government Services companies and initiate coverage of Amentum (AMTM) and V2X (VVX) with a relative Underweight rating. The firm said they see accelerated Defense imports as a ripe oppty for countries to potentially ease their relative trade imbalances with the US.
• In Utilities: WTS and ZWS both upgraded to Buy in the Water Technology sector at Stifel saying they are generally much more defensive, and it expects to see some, but limited, impact to demand. Stifel also expects its Water Technologies companies to have pricing power to pass through what are likely to be modest, in most cases, increased costs to customers. Siemens Energy raised its outlook for the current fiscal year, citing a strong performance in all of its business areas which provide equipment and services to the global power industry. The group said it now expects a profit margin before special items of 4-6% in 2025, up from 3-5% previously, while sales are expected to rise by 13-15%, up from 8-10%.

• In Steel Sector: JPMorgan downgraded U.S. Steel (X) to Neutral from Overweight (tgt cut to $38 from $43) saying while steel has been excluded from reciprocal tariffs, revamped Section 232 tariffs should lend to a higher pricing floor and improved utilization, at least over time, The firm also lowered its price tgts on STLD to $135 from $140 and NUE to $140 from $156 and keeps an Overweight rating on the shares.
• In Materials/Rare Earth: TMC, MP shares rebound after President Trump signed an executive order for a Commerce Department investigation into critical mineral supply chains and methods to boost US production while cutting reliance on imports. The review will assess U.S. vulnerabilities for processing of all critical minerals – including cobalt, nickel and the 17 rare earths, as well as uranium – how foreign actors could be distorting markets, and what steps could be taken to boost domestic supply and recycling.

• In IT Services & Consulting: WIT shares slipped after reporting Q4 consolidated revenue rose 1.3% to 225.04B rupees ($2.63B) vs. analyst ests at 226.21B rupees; net profit for the quarter rose 26% to 35.7B rupees, compared with analysts’ mean estimate of 33.38B rupees; expects April–June revenue to fall 1.5%–3.5% quarter-on-quarter; shares of INFY, CTSH moved in sympathy.
• In Cyber security, Mizuho said Checks in the quarter were solid as cybersecurity demand was healthy and generative artificial intelligence adoption improved, the analyst tells investors in a research note. However, the firm says public cloud and consumption data points were mixed. Mizuho expects Q2 revenue outlook "to be very choppy" across the sector. It cut price targets to reflect the meaningful recent contraction in comp multiples along with a higher probability of a recession. (lowered tgts on CFLT, DDOG, MSFT, PD, NOW).
• In Software: PERI posted upside to Q1 estimates saying it expects revenue/AEBITDA of $88M/$1.5M vs consensus $83.7M/$0.8M as growth engines (DOOH, CTV) drove the upside.

• Chip stocks were weaker all day, led by hefty declines from AMD, NVDA on export restrictions. NVDA announced 8-K with $5.5B AprQ export restrictions; NVDA noted the US Govt is now restricting H20 shipments to China (including Hong Kong) and countries with arms embargoes; the restriction also impacts AMD’s MI308 artificial intelligence chips to China. Reuters notes China generated $17B in revenue, or 13% of Nvidia’s total sales, in its last fiscal year. Citigroup noted believes this will negatively impact AMD’s GPU, MU’s HBM memory and AVGO shipments to China but this is already incorporated in its recently trimmed estimates.
• In AI space, the New York Times reported the US weighing penalties that would block DeepSeek from buying U.S. technology and debating barring Americans’ access to its services.
• Barclays lowered price tgts for US chip stocks (AMD, INTC, MRVL, NVDA, etc.) across the board as the firm said it expects Q1 results to beat as their original outlook was likely conservative and as tariff related pull-ins created a better demand environment, but lays out scenarios where a modest tariffs equate to a 4%-6% sales hit on average for the group and where deeper tariffs in a dire scenario equate to sales decline of 9% and 12% in calendar year 2025 and 2026 on average. In a modest tariff scenario, the EPS hits could be 12%-13%.