Market Review: January 16, 2025

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Closing Recap

Thursday, January 16, 2025

Index

Up/Down

%

Last

DJ Industrials

-68.42

0.16%

43,153

S&P 500

-12.57

0.21%

5,937

Nasdaq

-172.94

0.89%

19,338

Russell 2000

3.50

0.15%

2,266

 

 

 

 

 

 

 

 

 

After a massive move higher on Wednesday following market friendly consumer price index (CPI) inflation data, Thursday was more a digestion day, as major averages finished down ahead of January option expiration tomorrow. Interest rate sensitive stocks/sectors outperformed, as Utilities (XLU), REITs (XLRE) rose more than 2.2% (both at highs) as Treasury yields dropped to weekly lows (10-yr at 4.60%, down from highs above 4.8% earlier this week), helping boost high divided paying sectors. Industrials, Energy and Materials also advanced while Consumer Discretionary and Technology (behind AAPL weakness which is down -8% YTD so far) lagged. In stock news, managed care stocks fell on UNH revenue figures, banks were mixed following another heavy dose of earnings results (MS, BAC, PNC, USB, MTB), semiconductors outperformed after TSM results, luxury retailers outperformed (RL, TPR, EL) following upbeat sales from Europe’s Richemont, crypto bounced as Bitcoin topped $100K.

 

Fed Governor Chris Waller did all he could to talk up chances of rate cuts this year, saying in a CNBC interview markets are underestimating the schedule of upcoming Fed rate cuts. “As long as the data comes in good on inflation, or continues on that path, I could see rate cuts happening sooner than the markets are pricing in,” Waller said. Even after some good news on inflation yesterday, futures markets reflected less than 50-50 odds that the Fed would cut by another quarter point before June. Waller reiterated several times during the interview that interest rate cuts in the first half of 2025 are highly plausible. Fed’s Goolsbee later noted to the WSJ that he was more comfortable that the labor market is stabilizing. Scott Bessent, U.S. President-elect Donald Trump’s choice to head the Treasury Department, on Thursday said that extending Trump’s 2017 tax cuts that are set to expire at the end of this year is “the single most important economic issue of the day.” “If we do not renew and extend, then we will be facing an economic calamity,” Bessent told the U.S. Senate Finance Committee. “We will see a gigantic middle class tax increase.”

Economic Data

  • U.S. Dec import prices +0.1%, in-line with estimates and vs Nov +0.1% while export prices +0.3% vs. consensus +0.2% and vs Nov unchanged. Dec non-petroleum import prices +0.2%, year-over-year +2.4%
  • Weekly jobless Claims climbed to 217,000 from 203,000 prior and vs consensus 210,000; the 4-week moving average fell to 212,750 from 213,500 prior week; continued claims fell to 1.859M from 1.877M prior week (vs. est. 1.871M) and the US insured unemployment rate unchanged at 1.2%.
  • January Philadelphia Fed index surges to 44.3 vs. est. -5 in very strong print; the prices-paid index 31.9 vs 26.6, prices-received at 29.7 vs 5.6, employment index at 11.9 vs 4.8 and Fed new orders index at 42.9 vs -3.6
  • December Retail Sales Ex-autos +0.4%, in-line with consensus and vs Nov +0.2% while overall retail sales rise +0.4%, slightly below consensus +0.6% and vs Nov +0.8%; Dec gasoline sales +1.5% vs Nov +0.2%; Dec cars/parts sales +0.7% vs Nov +3.1% and Dec Retail Sales Ex-autos/gasoline +0.3% vs Nov +0.2% (prev +0.2%).
  • January NAHB Housing market index 47, above consensus 45 and vs. 46 in December; index of current single-family home sales 51 versus 48 in December; January index of home sales over next six months 60 versus 66 in December and January index of prospective buyers 33 versus 31 in December
  • Nov Business Inventories +0.1%, in-line with consensus and vs Oct unchanged (prev +0.1%); Nov business sales +0.5% vs Oct unchanged (prev unchanged); Nov retail inventories ex-autos revised to +0.5% (prev +0.6%); Nov inventory/sales ratio 1.37 months’ worth vs Oct 1.37 months.

