Closing Recap
Monday, January 13, 2025
Index |
Up/Down |
% |
Last |
DJ Industrials |
358.67 |
0.86% |
42,297 |
S&P 500 |
9.18 |
0.16% |
5,836 |
Nasdaq |
-73.53 |
0.38% |
19,088 |
Russell 2000 |
5.17 |
0.24% |
2,194 |
The markets looked to start another week of 2025 the same way the last one ended: in the red. US Equity futures slid overnight and stayed there into the open with no economic news to guide markets and interest rate fears front and center with earnings fears lurking in the background. Both Nasdaq and S&P futures traded around their support pivots pre-market and faded below after the open with the Nasdaq underperforming. Early breadth favored decliners by 2:1 as Smallcaps were mixed versus the large-cap indices with IWM (-0.68%) versus SPY (-0.60%) and QQQ (-1.13%). Sector-wise, Energy (+1.74%), Materials (+1.14%) and Health Care (+0.44%) were early outperformers among S&P sector ETFs, while Communications, Technology and Utilities led the underperformers lower with six sectors gaining versus five declining. On a sentiment basis, there was small improvement but nothing the Fear & Greed Index remained at Fear with a 32/100 reading compared to 26 (Fear) last week and 48 (Neutral) last month.
In data of note today, household income growth expectations over the next year in the NY Fed Survey of Consumer Expectations came in at 2.84%, the lowest level since 2021. Separately, @bespokeinvest notes today is the first time the IWM has traded below its 200dma at any point in a trading session since 12/1/23. On energy, @MikeZaccardi highlights the XLE has enjoyed its best two-day move versus SPY since August 2022, ending the day higher by a little less than 2%. Lastly, @KobeissiLetter notes the S&P 500 is now trading below the November 5th level and has erased $2.5T of market cap in about four weeks.
Heading into the final hour of trading, equities were off their lows with S&P futures back to unchanged and Nasdaq futures still lower by about 0.6%. Bread had improved to about 3:2 still favoring decliners, but sector dispersion had improved to eight gainers versus only three decliners with Energy (+2.2%), Materials (+2.2%) and Health Care (+1.25%) as the primary outperformers and Communications (-0.10%), Technology (-0.8%) and Utilities (-1.1%) leading the underperformers lower. The Russell 1000 Value gained +0.74% to outpace its Growth counterpart at -0.73%. Stay tuned for PPI and CPI tomorrow and Wednesday as investors continue to seek indications for future Fed moves.
Commodities
- February gold futures rolled early and never really recovered as the Dollar and interest rates continued to hold an upward bias. Last week’s haven status trade may kick in again as we near inauguration day and face tariff uncertainty with the new administration, but for now gold is following equities as an interest rate trade. The February futures settled -$36.40/oz, or -1.34%, to $2,678.60 as the gold Fear and Greed Index remains Neutral at 51/100 versus Neutral last week, but down from Greed last month. We will see PPI tomorrow and CPI on Wednesday, so there will be plenty for investors to digest this week.
- WTI crude futures continued to see a lift from Russia sanctions concerns early in the session and never looked back. The view that sanctions would be sufficient to reduce Russian crude on the market helped offset supply glut concerns and provided support while better recent economic reports supported the demand side (despite the negative hit to equities outside energy). WTI February crude futures settled +$2.25/bbl, or +2.94%, to $78.82 (4-month highs) while Brent also gained $1.25/bbl, or +1.57% to $81.01.
Macro |
Up/Down |
Last |
WTI Crude |
2.25 |
78.82 |
Brent |
1.25 |
81.01 |
Gold |
-36.40 |
2,678.60 |
EUR/USD |
-0.0033 |
1.0211 |
JPY/USD |
-0.11 |
157.58 |
10-Year Note |
-0.01 |
4.788% |
Sector News Breakdown
Consumer Staples
- In Beauty: ELF was upgraded to Overweight at Morgan Stanley saying valuation looks compelling relative to outsized LT growth potential after a sharp pullback in the stock in H2 of 2024, with US scanner data leveling off recently to still solid growth, as well as strong LT growth for international/Naturium, and easier comps.
