Closing Recap

Wednesday, February 26, 2025

Following a four-day losing streak in the S&P, US equity futures enjoyed overnight gains. With no big economic news this morning and only one Fed speaker out today, perhaps we break the downward trend. Investor sentiment has been quick to retrench with the Fear & Greed Index remaining at Extreme Fear (25/100) for a second day this week versus 22/100 yesterday, 46/100 (Neutral) last week and 42/100 (Fear) last month. That said, early breadth favored advancers by almost 5:2 as small caps outperformed with IWM versus SPY and QQQ. Early sector performance saw Technology, Consumer Discretionary and Industrials as outperformers among S&P sector ETFs, while Health Care, Energy and Consumer Staples led the underperformers lower with eight sectors gaining versus three declining. 

In data of note today, @KobeissiLetter again pointed out the affordability issues in today’s economy. They noted homebuyer conditions dropped to the 3rd lowest on record in February, the index of buying conditions for vehicles dipped to near the lowest since 2022, buying conditions for large household durables moved sharply lower and wage growth has failed to keep up with inflation in these categories since 2020. Not a great picture for consumers. Kobeissi separately noted the number of Bloomberg news stories on layoffs has doubled over the past three weeks as layoffs jumped to 15,561 last week (most in almost a year). On inflation, @RyanDetrick noted consumers are expecting big jumps in inflation (mostly aligned by political party), but the @AtlantaFed Business Inflation Expectations is in-line with much of the past decade. Also on inflation, @RBAdvisors pointed out again that recent data suggest the trend in inflation expectations is not anchored and wondered whether the Fed will have to raise rates in 2025.

Heading into the final hour of trading, US equities were slightly in the red for both the S&P 500 and Nasdaq after more midday tariff headlines. Breadth continued to hold in favor of advancers, but only by a slight margin as small caps continued to outperform with IWM leading versus SPY (-0.05%) and QQQ up slightly. S&P sector performance slipped to only four sectors, gaining versus seven declining with Technology, Utilities and Industrials as outperformers versus Health Care, Energy, and Consumer Staples underperforming. On a growth versus value basis, both were in the red, but growth was the better of the two. The Russell 1000 growth was off only 0.04% versus its Value counterpart down 0.38%. Tonight we get earnings from NVDA, which surely will take a large role in steering the markets tomorrow. We also will see Initial Jobless Claims and GDP at 8:30am. With a late day bounce, the S&P and Nasdaq snapped their 4-day losing streaks.

• US mortgage market index -1.2% to 212.3 in week ended Feb 21; US mortgage purchase index climbs 0.2%, refinance index falls 3.6% and the average 30-year mortgage rate falls 5 bps to 6.88% in Feb 21 week, lowest since mid-December 2024 as per weekly MBA data.

• WTI March crude futures trended sideways overnight before slipping into negative territory early. Even a weekly crude stocks draw versus an expected build failed to move futures back to gains, eventually settling down $0.31/bbl, or -0.45%, at $68.62. Ongoing tariff impact fears, consumer confidence worries and hopes for an end to the Ukraine/Russia war (including potential for easing of Russia sanctions) pressured futures though the session to the lowest levels of the year. Brent similarly finished the session lower by $0.49/bbl, or -0.67%, at $72.53.
• The U.S. dollar index (DXY) and Treasury yields reversed earlier gains, both ending near lows of the day as the 10-year yield fell for a 6^th straight day to 4.25%. Signs of deceleration in the U.S. economy and concerns about the impact of U.S. policy sent investors searching for refuge in safe-haven bonds in recent weeks and today was no different. Crypto prices also tumbled as Bitcoin declined over 6% to around $83,000, lowest since early November.

• In Retail: TJX reported positive quarterly results, rebounding after its TJ Maxx and Marshalls brands saw softer-than-anticipated sales last quarter, but forecast its annual comparable sales growth below Wall Street ests as sees Fy comp store sales to grow 2%-3% for FY26, vs. analysts’ average estimate of a 3.4% rise. In home improvement retail, LOW reported better results and guidance following HD results the day prior.
• In Food & Beverages: GO shares slipped after guiding FY25 EPS $0.70-$0.75 below consensus $0.87 while 4Q performance was soft, with worse-than-feared profitability overshadowing better-than-expected traffic-driven comps; BUD shares bounced after Q4 results and CEO notes tariffs on steel and aluminium will have a limited impact on Anheuser-Busch InBev in 2025 thanks to factors like hedging.

