Closing Recap

Thursday, March 27, 2025

U.S. stocks finished the day lower, sliding in the final minutes ahead of key inflation data tomorrow morning (PCE), expected Trump comments tonight (more talk ahead of April 2^nd reciprocal tariffs), and one of the more highly anticipated tech IPOs in a while. Stocks opened lower initially, before rebounding mid-morning, only to erase those gains and finished down slightly. Gold prices posted new all-time closing highs above $3,060 an ounce while the dollar edged higher along with oil. There were a few notable news items impacting market sentiment today:

1)     Tariffs: President Trump’s overnight permanent tariffs on autos that are not made in the US, effective April 2 starting at 2.5% and scaling to 25% with no exceptions send stock prices lower. The headlines weighed heavily on shares of global auto stocks with likes of GM, STLA and foreign autos falling, but saw pockets of strength in used car/fleet names (CAR, HTZ, KMX) and auto parts retailers (AAP, AZO, ORLY). CNBC’s Sara Eisen noted about half of U.S. cars sold here are imported. Here’s where they are from and who will feel the biggest hit from new 25% tariffs on autos made outside the U.S. with Mexico 32%, Japan 16%, Korea 15%, Canada 13%, Germany 10% and “other” 13%.

2)     Inflation/Economic data: the final reading of Q4 GDP offered no major surprises and neither did the Q4 PCE data points, while jobless claims were mostly in-line. Attention now turns to tomorrow’s “fresher” February PCE inflation data at 8:30 AM where ests M/M for est. +0.3% (prior +0.3%) and on a Y/Y basis est. to rise +2.5% (prior +2.5%). Core PCE Price Index M/M for February est. +0.3% (prior +0.3%) and Y/Y expected to rise +2.7% (prior +2.6%). Tomorrow we also get Personal income/spending and University of Michigan confidence.

3)     After a strong start to the week with big advances for technology (XLK), the sector has pulled back the last few days amid weakness in semis and data center names after multiple reports that CoreWeave (CRWV) is planning to downsize its IPO and cut the price (prior expected range was $47-$55). News of slowing demand/high debt for the company (as per CNBC Faber the day prior), has weighed heavily on sentiment for the space (NVDA, AMD, ARM, SMCI, VRT, etc. been weak). CNBC Leslie Picker noted this morning that NVDA was forced to step in and “anchor” the IPO with a $250MM order at $40 per CNBC (not necessarily the pricing of it and no confirm if deal range was cut. (NVDA already owns 5% of CRWV).

In Interesting Stats: 1) @ Charlie Bilello tweets: “The S&P 500 fell 1.1% yesterday, the 12th daily decline in 2025 w/ a loss above 1%. Last year at this point we had only 3 large down days which was abnormally low. The average year since 1928 has 29 large declines. This is the price of admission.” 2) This week’s NAAIM Exposure Index number declined from last week’s reading (new YTD low): 57.55 (from 64.64) – recent peak of 99.24 from 12/11, prior trough reading of 64.10 to start the year on 1/1. 3) Bearish sentiment remains above 50 a 4^th week: The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -24.8 vs -36.5 last week. Bulls rise to 27.4% from 21.6%, Neutrals rise to 20.4% from 20.3% and Bears fall to 52.2% from 58.1%.

• Weekly Jobless Claims fell to 224,000 in the latest week from 225,000 prior (and consensus 225,000); the 4-week moving average fell to 224,000 from 228,750 prior week; continued claims fell to 1.856M from 1.881M prior week (previous 1.892M).
• Kansas City Fed Manufacturing Index up to -2 vs. -5 est. & -5 in prior month, the highest since May 2024 with some week internals as new orders fell to -12 vs. -7 prior; prices paid up to +42 vs. +38 prior.
• February pending home sales index up 2.0% vs. last month, consensus 2.9%
• U.S. advance Feb goods trade balance was (-$147.91B); advance Feb wholesale inventories +0.3% and U.S. advance Feb retail inventories excluding autos +0.1%.
• The U.S. Congressional Budget Office projected significant increases in federal budget deficits and debt over the next 30 years, in part due to rapidly rising interest costs. The CBO’s latest long-term budget projections show federal deficits accelerating to 7.3% of the economy in fiscal year 2055 from 6.2% in 2025.

