Closing Recap

Thursday, April 17, 2025

Another roller coaster week comes to a close, with major averages finishing the week in negative territory! US equity futures climbed back into positive territory overnight with investors hoping to end the short week on a good note. Pre-market economic data was a mixture of good and bad with claims better but Philly Fed not pretty and the market seemed to brush off all of it and stay the course with modest gains. On a sentiment basis, the weekly AAII bull-bear spread came in at -31.5 vs -30.4 a week ago. Bulls fell from 28.5% to 25.4%, while Bears fell from 58.9% to 56.9%. The Fear & Greed Index remained depressed at 19/100 (Extreme Fear) versus 8/100 (Extreme Fear) last week and 22/100 (Extreme Fear) last month. Also showing renewed softness was the sell-side upgrade/downgrade ratio, which has been sub -50% three of the past four days after averaging almost 58% last week. Early breadth favored advancers by about 3:2, though indices were in the red on weakness in large health care and tech with IWM (-0.16%) versus SPY (-0.08%) and QQQ (-0.35%). Consumer Staples (+1.29%) and Utilities (+1.21%) were early outperformers among S&P sector ETFs, while Consumer Discretionary (+0.03%), Health Care (-0.69%) and Technology (-0.71%) led the underperformers with nine sectors gaining versus only two declining. 

In data today, @DataTrekMB noted the divergence between VIX and valuations with VIX +30 reflecting fear but the forward P/E of the S&P 500 (19.7x) still indicating confidence in earnings and the economy. Company guidance as we make our way through earnings season will give us a better understanding of how managements are looking at the world. Also on sentiment, @KobeissiLetter noted a record 50%-ish of institutional investors intend to reduce US equity exposure per a Bank of America survey, with allocation to US stocks sliding by 13 percentage points over the past month to the lowest net underweight (36%) since March 2023. He also pointed out US large bankruptcies climbed to the highest quarterly count since 2010, rising to 188 in Q1.

Heading into the final hour of trading, stocks were off the highs, slipping in the final minutes though breadth had extended to favor advancers by almost 3:1 with IWM (+0.91%) leading over SPY and QQQ. Sector-wise, Energy (+2.35%), Consumer Staples (+2.3%) and Real Estate (+1.75%) were outperformers among S&P ETFs, while Consumer Discretionary (+0.7%), Technology (-0.4%) and Health Care (-0.45%) paced the underperformers with no change in breakdown from the morning and only Technology and Health Care in the red (weighed down by a -22% decline in UNH after results/lowered outlook). In terms of growth and value, both enjoyed gains to end the week with value the outperformer. The Russell 1000 Value gained 0.57% versus its Growth counterpart at only +0.2%.

• Housing Starts for March weakened, falling -11.4% to 1.324M unit rate (below est. 1.42M) vs Feb +9.8% as single-family starts -14.2% to 940,000-unit rate; multifamily -3.5% to 384,000-unit rate. March housing permits rose +1.6% vs Feb -1.0% to 1.482M unit rate (consensus 1.446M) vs Feb 1.459M unit rate.
• Philadelphia Fed Business Outlook for April with negative -26.4 reading vs. est. +2.2 and prior +12.5; Fed prices paid index April 51.0 vs March 48.3; new orders index April -34.2 vs March 8.7; employment index April 0.2 vs March 19.7; six-month capital expenditures outlook April 2.0 vs March 13.4.

• May WTI crude futures extended yesterday’s gains, settling up $2.21/bbl, or +3.54%, to $64.68 heading into the long weekend. A new round of Iran sanctions and hopes for progress on trade deals in the tariff battles helped propel oil to a two-week high. Today’s move also cemented a weekly gain for the first time in three weeks. Brent similarly gained $2.11/bbl, or +3.2%, to settle at 67.96.

• In Retail: WRBY upgraded to Buy from Hold with $27 PT at Loop Capital saying they believe the sell-off in shares year to date (-41%, as compared to a -9% decline in the S&P 500) is well overdone and provides a long-awaited attractive entry point. In addition, LOOP’s channel checks indicate the company’s demand trends remained healthy in Q1 2025. COTY was downgraded from Outperform to Market Perform at Raymond James saying they expect a tepid earnings season across its Beauty, Personal Care, and Household Product coverage group for calendar Q125 as a result of decelerating sales, most notable in the U.S. but also spreading to Europe and Latin America, with downward outlook revisions to reflect slowing demand and higher costs.

