Closing Recap
Wednesday, January 29, 2025
Index |
Up/Down |
% |
Last |
DJ Industrials |
-137.08 |
0.31% |
44,713 |
S&P 500 |
-28.37 |
0.47% |
6,039 |
Nasdaq |
-101.26 |
0.51% |
19,632 |
Russell 2000 |
-5.77 |
0.25% |
2,283 |
U.S. stocks finished lower following today’s FOMC meeting and into a very important earnings night! U.S. stock markets opened lower, slipping further following the release of the FOMC statement where the Fed kept rates at 4.25%-4.5% as expected but made one notable change in their statement – the removal of “inflation has made progress toward the Committee’s 2% objective” from the December Fed meeting (the exclusion of headline raised inflation concerns). After the headlines, fed fund futures indicated a stronger chance that the Federal Reserve will not cut interest rates until June. Traders after the statement were pricing in about a 40% chance of a rate cut before June, compared with nearly 50% seen earlier. Treasury yields popped to highs after the statement with the 10-yr hitting 4.58% before Powell spoke. After he spoke, markets rebounded as he downplayed the inflation concerns, but major averages still closed lower.
With the FOMC meeting behind us (ECB policy meeting is tomorrow morning), attention turns back to earnings tonight and then economic data Thursday morning. After the bell tonight, three of the “Mag7” names are expected to report with TSLA, META and MSFT all due, as well as other key tech names IBM, WDC, NOW and others. Then tomorrow, big earnings reports from Dow component CAT, freight giant UPS and MA in credit cards followed by the first estimate of Q4 GDP on Thursday and December Personal Consumption Expenditures (PCE) on Friday. Stocks took a dive about an hour before the FOMC policy results after a Bloomberg report indicated Trump officials discuss tightening curbs on Nvidia China sales/held early talks about restricting NVidia’s H20 chip – semis were mixed on the day.
So, is a strong January a good sign? Well, RyanDetrick tweets: “The S&P 500 is up nearly 3% YTD and January is almost over. This is a good sign, as a higher January tends to suggest better returns in the final 11 months of the year. Up 12.2% on avg and up 86.7% of the time when Jan is higher, compared with all yrs avg return of 8.1% and 75%.”
FOMC Headlines
- The Fed unanimously held interest rates steady in 4.25%-4.5% target range (as expected) and gave little insight into when further reductions in borrowing costs may take place in an economy where inflation remains above target, growth continues, and the unemployment rate is low. After several months in which inflation data have largely moved sideways, the U.S. Central bank dropped from its latest policy statement language saying that inflation "has made progress" towards the Fed’s 2% inflation goal, noting only that the pace of price increases "remains elevated." "Economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid," the Central bank’s policy-setting Federal Open Market Committee said in a statement after the end of its latest two-day meeting.
Commodities
- Oil prices fell with WTI crude down -$1.15 or 1.56% to settle at $72.62 per barrel while Brent fell -$0.91 or 1.17% to settle at $76.58 per barrel, touching a multi-week low after crude stockpiles in the US rose more than expected last week. Crude oil stockpiles in the U.S. rose by 3.46 million barrels last week as refiner intake slumped for a third consecutive week, data from the Energy Information Administration showed on Wednesday. U.S. natural gas futures slipped to a three-week low of $3.418 per million British thermal units (mmBtu) amid forecasts for milder weather/lower heating demand over the next two weeks than previously expected.
- February gold edged higher by $2.30 to settle at $2,769.80 an ounce, then prices dropped after the FOMC policy statement inferred the Fed was more cautious on inflation than previously stated, leading to speculation any future rate cuts may be pushed further down the line. U.S. Treasury yields fell before the Federal Reserve meeting but popped as high as 4.58% before paring gains after inflation comments/keeping policy in-line.