• In Delivery: CART reported Q424 results whereby GTV came in at the high end of guidance, while EBITDA was $12M above the high-end of guidance (in line with the Q324 EBITDA beat). While Q125 GTV guidance came in marginally above consensus, Q125 EBITDA guidance was ~5% below consensus.
• In Casinos & Gaming: CZR company-wide EBITDAR of $882M was -3% vs. consensus, as Las Vegas results were weaker than expectations; Las Vegas revenue and EBITDAR missed expectations by 1% and 2%, respectively, and ended 2024 down 4% YoY and 6% YoY, respectively.
• In Autos: GM said it will increase its quarterly dividend by 25% and undertake a new $6 bln share buyback program; LCID initiated FY25 vehicle production guidance of 20,000, after delivered 10,241 vehicles and produced 9,029 vehicles. LCID was downgraded to Underperform at bank America as thinks departure of CEO Peter Rawlinson more consequential than understood by market and expects product development to stall & consumer demand could be dampened; in auto retail, AAP posted Q4 but 2025 comp sales view weighs on shares.

• In Solar: FSLR reported revenue 1% above consensus but missed on gross margin due to multiple factors including Inflation Reduction Act credit sales, warranty charge, module shipment delay, and warehousing costs. FSLR reported mixed Q4 results as its gross margin results and guidance were below expectations, but shares rise on better than feared guidance as analysts note 2025 revenue guidance of $5.55B at the midpoint seen as a positive given weak 2025 revenue guidance was a key concern going into the results; shares of CSIQ, DQ, JKS, ENPH, SEDG, RUN among other names moving higher in reaction early in beaten-up solar space.

• In Financial Services: INTU FQ2 revenue solidly above estimates (4%) across all key segments (Credit Karma, Small Biz Segment) and op. margin and EPS were significantly better than expected while online Ecosystem ex Mailchimp growth reaccelerated to 25% Y/Y after 8 quarters. FICO was upgraded to Outperform at RBC Capital and raised tgt to $2170 from $2040 saying the recent stock sell-off, fueled by concerns about GSE privatization, nomination of new FHFA Director, potential risks to FY25 guidance has created an attractive buying opportunity.
• In Insurance: LMND slips early as Q4 results better with EPS loss (-$0.42) vs. est. loss (-$0.60); Q4 revs rose 29% y/y to $148.8M vs. est. $144.9M but shares fall on weaker guidance as sees Q1 revs $143M-$145M vs. est. $151.4M and 2025 revs $655M-$657M; PRCH shares soared after results, prompting an upgrade to Buy at Loop Capital noting the company fell short on total revenue, but it exceeded expectations in terms of profitability, and looking ahead to 2025, the management believes they can maintain an 80% gross margin.

• GNL said it is selling its multi-tenant portfolio to subsidiary of RCG Ventures Holdings for about $1.8B and plans to use proceeds to lower balance on its Revolving Credit Facility, aiming for investment-grade credit rating; the firm said it is expecting to save $6.5M annually in G&A expenses; announces $300M share repurchase program
• NHI Q4 results were highlighted by continued improvement in underlying fundamentals within its triple-net and SHOP segments, and additional progress around new investments. Results for the quarter slightly exceeded consensus. Initial 2025 NFFO guidance missed consensus by 1.2% at the midpoint.
• RLJ 4Q24 adjusted EBITDA and adjusted FFO beat expectations, with RevPAR growth and hotel EBITDA margins outperforming our assumptions. Notably, ADR growth drove the better-than-expected RevPAR growth and was the best ADR growth since 1H23.

