Closing Recap

Friday, March 21, 2025

With US equity futures lower again overnight, it looked like we could see a five-week losing streak for US stocks. Softer earnings/guidance from FedEx and Nike aren’t helping sentiment and tariff headlines continued to swirl, creating plenty of uncertainty to keep investors sidelined for now. Pre-market comments from the Fed’s Goolsbee that he believes rates will be lower 12-18 months from now definitely didn’t help the mood in the markets when investors have more aggressive expectations. Futures rolled on the headlines and the Fed’s Williams also didn’t help when saying it has become harder to forecast now, and the Fed is in no hurry to make the next monetary policy decision. Sentiment-wise, today’s Fear & Greed Index registered 20/100 (Extreme Fear) versus last week also at 20 and last month’s 36 (Fear). A year ago, the index was at 71 (Greed). Early breadth favored decliners by a bit more than 3:1 as Smallcaps underperformed with IWM (-1.07%) versus SPY (-0.67%) and QQQ (-0.73%). On an S&P sector basis, Communications (+0.35%), Consumer Staples (-0.11%) and Health Care (-0.61%) were early outperformers among S&P sector ETFs, while Industrials (-0.96%), Technology (-1.02%) and Materials (-1.66%) led the underperformers with only Communications in the green. Stocks did spike into the bell heading into the weekend. For the week, the S&P 500 gained 0.5%, the Nasdaq climbed 0.17%, and the Dow climbed 1.2%.

In data of note today, with the market trying to avoid a fifth consecutive down week, it is worth noting the average one-year return following such a skid is about +10% with positive returns more than 70% of the time dating back to about 1939 (though there have been some large swings). On S&P losing streaks @bespokeinvest noted May 2022 was the last five-weak losing streak (that one extended to seven weeks) and eight weeks was the longest ever (May 1970 and March 2021). On interest rates, following Fed speakers’ language this morning and perhaps reflecting recession concerns, expectations have been pushed out a bit, but the market still sees implied rates dipping to about 3.4% by June 2026. Lastly @KobeissiLetter talked stagflation today, noting the Philadelphia Fed Manufacturing Index saw dips in the monthly result, six-month outlook for new orders and six-month business outlook while prices paid jumped to the highest since July 2022.

Heading into the final hour of trading, breadth continued to favor decliners but improved to just over 2:1 as small caps continued to underperform with IWM (-0.65%) versus SPY (+0.06%) and QQQ (+0.3%). Sector performance remained similar to the morning with Communications (+0.8%) led and Consumer Staples and Consumer Discretionary also outperformers, while Energy (-0.74%), Utilities (-0.7%) and Materials (-1%) paced the underperformers among the10 sectors declining. On a growth vs value basis, both were in the red with growth the relative outperformer. The Russell 1000 Growth dipped by 0.15% versus its Value counterpart at -0.70%.

• WTI April crude futures dipped overnight and early in the session but worked higher as the day progressed to settle with a gain of $0.21/bbl, or +0.31%, at $68.28, also notching a weekly gain. Futures have swung this week on demand concerns resulting from tariffs and reciprocal tariffs yet to be implemented as well as overall economic and recession fears. Also, of concern has been Trump’s efforts to reduce supply from Venezuela and Iran. On the supply side as well, the recent uptick in Israeli attacks in Gaza has once again spurred questions about supply impacts. Overall, there are no significant changes in underlying catalysts. Brent similarly gained $0.16/oz, or +0.22%, to $72.16.

• In Homebuilders: LEN Q1 EPS of $2.14 topped consensus of $1.71, the beat was on lower corp. G&A (1.9% of revenue vs 2.6% guide), financial services, and misc. items. Homebuilding was mixed as a lower gross margin (18.7% vs KBW’s/consensus 18.9%/19.1%) offset 3-4% better orders/deliveries; guided Q2 implied EPS of $2.20, which was below consensus $2.40/$2.65 driven by lower margins (18% vs KBW’s/est. 19.3%/19.7%).

