Closing Recap

Tuesday, February 25, 2025

U.S. stocks slid for a 4^th straight trading day as major averages drop below key technical levels this morning but managed to rally off lows starting around 11:30, paring losses throughout (and reclaiming some of those levels), ending well off the session lows as markets await NVDA earnings tomorrow night and PCE inflation data this Friday. The biggest drags in the S&P today were energy as WTI crude oil prices closed below $70 per barrel on tariff/confidence fears, technology and communications on large cap Mag 7 weakness, while the biggest winners were defensive consumer staples, healthcare, and REITS as another slump in Treasury yields made higher dividend paying stocks/sectors look more attractive. In other data today, U.S. single-family house prices increased in December, another blow to affordability alongside elevated mortgage costs, even as the housing supply increases. After hitting all-time record highs last week for the S&P 500, stocks have pulled back on slowing growth concerns for the economy.

Weaker consumer confidence economic data today (biggest decline since Aug 2021) added to the slowing U.S. growth concerns that are weighing on market sentiment in recent days. Potential tariffs/trading impact concerns (Trump has said tariffs on Canada and Mexico are set to move forward next week), recent commentary by Wal-Mart (WMT) by lowering guidance for the year, along with rising inflation data of late (CPI, UoM) have all impacted confidence. The decline in consumer confidence today echoes similar findings reported by the University of Michigan’s sentiment survey last week. Government job cuts, the Department of Government Efficiency (DOGE) are also raising fears that they will lead to a weaker labor market and hit consumer spending. Treasury yields dropped to about 4.3%, down 10-bps from the day prior while Bitcoin prices dropped below $87,000 as part of a broader selloff in cryptocurrencies. In geopolitical news, Ukraine agreed to a minerals deal with the U.S. as Kyiv will now give 50% of future mineral revenue to a joint fund—but gets no security guarantees. Meanwhile, Republicans who control the U.S. House of Representatives faced growing internal opposition to their current plan to advance President Donald Trump’s tax-cut and border agenda, prompting Speaker Mike Johnson to acknowledge that a planned vote might not happen on Tuesday.

• Richmond Fed composite manufacturing index +6 in Feb vs -4 in January; Richmond Fed manufacturing shipments index +12 in Feb vs -9 in January.
• U.S. home prices +0.4% in December from November according to U.S. regulator, while U.S. home prices index 436.1 in December and U.S. home prices +4.7% in 12 months through December.
• December 20-metro area home prices +4.5% (consensus +4.4%) from year ago vs +4.3% in November (previous +4.3%) as per S&P CoreLogic Case-Shiller data; December home prices in 20 metro areas +0.5% seasonally adj (consensus +0.3%) vs +0.4% in November (previous +0.4%).

• U.S. Treasury two-year yield drops to lowest since early December, down at 4.08% while the benchmark 10-year yield fell to 4.3%. A big range for Treasury yields after hitting lows of 3.60% in September before traders began pricing in higher odds of a Trump victory and reached 4.81% in January, a 14-month high, but has since slid 5-straight weeks to 4.3% (on track for a 6^th weekly of lower yields). Yields tumbled last Friday after data showed U.S. business activity nearly stalled in February, while consumer fears about inflation surged. Data on Monday further showed U.S. consumer confidence deteriorated at its sharpest pace in 3-1/2 years in February.
• The Japanese yen rose to its strongest level in more than four months against the US dollar as global risk-off sentiment and expectations of more interest-rate hikes from the Bank of Japan boosted its appeal. The JPY/USD hit lows around 148.60 before bouncing back above 149.

• In Retail: DDS Q4 total retail sales fell 1% compared to the 13-week period last year, hurt by weaker performing men’s apparel, accessories and shoes categories while EPS of $13.48 compared to $15.44 a year ago and retail gross margin for the quarter fell to 36.1% of sales compared to 37.7% a year ago. BYON reported a larger than expected Q4 EPS loss on weaker revs while Q4 orders delivered of 1.7 million, a decrease of 34% y/y and active customers of 5.4 million, a decrease of 4% y/y; KTB shares plunged after Q4 results just topped estimates but guidance for year below views with ES $5.20-$5.30 on sales $2.63B-42.69B below ests $5.37/$2.68B; AS said sees lower sales growth this year after a strong 2024, while Q4 results boosted by its expensive Arc’teryx brand.

