Closing Recap

Friday, February 14, 2025

After a week of big market swings and strong rallies, Friday was pretty quiet, with the S&P trading in a narrow range after coming up just short of its all-time intraday high of 6,182.18…while “buying the dip” continues to pay handsome dividends. In fact, one can say so far in 2025, (much like 2024) the market mantra remains “every dip is a buying opportunity. The bigger the dip, the bigger the opportunity,” as evident over the last 3-week period. We saw the big market plunge on DeepSeek competition fears three weeks ago for tech, then the tariff headline decline impact last Monday (before subsequent bounce), and the “hotter” CPI reading dip on Wednesday, before recovering all the losses by early next day to new highs today. Global markets remain well bid with US S&P 500 at record highs, STOXX 600 and German Dax hitting record highs this week and Asian stocks too posting big gains. The S&P sector strength has been broad based to start the year with Communications (XLC the big winner +8.75% YTD) thanks too META which posted its 20^th straight day of gains today, Materials (XLB +7.5% YTD), Financials (XLF +7.5%) and Healthcare (XLV +5.85%) rounding out the top winners…though all eleven S&P sectors are higher on the year. Economic data has not been market friendly, with signs of rising inflation (CPI, PPI) while retail sales today showed a sharp decline, yet markets still shrug it off. We head into the long holiday weekend with stock and bond markets closed Monday for President’s Day.

• January import prices +0.3% (below consensus +0.4%) and vs Dec +0.2% while Jan export prices rose +1.3% (above consensus +0.3%) and vs Dec +0.5%; U.S. Jan non-petroleum import prices +0.1%, year-over-year +1.8%; Jan petroleum import prices +2.9% vs Dec +0.6%; Jan year-over-year import prices +1.9%, export prices +2.7%.
• January Industrial output rose +0.5%, above consensus +0.3% and vs Dec +1.0% while capacity utilization rate 77.8% slightly above consensus 77.7% and vs Dec 77.5%; Jan manufacturing output -0.1% (consensus +0.1%) vs Dec +0.5% (previous +0.6%); cap use 76.3% vs Dec 76.4%.
• Dec inventory/sales ratio 1.35 months’ worth vs Nov 1.37 months; Dec Business Inventories -0.2% (consensus unchanged) vs Nov +0.1% (prev +0.1%); Dec business sales +0.8% vs Nov +0.6% (prev +0.5%).

• Oil prices slid again on Friday, with WTI crude -$0.55 or 0.77% to settle at $70.74 per barrel (down -0.37% on week) while Brent crude fell -$0.28 or 0.37% to settle at $74.74 per barrel. Natural gas prices rose 12.57% on week to $3.725 mln Btus, a 41.5c move on week after rising 2.67% today, now up 5- straight days.
• The Euro advanced +0.3% to around 105 level, highest in 2 months, while the dollar/yen moved back towards the 152 level off earlier 2025 highs above 158. Treasury yields moved in a wide range this week, recovering the 4.5% on the 10-year beginning of the week, moving as high as 4.65% on Wednesday after the CPI data came in hot, then cooled Thursday and today following PPI and Retail sales to hit lows od 4.45% before ending at 4.48%.

• In Home Improvement: FND was upgraded from Market Perform to Outperform at Telsey and raised tgt to $115 saying while anticipating Floor & Decor’s sales may remain soft in the short term, it expects performance to improve solidly as 2025 progresses as the housing market has picked up steam. For home furnishing stocks (W, BYON, ARHS, RH, WSM, ETD, LZB), @ActAccordingly noted “Furniture and home furnishings sales increased 3.7% YOY (adjusted) in January, the 5th consecutive month of YOY growth for the industry. Category spend per household for 2024 was a meager 8% higher than 2019 levels well below longer term trends (after an enormous increase and violent decline in the past 5-years). 3-5% annual category growth (or much higher if existing home sales rebound) seems highly likely.”
• In Food sector: shares of egg producers (CALM, PPC, VITL) fell after a mid-afternoon press release from Zoetis saying they receives conditional license from USDA for Avian Influenza Vaccine, H5N2 subtype, killed virus”. THS shares rallied despite weaker results, posting a slight decline in Q4 sales (missing estimates) while their guidance for the current quarter and year came in below Wall Street’s estimates guiding Q1 revenue $785M-$800M vs. est. $835.3M; shares of KLG a standout to the upside with a midday surge.

• In Autos: auto supplier MGA cut its 2026 sales estimate to be between $40.5B-$42.6B from prior view of $48.8B-$51.2B while offering a weak revenue forecast for the current year on Friday and said challenges such as uncertain government policies have made forecasting "more difficult" AXL posted a smaller Q4 EPS loss on slightly weaker revs but shares rose after guides FY adj Ebitda $700M to $760M vs. est. $706.8M on better FCF; GT shares benefit from a top and bottom line Q4 beat in the tire sector.
• In Casino & Gaming: WYNN rises on earnings reports as Stifle noted results and outlook probably aren’t as strong as MGM’s the day prior, but was pretty close and more importantly should allow WYNN shares to move higher; DKNG reported Q424 revenue of $1.393B, increasing 13% YoY, exceeding lowered Street expectations following the unlucky sport outcomes in October and December as analysts noted the stretch of bad outcomes proved to be one of the worst NFL seasons in history for sportsbooks. EBITDA of +$89M also exceeded expectations. MGM was upgraded to Buy from Hold at Argus citing Q4 earnings beat, noting the year-to-date improvement in its Regional properties and the operations on Las Vegas Strop position MGM to benefit from strong demand in 2025.
• In Education/Learning: UDMY Q1 and FY25 revenue guidance were slightly below consensus while the adj. EBITDA outlook was ahead of expectations for both periods, reflecting the continued expectation that 2025 will be a transition year as the company works through changes to its sales and marketing approach.