Commodities, Currencies & Treasuries

  • U.S. WTI crude oil futures fell -$1.36 to 1.7% to settle at $78.68 per barrel after rising 2.6% in the previous session to their highest price since July 19th and Brent falls -$0.74 or 0.9% to settle at $81.29 per barrel. The ceasefire in the Gaza Strip should start on Sunday as planned, despite the need for negotiators to tie up a "loose end" at the last minute, U.S. Secretary of State Antony Blinken said. U.S. natural gas futures continue gains, prices up by 5% at two-year highs on forecasts that extreme cold will boost demand to record highs.
  • February gold gains $33.10 of 1.22% to settle at $2,750.90 an ounce. Treasury yields fall about 5 bps to 4.6% for the 10-year after tumbling over 14 bps on Wednesday behind market friendly economic data (colling of PPI, CPI inflation readings this week). Bitcoin moves back above $100,000 while the dollar index (DXY) slips back below 109. JPY, CHF and EUR were the best performing currencies, while CAD, BRL and MXN were the worst on the day.

 

Macro

Up/Down

Last

WTI Crude

-1.36

78.68

Brent

-0.74

81.29

Gold

33.10

2,750.90

EUR/USD

0.0013

1.0302

JPY/USD

-1.25

155.22

10-Year Note

-0.051

4.653%

 

Sector News Breakdown

Retail, Consumer Staples & Restaurants:

  • In Large Cap Retail: TGT guided Q4 comparable sales about +1.5%, above prior view of about flat, and vs estimate +0.18% while still sees adjusted EPS $1.85 to $2.45 vs. estimate $2.19; still sees adjusted EPS $8.30-$8.90 vs. estimate $8.67. SYM shares after acquiring WMT’s advanced systems and robotics business for $200M in cash to develop an "advanced solution" to automate Walmart’s Accelerated Pickup and Delivery centers, with an initial order covering hundreds of stores. SYM was also initiated at new Outperform w/ $35 PT at Oppenheimer as sees the company disrupting the warehouse and distribution center market.
  • Luxury retailers rallied after Richemont (CFRUY) reported a 10% increase in Q3 sales, much better than the 1% increase expected by analysts as its core jewelry business, which includes brands such as Cartier and Van Cleef & Arpels, recorded a 14% rise in sales, compared to a 5% analyst consensus; said it saw double-digit sales growth in the Americas, Europe, the Middle East, Africa and Japan (EL, TPR, RL, BURBY, LVMUY, PPRUY were active).
  • In Other Retail UAA was downgraded to Hold from Buy at Argus noting they continue to expect revenue to decline by about 10% in FY25 and while UAA is showing margin improvement, revenue in all segments is down. Lastly, the co says guidance from management still shows struggles ahead. Mattress retailer TPX shares advanced after Piper noted their PSC Mattress Retailer Survey, which includes input from ~15 retailers representing ~450 stores, demonstrated continued improvement as Q4 (Oct-Dec) was the strongest quarter in 3 years, and marked a notable improvement from Q3 at -MSD% y/y.

Autos, Leisure, Gaming & Lodging:

  • In Autos: auto parts supplier DAN was upgraded to Buy from Hold and raise PT to $18 from $11 at UBS believing the company can use the proceeds from the previously announced potential sale of their Off-Highway (OH) business to de-lever and have more value accrue to the equity. In EVs’ Cantor said they expect the potential removal of the $7,500 EV Tax Credit, continued advancement in autonomous technology (via the integration of AI and software), and the implementation of new tariffs to play material roles in the demand for EVs. PSNY shares fell after the electric-vehicle maker posted disappointing quarterly revenue and lowered rev guidance