- In Food & Beverages: STZ was downgraded to Neutral at JP Morgan and cut tgt to $203 from $262 saying deterioration in consumer demand towards the end of FQ325, particularly in November, led to a miss in the quarter and a guidance cut to FY25.
- In Restaurants: PBPB said expects positive Q4 same store sales growth; prelim Q4 same store sales growth +0.2% to +0.3%; PZZA reports preliminary Q4 North America comparable sales down -4%; SHAK forecasts 2025 adj. EBITDA $200.0M-$210.0M vs. est. $206.7M and 2025 revs $1.45B-$1.48B above est. $1.43B as sees Q4 revs $328.7M vs. est. $325.7M.
Retail, Consumer Staples & Restaurants:
- AEO raises Q4 profit outlook; says holiday sales above expectations with growth across brands; American eagle outfitters Inc outlook Q4 operating profit expected to be about $135M.
- ANF forecasts FY net sales +15%, vs. prior forecast +14% to +15% (est. 15.2%), sees fourth-quarter net sales to between 7% and 8%, vs. previous 5%-7% forecast, in line with estimates of 7.5% growth.
- AS guides FY24 revenue to the high end of the previous guidance range of 16-17%.
- BOOT reports preliminary Q3 EPS $2.43 vs. consensus $2.05; sees preliminary Q3 revenue $608.2M vs. consensus $593.45M and guides preliminary Q3 same store sales growth of approximately 8.6%.
- DXLG lowers FY24 revenue view to $467M-$470M from $470M.
- FIVE sees FY24 adjusted EPS $4.78-$4.96 vs. consensus $4.93 and revs $3.84B-$3.87B vs. consensus $3.86.
- IRBT guides Q4 revenue to be about $171M vs. consensus $187.84M as well as GAAP operating loss of approximately ($59M) and non-GAAP operating loss of approximately ($47M).
- JILL reaffirmed Q4 and full year 2024 guidance in advance of its fireside chat and investor meetings at the 27th Annual ICR Conference; continues to expect net sales to be down 4% to 6% compared to the 14-week fourth quarter of fiscal 2023, total company comparable sales to be up 1% to 3% y/y.
- JWN reports holiday sales, updates outlook saying it expects 2.5%-3.5% comparable sales growth for fiscal 2024; says net sales increase of 4.9% and a comparable sales increase of 5.8% for nine-week holiday period ended January 4; expects revenue growth of 1.5 to 2.5% in FY24 vs 53-week fiscal 2023.
- LULU raises Q4 EPS view to $5.81-$5.85 from $5.56-$5.64 (vs. est. $5.66) and raises Q4 revenue view to $3.56B-$3.58B from $3.475B-$3.51B and now expects gross margin to increase approximately 30 bps relative to the fourth quarter of fiscal 2023, compared to its previous guidance of a decrease of 20 to 30 basis points.
- Macy’s (M) forecasts Q4 sales at to slightly below the low end of $7.8B-$8B; says comparable sales were roughly flat quarter-to-date; forecasts Q4 adj EPS in-line with $1.40-$1.65 range.
- URBN said total retail segment net sales increase 7%, comparable sales up 6% for two months ended Dec 31 and total company net sales increase 10% for two months ended Dec 31, 2024
- ZUMZ guides Q4 EPS $0.72-$0.77 vs. prior view $0.83-$0.93 (est. $0.89) and cuts Q4 net sales to $275M-$277M, below prior forecast $284M-$288M.
Homebuilders, Building Products, Home Furnishing:
- In Home Furnishing: RH was upgraded to Overweight at Morgan Stanley and raised tgt to $530 from $435 saying following three years of retrenchment in demand, weak housing turnover and margin compression, they believe RH is in the early stages of a positive inflection and long-term fundamentals can again dominate the conversation. ETD was downgraded to Hold from Buy at Argus saying the company is facing much uncertainty in the home furnishings market in the year ahead as sales are stagnant, orders are down, and margins are narrowing.