• In Home Furnishing: HOFT Q4 sales increased 21.7% to $104.5M while posts net loss of $2.3M, or 22 cents per share, compared with a profit of $593M, or 6 cents per share, a year ago; says the planned exit of Savannah warehouse is expected to save $4 million to $7 million annually beginning in fiscal 2027
• In Building Products: TREX upgraded to Outperform from Market Perform at BMO Capital saying the recent pullback in the stock offers a very attractive entry point; notes Trex has a market leading position in composite decking with a multi-year material conversion opportunity from wood.

• In Casinos & Online Gaming (OSB) – DKNG, FLUT, MGM, PENN: Benchmark notes North Carolina Senate Republicans have proposed doubling the online sports betting tax rate from 18% to 36%, aligning the state with top-tier tax regimes like New York and Pennsylvania. The move could generate tens of millions in additional revenue, with UNC and NC State projected to receive $11.5M each, while smaller schools get $500K–$1.5M.
• In Autos: HTZ shares jumped early, adding to yesterday’s 56% spike after CNBC reported that Bill Ackman’s Pershing Square holds about a 19.8% stake in the rental-car company; XPEV said it is ramping up its global expansion, despite the intensifying trade war between Washington and Beijing, and the European Union’s punitive tariffs against Chinese cars. In Charging stocks, UBS said they expect incrementally more cautious outlooks from charging hardware names (BLNK, CHPT, WBX) given uncertain impacts of tariffs on both profitability and EV demand, potentially pushing out adj. EBITDA breakeven targets.

• In Solar: Citigroup out with a sector note as they downgraded ENPH to Sell and RUN to Neutral to reflect the firms negative view on residential solar given IRA uncertainty, slower growth due to persistently high rates, lower pace of utility price increases, and tariff impact on storage. CSIQ was upgraded to Neutral saying IRA risks and a large portion of tariff impact appear to be already in utility scale stocks. Any policy clarity should drive utility scale solar higher given attractive economics and more demand visibility from datacenter/AI. Citi also upgraded GNRC to Buy as it thinks the company is well positioned to defend margins with upside from above average hurricane season and downgraded BLDP to Sell given challenges to the H2 economy but prefer the name over PLUG; top pick in renewables is FSLR and least preferred names are PLUG, SEDG, and ENPH.

• HBAN Q1 EPS $0.34 vs. est. $0.31; board approves $1B share repurchase authorization; provision for credit losses was $115M, higher than $107M from a year earlier; Q1 NII jumped to $1.43B, compared with $1.29B y/y; now expects a record full-year NII to rise between 5% and 7% (above prior view 4%-6%).
• FNB Q1 EPS $0.32 vs est. $0.30 on NII $323.845Mm vs est. $322.41Mm, credit loss provision $17.489Mm.
• KEY Q1 EPS $0.33 vs. est. $0.32; Q1 revs $1.77B vs. est. $1.75B; Q1 net interest income grew 4% and the net interest margin increased by 17 basis points to 2.58%.
• OZK Q1 EPS $1.47 vs est. $1.41; Q1 net income $167.9M vs. est. $161.2M.
• RF mixed Q1 as EPS beat consensus, but revs missed estimates; net interest income (NII) grew marginally from a year earlier to $1.19 billion; wealth management income jumped 8.4% from a year earlier to $129M.
• SCHW Q1 adj EPS $1.04 tops est. $1.01 as revs climb 18% y/y to $5.6B vs. est. $5.53B; Net inflows to its managed-investing division grew 15%; logged higher revenue from trading and net interest, along with higher fees on bank-deposit accounts.
• SNV Q1 EPS of $1.30 was $0.18 ahead of the Street in a quarter marked by record levels of funded loan production; high end of guidance ranges for loans and deposits came down 1%, but expense targets also came down offsetting
• TFC Q1 EPS $0.87 vs. est. $0.86; Q1 revs $4.95B vs. est. $4.94B; Net interest income increased to $3.56 billion from $3.43 billion. Net interest margin was 3.01%, down six basis points; the bank’s provision for credit losses declined to $458 million from $500 million in the prior year period

• In Consumer Finance: Dow component AXP Q1 EPS of 43.64 topped the $3.47 consensus estimate as revs rose 7% y/y to $16.97B vs. est. $16.94B; said its top line grew on higher net interest income supported by growth in revolving-loan balances, increased card-member spending and continued strong card-fee growth; said saw sequential slowdown in airline billings growth; said spending levels through 1st week and a half of April remained consistent with Q1; ALLY reported Q1 PS beat of $0.58 vs. est. $0.42 on better revs and reiterated full year guide saying it is closely monitoring macroeconomic environment
• In Resources & Staffing: MAN Q1 adj. EPS of $0.44 missed the analysts’ estimate of $0.50 while guided Q2 EPS to be between $0.65-$0.75, below analysts’ estimate of $0.95 as the CEO said the demand outlook is less clear based on increased caution following trade policy developments (RHI, KFY, KFRC other staffing names).