• AZN said that its experimental breast cancer treatment, Camizestrant, improved patient survival without the disease getting worse in a study, a positive outcome in the development of the therapy key to the company’s pipeline.
• LLY said it plans to spend at least $27 billion to build four new manufacturing plants in the U.S., which will be built over the next five years, and are expected to create more than 3,000 jobs for skilled workers like engineers and scientists as well as 10,000 construction jobs, the company said.
• MDGL reported Q4 and FY’24 Rezdiffra net sales of $103M and $180M respectively; as of year-end 2024, more than 11,800 patients on Rezdiffra; cash, cash equivalents $931.3M; reported positive 2-yr results from the open-label compensated MASH cirrhosis (F4c) arm of the Phase 3 MAESTRO-NAFLD-1 trial of Rezdiffra (resmetirom).

• In Medical Equipment: MASI announced Q4 revenue of $601M/+9% cc that was consistent with the company’s preliminary release in January, while adjusted EPS finished at $1.80 on the back of strong HC OM% and raised its 2025 guidance.

• In Aerospace & Defense: AXON reported strong Q4 results, sending shares higher as EPS of $2.08 topped consensus $1.43 on revenue of $575.1M, up 34% y/y (vs. consensus $566.7M), on adjusted EBITDA of $142.0M, up 56% y/y (consensus $138.7M) in the quarter and provided upside rev guidance. ASTS said secures $43M contract in support of U.S. Space Development Agency through prime contractor. LUNR shares rose as the co is for the launch of its second moon lander, as six-legged lander, named Athena is encapsulated atop a SpaceX Falcon 9 rocket at NASA’s Kennedy Space Center in Florida ahead of its launch scheduled for 7:17 pm.

• In Lithium sector: SBSW said it will not go ahead with plans to invest in the Rhyolite Ridge lithium project in the U.S. state of Nevada, after the price of the rare metal plunged. Sibanye said after reviewing updated studies on the planned lithium mine, a decision was taken not to proceed with additional investments.
• In Chemicals: NGVT was upgraded to Outperform at BMO Capital and raising tgt to $65 saying with an activist (Vision One) now in NGVT, the firm believes investors are better protected from downside risks and should enjoy the coming lift tied to NGVT’s improved EPS/FCF.

• CHKP was upgraded to Overweight at JP Morgan with $255 tgt as thinks the timing of recent platform investment, along with recent management changes, is significant as the company is well positioned to benefit from a Quantum product cycle gaining momentum.
• KEYS 1Q adj. EPS of $1.82 was a $0.13 beat vs Street driven by revenue and margin upside as 1Q orders grew 4% y/y; guides Q2 revs $1.27-1.29B vs est. $1.274B and adj EPS $1.61-1.67 vs est. $1.59.
• WDAY Q4 results beat as cRPO growth of 15.2% came in ahead of expectations of 14.3%, and the Company issued better FQ1 cRPO growth guidance of 14.5-15.5% vs the Street’s 13.9%; also, FY26 subscription revenue growth of ~14% is reiterated, and OM outlook is ticking higher to 28% (vs. 27.5% previously).
• WK delivered solid Q4 results, with a ~$5M topline beat and EPS in-line with Street’s expectations, as customers over $500K ACV grew 32% y/y; also provided an upbeat CY26 outlook as subscription revenue growth is expected to remain in the 20% range and margins modestly expand.
• ZETA delivered upside across the board with revenue growth of 50%, 31% organic ex-political, showing no deceleration from Q3; FY/25 guidance was raised, but Q1 revenue guidance being in-line is the primary area of pushback from strong print.
• ZI shares jumped after Q4 results delivered upside expectations, and Piper upgraded to Neutral though noted that operational challenges remain elevated despite better-than-feared results and Q4 revenue declined y/y for the third consecutive quarter along with a tepid Q1 outlook.

• SMCI shares surged after the company met a deadline from Nasdaq to submit delayed regulatory filings in order to avoid delisting. After the close on Tuesday, Super Micro filed updated quarterly reports for its fiscal year ended June 30, 2024, as well as quarters ended Sept. 30, 2024, and Dec. 31, 2024.
• ON filed an 8-K and announced on February 24, 2025, that it initiated a Company-wide restructuring plan that will impact all business groups, including the worldwide manufacturing organization.
• Chinese AI startup DeepSeek on Wednesday introduced discounted off-peak pricing for developers looking to use its AI models to build their own products, its website showed. The company said the cost of using its API, a platform that allows developers of other apps and web products to integrate its AI models, would be up to 75% cheaper.