Energy, Industrials and Materials
- In Energy: Bank America with several changes in the E&P sector today, as EOG, CHRD and MGY are all downgraded to Neutral from Buy and upgraded RRC, GPOR and OVV to Buy. Bank America said they believe 2H25 is framed by tight gas balances that sets up for a material shift higher the forward curve, creating momentum around gas E&P’s that could shift valuations higher to $4.00 NYMEX – the new baseline for our Gas E&P valuations. DVN top oil pick, EQT deleveraging, CTRA gas overlooked.
- In Utilities: AEP upgraded to Buy from Underperform at Bank America following the announcement of a 19.9% minority sale of transmission holding company assets for $2.8B and the appointment of Trevor Mihalik as CFO. NEP was downgraded to market perform from outperform given the potential for persistently higher rates and the negative impact on both yield oriented names and especially renewable-exposed stocks. EIX tumbles a 6th straight day on Los Angeles wildfire concerns
- In Metals & Mining: CLF is partnering with rival NUE in a potential bid for U.S. Steel (X), whose takeover by Japan’s Nippon Steel was just blocked by the White House earlier this month, CNBC’s David Faber reported this morning. Cleveland-Cliffs would purchase all of U.S. Steel for all cash and then sell off the Big River Steel subsidiary to Nucor, the sources said. The offer would be in the high $30s a share. In gold miners, GOLD announced it will temporarily suspend operations at its Somilo and Gounkoto mines in Mali following the seizure of its gold stock.
- In Paper & Packaging: BALL was Reiterate Overweight, CCK was upgraded to Overweight and AMBP upgraded to Equal Weight from UW saying if the demand environment continues to normalize with inflation as the firm suspects, it sees an improved risk-reward set-up in 2025 across its packaging coverage. Consistent low-single-digit volume performance allows investors to shift their attention from volumes and onto shareholder returns, leverage ratios, and free cash flow, for which Morgan sees BALL and CCK screening most attractive.
- In Ag Chemicals: MOS (tgt to $30 from $26) upgraded to Neutral from Underperform and both CF (tgt to $105 from $79) and NTR (tgt to $58 from $50) were double upgraded to Overweight from Underweight saying the recent World Agricultural Supply and Demand Estimates report from the United States Department of Agriculture produced "decidedly constructive data" for the agriculture sector going into 2025. Piper said the significant shift in its agriculture outlook, which is almost always directed by grain fundamentals, is driven by substantial adjustment to the estimates for the recently harvested crop, especially corn and soybeans.
- In Industrials: HON, facing continued pressure from activist Elliott Investment Management, is set to proceed with a breakup, Bloomberg reported this afternoon citing people familiar with the situation.
Financials
- In Insurance: P&C insurer extend last week declines (ALL, AIG, CB, MCY, PGR, TRV) as the California wildfires could be the costliest disaster in US history, the state’s Governor said, as forecasts of heavy winds raised fears that the catastrophic blazes would spread further.
- In Asset managers: BEN reported preliminary month-end assets under management (AUM) of $1.58 trillion at December 31, 2024, compared to $1.65 trillion at November 30, 2024. This month’s decrease in AUM reflected the impact of negative markets and long-term net outflows of $18.9B. TROW preliminary month-end assets under management of $1.61 trillion as of December 31, 2024. Preliminary net outflows were $10.9B for December 2024, $19.3B for the quarter-ended December 31, 2024.
- In Financial Services: LZ was upgraded to Overweight at JP Morgan and raised tgt to $9 from $8 as sees a positive inflection point in overall business formations data and said has conviction that management will guide the midpoint of the 2025E Adj. EBITDA range at least 5% above the Street’s estimate.