• NVO was downgraded to Market Perform from Outperform at BMO Capital and cut tgt to $64 from $105 saying Novo’s "first mover advantage" with semaglutide, the active ingredient in its weight loss and diabetes drugs, has waned with Lilly’s tirzepatide taking share rapidly
• QURE shares jump after saying its treatment for Huntington’s disease, received breakthrough therapy designation from the FDA; said the FDA’s designation for AMT-130 is in addition to the regenerative medicine advanced therapy designation, orphan drug designation and fast track designation previously granted.
• TLRY proposed reverse stock split at a ratio ranging from 1-to-10 to 1-to-20

• Hospital operators (HCA, CYH, UHS, THC) advanced early after health insurer UnitedHealth Group flags bigger-than-expected jump in medical care demand among older adults.
• The National Institutes of Health, which has long pursued and funded research that has helped fuel industry innovation, is on the chopping block, according to a draft Trump administration budget that surfaced yesterday. The budget proposes a massive $20 billion cut for the NIH in 2026 — roughly a 40% reduction — and a sweeping consolidation, from 27 institutes and centers to just eight – STAT News reported.

• In Industrials: Jefferies lowered estimates on both CMI, PCAR as they lower their industry forecasts, adopting an ‘industrial slowdown’ with ‘mild pre-buy’ base case with downside in a recession or with a total elimination of 2027 regulations. Jefferies EPS estimates for PCAR and CMI are reduced in line with their Truck forecasts.
• In Aerospace & Defense: LMT shares fell after announced the departure of its CFO, Jesus Malave, and named insider Evan Scott as his successor, effective immediately. Evan, who previously held the role of treasurer and CFO of the U.S. defense company’s two different business areas, has been with Lockheed for 26 years.
• In Metals & Mining: VALE produced 67.7 million metric tons of iron ore in Q1 of 2025, down 4.5% y/y saying heavy rainfall impacted production in its Brazilian Northern mining complex; reaffirmed its outlook to produce between 325M-335M tons of iron ore in 2025; Q1 sales rose 3.6% in the quarter; the average realized price of Vale’s iron ore fines was $90.80 per ton in Q1, down almost -10% y/y and a -2.4% decline q/q. AA shares slipped after earnings and forecast a $90M hit in q2 on tariffs.

• In Software: Following its IT VAR Survey, Keybanc downgraded MSFT from Overweight to Sector Weight and removing its price target; in Enterprise Software also reducing estimates for MSFT and NOWfor Security, Data & AI, lowering PTs for AI, CVLT, CYBR, PANW, RBRK, and SNOW on weaker macro survey data and lower peer multiples; lowering estimates on S and CFLT and in Vertical Software, HCM, & DevOps: Lowering PT for GTLB to reflect the incremental risk associated with public sector deals.
• In IT Services: INFY shares fell early after forecasts FY revs to range of 0%-3%, below consensus est. +6.28% after mixed Q4 results (net income beat while revs 409.25B rupees, +7.9% y/y, missed the est. 421.17B rupees; lowered outlook as clients scales back large IT projects amid geopolitical and economic uncertainty.
• In Semis: TSM Q1 earnings and sales topped views and guided higher on Q2 revenue to $28.4B-$29.2B above prior year $20.8B y/y while for the full year it expects revenue growth roughly midway between 20% and 30%; reported Q1 profit climbed 60% on the year to T$361.6 billion ($11.1 billion), its fourth straight quarter of double-digit growth, comfortably beating est. T$354.6 billion.
• In Semicap equipment, Keybanc said given the numerous swings in trade policy in recent weeks and the unpredictable potential impact on end market demand they are shifting its focus toward names with more direct catalysts and better visibility. As such, the firm downgraded AMKR and TER to SW from OW, and it is also adjusting estimates and seeing more positive outlooks for AMAT, LRCX, AEIS and MKSI.