Closing Recap

Thursday, May 22, 2025

After tumbling Wednesday afternoon following a weaker 20-year bond auction and a subsequent spike in Treasury yields, today was more of a “chop” day for U.S. averages, before a melt-up this afternoon as stocks took their cue from the bond market today. However, in the final minutes of the trading day, the market gains unraveled, ending the day little changed on no specific news. The 10-year yield hits highs around 4.63% this morning and the 30-yr above 5.15% which weighed on sentiment as stock futures were lower…but as yields sunk throughout the day, stocks followed bonds higher. Stocks rallied all afternoon as the CBOE Volatility index (VIX) edged under the 20 level as investors remain comfortable buying any market dip the last 4-5 weeks since the sharp April sell-off. Lots of interesting stories today included the resurgent Bitcoin hitting all-time highs above $112,000 today, the move in Treasury’s hitting interest rate sensitive sectors (Utilities), the sweeping tax bill out of Washington and its impact on several S&P sectors/stocks (ex: solar). Quiet on the trade/tariff headlines as focus over the last week in DC remains the tax bill.

The Republican-controlled U.S. House of Representatives narrowly passed a sweeping tax and spending bill that would enact much of President Donald Trump’s policy agenda and now heads to the Senate for vote. The bill would fulfill many of Trump’s campaign pledges, delivering new tax breaks on tips and car loans and boosting spending on military and border enforcement. It will add about $3.8 trillion to the federal government’s $36.2 trillion in debt over the next decade, according to the nonpartisan Congressional Budget Office. The 1,000-page legislation would extend corporate and individual tax cuts passed in 2017 during Trump’s first term in office, cancel many green-energy incentives passed by Democratic former President Joe Biden and tighten eligibility for health and food programs. It also would fund Trump’s crackdown on immigration, adding tens of thousands of border guards.

In stocks news, AAP, RAMP, SNOW, URBN big winners following earnings; solar stocks tumble (RUN, ENPH, SEDG) due to concerns over a proposed U.S. House bill that could accelerate the phase-out of the 30% residential solar tax credit by years end; managed care names weak (HUM) after CMS launches an expanded Medicare Advantage (MA) audit strategy; GSE’s (FNMA, FMCC) rally after President Donald Trump said he was considering taking the U.S. mortgage finance firms public. Bitcoin hits record highs lifting Bitcoin miners, gold slips. Utilities and other interest rate sensitive sectors (high dividend payers) saw weakness amid the volatility in Treasury yields.

Sentiment Readings today included: 1) After a record streak of 50%+ bearish sentiment readings, the AAII Sentiment survey now has more bulls than bears according to Bespoke Invest. The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was +1 vs -8.5 last week. Bulls rose to 37.7% from 35.9%, Neutrals rose to 25.6% from 19.7%, and Bears fell to 36.7% from 44.4%; 2) This week’s NAAIM Exposure Index reading advanced to 80.87, rising from last week’s 70.56 – vs. recent peak of 99.24 from 12/11 – recent trough from 4-17 of 35.16 – Last Quarter Average (Q1) of 72.50.

In an interesting story today, the U.S. government is phasing out the penny, whose use has spanned more than two centuries. The Treasury Department will stop putting new pennies into circulation by early next year. Afterward, there won’t be enough pennies to use in everyday cash transactions, and businesses will need to start rounding up or down to the nearest 5 cents, the Treasury said in a statement.

• The Chicago Fed National Activity Index for April sinks to -0.25, the worst since October and also the worst sequential chance since November 2022.
• S&P Global May flash composite PMI at 52.1 (vs 50.6 in April), S&P Global May flash services PMI at 52.3 (vs 50.8 in April) and S&P Global May flash manufacturing PMI at 52.3 (vs 50.2 in April).
• April Existing Home Sales 4.00M unit rate fell -0.5% (slightly below consensus 4.10M), and vs March 4.02M (prev 4.02M); April inventory of homes for sale 1.45M units, 4.4 months’ worth; April national median home price for existing homes $414,000, +1.8% from April 2024.

• Oil prices declined with WTI crude slipping -$0.37 or 0.6% to settle at $61.20 per barrel (but off morning lows) after reports that OPEC+ members are discussing whether to agree on another large production increase at their meeting on June 1 (as per Bloomberg). An output hike of 411,000 barrels a day (bpd) for July is among the options under discussion, although no final agreement has yet been reached, the report said. Weekly natural gas inventory data showed US natural-gas stockpiles climbed 120 bcf last week, versus forecast of +115 bcf.
• Treasury yields spiked this morning, with the 10-year yield hitting highs around 4.63% and the 30-yr yield 5.15%, the highest since October 2023 but ended lower at 4.54% and 5.0% respectively. Yields rose following a weak 20-year Treasury auction on Wednesday that drove a stock market selloff. Demand for the auction showed demand was weak as investors appear to be demanding a higher yield for the risks. Concerns are stemming from President Trump’s tax bill, passed by the House early Thursday (and to the Senate next), which will increase already high government debt by trillions of dollars over the next decade (a main reason for the loss of the country’s last AAA rating last week by credit rating agency Moody’s).

