Market Review: January 17, 2025

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Closing Recap

Friday, January 17, 2025

Index

Up/Down

%

Last

DJ Industrials

334.70

0.78%

43,487

S&P 500

59.37

1.00%

5,996

Nasdaq

291.91

1.51%

19,630

Russell 2000

9.09

0.40%

2,275

 

 

 

 

 

 

 

 

 

U.S. stocks posted another massive market rally on Friday, rising about 3% for the week heading into the 3-day holiday weekend on improved sentiment and economic optimism. The continuation of lower bond yields this week (10-yr down over 20 bps off highs to 4.6%) helped following this week’s “cooler” CPI and PPI December readings as well as “dovish” comments from Fed Governor Waller yesterday saying if we continue to get inflation numbers like Dec than reasonable to think we could get rate cuts in 1st half of 2025 and possibly 3 to 4 for the year. Economic data remains strong showing a solid US economy as evident by a big jump in Philadelphia manufacturing yesterday (44.3 reading vs. est. -5), along with significantly better housing starts/permits data today along with higher industrial production. Markets also saw strong earnings results from large cap banks this week (JPM, BK, Citi, WFC, GS, MS) boosting financials (XLF +6% this week) where next week’s activity picks up in tech. Note next week is an abbreviated trading week, closed Monday for MLK Jr. holiday while ~9% of the SPX is scheduled to deliver results, led by: Financials, TMT, & Industrials. Some of the highlight names are DHI, KEY, MMM, NFLX, UAL, HAL, JNJ, KMI, PG, CSX, GE, TXN, AXP, LVS, VZ. The U.S. dollar declined on the week for just the second time since the Fed cut rates in September while Treasury yields fell. Overnight, China activity data for Dec was mostly better than expected, including IP and Retail Sales (Q4 GDP also better at 5.4% YoY vs cons 5%). Attention will now move to Trump’s inauguration on Monday and what executive orders held quickly take once he’s in office. In stock news today, transports lagged the broader market rally as earnings and guidance from trucker JBHT weighed on the group; healthcare again lags in what has been a tough week as CMS said it will pay less for 15 drugs in the future including NVO’s Wegovy and Ozempic; chip stocks surged again led by INTC, QRVO and GFS on individual stories (see below); oil services jumped behind better SLB earnings results; crypto names jumped on Bitcoin 5% pop.

 

Donald Trump Presidential inauguration is Monday, and markets are awaiting details of his Day 1 executive orders. Reminder that President-elect Donald Trump said at the end of November 2024 that he plans to impose a 25% tariff on all products entering the US from Canada and Mexico using an executive order to be signed on January 20th, 2025. The US has large trade deficits with both Canada and Mexico. And both Canada and Mexico trade a large part of its GDP with the US (about 30% and 40%, respectively). Both economies are likely to retaliate to US tariffs with targeted tariffs, leading to a trade war. The fear is that Trump’s plans on tariffs and immigration could spark a trade war and fresh price pressures at a time when the economy is already strong, which could force the Fed to stave off further monetary policy easing. Will he use a big “bazooka” or perhaps raises tariffs gradually when putting pressure on China and other major trading partners, including Europe remains the big question in the near-term.

 

Economic data today strong as Housing starts climbed in December to the fastest pace since early 2024, reflecting a surge in multifamily projects and a more modest advance in one-family homes. New residential construction increased nearly 16% to an annualized rate of 1.50 million, rebounding after a three-month slump despite a spike in mortgage rates. The IMF boosted its 2025 global growth outlook, largely on an upgraded outlook on the U.S. economy that offset generally disappointing growth around the rest of the world. The Fund now sees world growth at 3.3%, up from the 3.2% prior forecast, though it is still slightly below the 3.7% average (2000-2019). China also with positive GDP data overnight boosting stocks

Economic Data

  • December housing starts jumped +15.8% to 1.499M unit rate, topping consensus of 1.32M and vs November -3.7%; Dec single-family starts +3.3% to 1.050M unit rate; multifamily +61.5% to 449,000-unit rate. Dec building permits came in at a 1.483M unit rate (consensus 1.460M) vs Nov 1.493M unit rate and Dec single-family permits +1.6% to 992,000-unit rate; multifamily -5.0% to 491,000-unit rate.
  • December Industrial Output rises +0.9%, above consensus +0.3% and vs. Nov +0.2% while capacity utilization rate rises to 77.6% (consensus 77.0%) vs Nov 77.0% (previous 76.8%).