• In Autos: TSLA shares tumble as much as 9% for its deepest-one-day slump since last July after fresh data showed the co’s sales in Europe dropping by almost half in January. Figures from the European Automobile Manufacturers Association showed TSLA sales dropping 45% in Europe, while overall sales of EVs in Europe jumped 37%.
• In Casino/Gaming/OSB: DKNG, FLUT, CZR, MGM, PENN shares were volatile as the prelim NJ budget was expected to come out today. Bank America noted that last week DKNG sold off hard following reports that the NJ gov is considering raising online gaming tax rates to combat the state’s $3B deficit. NJ currently has 14.25% tax for online and 17.5% on iCasino.

• CIVI was downgraded to Sector Weight at Keybanc after earnings last night and removes $84 PT following disappointing 2025 guidance forecasting a 4% y/y decline in oil, announces 10% workforce reduction, terminated employment of COO T. Hodge Walker.
• CTRA posted Q4 EPS beat vs. Street expectations driven by a 3% beat on oil and a ~6% beat on total volumes and maintained its F2025 initial outlook from November but is changing the mix of spending modestly by lowering Permian spending by $70mm and increasing Marcellus by $50mm.
• FANG delivered a ~12% beat of FCF vs. Street, driven by a combination of stronger volumes (oil +0.5%, total +4% vs. expectations) and better operating costs; lowered Midland basin well costs by ~$45/ft compared to post-Endeavor synergy targets; total Capital spending was ~6% below the prior outlook.
• SLB said it now expects its buyout of CHX to close by the end of the first quarter or early the second quarter of 2025. The deal is still under antitrust review in other regions, including Norway, where the country’s competition regulator is planning a phase II review.
• In Utilities & Solar: CWEN 4Q CAFD above consensus on EBITDA below the Street, FY25 guidance reiterated, and announced multiple growth investments and commercial agreements supporting its ability to achieve the upper half of its FY27 CAFD/share growth target. SHLS posted mixed Q4 results (EPS miss/revs beat), with Q1 revenue $70M-$80M, below consensus $99.01M and sees FY25 revenue $410M-$450M vs. consensus $443.23M; SRE shares tumble as Q4 EPS and revs fell well short of consensus while cut its FY25 EPS outlook to $4.30-$4.70 from $4.90-$5.25 (and below est. $5.15) while increases its FY26 long-term EPS growth view to 7%-9%. AI-backed power names space extends weekly declines with big losses in OKLO, VST, CEG, GEV, SMR among others.

• In Insurance: EVER shares jumped after Q4 results came in solidly above expectations, with revenue, VMM, and adj. EBITDA all noticeably above estimates while Q1 guidance calls for 73% y/y revenue growth at the midpoint with continued healthy margins; GSHD Q4 beat consensus on revenue, adj EBITDA, and EPS driven by higher contingent commissions, and it beat on written premiums by ~1%, while 2025 core revenue guide missed consensus by ~2%, but management pointed to conservative retention assumptions.

• BTDR reported Q4 revs $69M below the consensus $72.8M; as Q4 Gross profit was $5.1M vs. $27.0M y/y and net loss was -$531.9M vs. $5.0M y/y.
• RIOT mined $123M of Bitcoin during Q424, up 105% y/y, driven by the number of Bitcoin mined declining to 1,516 (from 1,630) and the average price of Bitcoin mined increasing to $81,234 (from $36,815).

• MRVI postponed its Q4 earnings results and intends to delay the filing of its 2024 Form 10-K, citing reasons including assessing the effectiveness of controls over financial reporting; said need to assess an error with respect to revenue recognition associated with a single shipment that resulted in approximately $3.9M.
• PFE announced yesterday that it has tapped Patrizia Cavazzoni, the former head of the FDA’s drug center, as chief medical officer; announcement immediately prompted criticism on social media about the “revolving door” between the FDA and industry.
• VCYT delivered solid 4Q24 results driven by outperformance in Decipher prostate (44% yoy growth) and Afirma thyroid (4% yoy growth); Q4 revenue of $119mn, slightly above consensus of $116mn on better EPS.
• ADUS Q4:24 adj. EPS of $1.38 (GAAP $1.07), vs. Street ests. $1.36, while adj. EBITDA of $37.8M topped Street ests. of 37.4M.