Macro |
Up/Down |
Last |
WTI Crude |
-1.15 |
72.62 |
Brent |
-0.91 |
76.58 |
Gold |
2.30 |
2,769.80 |
EUR/USD |
-0.0022 |
1.0406 |
JPY/USD |
-0.18 |
155.33 |
10-Year Note |
0.006 |
4.554% |
Sector News Breakdown
Retail, Consumer Staples & Restaurants:
- In Restaurants/Dining: EAT shares jumped on better results and guidance as Q2 adj EPS $2.80 easily topped the $1.80 estimate while revs rose 26% y/y to $1.36B, vs. est. $1.24B; System-wide comparable sales +24.2% vs. +4.4% y/y, Brinker Co-owned comp sales +27.4% vs. +5.2% y/y, Chili’s Comparable Restaurant Sales 31.4% vs. 5% y/y, Maggiano’s Comparable Restaurant Sales 1.8% vs. 6.7% y/y, and Chili’s Domestic Comparable Restaurant Sales 30.8% vs. 5.1% y/y; raises FY25 revs view to $5.15B-$5.25B, above prior view of $4.70B to $4.75B. SBUX results beat as Q1 EPS $0.69 vs est. $0.67 on revs $9.4B vs est. $9.305B, US comps -4%, N. Am. comps -4%, China comps -6%, Int’l comps -4%, total comps -4% vs est. -5.3%.
- In Retailers: VFC reported Q3 revenue and adj operating income ahead of the company’s forecasts and boosted its fiscal 2025 forecast for free cash flow to $440M from $425M (shares opened higher and reversed lower); VSCO announces CFO to retire while guides Q4 adj EPS $2.20-$2.30, above prior forecast $2.00-$2.30 and sees Q4 adj. Oper income $260M-$270M vs. est. $266.5M with Q4 net sales +3% to +4%. TPX shares outperformed after positive analyst commentary this morning following meetings at the Vegas furniture market this week; Loop raised PT to $70 and Keybanc to $66 saying conversations point to improving tends through Q4 and into January, post-election, within the bedding industry.
- In Food: the sector was in focus (GIS, CAG, KLG, HSY) Wednesday as Robert F. Kennedy Jr., President Donald Trump’s pick to head the Department of Health and Human Services, is set to face senators at committee hearings this week.
Autos, Leisure, Gaming & Lodging:
- In Autos: auto supplier AXL said it will buy GKN Automotive owner Dowlais in a cash-and-stock deal, valuing the London-listed firm at about 1.16 billion pounds ($1.44 billion) – Shareholders of American Axle will own 51% of the combined company, with Dowlais shareholders controlling the rest. RIVN was initiated at Underperform and $6.10 tgt at Bernstein saying while sees the company succeeding in its plan to reach >500k units by 2030, this is not enough to create financial success for shareholders. MNRO shares dropped on earnings results.
Energy
- In Oil Services: Britain’s competition regulator said it has launched an inquiry into oilfield services company SLB’s proposed $8 billion deal to buy smaller rival CHX, looking at whether the deal, which was announced in last April, would raise competition concerns in any UK markets.
- In Renewables/Solar: NXT shares jumped after reported fiscal Q3 earnings, with a beat on both revenue and EPS; full-year profitability guidance was raised, largely due to the raising of its structural gross margin target to the low 30s due to increased domestic content, as well as operational improvements (was upgraded to OW at Barclays and a Buy at Jefferies); shares of others in group moved in reaction (ARRY, FSLR).
Banks, Brokers, Asset Managers:
- In FinTech & Lending: LC tumbled after guiding Q1 loan originations between $1.8B-$1.9B (vs. Bloomberg est. $1.98B) and pre-provision net revenue of $60M-$70M and posted higher Q1 provisions of $63.2M, up 51% y/y.
- In Crypto: COIN was upgraded to Neutral from Underperform at Mizuho and raised tgt to $290 from $250 saying their analysis of bitcoin adoption growth points to further upside in bitcoin price over the medium-term. USDC market cap is on an upward trajectory, and stablecoin revenue is 20% of COIN’s mix. MSTR was initiated at Buy and $550 tgt at Compass Point saying it offers Bitcoin exposure to equity investors by steadily increasing its BTC holdings per share.
- In Insurance: BHF was upgraded from Equal Weight to Overweight at Barclays and raised tgt to $85 from $52 noting on January 28th, the Financial Times released a piece stating Brighthouse was in the process of exploring a sale and were entertaining bids from prominent private capital managers. Barclays said they believe there remains ~45% more upside potential to current levels. PGR Q4 combined ratio reported 87.9%, vs. est. 89.9%, Q4 net premiums earned $19.14B above Bloomberg est. $18.75B and Q4 net premiums written $18.11B.
