Closing Recap

Thursday, February 13, 2025

Another stellar day for U.S. stock markets posting solid gains and nearing all-time highs despite another “hotter than expected” inflation reading vs. economist views, as markets put a positive spin on it, while macro fears subside. The January headline and core PPI readings were above estimates and prior month levels (similar to the CPI spike on Wednesday), but markets focused on certain components in the Producer Price Index (PPI) that pointed to lower inflation, suggesting that the Fed remained on track to cut interest rates later this year. U.S. PPI rose 0.4% after an upwardly revised 0.5% gain in December, but key elements in the computation of the core Personal Consumption Expenditures (PCE) index, which the Fed tracks, were actually benign or lower. For instance, components like physician’s office and hospital prices were either broadly unchanged or rose just slightly. Healthcare, with nearly 20% weighting in the core PCE, declined 0.06%. Portfolio management prices, another important item on core PCE, posted a modest 0.4% increase. For now, markets looking for positive market narrative on data, but recall it was only a few years ago that the Fed called rising inflation “transitory”, which proved to be incorrect. Strong set up remains as @ConnorJBates_ notes “No denying we have a favorable setup on the market right now. See if bulls can step up and follow through. Fear & Greed – Neutral 46. AAII Investor Sentiment – Highest Bearish Sentiment in a year. 47.3% of participants are bearish. NAAIM down again. 75.62 reading.”

In other news today, President Donald Trump unveiled a roadmap for charging reciprocal tariffs on every country that charges duties on U.S. imports. The tariffs were not going into effect on Thursday but could begin to be imposed within weeks as Trump’s trade and economic team study bilateral tariff and trade relationships. Trump’s reciprocal tariffs would match the higher duty rates charged by other countries. The reciprocal Trump tariffs are just part of a tariff barrage, including 25% tariffs on steel and aluminum, a 10% tariff on Chinese imports and threatened 25% tariffs on imports from Mexico and nonenergy imports from Canada. U.S. President Donald Trump said that BRICS nations (Brazil, Russia, India, China) could face 100% tariffs from the United States “if they want to play games with the dollar.” Meanwhile, European shares closed at a record high, as investors cheered upbeat earnings overseas, while sentiment was also buoyed by signs that Russia’s conflict with Ukraine could end soon. The pan-European STOXX 600 index was up 1%, while Benchmark indexes of Germany rose 2% to record highs.

Is caution warranted? Goldman Sachs strategy analyst noted retail investors bought the dip after hot CPI. This Goldman strategist says the tide is about to turn. “This is the last bullish email that I will send for Q1 2025 as the flow demand dynamics are quickly changing, and we are approaching negative seasonals,” he said. January and February are the largest months for inflows into 401(k) and 529 plans, but this flow is expected to fade soon. Corporates are busy buying a record $1.16 trillion share this year, but activity will slow after March 16. Retail investors have been net buyers for 22 consecutive days, with the top three largest buying days on record. However, this trend may be unsustainable, he said.

• Weekly Jobless Claims fell to 213,000 from 220,000 prior week (and est. 215K); the 4-week moving average fell to 216,000 from 217,000 prior week; continued claims fell to 1.850M from 1.886M prior week (vs. est. 1.88M) and the US insured unemployment rate unchanged at 1.2%.
• NY Fed notes Q4 total household debt climbs 0.5% to $18.04 trillion; overall household debt up $3.9 trillion since end of 2019; said aggregate delinquency rates up ‘slightly’ in fourth quarter and as of December, 3.6% of debt in delinquency vs 3.5% in third quarter; said Q4 delinquency transition rates steady except for credit cards which edged higher; auto loan delinquency rates remain ‘elevated’ and credit card balances climbed $45B from Q3 to $1.21 trillion, auto loan balances climb $11B from Q3 to $1.66 trillion.

• April gold rises $16.70 to settle at $2,945.40 an ounce, adding to gains and hold near record highs amid escalating concerns about U.S. President Donald Trump’s impending tariff plans, which could further strain global trade relations. The news that the US is trying to broker a peace deal between Russia/Ukraine failing to dent the precious metals interest.

