Closing Recap

Friday, March 07, 2025

Stock market activity hasn’t been boring this week, that’s for sure! An incredible move for US stocks on Friday, both to the downside (initially) and upside (finishing the day near highs), closing out a tumultuous week on a positive note

for major averages…the question is, can the momentum continue into Monday? It was a week to forget for major U.S. averages, falling more than 3% for the S&P 500, Nasdaq and Russell 2000 on the week (3^rd straight down week for each, the longest losing streak since mid-July-early August), taking out several key technical support levels along the way as for the first time in a long time “buying the dip” proved unsuccessful. The US dollar also tumbled more than 4% on the week vs. the euro along with weakness vs. other currencies. The Nasdaq 100 Index sank into a correction on Friday (down more than 10% from highs), as investors continue to sour on the mega cap technology stocks that led the stock market rally over the past two years. There were few places to hide this morning from the recent stock destruction with Nasdaq falling over 11% in the last 12-trading days (and dropping below its 200dma support for the first time in 2-years), the S&P down over -8% from its ATH just 2-weeks ago and the Russell 2000 is not far from a 20% drawdown from its November all-time high. However, after some soothing commentary from Fed Chairman Powell in a speech today, stock markets found their footing around noon et, and proceeded to rally throughout the day, finishing with modest gains on Friday and paring weekly declines. Today’s market leaders were utilities and energy and a bounce in technology, while financials and consumer discretionary declined.

Slowing growth concerns and tariff implications have been at the heart of this 2-week pullback, with markets selling first and worrying about impact later. China’s commerce ministry on Friday urged the United States to correct its “wrong practices” of additional tariffs on China due to the fentanyl issue and stop blindly “shifting blame.” Volatility also impressive as the S&P 500 (SPX) just went 7-straight days with +/- 1% daily change. The CBOE Volatility index rose over 6.5% to 26.56, its highest level since late December before pulling back early afternoon to 24 after comments from Fed Chairman Powell soothed markets slightly. In addition to the tariffs vs. Canada, Mexico and China, and reciprocal tariffs vs. other countries in April, the White House is still trying to broker a peace deal between Russia and Ukraine. Just lots of uncertainty overall adding to fears. European shares closed lower on Friday, as the pan-European STOXX 600 was down 0.7% for the week, and snapped a 10-session winning streak, its longest since early 2024.

• The February unemployment rate 4.1% (above consensus 4.0%), while wages were mostly in-line as U.S. February average hourly earnings +4.0% from year earlier (est. +4.1%) and February average hourly earnings all private workers +0.3% from prior month (est. +0.3%).
• Fed speakers as well today with Federal Reserve Chair Jerome Powell saying the U.S. central bank will be in no rush to cut interest rates while it waits for more clarity on how the policies of the new Trump administration affect the economy. "We are focused on separating the signal from the noise as the outlook evolves. We do not need to be in a hurry and are well-positioned to wait for greater clarity."
• U.S. Federal Reserve Governor Adriana Kugler said on Friday that rising inflation risks argue for an extended period of steady Central bank interest rate policy. “Given the recent increase in inflation expectations and the key inflation categories that have not shown progress toward our 2% target, it could be appropriate to continue holding the policy rate at its current level for some time,” Kugler said.
• Federal Reserve Bank of New York President John Williams said on Friday that so far there’s no evidence that inflation expectations are starting to run into any form of trouble. Based on recent data, “there is no sign of inflation expectations becoming unmoored at any forecast horizon relative to the pre-pandemic period.”

• April gold prices slipped -$12.50 to settle at $2,914.10 an ounce, but sharply above last Friday’s closing price of $2,845.50 an ounce (up 2.39% on week), buoyed by trade war concerns and a weaker dollar, now rising 9 of the last 10-weeks. Jobs data was not as bad as feared (or as bad as Wednesday’s ADP private payroll report), giving markets hope about the economy. The U.S. dollar index posted its worst weekly performance since November 7, 2022, making gold less expensive for foreign buyers. The Fed has held interest rates steady so far this year after executing three rate cuts last year, but the market expects easing to resume in June.

• Bitcoin prices ended the day lower, failing to get a boost as the White House US strategic reserve plan disappoints traders. Prices dropped to around $87,000 this afternoon. Meanwhile the global bond sell off continued yesterday as German bund yields continued to rise and peaked at almost 2.93%. The 10-year US Treasury yield continued its rebound from the 4.10% low on Tuesday and peaked at 4.34% yesterday.

• Canada’s auto industry likely won’t face a prolonged tariff situation, according to TD Cowen saying that the recent implementation then reversal of tariffs shows the complexity of the auto supply chain and how prolonged tariff duration would be negative to the U.S.’s own auto industry and economy.

• In Warehouse/Specialty Retail: COST reported Q2 profit that trailed Wall Street expectations ($4.02 vs. est. $4.11) while the company reported that its February comp (ex. fuel) increased 8.6% in the US. FNKO reported a 4Q beat, but guided 2025 below the Street due to 20% tariffs on China goods–retaliatory tariffs on Vietnamese goods would represent further downside; guidance for 1Q25 was significantly below consensus, partly due to shipping disruptions at the Mexican border.
• In Apparel/Footwear Retail: GAP shares were strong as reported a strong Q4 EPS beat, with Sales/GM/SG&A all better than consensus (only Athleta didn’t beat), with management noting continued market share gains, and guiding above to +8-10% FY25 EBIT growth. Merch margin increased +20bps (lightest since 3Q22) with YoY inventory higher (first time since 3Q22). GCO shares fell after guiding FY26 adjusted cont ops EPS $1.30-$1.70 (est. $2.35), while expects FY26 total sales to be flat to up 1% compared to FY25. LE said it began a process to explore strategic alternatives, including a sale, merger or similar transaction, to maximize shareholder value
• Wells Fargo noted Retail Hardline/Restaurant shares are -11%/-7% (-7% SPX) off Feb peaks, as tariff/policy uncertainty likely means NT volatility. Wells playbook leans more defensive (needs-based, pricing power, scale), but see some opportunities post sharp sell offs. As the tariff situation evolves by the minute, the potential impact on inflation, supply chains & FX volatility likely remains front & center for investors. The firm favors ORLY, AZO, TSCO, HD, LOW; but says RH sell off looks too severe.
• Defense food stocks were one of the best performing sectors, with big gains from CPB, GIS, CAG, THS, SJM, UTZ, KHC, KLG, GIS and others as investors still rotating out of high beta tech names and financials, and into more defensive sectors.