- In Brokers: Barclays and JMP Securities raised their price targets on HOOD to $54 and $60 a share, respectively, up from $49 and $53. Both shops have buy-equivalent ratings on the stock. Barclays believes robust trading activity in the fourth quarter should help Robinhood deliver an earnings beat.
Biotech & Pharma:
- JNJ entered into a definitive agreement to acquire all outstanding shares of ITCI for $132.00 per share in cash for a total equity value of approximately $14.6 billion.
- LLY said it would buy cancer therapy developer Scorpion Therapeutics for up to $2.5 billion in cash, getting its experimental oral therapy, STX-478, which is currently being tested in early-stage trials for breast cancer and other advanced solid tumors.
- SAGE confirmed that BIIB has submitted to the Company an unsolicited, nonbinding proposal to acquire all the outstanding shares of Sage Therapeutics not already owned by Biogen for $7.22 per share.
- GSK entered into an agreement to acquire IDRx, a Boston-based, clinical-stage biopharmaceutical company dedicated to developing precision therapeutics for the treatment of GIST. Under the agreement, GSK will pay $1B upfront, with potential for an additional $150M success-based regulatory approval milestone payment.
- Also, several company updates ahead of the JP Morgan healthcare conference this week:
- ALNY forecasts 2025 net product revenues $2.05B to $2.25B, vs. est. $2.13B
- ARDX FY’24 total U.S. net product sales revenue of ~ $319M; reaffirms peak U.S. net IBSRELA sales revenue of greater than $1B; announces peak U.S. net XPHOZAH sales revenue of $750M; $250M in cash, cash equivalents.
- ARQT guided Q4 revs about $63M vs. est. $57.8M (above prior year $44.8M) and said would result in product revenue of about $160M for the full year, up more than fivefold from the 2023 total.
- CPRX guides 2024 total net rev slightly exceed upper end of latest guidance.
- MRNA forecasts 2025 revenue to $1.5B to $2.5B, below prior forecast $2.5B to $3.5B.
- REGN shares slipped after saying Q4 Eylea HD generated $305M in U.S. sales, missing forecasts for $411M, according to FactSet. Offsetting that, standard Eylea brought in $1.19B in U.S. sales, while analysts projected a slightly lower $1.07B; but standard Eylea benefited from $85M in one-time higher wholesaler stocking.
- RXST sees FY25 revenue $185M-$197M vs. consensus $187.35M; sees FY25 gross profit margin in the 71%-73% range. In addition, the company expects FY25 operating expenses in the range of $165M-$170M, including non-cash stock-based compensation expense guidance in the range of $22M-$25M.
Healthcare Services & MedTech movers:
- Health insurers, services, facilities: (UNH, CI, CVS, ELV, HUM) rise after the U.S. government on Friday proposed 2026 reimbursement rates for Medicare Advantage plans run by private insurers that will result in a 2.2% increase in payments, compared with a decline of 0.2% last year. OPCH guides prelim Q4 net revs $1.34B-$1.35B above est. $1.27B.
- MedTech: CDNA guides FY25 revenue $370M vs. consensus $363.04M and said well-positioned for another successful year of growth in 2025 and on pace to achieve targets of $500M in revs and 20% adj EBITDA in 2027. GH raises FY24 revenue view to $737M from $720M-$725M (est. $723.85M) and Q4 revs $200M vs. $188.9M; NVRO forecasts 2025 revs about $408M-$409M vs. est. $406.3M and Q4 about $105M-$106M vs. est. $100.1M. CSTL now expects to meet or exceed the top end of its full-year 2024 revenue guidance of $320-330M.
- Life Science (Diagnostics): EXAS revenues of $713M were ahead (+3%) of reset expectations, led by Screening, while trio of pipeline launches (CG+, MRD, MCED) remain on tap for 2025. HOLX revenues of $1.02B were ~in-line with Street (-0.2%), with Diagnostics ahead (+3%) while Breast missed (-5%) and EPS is expected to be at high-end of guide ($1-1.03 / Street: $1.01). NTRA saw another big beat (’24 average: 18%), with strong testing volumes (+26% y/y) and improved ASPs (as per Jefferies).