• In Retail: CROX reported Q4 sales and profit that topped consensus expectations and issued stronger-than-anticipated annual forecasts for both metrics; upsizes share buyback authorization by $1B; posts Q4 revs $990M vs. est. $961.92M driven by outperformance in North American business as well as growth in China. HBI posts Q4 net sales of $888.4M below consensus expectations of $950.3M on weaker sales guidance for year to $3.47B-$3.52B vs. est. $3.66B and said CEO will depart at the end of 2025, or upon the appointment of his successor.
• In Restaurants: BROS shares surged on Q4 results (revs +34.9% y/y) and commentary highlighted comp store sales (+9.5%) & traffic strength, considerable margin & earnings upside, and confidence in strategic plans; QSR was downgraded to Hold from Buy at Argus, concerned about rising costs overall, and the widening Gap between meals away from home (up 3.4% in January and 3.6% in December) and groceries, which has hurt results. WEN another mover in dining space after results and buyback. PZZA shares spiked late day after Semafor reported that Irth Capital Management, as investment fund backed by a member of Qatar’s royal family has spoken with advisors about mounting a take-private bid for $1.4 billion the pizza chain. https://tinyurl.com/zst5y89u

• In Lodging: Hyatt (H) shares tumbled after results fell below analyst estimates as revs fell -3.5% y/y to $1.6B, missing estimates of $1.66B and adj EPS of $0.42 well below consensus of $0.78 (some noted the weakness as a reason for airline weakness today); WH shares declined following its results last night; next up is ABNB earnings after the close tonight.

• In Utilities: several earnings out as AEP reported Q4 EPS in-line while revs of $4.7B misses the $4.9B estimate and backs its FY EPS view of $5.75-$5.95; DUK similar results as EPS mostly in-line while revs $7.36B misses the $7.65B estimate while introducing 2025 adj EPS view of $6.17-$6.42, vs. consensus $6.33; DTE Q4 EPS $1.51 tops the $1.44 estimate and guides FY operating EPS $7.09-$7.23 vs. est. $7.20; PPL Q4 ongoing EPS $0.34 vs. misses est. $0.38 on revs $2.21B, vs. est. $2.08B, while forecasts 2025 ongoing EPS $1.75 to $1.87 (est. $1.83) and boosts capital plan to $20B from 2025 through 2028.
• In Oil E&P and Equipment: NOG announced 2025 guidance which fell short of expectations, with capex ~3% above consensus while oil volume guidance was ~5% below; for Q4, oil volumes still came in ~2% below consensus (capex in line) and natural gas pricing appears weaker than expected. AR delivered an EBITDAX/FCF beat of ~3%/~22% vs. Street consensus driven primarily by lower-than-expected capital expenditures. Capital guidance for 2025 came in modestly better than expected

• In FinTech/Payments: ADYEY shares rise after the Dutch payments company reported higher than expected net revenues in the second half of 2024 and forecast margin expansion in 2025; Adyen’s net revenues in the six months to December were up 22% to 1.08B euros, leading to full-year core earnings of 992.3M euros ($1.04 billions), which beat the 974.7M euros expected; shares of XYZ, PYPL, GPN moved on results.
• In Financial Services: MCO total Q4 revs rise 13% y/y to $1.67B and service revs +17.2% y/y while guiding its 2025 EPS view to $14-$14.50 above ests $13.58; RDDT shares fell as delivered a strong Q4 revenue print and Q1 guide relative to street expectations, though US DAUqs came in ~7% below, as a Google algorithm change reduced traffic to the site toward the end of the Q4.