• In Aerospace & Defense: AL was downgraded to Underperform from Buy at Bank America, hindered by three key factors – 1) a smaller fleet, 2) limited engine exposure, and 3) less shareholder friendly capital deployment. LUNR shares tumbled a second day after its second moon lander, Athena, landed on its side, near the south pole of the moon on Thursday, similar to the company’s first lunar landing attempt last year. Gov’t defense contractor/service names BAH, CACI, LDOS among big gainers on the day.
• In Metals & Mining: Steel producer STLD was upgraded to Overweight at Morgan Stanley (tgt trimmed to $53 from $56) as completion of CAPEX cycle increases FCF and paves the way for higher cash returns. Lots of strength in steel names in general with NUE also higher.
• In Refiners: Piper lowered prices targets for DINO, DK, MPC, PARR, PBF and VLO saying with two months in the books in the Q1, the firm is adjusting its Q1 2025 and 2025 estimates for the refiners in-line with margins to date and the increase in 2025 full year margins. While significant market volatility year-to-date doesn’t exactly provide encouragement on the shelf life of Piper’s estimates, at present it sees downside to Q1 estimates, but generally 10%-15% upside for the remainder of 2025. The firm says Valero remains at its top pick.
• In Transports: Deutsche Bank initiated coverage on some U.S. trucking firms, with Buy ratings for CHRW ($129 PT), and ODFL ($236PT) saying ODFL’s financial position will strengthen in the next up-cycle, as the co benefits from better fixed-cost absorption; also starts JBHT with a Hold and $167 tgt. The firm said rates for cross-border trucking to and from the U.S. jumped amid new tariffs on Canada and Mexico, as cos scrambled to accelerate shipments ahead of an expected increase in costs.

• JAZZ was upgraded to Buy from Neutral at UBS saying base business strength and Ziihera pipeline catalysts boost UBS’s confidence that the stock warrants a 7.0x P/E multiple, while it previously targeted ~6x.
• In Healthcare Services: WBA agreed to be acquired by an entity affiliated with Sycamore Partners. The total value of the transaction represents up to $23.7B. WBA shareholders will receive total consideration consisting of $11.45 per share in cash at closing of the Sycamore transaction and one non-transferable right to receive up to $3.00 in cash per WBA share from the future monetization of WBA’s debt and equity interests in VillageMD, which includes the Village Medical, Summit Health and CityMD businesses

• In Internet of Things: IOT shares fell after reported Q4 earnings and revenue (adj EPS $0.11/$346.3M vs. est. $0.07/$335.33M) that topped Wall Street targets while fiscal 2026 sales guidance just met expectations; for next quarter, it sees revenue of $1.528B at the midpoint of its outlook, in line with consensus estimates.
• In Data Center: VRT was initiated with an Outperform and $121 tgt at RBC Capital on the near-pureplay datacenter power/thermal solutions provider. With 80% datacenter revenues, Vertiv has a scarcity value plus an array of #1-#3 market positions, including top 2 in liquid cooling.
• In Software: ORCL earnings Monday night and Keybanc said heading into the report, it is hard not to be cautious and shares reflect it. The firm noted ORCL has sold off harder than the rest of the sector during this recent volatility, down 4.9% in the last 10 days compared to the IGV’s -2.1% return. The expected signing of large OCI contracts in the quarter are expected to help build the RPO materially in the quarter.
• In AdTech: TTD was upgraded from Sell to Hold at Benchmark as the stock has fallen to within ~10% its DCF-based fair value of $59 saying aside from ongoing macro/geo-political risks pressing mkt multiples down further, expects TTD’s NTM share price to be dictated by the pace of its mean reversion to digital ad industry growth.
• In Computer hardware: HPE shares tumbled after Q1 earnings and Q2 guidance missed Wall Street expectations and said it would begin a cost-cutting program that will reduce its overall headcount by about 5%, or about 2,500 jobs; guided Q2 revs $7.2-7.6B vs est. $7.934B and adj EPS $0.28-0.34 vs est. $0.50.

• WOLF said it is reducing headcount by about 180 employees, primarily in materials operations, at both the Durham and Siler city locations and in Q3, expects to take a one-time charge relating to a litigation settlement; targets FY26 capex of $150M-$200M; reconfirming business outlook for Q3.
• On Thursday, the Semiconductor Industry Association (SIA) announced January monthly sales of $50.8B (down 14.0% MoM), below seasonality of down 9.1% MoM and Citigroup estimate of $52.3B (down 11.5% MoM) due to weaker Memory and Microcontroller sales. While Citigroup expects below-seasonal semi sales in Q125, it remains positive on semis as AI strength (roughly 20% of semi demand) remains solid and it expects inventory replenishment in the analog space in 2025.