• In Autos: TSLA posting its 9^th straight week of declines; in Chinese EV space, NIO Q4 revenue of 19.7B Chinese yuan ($2.70B) compared to $2.79B estimate, as the number of EVs delivered +45% y/y to 72,689 while guided Q1 deliveries 41k-43k well below the 65k estimate and sees revs between $1.69B-$1.76B vs. est. $2.48B; in auto retailers, AZO was upgraded to Buy from Neutral at Davidson (tgt to $4,192 from $3,500) citing its defensive positioning; the company being an inflation and tariff beneficiary; commercial market share gains.
• In RV/Leisure products: Roth said they maintain a net cautious stance on the RV market after conducting an industry panel with the management teams with both CWH and THO; Roth’s more bearish stance on THO also factors in profit erosion while regaining market share and an incrementally weaker narrative in the European RV market. Notes plunging Consumer Confidence levels, caused by uncertainties created by tariffs, have put cold water on a more constructive narrative, at least for now.
• In Lodging/Online travel: HST was upgraded to Equal Weight at Morgan Stanley saying recent performance in the stock has left valuation below peers and at trough levels (ex-pandemic), creating a more balanced risk reward. While the stock’s fundamentals are likely to be challenged by deteriorating trends in key markets, HST has already seen greater downward revisions vs peers.

• ALNY won U.S. approval for its injectable drug, Amvuttra, for a rare and deadly heart disease, securing an entry into a market dominated by PFE’s blockbuster Vyndaqel; the drug was approved to treat adult patients with ATTR-CM, in which faulty transthyretin proteins accumulate in the heart, potentially causing the organ to fail.
• TELA was downgraded by two Wall Street firms after reporting Q4 results, which were well below estimates as the company experienced meaningful sales force turnover as a number of reps were poached towards the end of the quarter and mgmt provided ’25 guidance that was also well below original targets.
• In the Clinical Research Organization Sector: Goldman Sachs still believes the long-term growth prospects for CROs remain intact (though likely at a lower rate than the DD growth seen in the last 5 years), however it believes the near-term outlook is likely to remain challenging. For CRO’s said believe that the weakness in demand is likely to persist through most of 2025 as large pharma budgets rarely change rapidly. As a result of these concerns around the pace of recovery, they downgrade CRL and ICLR to Neutral from Buy.
• In Life Science Tools: DHR was upgraded to Buy from Neutral at Goldman Sachs with $260 PT following its Dec 7th ’23 downgrade on the back of rich valuation while ’24, and ’25 consensus earnings expectations which it believed were too high at the time. Since then, ’25 consensus estimates have come down -8% for reported revenue growth and -12% for EPS.

• In Airlines (DAL, UAL, LUV, AAL): Britain’s Heathrow Airport was shut on Friday after a huge fire at a nearby substation knocked out its power, stranding passengers and angering airlines who questioned how such crucial infrastructure could collapse. The fire cut the power supply and back-up system for Europe’s busiest and the world’s fifth-busiest airport. Airline experts said the last time European airports experienced a disruption on such a large scale was the 2010 Icelandic ash cloud that grounded some 100,000 flights.

• In earnings, PL reported Q4 adj EBITDA that beat expectations, but FY26 revenue guidance was in-line while adj EBITDA guidance was below Street; however, transformative $230M JSAT deal to be digested in FY26, deals provide upfront cash, but related satellite capex moves to COGS weighing on near-term.

• In IT Services & Consulting: ACN shares weak again, one day after dropping more than 7% after weaker bookings results for the quarter and said federal government spending cuts have negatively impacted business (the commentary hit other IT service names like EPAM, IBM, GLOB). Accenture also called out softness in its US Federal Services business (~8% of total revenue as per Needham) due to the impact from DOGE which weighed on other gov’t IT service names (BAH, CACI, LDOS, SAIC).

• MU read through to WDC, SNDK in memory; MU NAND ASPs fell by a high-teens percentage in FQ225 after falling by a low single-digit percentage in FQ115; NAND bit shipments sequentially grew modestly and are expected to grow in 2025 by a low double-digit %; HBM is sold out for CY25; HBM sales grew more than 50% sequentially to over $1B; guided to 10% higher sales, 140 bps lower non-GAAP gross margins.
• SMCI was upgraded to Neutral from Underweight at JP Morgan as the company has cycled past the uncertainty in relation to pending SEC filings and is on the cusp of benefitting from ramp in Blackwell based server shipments which are already seeing materially higher demand than prior generation, with additional benefit to revenue growth from higher ASPs.