• EQIX reported AFFO of $7.92, a miss compared to Mizuho at $8.13 and the Street, driven by lower MRR growth of 5% compared to Mizuho model at 7%, and FX impact; 2025 revenue guidance was nearly 400 bps below consensus and >200 bps below consensus for adj. EBITDA.
• GTY reported 4Q24 AFFO of $0.60, which beat both consensus of $0.59 while mgmt adjusted its previously announced (January 7) FY25 AFFO guidance down by 0.6% to a new range of $2.38-$2.41 ($2.40-$2.42 prior) driven by a tenant filing bankruptcy, which is likely related to Zips Car Wash.
• IRT reported 4Q24 Core FFO that was in line with consensus expectations and management’s implied guidance while initial 2025 CFFO guidance missed expectations by 1.3% at the midpoint; same store revenue growth guidance of 2.6% y/y at the midpoint implies reacceleration through the year relative to the 2.3% y/y.
• VTR wrapped up 2024 with 4Q24 NFFO in line with expectations, but operating momentum within its SHOP segment and investment backlog heading into 2025 signal a positive setup in 2025. Initial 2025 NFFO guidance fell modestly short of consensus but implies attractive earnings growth of 7% at the midpoint.

• GMAB upgraded from Market Perform to Outperform at Leerink with a longer-term view beyond the near-term JNJ opt-in decision for GEN3014 (HexabodyCD38). Leerink continues to believe it is unlikely that JNJ will opt-in.
• WST shares fell as Q4 EPS and sales topped consensus views but guides 2025 adj profit between $6.00-$6.20 per share, well below the consensus estimate of $7.44 and sees 2025 sales between $2.88B-$2.91B vs. est. $3.04B.
• Vaccine names, MRNA, PFE, BNTX, NVAX were on watch as well as food companies after RFK Jr. confirmed as HHS Secretary in a 52-48 vote; Sen. McConnell was the lone GOP no vote.

• Med Equipment/Life Sciences: TXG shares fall as reported revenue in-line with their prelim 4Q24 announcement back in mid-January. FY25 revenue guidance to be in the range of $610mn-$630mn (vs. est. $632mn). Management expects a ($7mn) headwind associated with NIH funding concerns given their outsized 20-25% of total revenue exposure to the NIH. BRKR FY EPS guide midpoint slightly above estimates though rev guide below consensus. Q4 EPS $0.76 ex-items vs FactSet $0.74. Q4 revenue $979.6M vs $975.2M. FY EPS guide $2.67-2.72 ex-items vs $2.67 est. FY rev guide $3.47-3.54B vs $3.56B est. Rev growth of 3% to 5%, with CER growth of 5% to 7%.
• Animal Healthcare: ZTS shares decline as forecasts for 2025 adj. profit per share to be between $6.00-$6.10, below analysts’ estimate of $6.29 and guides revenue to be between $9.23B-$9.38B below est. of $9.57B.

• Aerospace & Defense: industry was little changed most of the day before sliding this afternoon after President Trump in his comments on trade and spending indicated the US could halve defense spending; names like LMT, NOC, RTX, LHX, GD slid on headlines as well as gov’t service names such as LDOS, BAH, CACI, SAIC, KBR
• In Machinery: DE shares fell as reported Q1 EPS $3.19 vs. est. $3.11 (but down from $6.23 y/y); Q1 revs fell -30% y/y to $8.51B but above the consensus est. $7.89B; is now expecting sales at its production and precision agriculture division to fell 15% to 20% in FY25, expects small ag & turf sales to fall 10% and for construction and forestry sales to fell 10% to 15%.
• In Transports: Airline stocks fell sharply, UAL, AAL, Dal, ALK, among others, weighing down the Dow Transportation index, but other segments of the index (truckers, parcel, rails) were strong.
• In Chemicals: DD was upgraded to Equal Weight from Underweight at Barclays saying better electronics growth, shorter spin timeline, reduced separation costs, and SOTP upside potential are all positive developments in their investment thesis. OLN was downgraded to Neutral at Piper and cut tgt to $33 from $41 based on their view that challenges OLN faces due to the difficult economic conditions in the EU and Asia will not be able to be offset by other improvements it sees in US markets in 2025.
• In the Lithium/Materials sector: ALB reported Q424 EBITDA of $251M, compared to consensus of $187M, beating in Energy Storage and Specialties, while missing in Ketjen. Energy Storage volumes fell 10% y/y, Lithium pricing fell 53% y/y; ALB’s EBITDA scenario for ’25 based on ~$9/kg (current price level) is $900M at the midpoint. Ethanol related names ADM, GPRE saw a spike this afternoon after Fox news reported the Trump memo on reciprocal tariffs to mention Brazil ethanol tariffs.
• In Paper & Packaging: IP announces facility closures noting permanent closure of the company’s Red River Containerboard Mill In Campti, La., recycling plant in Phoenix, Az. Red River containerboard mill closure expected to reduce containerboard capacity by about 800,000 tons on an annualized basis