Commodities

  • U.S. crude oil futures settle at $77.88/bbl, falling -$0.80 or 1.02% but West Texas Intermediate crude oil still posted its fourth straight weekly gain as the latest U.S. sanctions on Russian energy trade heightened expectations for oil supply disruptions to a global supply in a market already tightened by cold weather. Brent crude slipped -$0.50 or 0.62% to settle at $80.79 per barrel. Israel’s Prime Minister Benjamin Netanyahu said an agreement with Hamas to pause the war in Gaza has been finalized, suggesting it’s on track to begin on Sunday. Nymex front month contract settles down 7.3% at $3.948/mmBtu and was down -1% on the week.
  • February gold prices slip -$2.20 to settle at $2,748.70 an ounce but finished the week higher by just under 1% (3rd straight week of gains) as uncertainties around President-elect Donald Trump’s policies and renewed bets of further rate cuts following cooler inflation data lifted the precious metal this week. Gold had hit one-month highs on Thursday and remains roughly $65 bucks away from its all-time high of $2,790.15 hit in October.
  • The U.S. Dollar index (DXY) rises +0.25% to 109.23 as investors await Trump’s inauguration and clarity on the course of the incoming administration’s policies/tariffs. Still, the U.S. dollar is down on the week, on track to Snap its 6-week winning streak. The dollar fell vs the Yen this week as expectations for a Bank of Japan rate hike next week grow following remarks from BOJ officials this week. Canadian hits lowest levels vs. US dollar since 2020.
  • The 10-year yield was flat on the day but declined 16.1 bps on the week to 4.610% this week, its largest one-week yield decline since Friday, Nov. 29, 2024. The 10-yr yield is off 19.1bps from its 52-week high of 4.802% hit Monday, Jan. 13, 2025, but up 46.5 bps from 52 weeks ago
  • Bitcoin prices extended Thursday gains, surging another 5% ahead of Donald trump presidential inauguration on Monday, with prices topping $105,500, about $3k away from all-time highs and off lows last week below $90,000.
  • Corn futures extended gains, rising over 2% at $4.81 a bushel, highest levels in over a year, shaking off caution seen among commodity traders ahead of President-elect Trump’s inauguration on Monday. Reuters noted grain analysts maintain that rainfall in Argentina this weekend, if it materializes, will put pressure on the current rally.

 

Macro

Up/Down

Last

WTI Crude

-0.80

77.88

Brent

-0.50

80.79

Gold

-2.20

2,748.70

EUR/USD

-0.0016

1.0282

JPY/USD

1.08

156.20

10-Year Note

0.005

4.61%

 

Sector News Breakdown

Retail, Autos, Consumer Staples & Restaurants:

  • In Retailers: CROX was downgraded from Buy to Hold at Williams Trading and cut tgt to $112 from $127 saying Crocs trends are weakening, and HEYDUDE trends remain weak and are showing no signs of improving; says the Outlook for HEYDUDE has diminished since CROX announced its Q324 results. WRBY was downgraded to In-line from outperform at Evercore/ISI saying finds the risk reward outlook to be less compelling at current levels.

Energy

  • In Energy: oil service giant SLB reported Q4 adj EPS $0.92 vs. est. $0.90 on better revs $9.28B vs. est. $9.18B while boosts its dividend and begins $2.3B in accelerated share repurchases along with positive comments on c/c saying expect activity rebound in Q2, particularly in international markets. US total rig count down 4 to 580 in latest week says Baker Hughes (BKR) as oil rigs fall 2 to 478 and gas rigs down 2 to 98
  • In Utilities: VST shares fell after a fire at a battery facility on the site of its Moss Landing power plant in Monterey County, California prompted orders for the evacuation of places nearby; the fire began in a building that contains lithium-ion batteries on Thursday afternoon (FLNC shares were weak as battery pack supplier)

Banks, Brokers, Asset Managers:

  • CFG Q4 EPS $0.85 vs. est. $0.83; Q4 revenue $1.99B vs. est. $1.96B; reports Q4 net interest margin 2.87% vs. 2.91% last year; Q4 provisions for credit losses $162M.
  • HBAN Q4 profit rises to $530M or $0.34 vs. est. $0.31 and above prior year $243M or $0.15; said Q4 NII increased $44M, or 3%, from prior qtr; Capital markets and advisory fees jump 74% to $120M, while wealth and asset management revenue rose 8% to $93M.
  • OZK Q4 EPS $1.56 vs est. $1.44 on NII $379-398Mm vs est. $376.89Mm, credit loss provision $37.174Mm; Book value per common share was $47.30 at December 31 an 11.5% increase from $42.42 at December 31, 2023.
  • RF shares fell on results as Q4 EPS $0.56 vs. est. $0.55; and Q4 revs $1.845B vs. est. $1.855B; says guides Q1 NII to decline modestly vs. 4Q; Q4 net interest margin 3.55% and provision for credit losses $120M.
  • STT Q4EPS $2.60 tops consensus $2.44 and revs rise 12% y/y to $3.41B vs. consensus $3.34B as second trust bank this week with better earnings (BK on 1/15); said Q4 fee revenue was $2.66B, +13% y/y as n Net interest income was $749M, rising +10% y/y and FTE net interest margin 1.07% vs. 1.16% y/y. Assets under management declined -0.4% q/q to $4.72 trillion; forecasts year NII roughly unchanged y/y
  • TFC Q4 EPS $0.91 vs. est. $0.88; Q4 revs $5.11B vs. est. $5.06B; Q4 tangible book value per share $30.01; Q4 CET1 capital ratio 11.5%; Q4 Provision for credit losses $471M and net charge-offs $453M; sees Q1 adj rev down about 2% Q/Q and sees FY adj rev up 3% to 3.5%.
  • In Brokers: Morgan Stanley elevated Overweight HOOD to Top Pick with 43% boost to its 2026 EPS forecast and new $64 PT that sees 40% upside. The firm said they see a sustainable business model that’s expanding into different business lines with many vectors for growth that’s not yet reflected in valuation. Into 4Q, focus on cash sweep and NNA at the brokers, listen for volumes update and market share dynamics at MKTX and pricing changes at exchanges. The firm prefers OWs HOOD, LPLA, NDAQ, TW.

Bitcoin, FinTech, Payments:

  • In Payments: Keybanc said they are positive on payments (FI, GPN, MA, V) as bank earnings indicate healthy spend trends, continued consumer resilience. Following CQ4 prints, BAC, Citi, JPM, WFC CQ424 credit card volume grew +7.2% y/y (+5.2% q/q) vs +5.2% y/y in Q324 and debit card volume grew +5.6% y/y (+3.8% q/ q) vs +3.8% y/y in Q324. The firm views bank card volume growth (both credit and debit) as a positive read-through to MA U.S. Payment volume (~35% of total payment volume), Visa U.S. Payment volume (~50% of total payment volume), GPN Merchant Solutions adjusted net revenue, and FI Merchant Solutions revenue.

Biotech & Pharma:

  • The U.S. government named 15 drugs that will be subject to the second round of price negotiations by Medicare, including Ozempic and Wegovy (made by NVO), the drugs at the center of the weight-loss craze. The Biden administration said the drugs account for $41 billion in annual Medicare spending, and that price negotiations could result in significant savings. On the list of target medicines are treatments for cancer, type 2 diabetes and asthma and cover several drugs made by ABBV, AMGN, PFE, BMY, NVO, AZN, GSK and others.
  • HIMS weaker after Bank America warned tracking data indicates that Q4 Online revenue remains robust but may be trending below Visible Alpha (VA) consensus expectations.

Industrials & Materials

  • In Truckers: JBHT shares weighed on Dow transports after mixed results/guidance as revs of $3.15B were in-line with consensus but EPS missed; shares fell further overnight after mgmt said Q125 operating income would be down -20% to -25% sequentially, implying operating income of ~$175M; shares of XPO, ODFL, SAIA, LSTR, RXO, WERN, MRTN moved in sympathy).
  • In Airlines: AAL was upgraded from Underperform to Neutral at Bank America and raise tgt to $20 from $12 saying the airlines should benefit from the strong trends discussed by DAL last week: solid premium revenues, a build back of corporate travel, and growth on Atlantic routes. Bank America downgraded LUV and JBLU from Neutral to Underperform citing less exposure to corporate, premium, and international routes, The firm notes both airlines trade at the high end of historical valuation ranges despite less exposure to the strongest industry trends.
  • In Shipping companies: Maersk (AMKBY) shares dip along with other shipping Co’s as a ceasefire deal in Gaza nears, raising prospects of Red Sea reopening and boosts concerns that freight rates may decline as overcapacity in shipping could return with the potential reopening of the key trade route.
  • In Distributors: FAST reported Q4 EPS $0.46 missed ests of $0.48 and posts 3.7% y/y rise in Q4 revenue to $1.82B missing analysts’ estimate of $1.84B citing slow growth rate to softness in manufacturing environment throughout 2024; said foreign exchange rates hurt Q4 2024 sales, compared with positive impact year ago; shares rebounded off morning losses following commentary on its conference call.