- Life Science (Tool): TXG saw big 4Q revenue beat (best % in 4 yrs) albeit against reset bar, with Instrument revenues encouraging especially for Chromium (+>40% q/q). RVTY core growth was nicely ahead (+6% vs +3-5% guide), while revenues of ~$730M were in-line with Street due to more adverse FX (-2% vs guide). QGEN announced ~$300M synthetic share repurchase, expected to be completed later this month (follows prior ~$300M in 1Q24), which should add ~$0.05 to 2025 EPS (+2%) – as per Jefferies.
- Diabetes sector: DXCM guides Q4 revenue $1.113B vs. consensus $1.1B and is also updating 2024 non-GAAP gross profit margin and non-GAAP operating margin guidance to 62% and 19% respectively.
Technology
- In Online: ETSY was upgraded to Hold from Underperform at Jefferies and raised tgt to $55 from $45, positive on the internet sector heading into 2025, citing a supportive macro backdrop and constructive valuations. Jefferies cites improved second half growth and a more balanced risk-reward on the shares for the upgrade of Etsy. The firm also downgraded PINS to Hold from Buy (tgt to $32 from $40) on expectations of slower Performance+ rollout and margin growth against its "more muted" advertising checks. Top picks UBER, Z, APP, TTWO.
- In Software: CWAN to acquire ENFN for $11.25 per share in cash, stock; Clearwater will pay $30M to terminate Enfusion’s tax receivable agreement; deal equates to a purchase price of approximately $1.5B. Morgan Stanley upgraded WIX and SEMR in 2025 software outlook saying improving demand with a cyclical spend recovery and secular tech cycle, conservatism in forward outlooks and discounted valuations relative to broader software drive our positive view on SMB & front office software. SNOW tgt raised to $200 at Oppenheimer, keeping as a top pick in 2025 as see good support for improving consumption with room for upside from new products, expanding AI use, and better margins.
- Communications and Networking: CMTL posts Q1 operating loss of $129.2M and said it is not providing guidance; also says turnaround exec Ken Traub has replaced John Ratigan as president and CEO to explore strategic alternatives.
Semiconductors:
- ARM is developing a long-term strategy to hike prices by as much as 300% and has discussed designing its own chips in a move to compete with its biggest customers, Reuters reported this afternoon. It licenses the intellectual property that AAPL, QCOM, MSFT, and others use to design their chips, charging a small royalty for each chip produced with Arm technology.
- Shares of chip companies NVDA, AMD, AVGO and others decline after the U.S. government says it would issue a new regulation designed to control access to U.S.-designed artificial intelligence chips and technology by other countries – curbs will take effect 120 days from publication. Also, a report in the Information noted some of NVDA’s biggest customers are facing new delays in getting its most advanced AI chips up and running in data centers, having been plagued by overheating as well as glitches involving the way the chips connect.
- Semi equipment: both COHU and ICHR were downgraded from Buy to Hold at Needham to reflect its view that both the front-end and back-end equipment cycle in the next two years will be mild. Needham believes to justify the current valuation, COHU and ICHR must grow at 30% and 25% CAGR, respectively, over the next two years. Also, Needham upgraded KLAC from Hold to Buy w/ $750 PT saying when the time gets tough, KLAC outperforms. Semicap customers may hold back capacity expansion in the face of uncertainty, but they will not hold back technology upgrades.
- Cantor initiated on the mid-cap process control group of ONTO (OW), NVMI (OW), and CAMT (Neutral) – with upside to price targets across the group supported by the underlying secular growth opportunity in process control given complexity inflections across the front-end (i.e., GAA, BSPD, 4F2, etc.) and advanced packaging (i.e., HBM, CoWoS, PLP, etc.). All 3 of the names we are initiating on today will benefit from this underlying growth story, though each has unique strengths and opportunities.
Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.