Closing Recap

Tuesday, February 18, 2025

US equity futures held modest overnight gains on both the Nasdaq and S&P coming out of the long holiday weekend and had only the NY Fed manufacturing data on the pre-market economic calendar. Gold, oil, yields and the Dollar were also all-seeing gains ahead of the equities open. Equities rolled into the open, though, and by 10am both S&P and Nasdaq futures were in the red. Today’s Fear and Greed Index rose a few points to 47/100 (Neutral) from the prior reading of 44 (Fear). Last week’s reading was 43 (Fear) and last month was 37 (Fear). A year ago we were at 73 (Greed). By mid-morning, breadth favored advancers by 3:2 as small caps outperformed with IWM (+0.57%) versus SPY (+0.02%) and QQQ (-0.25%). Energy (+1.02%), Industrials (+0.89%) and Utilities (+0.85%) were outperformers among S&P sector ETFs, while Health Care (-0.12%), Consumer Discretionary (-0.33%) and Communications (-0.59%) led the underperformers lower with eight sectors gaining versus only three declining. AMZN, AAPL, META and GOOGL were among names in the red as big tech underperformed as well.

In noteworthy data @NicholasABrown highlighted mounting layoff announcements including 11% at Estee Lauder, 10% at Kohl’s corporate, 20% at Chevron, 15% at Southwest Airlines corporate and 3,000 jobs at Continental in its automotive segment. On housing, @charliebilello noted there are 1.8Mm active US home listings, marking the highest inventory since June 2020. Separately, he also pointed out that the S&P 500 is trailing international stocks so far this year at +4.0% versus +7.2% after over 16 years of US outperformance (but it’s only February). On contrary indicators, @KobeissiLetter noted the US professional and business services sector jobs have contracted for 17 consecutive months, losing 248,000 jobs since May 2023, while @RBAdvisors highlighted industrial production is strongly accelerating and he wonders whether the Fed may have to raise rates in 2025. Pick your poison, as they say.

Heading into the final hour of trading, stocks had moved back toward the unchanged mark. Breadth slipped back to about even, slightly favoring advancers by 1.1:1 as Smallcaps continued to outperform with IWM (+0.35%) versus SPY flattish and QQQ down modestly. Sector performance continues to hold with eight S&P sector ETFs in the green versus three in the red with Energy, Materials and Utilities outperforming and Health Care, Consumer Discretionary and Communications lagging. On a growth versus value basis, value was the clear leader today. The Russell 1000 Value was gaining 0.44% versus its Growth counterpart in the red at -0.38% as META, AVGO, NFLX, GOOGL, AMZN, MSFT and AAPL were all lower. Bitcoin prices slide of 2% to $94,000 and Treasury yields end day at highs (10-yr above 4.55%). Following a spike in the final minutes of the day, the S&P 500 (SPX) closed at a new record high of 6,129.57.

• U.S. February NAHB Housing market index 42 (below consensus 47) versus 47 in January; the index of current single-family home sales 46 versus revised 50 in January (previous 51); index of home sales over next six months 46 versus revised 59 in January (previous 60); index of prospective buyers 29 versus revised 32 in January.

• WTI March crude futures were volatile through the session but finished higher by $1.11/oz, or +1.57%, to settle at $71.85. Early news of a drone attack on a Caspian Pipeline facility pushed crude higher as the attack could reduce oil flows from Kazakhstan by 30%. The attack is said to have resulted in significant damage to a major pumping station with an estimated repair/restoration time of 1.5-2 months. Beyond the drone attack, investors focused on the potential for OPEC+ to delay production hikes set for April. Reports circulated later that Russian Deputy Prime Minister Alexander Novak had denied that OPEC+ was considering a delay. Brent also gained, settling +$0.62, or +0.82%, at $75.84/bbl.

• In Food & Beverage: CAG shares slipped after cutting its year EPS view to $2.35, below prior view of $2.45-$2.50 citing supply constraints and foreign exchange rates saying they experienced interruptions in customer service for frozen meals containing chicken and vegetables in Q3 due to supply issues on two product platforms. STZ shares rose early after Warren Buffett’s Berkshire Hathaway disclosed a new investment in the company on Friday as purchased 5.62M shares in Q4 as the stake worth $1.24B as of filing. HSY reaffirms its full-year 2025 financial expectations for net sales and EPS while saying the impact of foreign currency exchange rates is anticipated to be an approximate 30 basis point headwind to net sales growth for the full-year 2025.

• In Leisure Products: In Swimming pool, LESL was double downgraded to Underperform from Buy at Bank America and lower ests given disappointing F2025 EBITDA guidance, share loss weighing on top line growth, and muted free cash flow (FCF) generation limiting LESL’s ability to pay down debt.
• In Casino & Gaming: WYNN was upgraded to Buy from Hold with $118 tgt at Jefferies saying the development of Al Marjan Island and exposure to stable VIP/premium consumers as Macau recovers should be positive catalysts for shares while expects a sentiment shift to more mid-range valuation levels. RSI shares fell early after the Co noted in filing Colombian President Petro issued a temporary decree on 1/24 imposing a 19% Value-Added Tax (VAT) to be collected on player deposits made in the country with operators of games of chance and luck operated over the Internet.
• In Autos: auto supplier VC reported Q4 revenue that missed consensus estimates; CVNA removed from Stampede List at DA Davidson and maintains Neutral saying the firm tracks used retail unit data for each of the major traditional franchise auto dealers as well as KMX as a leading indicator as both of these leading indicators are showing positive trends in front of CVNA’s report on Wednesday. This suggests that CVNA is likely to see accelerating growth in Q424 but feels it is already in consensus estimates.