• In Broadlines/Hardlines: TGT was downgraded from Outperform to Market Perform at Telsey and cut price tgt to $110 from $130 to reflect the continued challenging macro environment, inconsistent operating execution, limited visibility on the progress of initiatives, and potential risks related to tariffs. BJ Q1 adj EPS $1.14 tops consensus $0.92; Q1 revs $5.03B vs. est. $5.19B; Q1 comparable club sales increased by 1.6% y/y; Q1 comparable club sales, excluding gasoline sales, increased by 3.9% y/y, led by traffic growth.
• In Home Furnishing: WSM shares slide as Q1 earnings and revs topped consensus as Comparable brand revenue came in at 3.4% growth but only reiterated prior forecast of revenue to be in the range of a decline of 1.5% to growth of 1.5% in fiscal 2025.

• In Leisure Products: gym owner PLNT was upgraded from Hold to Buy at Stifel and raised its tgt from $82 to $120 saying recent results suggest gross joins have stabilized, and Stifel believes there are several potential catalysts to keep comparable sales in the mid-to-high single-digit range over the next couple of years.

• OPEC+ members are discussing whether to agree on another large production increase at their meeting on June 1, Bloomberg News reported on Thursday. An output hike of 411,000 barrels a day (bpd) for July is among the options under discussion, although no final agreement has yet been reached, the report said, citing delegates. Reuters have previously reported that OPEC+ will accelerate oil hikes and could bring back as much as 2.2 million bpd to the market by November, including via an accelerated increase in July.

• In Banks: Canadian bank TD reported a fall in Q2 profit on Thursday, as provision for credit losses jumped to C$1.34 billion ($965.5 million) from C$1.07 billion a year earlier; reported record revenue of C$2.13 billion, a 10% jump from a year earlier; posted adjusted net income of C$3.63 billion, or C$1.97 per share, for the three months ended April 30, compared with C$3.79 billion, or C$2.04 per share, a year earlier.
• In Crypto: Bitcoin reached new all-time highs today, reached a record price of $111,878 on Thursday before paring gains, but another incredible run. In research today for Bitcoin miners, Citizens initiated APLD at Outperform and $12 PT, CORZ Outperform and $15 tgt, HUT Outperform and $25 PT, and WULF Outperform and $7 PT with a Market Perform (no PT) for CRWV in Digital Infrastructure sector. The WSJ reported Cryptocurrency exchange Kraken plans to offer tokenized versions of over 50 stocks/ETFs to non-U.S. customers, starting in Europe, Latin America, Africa and Asia, as non-U. S. customers will be able trade AAPL, TSLA, NVDA and other popular stocks as tokens over a digital ledger. https://tinyurl.com/5aj8ua8x
• In Financial Services: rental company URI was upgraded to Overweight at Keybanc with $865 tgt after attending its Specialty Rental Analyst Day in Ridgefield, NJ, where management showcased its ability to drive outsized market share gains through leveraging the scale of its industry-leading fleet size and its differentiated one-stop-shop portfolio. In Credit ratings/agencies, FICO was defended a second day by Jefferies after shares have fallen -22% in 2-days on concerns regulators will begin to more closely scrutinize mortgage costs. On Tuesday, FHFA Director Bill Pulte called out FICO by name, and noted the FHFA was actively looking to move to bi-merge credit reports from tri-merge. INTU to report earnings after the close.
• In Payments: PGY is issuing its first bond backed by loans made to online shoppers; Pagaya is set to issue $300M of bonds Thursday that will be used to fund buy now, pay later, or point-of-sale, loans offered by Klarna. JPMorgan Chase and Atlas, the asset-backed finance arm of Apollo Global Management, are arranging the bond sale, a person familiar with the matter said – WSJ reported and later confirmed.
• In Insurance: WRB was downgraded from Buy to Neutral at Goldman Sachs to reflect its view that WRB has a relatively worse reserve position versus peers, combined with a less attractive valuation. Goldman said it thinks WRB’s U.S. medium/long-tail reserve position is deficient equal to 4% of statutory surplus, which is 4pp worse than the adequate reserves it estimated last year, and 11pp worse than the average GSe 7% redundant U.S. medium/long tail reserve position at peers.