Materials, Metals & Mining

  • In Chemicals: Wolfe Research upgraded DD from Peer Perform to Outperform ($91 PT) saying despite 1H macro challenges, forecast a cleaner growth trajectory for E&I (2H25 thesis) and W&P in ’25/’26 – and leave margin expansion as further upside to #s. The firm also upgraded AXTA to Outperform ($41 PT) on a continuation of global share gains in both the Refinish (~60% of EBITDA) and Auto OE platforms.

Technology

  • In Social media: The Supreme Court upheld a law that is set to shut down the wildly popular TikTok social media platform in the US in the coming days. U.S. supreme court rules against TikTok’s challenge to law that would force sale or ban app in United States. Real estate mogul Frank McCourt, who is trying to buy TikTok’s U.S. arm, reiterated his investor group’s ability to make a deal and still comply with the Supreme Court’s ruling.
  • Software outlook for 2025 at Citigroup leads to NET upgraded to Buy, flags ZS, DT as heavily debated sub-sector plays; named CRWD, VRNS on negative 90-day catalyst watches, with OKTA on positive 90-day watch list catalyst. The firm said another year of anemic cyber budget growth surfacing in CITI’s CISO survey, breeds its skepticism in the group’s ability to outrun such dynamics this time, where CY24’s relative outperformance was largely valuation re-rating led, as estimates barely moved. Citi says they are generally more bullish on its IT/DevOps-centric coverage (DDOG, DT, TEAM) for better relative growth/cleaner GenAI tether, but remain selectively constructive on cyber via ZS, CYBR, and “crossover” stocks RBRK, NET (upgrade to Buy).
  • TD Cowen with several changes in software as they downgraded HUBS to Hold from Buy (but raised tgt to $725 from $680), saying they see the shares as fairly valued following the recent rally. It models HubSpot’s model growth decelerating from 20%-plus to mid- to upper-teens. SAP was upgraded to Buy from Hold (tgt to $305 from $240) saying the stock appreciation and growth execution was resilient in 2024 and sees more of the same ahead. CRM was upgraded to Buy from Hold (tgt to $400 from $380) saying recent share pullback has created a compelling entry point.

Semiconductors:

  • INTC shares rose after chip-focused publication SemiAccurate was circulating on Friday about a company looking to acquire Intel https://tinyurl.com/3dvjy6nw
  • QRVO shares rose after an SEC filing showed activist investor Starboard Value built a 7.7% stake in the chipmaker.
  • GFS shares popped this afternoon after Trump appointee Lutnick signaled that he’s committed to Chips Act program; US officials mulled longshot idea of Intel-Global foundries deal, reported Bloomberg.
  • WDC said expects Q2 revenue at mid-point of $4.20B-$4.40B range, as mid-point below the consensus $4.24B and said expects Q2 non-GAAP EPS at lower end of $1.75-$2.05 range (vs. est. $1.82); announces Wissam Jabre to step down as CFO of Western Digital HDD business.
  • In Semi Equipment: AMAT and LRCX both upgraded to Overweight from Sector Weight with tgts $225 and $95 respectively as they position themselves for names leveraged to AI-related devices and leading-edge transitions like GAA and technologies that support improving device performance, including BSPD and Advanced Packaging.
  • Barclays double upgraded LITE to Overweight from Underweight and PT to $125 from $80 and rolling out 2026 numbers across semi coverage; think this will be another year defined as the AI have and have-nots. The firm said they are more selective on its AI preferences. They raised price tgts for ALGM, ARM, ALAB, AVGO, COHR, MRVL, NVDA, SITM, SLAB and lowered for AMD, ADI, AMAT, CAMT, INTC, KLAC, LRCX, NXPI, QCOM, QRVO, SWKS, WDC.

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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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