• In Utilities: CEG reported top and bottom line Q4 beat and affirms year outlook; ETR Q4 profit topped estimates (EPS $0.66 vs. est. $0.64) citing lower operating expenses and higher electricity demand (expenses fell to $2.07B from $2.47B y/y) and forecast its full-year 2025 profit between $3.75-$3.95 per share vs. est. $3.91; POR was downgraded from Buy to Neutral at Ladenburg due to the expected drag of equity on EPS growth. PCG was downgraded to Neutral from Buy at Guggenheim. EIX was upgraded to Buy from Neutral at UBS noting the stock has re-rated to a -52% ’27 P/E discount following the Eaton fire.

• In Business Support Services: HEES said it received a superior proposal from HRC in an offer that includes $78.75 cash and 0.1287 Herc shares per H&E share (total $104.89 per share); URI said it will no longer pursue the acquisition of HEES and will restart its repurchase program (HEES to pay $63.5M termination fee to URI).
• In Consumer Finance: Monthly Master Trust card data shows BAC credit card delinquency rate was 1.48% at January end and credit card charge-off rate were 2.43% in January; COF January net charge-offs 6.12% vs. 5.71% y/y and said delinquencies 4.61% vs. 4.78% y/y; DFS January credit card delinquency rate 1.80% and credit card charge-off rate 2.63% at Jan end – SEC filing; JPM credit card delinquency rate 0.88% at January and credit card charge-off rate 1.64% in January.

• BIIB and STOK signed a deal to co-develop and sell Stoke’s experimental drug for Dravet syndrome, outside the U.S.
• MRNA was downgraded to Equal Weight from Overweight at Barclays and cut tgt to $45 from $111, post the Q4 report as continues to believe in Moderna’s differentiated platform, but sees limited share upside due to policy risk and lack of other major clinical catalysts.
• RARE announces FDA acceptance and priority review of the biologics license application (BLA) for ux111 AAV gene therapy to treat Sanfilippo syndrome type A; priority review for Ultragenyx BLA with PDUFA date Aug 18, 2025.
• RCUS shares slipped after their 13.6M stock offering priced $11 each, a 16% discount to last close as the company plans to use gross proceeds of ~$150M to develop its experimental kidney cancer drug and for other purposes.
• REGN and SNY won FDA priority review of their application seeking expanded approval of their anti-inflammatory drug Dupixent for adults with the chronic skin disease bullous pemphigoid. Both co’s said the speedy FDA review is based on study results showing significant improvements in sustained disease remission with Dupixent compared with placebo. The agency has set a target action date of June 20 for the application.
• SLDB 35.74M Spot Secondary, priced at 4.03 after reporting positive initial clinical data from next-generation Duchenne Gene therapy candidate SGT-003; day 90 biopsy data reported from first 3 participants dosed in Phase 1/2 INSPIRE DUCHENNE trial.
• TEVA and ALVO said the FDA has accepted for review its marketing application for a biosimilar or close copy of REGN’s Eylea; says AVT06 is a proposed biosimilar of Eylea’s 2 milligram dose which is used to treat eye disorders like macular degeneration, macular edema and retinopathy.

• In Health Services: HIMS was downgraded to Equal Weight from Overweight at Morgan Stanley saying that while it continues to have a favorable view of the Hims & Hers platform, the strong momentum in the company’s business is now adequately appreciated in the shares. WGS shares rose after guiding FY25 revenue $350M-$360M, above consensus $338.77M and growth in exome/genome volume and revenue of at least 30%; Adjusted gross margins between 65%-67%. NEO shares tumbled on results as Q4 revs fall just short of consensus while backs its year revs and Ebitda outlook.

• In Building Products: VMC Q4 adjusted EPS $2.17 topped consensus of $1.75 in better revs $1.854B above consensus $1.81B saying aggregates-led business delivered a strong finish to the year; said pricing environment remains positive, inflationary pressures continue to moderate.
• In Transports: in airlines, LUV announced plans to cut 15% corporate jobs, or about 1,750 roles, in the first-ever round of layoffs in its history; the layoffs include 15% of the co’s senior management committee and the co estimates savings of $210 mln in FY25 and $300 mln in FY26, excluding lay-off related costs. A DAL regional jet flipped upside down upon landing at Canada’s Toronto Pearson Airport on Monday amid windy weather following a snowstorm, injuring 18 of the 80 people on board, officials said.
• In Chemicals: HUN reported 4Q24 EBITDA of $71M, compared to consensus of $74M as the company modestly beat in Advanced Materials (AM), while missing in Polyurethanes (PU) and Performance Products (PP) while guided Q1 below consensus. SHW announced the acquisition of BASF’s Architectural Paints business in Brazil for $1.15B in cash, or ~12x EV/ EBITDA after synergies.

• In Software: DDOG was downgraded to Peer Perform at Wolfe research saying FY25 growth guidance came in below expectations and their checks on the name leave them incrementally cautious on the future durability of growth while margins are also expected to contract this year.
• Quantum Computing: after a tremendous 2024, shares of quantum compute stocks tumbling to start 2025, with shares of IONQ, RGTI, QMCO, QUBT, QBTS extending declines this morning.

• SMCI was among top gainers in the S&P 500 early on, adding to gains last week post earnings.