• Managed Care stocks weak (UNH, CVS, HUM), after CMS launches an expanded Medicare Advantage (MA) audit strategy. CMS announced plans to aggressively increase Medicare Advantage risk adjustment coding audits (aka RADV audits), and it intends to complete audits for payment years 2018-2024 by early 2026. CMS intends to deploy advanced technology to review medical records more efficiently and will increase its medical coders staff to 2,000 (up from 40). CMS also expects to increase its audit volume to include all ~550 MA plans each year (vs. 60 previously) and will review 35-200 records per plan per year (vs. 35 previously).
• In MedTech: Citigroup with several changes as they reiterate BSX as top pick, while adding EW to top picks list (and removing PODD), downgrading BDX to Neutral from Buy; upgrading ITGR to Buy from Neutral; closing its Negative Catalyst Watch on HAE, maintaining the Positive Catalyst Watch on COO. The good news is that underlying MedTech fundamentals appear intact after tariff impact, including volumes, pricing, and CAPEX. Separately, INGN was upgraded from Hold to Buy at Needham with $12 tgt as it believes that the new management team has made significant progress with a turnaround and this is not reflected in its share price.
• In Life Sciences & Diagnostics: Citigroup said coming out of the 1Q earnings cycle, headwinds from the changes to the US A&G policies and tariffs kept the investor appetite light for Tools and CROs. While cautious on the group overall, they remain constructive on certain areas such as bioprocessing as the recovery seems to be underway given multiple quarters of healthy order growth. Citi downgraded BRKR to neutral given A&G-specific headwinds which they believe could linger heading into 2026. They walk away from 1Q earnings naming DHR, EXAS, and GH as top picks given their strong underlying demand and tariff impact assumptions. Tariffs were at the forefront of investor interest during Q1 earnings, and most A&G exposed names include: TXG, BRKR, ILMN, QGEN, and TECH.

• In Transports: ZTO was downgraded from Buy to Neutral at Bank America and cut tgt to $19 from $24 citing an “uninspiring” Q125 result and said sees limited catalysts ahead as the price competition, especially ZTO vs YTO, looks stiffer than expected; now projects a 10% decline in adj. net profit to RMB9.1B in FY25.
• In Aerospace & Defense: RKLB announced the launch window for its next mission for real-time space-based intelligence company BKSY. The mission, named "Full Stream Ahead", will launch from Rocket Lab Launch Complex 1 in New Zealand during a launch window that opens on May 28^th.

• In Telecom: AT has agreed to acquire substantially all of LUMN’s Mass Markets fiber business for $5.75B in an all-cash transaction. The deal is expected to close in the first half of 2026 and will result in AT&T acquiring ~1M fiber customers and ~4M fiber passings across 11 states. Politico reports that phone companies (VZ, T, TMUS) failed to warn senators about surveillance, Wyden says.
• In Media: CMCSA’s NBCUniversal has made an offer to Major League Baseball to take over the package of regular-season and postseason games that DIS ESPN is walking away from, offering much less than its rival currently pays – WSJ https://tinyurl.com/3zfp9xxh

• GWRE was downgraded to Neutral from Buy at Davidson with an unchanged price target of $226 saying that the valuation has become more stretched with the outperformance of the shares over the last two years and expects Guidewire will meet or modestly exceed the firm’s Q3 forecasts.
• RAMP shares jumped after better results as both ARR and RPO accelerated nicely for a second straight quarter, noting RPO saw its strongest sequential growth in FQ4 since the company began reporting the metric in FY19; also, there were 20 $1M+ annual contract value deals were renewed in FQ4.
• SNOW reported a strong Q1 EPS/revs beat and raised guidance for the full year, lifting shares with highlights for the quarter including Healthy CRPO growth (27%), as increase in the guidance for FY26, no indications of an increase in macro concerns, product revs of $997M beating consensus $959M and was up 5% q/q and 26% y/y, while one concern in the quarter was NRR slipping to 124% (vs. 126% last quarter).
• ZM Q1 EPS beat just below 1% (on slightly better revs) and raised the full-year guidance by $5MM more than the beat but emphasized the FY raise was not a read through of the beat, but rather the expected benefit from a $1/month pricing increase for their month-to-month Online Pro customers.

• MRVL was downgraded to Hold from Buy at Melius as expected Marvell to do well due to its custom silicon business but now thinks this may not happen flagging concerns about Marvell’s role in AMZN and MSFT’s custom accelerator projects, and potential competition from other companies.
• NVTS shares surged after NVDA said it will collaborate with Navitas Semiconductor on its next generation 800V HVDC architecture (no terms were disclosed).
• SYNA announced that its board of directors has appointed Rahul Patel as chief executive officer. He succeeds Interim CEO Ken Rizvi, who will continue to serve as CFO. Most recently, Mr. Patel served as senior vice president and group general manager of QCOM’s Connectivity, Broadband, & Networking Group.
• STX board approves $5 bln share repurchase program; held an investor, Analyst day event today in NY.