Energy

  • In Energy: BP is eliminating 4,700 positions internally, about 5% of its workforce, and more than 3,000 contractor jobs, Chief Executive Officer Murray Auchincloss told staff on Thursday. TALO announced that the Katmai West #2 well encountered hydrocarbons in line with expectations; production is expected to begin late in 2Q25, with a ramp to 15-20 mboe/ d gross (70% oil). The largest gasoline pipeline in the US will remain shut through Friday, prompting East Coast fuel terminals to limit supplies. Nat gas producers AR, CTRA, EQT, RRC, CRK continue to gain as temperatures across the U.S. remain colder than normal.
  • In Solar: FSLR was upgraded to Buy from Neutral at Seaport Research with a $274 price target calling it their favorite utility-scale solar name for 2025 with the best risk/reward profile specific to policy. ENPH was downgraded to Hold from Buy at Truist and cut its tgt to $65 from $100 as sees incremental growth headwinds persisting for the next several quarters and notes shares are "already trading at a meaningful premium to peers. While Truist ultimately expect policy revisions/pullbacks from the Trump admin to be less punitive than currently implied by group multiples, they stay highly selective ahead of/into the first 100 days, buying GEV for diversification/AI power demand & FSLR for U.S. manufacturing.
  • In Utilities: CNP submitted a letter to the Public Utility Commission of Texas (PUCT) declaring they had reached a non-unanimous settlement in their Houston Electric rate case, with details to follow in the next week. Bank America reiterates Buy on PCG, SRE, EIX as they walk through various AB 1054 wildfire fund scenarios in light of ongoing uncertainty. The firm lowered tgts EIX to $78 and PCG to $21 to reflect elevated wildfire risk. Nuclear power stocks SMR, OKLO, NNE, NRG, CEG, VST among movers this morning after Trump Treasury Secretary pick Scott Bessent said during his confirmation meeting that he was in favor of more nuclear power plants.

Banks, Brokers, Asset Managers:

  • Reporting season kicked off yesterday with substantial earnings beats from JPM, GS, C, BLK, BK and WFC Financials are expected to have a particularly strong 4Q, helped by easy prior year comps at the largest banks. Earnings this morning included:
  • BAC Q4 EPS $0.82 vs. est. $0.77 on revs $25.35B vs. est. $25.13B; Q4 net interest income $14.36B, vs. est. $14.12B; Provision for credit losses $1.45B, vs. est. $1.57B; forecasts yr noninterest expense about 2%-3% above 2024 levels; said anticipate a stronger 2025 for dealmaking, helped by President-elect Donald Trump’s vow to implement pro-business policies; Q4 investment banking fees jumped 44% to $1.7B in Q4 y/y.
  • MS shares rise as Q4 EPS $2.22 topped consensus $1.69 on better revs $16.22B vs. est. $15.03B as Q4 equities trading revs $3.33B beat est. $2.63B and Q4 wealth management revs $7.48B vs. est. $7.32B; Q4 investment banking revenue rose 25% to $1.64B (similar to GS, JPM strength day prior).
  • MTB shares fall as Q4 EPS $3.92 vs. consensus $3.74; Q4 CET1 capital ratio 11.67%; Q4 net charge-offs .47%; Provisions for credit losses rose to $140M from $120M, total assets rose to $211.9M from $208.6M.
  • PNC Q4 EPS $3.77 vs. est. $3.31; Q4 revs $5.57B vs. est. $5.5B; Q4 tangible book value per share $95.33, Q4 CET1 capital ratio 10.5% and provision for credit losses $156M; sees Q1 revenue down 1%-2% vs. Q4; sees Q1 average loans down about 1% and net interest income down 2-3%.
  • SNV Q4 EPS beat $1.25 vs est. $1.20 on higher NII, fees, and lower taxes; partially offset by provisions; the NIM increased 11bps to 4.39%, loan yields declined 11bps to 7.47% vs our 7.45% estimate.
  • USB shares fell after results; Q4 EPS $1.07 above est. $1.05 and revs $7.01B vs. est. $6.99B; said sees Q1 net interest income (NII) relatively stable vs. $4.18B in Q4, sees FY25 revenue up 3%-5% vs. $27.6B in FY24, vs. consensus $28.67B; provisions for credit losses rose to $560M in Q4 from $512M y/y; Q4 net interest margin  fell to 2.71%, compared with 2.78% in the year-ago period.

Financials Services, Bitcoin, FinTech, Payments:

  • Brazilian payment companies STNE and PAGS both downgraded to Neutral from Buy at Citigroup saying with challenges stemming from rising interest rates (CITI macro team forecasts the Selic to reach 15.5% by June), these acquirers are expected to face significant financial expenses headwinds. Citigroup said the recommendation now is to avoid the industry, as the economics are under pressure, and it doesn’t see a light at the end of tunnel.
  • In Financial Services: TRU is buying a majority stake in its Mexican arm, buying out several major banks in a deal worth around $560 million. TransUnion’s stake in Trans Union de Mexico will come up to around 94%, from a current 26%, it said in a statement.
  • In FinTech: Two technology trade groups sued the U.S. Consumer Financial Protection Bureau (CFPB) to block a new rule giving the regulator supervisory authority over payment apps and digital wallets from large non-banks. NetChoice and TechNet said Congress did not give the CFPB free rein to aggressively, arbitrarily and capriciously police large non-banks offering consumer financial services through such products as AAPL Apple Wallet, Google Pay and Venmo.