Biotech & Pharma:
- AKRO priced an upsized public offering of 5.33M shares at $48 per share.
- ETNB prices public offering of 21.7M shares at $8.75 per share.
- BEAM upgraded to Overweight at Cantor ahead of the upcoming preliminary data readout for BEAM-302 in alpha-1 antitrypsin deficiency (AATD).
- MRNA was downgraded from Buy to Neutral at Goldman Sachs and cut tgt to $51 from $99 noting the recent product revenue guidance represents the second in a series of negative revisions over the last six months, which leads them to believe MRNA has limited visibility on the revenue stream for the respiratory vaccine business.
- TEVA shares slid on guidance; reported Q4 revs $4.2B vs. est. $4.13B, guides 2025 free cash flow $1.6B to $1.9B, guides 2025 adj. EBITDA to $4.5B-$5B below est. $5.28B but rev mid-point $16.8B-$17.4B above est. $17B; guided 2025 EPS $2.35-$2.65 below ests $2.76.
- ZNTL said its experimental cancer drug, Azenosertib, works better than current treatments in ovarian cancer patients who have previously been treated with platinum-based chemotherapy and whose cancer has become resistant. It reported data from two mid-stage trials testing its therapy alone or in combination with niraparib in patients with ovarian cancer and platinum-resistant ovarian cancer patients.
Healthcare Services & MedTech movers:
- In the Dental Sector: HSIC confirmed a WSJ report overnight saying Private equity firm KKR has taken a large stake in the company and reached a deal to add members to the company’s board.
- In Life Sciences & Tools: DHR shares slipped after Q4 EPS $2.14 missed est. $2.16 while Q4 revs $6.54B above est. $6.49B; sees Q1 revenue down low-single digits and said sees FY25 revs up 3%.
- In the Ortho sector: ZBH said it would acquire medical device company Paragon 28 (FNA) for about $1.1 billion to expand its portfolio of orthopedic surgical devices. ZBH will make an upfront payment of $13.00 per share in cash, which represents an 8.3% premium to Paragon’s closing price on Tuesday; SYK better results as Q4 adj EPS $4.01, vs. est. $3.87 and Q4 revs $6.44B vs. est. $6.36B; sees FY25 adjusted EPS $13.45-$13.70, above consensus $13.47 and guides organic net sales growth to be in the range of 8.0% to 9.0% for 2025. SYK announced a deal to sell its $700M spinal implants business, with the U.S. piece set to close in 1H25.
Transports
- In Transports: in Airlines, ULCC said it has made a compelling new offer to combine with Spirit Airlines Inc. (SAVEQ) by issuing new debt and common stock. The proposed deal “would provide meaningful value to Spirit financial stakeholders, in excess of Spirit’s standalone restructuring plan,” Frontier said. In Rails, NSC Q4 adj EPS $3.04 tops ests $2.95 on mostly in-line revs of $3.204B
- In Industrials: OTIS Q4 sales of $3.68B topped ests but issued weaker guidance as expect 2025 adjusted EPS between $4.00-$4.10 (est. $4.14) and FY sales $14.1B-$14.4B vs. est. $14.6B.
- In Paper & Packaging: PKG shares slumped on earnings miss as Q4 adj EPS $2.47 vs est. $2.53 on sales $2.146B vs est. $2.13B; guides Q1 EPS $2.21 vs est. $2.41.
- In Defense: GD top and bottom line Q4 results top views ($4.15/$13.3B vs. est. $4.05/$12.82B) saying sustained demand for military munitions and vehicles boosted its defense businesses; BAESY shares fall following news of an LMT F-35 crash in Alaska (pilot reported safe) weighs (BAE Systems helps develop and manufacture the F-35)
- In Metals & Minig: Aluminum producers (AA, CENX) advanced early after the European Commission has proposed Russian primary aluminium imports be included in its 16th package of sanctions on Russia over its invasion of Ukraine, the proposal document seen by Reuters showed.