• Healthcare Facilities, Research, & Services: U.S. District Judge Colm Connolly ruled that the patents NTRA accused CDNA of infringing were invalid, dismissing Natera’s 2024 trial win over patent rights in DNA testing technology for kidney transplants; Natera plans to appeal the decision and pursue "all available remedies." HIMS reported top and bottom-line beats for Q4 but posted disappointing gross margins (77% vs. est. 78.4%), while issued guidance above views (recall shares tumbled last week after the FDA announced that the Semaglutide shortage is over).
• Life Sciences: The WSJ reported TMO is nearing a deal for Solventum’s (SOLV) purification and filtration business for $3.5-$4B, according to people familiar with the matter – WSJ https://tinyurl.com/5n7xzd2c  

• In Metals & Mining: CLF reported Q4 EPS loss (-$0.92), worse than the estimate loss (-$0.68) as Q4 revs fell -15% y/y to $4.33B vs. est. $4.43B and posted Q4 adj Ebitda loss $81M vs. profit $279M y/y saying results in 2024 were a consequence of the worst steel demand environment since 2010, impacted by auto production decline. AA warned that U.S. President Donald Trump’s plan to impose a tariff on aluminum imports could cost about 100,000 jobs across the United States, with CEO speaking at BMO Global Metals & Mining Conference in Florida.
• In Aerospace & Defense: PLTR shares fell for a 5th straight day hitting its 50dma support of $85.50, comes on DOGE budget cut concerns while the mgmt team set up planned insider sales; LUNR executive said on IM-2 mission to the moon, says "everything is ready to go" and says current value of contract with Intuitive Machines is $62.5M, up from $47M earlier.

• In AI: DeepSeek is accelerating the launch of the successor to January’s R1 model, according to three people familiar with the company, reported Reuters. DeepSeek had planned to release R2 in early May but now wants it out as early as possible, two of them said, without providing specifics. The company says it hopes the new model will produce better coding and be able to reason in languages beyond English. Details of the accelerated timeline for R2’s release have not been previously reported. https://tinyurl.com/jhyk2z6a . For Data center cooling names like VRT, DELL, ETN and others have been pressured over the last few weeks as UBS notes for VRT, the recent sell off is way overdone, as it implies >30% reduction in data center capacity growth vs what was priced in just 30 days ago. Notes VRT shares are down over 30% in the last 30 days (XLI -4%) on persistent AI infrastructure concerns (first DeepSeek, and now MSFT-related CAPEX concerns).

• TEM reported 4Q revenue rose 36% y/y to $200.7M (but below ests $203.1M) and EBITDA of -$7.8M. Formal FY25 guidance now incorporates the closing of the Ambry Genetics business – with revenue of $1.24B (vs. prior messaging of $1.23B pro forma) and adj EBITDA of $5M.
• UCTT reported mixed Q4 results (EPS beat/rev miss) and issued a soft Q1 2025 revenue guide (revs $505-555Mm vs est. $561.39Mm) due to China weakness and headwinds in Services from a struggling IDM customer.
• ZM delivered Q4 results above consensus, but guided FY26/Q1 below consensus, partly due to FX headwinds and prudent guidance by the new CFO; ZM closed its largest-ever CCaaS ARR deal (15K+ seats) while Enterprise revenue growth accelerated slightly Q/Q to 5.9% Y/Y and RPO/CRPO at the end of FY25 grew 6%/8% Y/Y.

• Chinese companies are ramping up orders for Nvidia’s (NVDA) H20 artificial intelligence chip due to booming demand for DeepSeek’s low-cost AI models, six people familiar with the matter said. The surge in orders, which is being reported for the first time by Reuters, underlines Nvidia’s dominance of the market and could help alleviate concerns that DeepSeek might cause a slide in AI chip demand https://tinyurl.com/2v436whv  
• NVTS guided for March quarter revenue to come below the firm’s forecast (sees Q1 revenue $13M-$15M below consensus est. $15.8M) with further industry headwinds impacting the business in the June quarter, followed by a sharp ramp in the second half.