Biotech & Pharma:

  • ATRA shares tumbled after the FDA declined to approve company’s cancer therapy tabelecleucel based on observations made during an inspection of a third-party manufacturing facility for the therapy.
  • NVO shares active as Denmark’s Prime Minister Frederiksen summoned business leaders who are concerned about a possible trade conflict with the U.S. over Greenland, a major lobby group said on Thursday after business leaders, including CEO of obesity drugmaker Novo Nordisk, met with the government.
  • REGN was downgraded to Neutral from Buy at UBS and lowering its PT to $738 from $1,130 as believes there is a disconnect between the market’s shorter-term focus on Eylea revenues vs REGN’s focus on building a long-term sustainable business. Eylea high dose adoptions are still limited at this stage, and with the backdrop of branded and biosimilar competition UBS doesn’t expect an inflection in the near-term.
  • In Managed Care: UNH shares fell after reported 4Q revenues of $100.8B (vs. $101.8B est.), with lower premiums and mixed Optum performance (worse OptumHealth + Insight vs. better Rx). MCR was 87.6% (vs. 86.5%, 110 bps higher) – with the company noting that previously cited headwinds continued at similar levels in 4Q and are contemplated in their 2025 outlook.
  • In Medical Research: CRL shares fell after Jefferies noted CITES, an int’l treaty governing trade of endangered species, released a statement recommending suspension of Cambodian NHP exports. The firm estimates that 32-49% of CRL’s NHP supply comes from Cambodia, which translates to $1.25 of EPS at risk.

Transports

  • In Airlines: LUV was downgraded to Sell from Neutral at Citigroup and cut tgt to $29.50 from $31.50 saying the airline now trades at a bigger P/E premium to the airline group than it did pre-COVID and over time, see Southwest’s valuation correcting to more normalized levels. AZUL was upgraded to Buy from Neutral at Seaport.
  • In Freight/Shipping: UPS was upgraded to Buy from Neutral at Bank America with an unchanged price target of $150 as sees a potential end to the freight recession in 2025 and cites benefits from the company’s dynamic pricing model and cost initiatives (which will offset volume losses).
  • In Railroads: CNI was upgraded to Buy in rail preview at Stifel given the shares have fallen to a more attractive entry point. The firm notes they expect modest volume growth and pricing improvements in 2025, but don’t know if that is significant enough to drive share price appreciation, I.E. multiple expansion for the rail sector.

Aerospace & Defense

  • In Gov’t Services: CACI was upgraded to Buy from Hold at Jefferies with a $515 price target saying the IT services group’s valuation has contracted from a 6% premium to a 20% discount. They cite high visibility to MSD+ organic growth in the near term with ramping contracts accounting for 7pts of FY26E revenue and just 6% Federal Civil exposure ex-DHS vs 25% avg implies limited risk of funding pressure under DOGE.
  • In Aerospace/Commercial: FTAI shares rebounded after being defended following a short report from Muddy Waters yesterday that sent shares down as much as -30% citing accounting issues. Deutsche Bank said based on their review of MW’s claims and FTAI’s financials, they don’t believe FTAI’s accounting is being manipulated. Stifel also reiterated its Buy saying Muddy Waters biggest claim was that "80% of FTAI’s Aerospace Products adjusted EBITDA is gains on sale." Stifel believes that FTAI is selling whole engines in the segment, only that the number is closer to 20% of adjusted EBITDA. Stifel estimates that Muddy Water’s claim of 80% from engines would result in a ~$35/share hit to valuation. At 20%, that hit should only be ~$10/share.

Materials, Metals & Mining

  • In Chemicals: DD announced it is no longer proceeding with the separation of the Water business and reaffirmed its 4Q24 EBITDA guidance of $790M. FUL mixed Q4 as EPS $0.92 vs. est. $1.00; Q4 revs $923M vs. est. $916.8M while guided FY25 revs to be up 1%-2% or $3.61B-$3.64B vs. est. $3.57B. RBC Capital lowered estimates and tgts for DOW, LYB, OLN, WLK, CE, HUN, and EMN due to ongoing demand weakness and October’s PE price drops, earlier than DOW/LYB had expected in their 3Q print, while CC remains favorite name in the group.
  • In Paper, Packaging, and Containers: Wells Fargo downgraded shares of AMBP to Equal Weight from Overweight and cut BALL to Underweight from EW (tgt to $49 from $56)  saying they believe beverage can manufacturers face the most significant headwinds within its coverage to start 2025, driven by an already challenging macro backdrop, trade policy risks, the "Make America Healthy Again" agenda, and the Surgeon General’s warning on alcohol.