- In Chemicals: in ag fertilizer names (CF), the EU commission last night proposed additional tariffs on Russian fertilizer imports from July onwards to gradually reduce them towards zero in next 3 years. SMG reports better Q1 results while reaffirmed yearly sales, adj gross margin and adj Ebitda guidance. ASH shares slid after Q1 sales missed expectations ($405M vs. est. $427M) while reaffirmed year sales outlook.
Internet, Media & Telecom
- In Telecom: TMUS reported better Q4 revenue and profit expectations (similar to comps AT and VZ recently) as EPS of $2.57 topped ests of $2.29 while revs rose 6.8% y/y to $21.87B (vs. est. $21.33B); said it added 903,000 postpaid phone subscribers, above Wall Street ests of 858K and outpaced rivals Verizon at 568,000 connections and AT&T at 482,000 connections in the last three months of 2024. AAPL said it was teaming up with TMUS and Elon Musk’s SpaceX to support Starlink on iPhones, Bloomberg reported (weighed on shares of GSAT, ASTS).
- In Hardware: AAPL was downgraded to perform from Outperform at Oppenheimer and lowers its FY26 EPS estimate to by 4% to $7.95, below consensus of $8.23E based on reduced estimates for iPhone sales in the next 12-18 months. Separately, reports showed that AAPL has been working with SpaceX and T-Mobile US Inc. to add support for the Starlink network in its latest iPhone software, providing an alternative to the company’s in-house satellite-communication service.
Hardware & Software movers:
- In the EMS Sector: SANM was upgraded from Underperform to Neutral at Bank America and raised tgt to $92 from $58 after recent earnings saying the communications end market (20% of rev in F24) is coming out of an inventory correction and F25 should see rev growth. FLEX shares rose on results and guidance as delivers record adjusted operating margin and EPS for Q3 while raises FY25 adj EPS view to $2.57-$2.65 from $2.39-$2.51 (est. $2.45) and boosts FY25 revenue view to $25.4B-$25.8B from $24.9B-$25.5B.
- In IT Services & Consulting: FFIV shares jumped after Q1 beat, guided 2Q revenues ahead, and raised full-year guidance (sees FY revs +6-7% vs est. +4.69% and adj EPS +6.5-8.5% vs est. +6.73%) as new opportunities are opening up across hybrid/multi-cloud and GenAI, driven by more stable IT spending, robust software renewals. MANH shares tumbled after reporting a mixed Q4, with complications from currency moves and project downsizing in Pro Services driving a $50M cut to the 2025 revenue outlook (guides FY revs $1.06-1.07B vs est. $1.136B and adj EPS $4.45-4.55 vs est. $4.91).
- In Electronic Equipment & Parts: GLW Q4 core EPS $0.57 above ests $0.56 and sales rose 18% y/y to $3.87B, topping ests of $3.74B with strong rev gains in Display Technologies sales $971M, +12% y/y, Optical Communications net sales $1.37B, +51% y/y and Specialty Materials net sales $515M, +8.9% y/y.
- In Cloud Software: DDOG was downgraded to Hold from Buy at Stifel and lower tgt to $140 from $165 saying they envision revenue growth and margin headwinds over the course of FY25, and this coupled with full valuation creates a less than favorable risk-reward for the stock.
Semiconductors:
- ASML shares boosted the semi-equipment sector (KLAC, LRCX, AMAT) after Q4 bookings of 7.09B euros ($7.39B), easily topping ests of 3.99B euros and up from 2.63B euros in Q4, saying a boom in AI drove demand for the company’s most advanced equipment; reported fourth quarter net income of 2.7B euros on sales of 9.3B euros.
- QRVO reported strong Q3 results and guided Q4 higher; results were driven by strong Aero/Def revs, which benefited HPA, and seasonally stronger AAPL revs. Despite stronger NT results, this is being offset by the exit of mass market lower GM Android revenues.
- SYNA announced that it has signed a definitive licensing agreement with AVGO that includes Wi-Fi 8, ultra-wideband (UWB), Wi-Fi 7, advanced Bluetooth, and next-generation GPS/GNSS products and technology for IoT and Android ecosystem.
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.