Closing Recap

Monday, February 10, 2025

U.S. stocks were in rally mode after markets fell last week, as investors look to Fed Chairman Powell commentary this week along with key economic data (CPI and PPI) and another flurry of corporate earnings. MCD shares advanced, among the leaders in the Dow despite a top and bottom line miss as investors opened the week snapping up stocks. Technology and Energy were among today’s leaders while Financials and Healthcare were the lone sector losers. There was no major economic data today (NY Fed inflation expectations report was higher than prior, but markets took in stride) to move markets while investors shook off reports of more intense tariff headlines. President Trump said this weekend he will introduce new 25% tariffs on all steel and aluminum imports into the U.S., on top of existing metals duties. The headlines had no negative impact on broader stock markets, boosted share prices of aluminum (AA, CENX), and steel names (NUE, STLD, CLF) while US listed China stocks also outperformed.

Highlights this week include, Fed Chairman Jerome Powell delivers his bi-annual report to Congress this week, leading off with the Senate Banking Committee on Tuesday at 10:00 am et, followed by the House Financial Services Committee on Wednesday (also at 10:00 am et). Few changes should be expected given the recent FOMC policy meeting where the Fed held steady last month on rates, with Powell continuing to indicate the two -25 bp cuts projected by the dots are still the base case. Also on watch is the January CPI inflation data on Wednesday 1/12, the PPI inflation reading on Thursday and the Retail Sales M/m reading for January on Friday.

• WTI crude oil prices rose $1.32 or 1.86% to settle at $72.32 per barrel while Bent crude rose $1.21 or 1.62% to settle at $75.87 per barrel (follows 3-weeks of losses). Front-month gas futures for March delivery rose 13.5 cents, or 4.1%, to settle at $3.444 per million British thermal units (mmBtu), their highest close since January 29.
•  Bitcoin prices rebounded after having posted their largest w/w percentage decline in 22 weeks last week, dropping -5.7% to $96,558. The price decrease can be primarily attributed to a broader risk-off sentiment after President Donald Trump unveiled a reciprocal tariff policy to countries imposing tariffs against American goods.
• Treasury yields edged slightly higher with the benchmark 10-yr back around 4.5% ahead of Powell testimony the next two days in D.C. and ahead of CPI and PPI inflation data this week. Questions remain about how tariffs will impact inflation and Fed decisions on interest rates.

• In Retail/Personal Products: SHOP was upgraded to Buy from Hold at Benchmark with a $150 price target saying they expect "comfortable upside" to reported and guided gross merchandise value tomorrow morning, but with more enterprise and Plus-driven upside to monthly recurring revenue and GMV than witnessed historically. EPC shares declined after Q1 results miss and cautious guide; Q1 adj EPS $0.07 vs. est. $0.12; Q1 revs $478.4M vs. est. $480.16M; sees FY25 adjusted EPS at lower end of $3.15-$3.35 range (est. $3.18); sees FY25 adjusted EBITDA at lower end of $356M-$368M. US listed China names BABA, PDD advanced.
• In the Food Sector: HAIN shares tumbled after Q2 sales of $411.5M missed the $430.8M estimate and widened loss while lowering its FY25 organic sales view to decline between 2% and 4%, down from prior view of flat or better. KHC was downgraded to Neutral at Mizuho, reducing ests saying food industry volume is eroding for many categories despite moderating inflation & stabilizing leftovers consumption. Mizuho views BRBR, SMPL, LTH, & NOMD as best positioned with material risks for HSY CELH price tgt and estimates reduced to below consensus at Stifel for 2025-2026 sales and adjusted EBITDA reflecting weakening sales trends in scanner data tracked channels which it thinks could result in additional modest destocking of inventories by PepsiCo.

• In the Lodging Sector: Playa Hotels & Resorts N.V. (PLYA) confirmed it has entered into an agreement with Hyatt Hotels Corporation (H) under which an indirect wholly owned subsidiary of Hyatt will acquire all outstanding shares of Playa for $13.50 per share in cash, or about $2.6B, including approximately $900M of debt, net of cash.
• In Casinos & Gaming: Citigroup downgraded shares of Wynn Macau (WYNMF), Melco (MLCO) and Sands China (SCHYY) to Neutral from Buy at Citi in Chinese casino names saying first it was the lower-than-anticipated GGR of MOP589M/day in Jan-25 and then it was the disappointing CNY GGR print. The firm said these two data points make them more cautious on near-term GGR trends. Citigroup now forecast Macau GGR to grow only +3% YoY (previously +7%), with 1H25E GGR expected to fall 1% YoY.
• In Leisure Products: Truist said they upwardly revised RV industry estimates (WGO, THO, PATK, LCII) and are now ~5%-6% above consensus saying after a tumultuous three-year stretch for the RV industry, recent dealer conversations suggest that the industrywide demand/earnings recovery is finally upon us, supported by improved demand signals, healthier margins/cash generation, and a broader restocking posture.