Internet, Media & Telecom

  • Social Media: shares of META, SNAP pulled back initially on reports U.S. President-elect Donald Trump is considering suspending the enforcement of the TikTok sale-or-ban law for 60 to 90 days, the Washington Post reported. President Joe Biden had signed a law in April banning TikTok and is the first time the United States has attempted to shut down access to an app with such a large user base – roughly 170 mln domestic users.
  • In Media/Internet: NFLX was upgraded to Buy at Seaport Research, price target $955 citing the operational tailwinds that should support Netflix’s position with industry-leading original content accolades, including gross additions, attraction of more top content projects, advertising growth, and live sports rights wins that should come with that reputation
  • In Telecom: AT was upgraded to Buy from hold with $27 PT at Argus noting management recently raised guidance and presented a strong case for shareholder returns, earnings and cash flow growth at a recent Analyst Day event as the company finishes extricating itself from some troublesome acquisitions and focuses on the convergence of wireless and fiber internet services. NOK was downgraded to Sell from Neutral at Goldman Sachs citing valuation for the downgrade following the stock’s outperformance as shares rose 40% in 2024, which is unwarranted, as the company saw continued downwards consensus earnings revisions through the period.

Hardware & Software movers:

  • AAPL shares fell for the 4th time in 5 days in a standout to downside in tech, dropping below its 100dma support of $233.15 today, (only 3 up days in January); earnings not until Jan 30th.
  • Application Software: Citigroup said they are turning more positive on application software/back-office software as upgrade BL, MNDY and PCTY to Buy ratings, downgraded INTA to Neutral and said new top picks are BL, PEGA, MNDY, and BOX with INTU top large-cap pick. Following improving software sentiment in Q4 and a recent valuation reset, Citi sees stable to improving demand and multiple thematic upside drivers supporting a more constructive view into ’25. BL upgraded to Buy citing compelling valuation on potential accel supported by SAP upgrade cycle with M&A potential likely limiting downside. MNDY upgraded to Buy on better risk/reward on pullback as see ’25 below cons guide as a risk but more than priced in. PCTY upgraded to Buy on improving SMB trends, differentiation in CFO G2M, and relative valuation vs peers. INTA downgraded on balanced risk/reward.
  • Software outlook at Morgan Stanley shows BILL, OS, DOCN all upgraded to Overweight from Equal Weight; CFLT and DDOG both downgraded to EW from OW, MDB named to pick as replaces FTNT. The firm said after testing investor patience through CY24, GenAI-based solutions appear poised to move the needle in CY25. While a large opportunity exists ahead, the GenAI cycle comes with risk as well. Morgan sees larger consolidators best positioned to accrue the gains and navigate the risks.

Semiconductors:

  • TSM helped the semiconductor index after logging record quarterly profit and said it expects robust revenue growth in the first three months of the year as demand surges for chips used in artificial intelligence processing; posted a 57% jump in net income to T$374.68B ($11.4B) for the quarter. Semi equipment stocks (AMAT, ASML, LRCX, KLAC) advanced in reaction as results shows rising demand for advanced nodes, AI accelerators & packaging solutions, coupled with $42B in FY25 CapEx, driving growth for key suppliers of lithography, process control tools.
  • AMD was downgraded from Outperform to Peer Perform at Wolfe Research based on a lower expectation for AMD’s datacenter GPU revenue this year than it previously expected. Wolfe now forecasts $7B datacenter GPU revenue in CY25 vs its prior expectation of $10B+, reflecting ~37% y/y growth.
  • WOLF $200M equity offering complete, one milestone closer to receiving first CHIPS Act distribution Goldman Sachs noted accounting for its 30% jump in shares on Wednesday. The firm noted before the market open on 1/15, WOLF announced the completion of $200M ATM equity program and marks the completion of another milestone for WOLF to finalize the company’s PMT and receive the first disbursement from the CHIPS office.

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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.

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