• In CDN/Website Services: FSLY shares fell as 4Q revenue grew 2% in line with the Street as was EBITDA margins, but a 100bps miss and beat respectively versus estimates; Q4 adjusted EPS loss (-$0.03) vs. est. 0c; Q4 revs $140.58M vs. est. $138.63M; sees FY25 adjusted EPS loss (15c)-(9c) vs. consensus $0.03.
• In Marketing software: APP shares surge as much as 30% after forecasting Q1 revenue and profit above estimates ($1.36B-$1.39B vs. est. $1.35B) and posted Q4 results that beat estimates, boosted by a 73% rise in advertising segment’s revenue; also guides Q1 adj EBITDA $855M-$885M vs estimates of $818.6M; said plans to sell its mobile gaming business to a privately held company for a $900 million cash and stock deal.

• In Electrical Components: IVAC to be acquired by STX, with shareholders to receive $4 per share; CGNX reported Q4 EPS of $0.20, which beat consensus of $0.16 as revenues of $230M increased 17% y/y and were above consensus of $221M and at the high end of the Company’s prior guidance of $210M-$230M. SONY shares jumped as raised its operating profit forecast for the year by 2% to 1.34 trillion Yen ($8.70B) as it reported strong growth at its key gaming unit; profit at the gaming business grew 37% in the October-December quarter. ZBRA shares slide after results and guidance expects FY25 rev growth +3% to 7% vs analysts’ estimate of growth of 8.2%.
• In Security Software: SAIL 60M share IPO priced at $23.00 the high end of range and opened at the same price; RPD issued 2025 ARR guided in line; however, margins guided well below as management meaningfully steps up investments for MDR, Exposure Command (VM + CNAPP + CASM), and to establish footprint in India; CYBR rises on Q4 top/bottom line beat ($0.80/$314.38M vs. est. $0.72/$301.45M).
• Networking & Communications: CSCO was upgraded from Neutral to Buy at Rosenblatt after earnings saying Q2 revenues rose 9% Y/Y to $14.0B and produced EPS of $0.94, exceeding consensus on each while total product orders grew 29% Y/Y (vs. 20% prior quarter) and 11% excluding Splunk (vs. 9% prior quarter), with strong improvement in Service Provider and Cloud orders.

• AEIS reported 4Q EPS 19% above consensus on revenue that was 5% above, and guided 1Q25 midpoint EPS that was 4% above, on revenue that was 3% above; strong 4Q result was largely driven by growth in both products and services in Semiconductor Equipment.
• AMD continues to gain share over INTC according to Bank America saying Q4 CPU trends suggest a continuation of share gains; says ARM share flattish in CY24 but CY25 pipeline is strong; noted INTC modestly gained back in desktops, but ASPs remain weak across the board (laptop/server) on potential aggressive pricing; lastly says Q4 PC CPUs greatly out shipped market demand, and Q1 could be sub-seasonal for INTC, slightly better for AMD
• ARM shares popped higher this afternoon after the Financial Times reported the company secures META as first customer for their ambitious new chip project.
• INTC extended its recent rally today; WCCF Tech reported that the US has reportedly provided TSM with alternatives on how the company will proceed with its business in the nation, including co-existing with INTC as a foundry business.
• MKSI reported 4Q24 non-GAAP EPS of $2.15, which beat consensus $1.95 and revs of $935M was up 5% y/y compared to est. $914M; 1Q25 EPS guide came in below consensus on in-line sales, indicating sequential decline. MKSI indicated it made an additional $100M voluntary debt prepayment in January.