• In MLPs: OKE was upgraded from Peer Perform to Outperform at Wolfe Research calling it a high quality and increasingly diversified company with a unique NGL position connecting the Bakken, Mid-con, and Permian to the Gulf Coast, as well as an incumbent refined products network through the middle of the country from Magellan.
• In Industrials: JCI was upgraded to Buy from Neutral at UBS and raise PT to $103 from $90 saying they are positive on the appointment of a new, outsider CEO Joakim Weidemanis, who during his tenure as head of Danaher’s Diagnostics business, oversaw 600 basis points of operating margin improvement during 2020-24. ATKR was downgraded to Hold at Loop Capital saying competition, both domestic and imports, has increased dramatically in the past year and new capacity is still coming online even as costs have increased vs pre-pandemic levels. ROK beat on EPS and reaffirmed EPS guidance.
• In Metals & Mining: Huge lift for US aluminum (CENX, AA), steel (NUE, X, STLD, CLF) producers after President trump said Sunday, he will introduce new 25% tariffs on all steel and aluminum imports into the U.S., on top of existing metals duties, in another major escalation of his trade policy overhaul. Gold miners also surged early (GOLD, AEM, NEM, etc.) as gold prices top $2,930 an ounce for record highs as upside buying momentum continues as safe haven demand heats up on tariff impact fears on inflation.

• In Consumer Finance: AXP shares slumped this morning after the CFO said that Q1 revenue growth will be lower than Q4, though said remain confident with full-year revenue guidance. Reuters noted U.S. consumers increased their collective credit balance by $40.85B in December, or 230.8% more than analysts expected. The spike more than made up for the previous month’s net $5.37B paydown. Looking beneath the hood of the Federal Reserve’s report, non-revolving credit – which includes big ticket items such as cars and tuition – jumped 112.4% to $17.99B.

• BMY said it has received positive results for its latest lymphoma treatment trials, the fifth type of cancer the drug has been shown to treat. Bristol said that the second phase of its Transcend FL trial for the drug Breyanzi met its primary endpoint.
• ILMN downgraded to Underweight from Equal Weight at Barclays given the recent China news and the risk to management’s ’25 and LRP guidance.
• MRK downgraded to Hold from Buy at TD Cowen and cut tgt to $100 from $121 saying clarity on HPV vaccine Gardasil is not improving, while Merck’s business development efforts seem to have lost momentum and its critical cancer treatment Keytruda is nearing its loss of exclusivity.
• PLRX shares tumble as voluntarily paused enrollment and dosing of its ongoing Beacon-IPF Phase 2b trial of bexotegrast in patients with idiopathic pulmonary fibrosis (was downgraded by several analysts).
• SWTX shares jumped after Reuters reported Merck KGaA in talks to buy SpringWorks Therapeutics. If the talks are successful, a deal could be signed in the coming weeks, the three sources said https://tinyurl.com/mr2pu9vk

• In Telecom: TMUS said Sunday it will launch its satellite-to-cell service, powered by SpaceX’s Starlink, in July for $15 a month; T-Mobile began wide-scale testing of the service on Sunday, which will be free till its launch; after its launch, the service will be included in T-Mobile’s premium Go5G Next plan at no extra cost.
• In Hardware: NTAP was downgraded to Neutral from Buy at Susquehanna saying looking forward, the firm thinks there is increased downside risk to consensus, especially in the July and October quarters as compares become challenging, while Enterprise AI is not expected to help with incremental demand until CY26.
• In Software: MNDY shares jumped sharply on better earnings results and guidance; CRM said that it plans to invest $500 million in Saudi Arabia related to artificial intelligence, as countries compete to secure investments in the nascent but critical technology. MANH shares declined after the company announced the retirement of President and CEO Eddie Capel.

• IMOS said they expect 6.3% full year 2024 revenue growth, with a 5.4% yoy December 2024 revenue decline and a 5.7% yoy 4q24 revenue decline; says co plans to buy back shares for up to t$17.39B.
• MBLY was upgraded to Neutral at Bank America on limited downside risk, bottoming sentiment; said discussions with investors also suggest sentiment is bottoming, and there are potential catalysts in 2025 from contract wins with several OEMs in the later stages of contract negotiations for SuperVision and Surround ADAS.
• NXPI entered into a definitive agreement to acquire Kinara, Inc., an industry leader in high performance, energy-efficient and programmable discrete neural processing units for $307M.
• SMTC shares tumbled after the announced 2026 net sales of CopperEdge products are expected to be lower than the company’s floorcase estimate of $50M due to rack architecture changes.
• TSM said Q1 revenue would be closer to the lower end of its guidance, as it expects a $161 million impact from an earthquake that rocked the island in January; said estimated losses from the earthquake that hit southern Taiwan in late January to be about NT$5.3B ($161M), net of insurance claims