• U.S. crude oil futures settle at $69.92/bbl, rising $0.27 or 0.39% while Brent Crude futures settle at $74.03/bbl, rising $0.24 or 0.33%. U.S. natural gas futures eased about 1% to a five-week low on Thursday on a bigger-than-expected storage build last week and forecasts for lower demand next week than previously expected. The U.S. dollar edged higher vs. the Japanese yen but slipped vs. the euro.

• RBC Capital said MBGYY, BMWYY, GM most negatively impacted by tariffs. Further, RBC stills think USMCA negotiations could exempt US OEMs from Mexico/Canada tariffs. Finally, German OEMs are likely worst hit but RBC does wonder if the threat of retaliatory tariffs from Europe might discourage tariffs on Europe from being implemented given jobs at SUV plants in the US. Most negatively impacted by tariffs would be Mercedes, BMW, and GM. Ford (F) and STLA would also be impacted.
• Deutsche Bank says for OEMs, TSLA and Ford (F) appear to be the most shielded given location of vehicle assembly facilities although Ford does face incremental exposure to imported engines; GM has the most exposure to Mexico. On the suppliers, virtually all will be subject to the derivative impact of tariffs. From direct impact standpoint, it appears seating (ADNT, LEA) and airbags/seatbelts (ALV) are not subject to the tariffs.
• Jefferies said after the 25% duty on all vehicles imported in the USA, effective April 2^nd; no adjustment for content at this stage, with final assembly in the US the determinant to avoid duty. On that basis, TSLA, RIVN, LCID would be fully exempt. Ford (F) should be less impacted than GM and STLA given the latter’s’ higher share of final assembly in units as well as higher than average value vehicles in Mexico (full size vehicles at GM and heavier duty versions of Ram at STLA).
• In Auto dealers/used cars: CARG was downgraded from Overweight to Neutral at JP Morgan and cut tgt to 434 from $42 saying the implementation of 25% tariffs on all imported automobiles, in addition to imported parts over time, is "unequivocally negative" for the auto retail ecosystem in the near- and medium-term. The firm downgraded TRUE from Neutral to Underweight as it continued to see execution risk and KAR was downgraded to Neutral from Overweight; notes 50% of all vehicles sold in the U.S. are imported.
• Rental cars (CAR, HTZ) shares jumped with strength possibly attributed to the tariff on autos; making their car fleets more valuable is thought. Also benefitting from the auto tariffs were auto parts retailers with AAP, ORLY, AZO shares climbing on thought being that people likely to keep their old cars and replace parts.

• In Utilities: NFE agreed to sell its assets and operations in Jamaica for $1.06B to EE which includes sale of its LNG import terminal in Montego Bay, offshore floating storage and regasification terminal in Old Harbour and a 150 megawatt combined heat and power plant in Clarendon; NWE reached a constructive settlement with several intervenors that resolves the natural gas rate case, agreeing to an $18M revenue increase.
• In Refiners: PARR was upgraded from Neutral to Buy at Goldman Sachs and raised its price target from $18 to $19, implying 34% upside saying at current levels, sees a compelling risk/reward set-up and while it is mindful of macro uncertainty and tougher Asia demand dynamics, it sees potential for Singapore margins to bottom. PSX was downgraded from Goldman to Neutral from Buy as sees limited upside to its SOTP valuation of $135, following YTD outperformance where they note shares have outperformed its Refining coverage by ~14%.

• In Mortgage Services (RDFN, ZG): The average U.S. homebuyer’s monthly payment reached a record $2,807 in late March, up 5.3% from last year, Redfin says. Rising sale prices–up 3% annually–and mortgage rates averaging 6.67%–double pandemic lows–are driving the surge. Though rates fell from January’s 7.04%, high costs still stifle sales, with Pending Home sales down 4.6%. But spring seems to be sparking activity: mortgage applications hit a seasonal peak since February, home tours outpace last year, and "homes for sale" searches have soared. New listings jumped 7.5%, the biggest rise in 2025.