• In Paper & Packaging: CLW shares declined after saying they will cut 10% of positions across company; said Q4 sales fell -5.8% y/y to $483M saying they continue to experience challenging SBS industry conditions, with supply exceeding demand. IP, SW, PKG shares advanced the day prior after IP announced facility closures noting permanent closure of the company’s Red River Containerboard Mill In Campti, La., recycling plant in Phoenix, Az.
• In Aerospace & Defense: Shares of defense contractors GS, LMT, NOC, RTX, LHX extended prior day declines, while government service contractors BAH, CACI, SAIC, HII, MRCY also remain volatile a day after President Trump’s recent comments on reducing military expenditure and nuclear weapons buildup. Goldman Sachs said they expect small reductions in defense spending over the medium-term and continue to see margin headwinds in the group as they maintain their cautious view on the group.
• In Metals & Mining: GLNCY held talks over sale of multibillion dollar African copper mines, the Financial Times reported this morning. Glencore last month rejected unsolicited bid for the mines from potential buyer in the middle east because the offer was too low according to the report. Glencore would consider selling part or all of its Congolese assets for the right price.
• In Transports: airlines rebounded (AAL, UAL, DAL, ALK, LUV, JBLU) after leading the Dow Transports lower yesterday; recall weaker comments/outlook from Hyatt (H) Thursday was partial to blame for group while ABNB commentary today may be helping. Also note, Deutsche Bank said today, “it appears that recent commentary from some of the carriers (E.G., too much capacity in Boston and an over-supplied market in Chicago) has been interpreted by some investors as the beginning of the end of the airline trade. As such, the stocks have traded off the past two weeks with some names down more than 15%."

• GLPG was downgraded to Underweight at Morgan Stanley and cut tgt to $22 from $31 saying deprioritization of GLPG5201 in CLL/RT leads them to lower PoS in these indications – both key drivers of value within MSCO’s model – and lower its rating to UW.
• MRNA posted a larger-than-expected Q4 EPS loss while revs beat but guided sees Fy25 revs $1.25B-$1.65B below est. $2.43B; said by 2025-end, aims to remove nearly $1B in costs.
• WST was upgraded to Buy from Hold following Q424 results and a 2025 guide that underwhelmed the Street at Deutsche Bank noting the stock sold off (38%) on the event and views the current price as an attractive entry point for a durable compounder.
• In the insulin sector: DXCM reported full Q4 results, which were, overall, mixed (consistent with the January preannouncement) though the company reiterated its 2025 financial guidance, with a commitment to deliver record domestic new patient additions.
• In Dialysis: DVA shares fell as Q4 results topped views but guided 2025 projections well below consensus as sees FY adj op Inc $2.01-2.16B vs est. $2.077B and adj EPS $10.20-11.30 vs est. $11.24.
• In MedTech: BIO shares fell after Q4 sales of $667.5M missed estimate of $679.3M and guided 2025 revenue growth of about 1.5% to 3.5% and operating margin of ~13% to 13.5%; said it will lay off about 5% of its workforce as a part of its restructuring plan.

• In Media: ROKU reported strong 4Q24 results, with revenue and gross profit coming in 4% and 9% above consensus, while EBITDA was $43M above consensus. Roku provided full-year 2025 guidance with gross profit guidance coming in ~3% ahead of consensus and EBITDA guidance ~$63M above consensus. WMG was upgraded to Buy at Citigroup saying on the heels of new contracts between SPOT and the labels, Citi expects some of this Gap to narrow as labels have secured price escalators independent of Spotify’s ARPU

• PANW delivered a Q2 print with key metrics above expectations including RPO (+21%-Y/Y), NGS ARR (+37%-Y/Y), Revenue (+14%-Y/Y), Product Revenue (+8%-Y/Y), and operating margin (+28.4%), and EPS and saw continued traction with its platformization strategy, newer focus areas.
• PCOR delivered a solid F4Q print, with better-than-expected revenue (+16% Y/Y-CC), cRPO (+19% Y/Y and up mid-teens excluding early renewals), and Total RPO (+29% Y/Y and the highest growth in six quarters) while slightly raised FY25 revenue (+12% Y/Y vs. +11% Y/Y prior) and Operating Margin (13%-13.5% vs. 13% prior).
• TWLO reported solid 4Q results with revenue increasing 11% YoY on accelerating messaging volumes, strong email revenues, and broad-based vertical/regional contributions; shares slip as Q4 EBIT and free cash flow were both in-line with the guidance, while the Q1 revenue growth guidance was slightly below consensus.

• AMD downgraded from Buy to Outperform at Daiwa and cut tgt to $130 from $170 noting management did suggest a strong 2H25 especially with the ramp of MI350, which was pulled into production earlier than planned in 2025 and will aid 2H revenue. MI400 to come out in 2026.
• INTC shares have rallied more than 26% this week on reports of the US government possibly getting involved with a plan involving both Intel and TSM
• NVDA revealed positions in quarterly filing as the firm exited its stakes in shares of SOUN, SERV, and NNOX (sending shares of all three lower) while revealed positions in both WeRide ADRs and NBIS
• As reported Thurs afternoon, the White House is reportedly in discussions to revise terms of US CHIPS Act awards, which could potentially postpose scheduled payments.