• BTAI reports topline data from SERENITY pivotal Phase 3 safety trial evaluating patients for acute treatment of agitation associated with bipolar disorders or schizophrenia expected in 2H’25.
• CRSP announced Chief Operating Officer, Julianne Bruno, will be stepping down from the Company to pursue external opportunities, effective as of April 11, 2025.
• NVO shares slide again, adding to recent weakness in the obesity sector and extending its losing streak to 7-days, to lowest levels since March 2023.
• SLNO won FDA approval of its treatment for a genetic disorder that can lead to obesity, diabetes and cardiovascular disease; said the FDA approved its Vykat XR extended-release tablets for the treatment of hyperphagia, a chronic and life-threatening feeling of intense, persistent hunger.
• WOOF shares jump, getting a boost on earnings and guidance saying expects to improve their bottom line through its efforts to clamp down on underperforming stores and products.

• In Insulin/Diabetes sector (DXCM, PODD, TNDM): Jefferies said takeaways from doctors surveyed treating diabetic patients are expecting MSD% volume growth of patients over the next 2Y and significant share gains for diabetes tech especially in IIT2, Basal and NIT2 groups. Specifically, JEFF’s respondents highlighted that ~13% of NIT2D patients are using CGMs today but this could rise to 22% in 2Y or 33% if it becomes reimbursed. Similarly, 64%/28% of T1D/IIT2 patients use pumps today which could increase to 76%/52% LT.

• In Aerospace & Defense: LMT was downgraded to Sector Perform at RBC Capital (tgt to $480 from $550) as believes the F-35 faces greater headline risk for international sales (while it sees little risk to actual order cancellations) and increased US budget pressure. Moreover, the recent NGAD loss has raised fresh questions on the long-term growth outlook, and RBC believes near-term catalysts are limited. The firm upgraded NOC to Outperform (tgt to $575 from $500 as emerging shift in DoD priorities support improved outlook.
• In Chemicals: FUL reported better Q1 EPS, revs and Ebitda and guided FY revs down 2-4% vs est. -3.29%, adj EBITDA $600-625Mm vs est. $602.35Mm and adj EPS $3.90-4.20 vs est. $3.97; CC was upgraded to Outperform at Mizuho noting freon-related inventories normalizing, specialty plastics stabilizing, PFAS expected below threshold, new CEO & CFO settled in.

• In Tech Business Services: CNXC shares jumped following outperformance in FQ1 results, especially on the EPS line but Canaccord noted FCF yield is where things really shine; also reiterated guidance.
• In Software: CHKP was upgraded from Neutral to Buy at Bank America and raised its PT from $230 to $260 on the improved business trends as believes new CEO Nadav Zafrir is fundamentally changing the growth outlook of Check Point. APP shares tumbled late afternoon after short seller Muddy Waters was out with a negative call, adding to the recent short calls late February from Culper research and Fuzzy Panda.
• Computer Hardware: SNX shares fall on weaker guidance as sees Q2 adj EPS $2.45-$2.95 below consensus $3.03 and sees revs $13.9B-$14.7B below est. $14.73B; followed weaker Q1 results (EPS/revs/Ebitda miss)

• AMD was downgraded to Hold from Buy at Jefferies and cut tgt to $120 from $135 as believes AMD’s traction in AI is limited and sees increased competition from INTC
• WOLF hired Robert Feurle as the electric-vehicle chip maker’s new CEO effective May 1; Feurle joins from Swiss chip maker AMS-Osram, where he has served as executive vice President and general manager of the company’s Opto Semiconductors unit.
• Bank America said top picks in diversified semis include ADI, NXPI and ON ahead of a cyclical recovery. They like ADI given 1) recovery confidence, 2) high quality portfolio, 3) best-in-class FCF; like NXPI due to: 1) relatively shallow peak-to-trough correction, 2) company-specific growth drivers, 3) value-add M&A; suggest ON for "high beta" to recovery given: 1) estimates appear de-risked, 2) expanding SiC share, 3) strong cash/FCF.