Mid-Morning Look

Wednesday, April 02, 2025

U.S. stocks weakened overnight, with S&P futures (Spuz) falling more than -1% and testing yesterday lows around 5,600 before the market open, before stock prices surged after the open, recouping the weakness as markets eagerly await the announcement from President Trump at 4:00 pm on reciprocal tariff details.  President Trump’s economic team is preparing a new tariff option for him in the waning hours before his April 2 trade policy announcement, according to reports this morning (WSJ). Trump’s team in recent days has considered imposing a 20% universal tariff on virtually all imports, versus a reciprocal plan that would apply different tariffs to different countries. But the U.S. Trade Representative’s office is preparing a third option-an across-the-board tariff on a subset of nations that likely would not be as high as the 20% universal tariff option, according to some reports. We are just a few hours from the final results, as Wall Street continues to dissect the impact on the U.S. economy and trading partners.

In other news, ADP private payrolls for March showed a larger than expected gain ahead of the monthly nonfarm payrolls report on Friday. In politics, Republicans restored two House seats in special elections in Florida to replace National Security Advisor Mike Waltz and failed attorney general nominee Matt Gaetz; but Republicans however failed to gain control of the Wisconsin State Supreme Court, where liberal judge Susan Crawford defeated Brad Schimel. In stock news, stocks still looking for direction with no S&P sector up or down more than 0.4% at the moment as investors position themselves ahead of the tariff announcement later this afternoon.  The dollar is lower, Bitcoin and Treasury yields are higher, and gold prices remain near all-time highs at $3,161 an ounce.

• February Factory orders ex-trans climb 0.4% m/m vs. est. +0.4% and vs Jan +0.3% (prev +0.2%); Feb factory orders ex-defense +0.5% vs Jan +1.9% and Feb Durables orders revised to +1.0% from +0.9%.

• In Payments: Goldman Sachs upgraded FI to Buy and JKHY to Neutral in Payment Technology saying choppy macro in Q1 to limit near term upside to spending. The firm leans into higher beta names with idiosyncratic stories (such as AFRM and XYZ) along with companies with defensive revenue streams. Upgrade FI to Buy (from Neutral) sees accelerating top-line growth driven by international expansion, rising customer base, and new products roll out in the near term and raise JHKY to Neutral as solid improvement in its top and bottom-line ahead set-against an expensive valuation relative to peers.
• In Insurance: JP Morgan shifted its view on life insurance stocks from Positive to Neutral, saying risk/rewards have become less compelling given an incrementally downbeat outlook for business fundamentals. It forecasts life insurers will report “weak” earnings and mixed business trends in Q1. JP Morgan upgraded RGA to Overweight from Neutral to reflect a positive outlook for business trends, more reasonable earnings expectations following the EQH deal, and the company’s defensive risk-profile. Separately, UBS downgraded RGA to Neutral from Buy driven by its expectation for the recent overhang on shares to persist over the near-term as management executes its newer, more aggressive growth strategy

• CRWV +15%; as shares rebounded after an uninspiring IPO debut last week when I priced at $40 before falling as low as $36 on March 31^st.
• CYTK +13%; rebounds after weakness from competitor EWTX in heart disease study; CYTK is nearing FDA approval for its competing hypertrophic cardiomyopathy drug
• SCHW +1%; upgraded to Buy from Neutral at Citigroup and raised tgt to $102 from $85 saying they see potential for an improving net new assets story as Schwab shifts to offense with the Ameritrade integrations over and investment spending to accelerate growth ramps.
• SPWH +90%; as Q4 results topped expectations as value-focused holiday strategies drove traffic and solid margins. Strength in core categories like fishing and camping offset broader consumer weakness. FY25 guidance was in-line, with management focused on cost control and inventory.
• XBI +1%; as biotech stocks get a minor bounce after tumbling in recent days on FDA departures, and cost cutting moves within the HHS, NIH, CDC and others by gov’t.

• EWTX -23%; shares tumbled after drug data after two cases of serious side effects; also announced the pricing of underwritten offering of 9.9M shares of common stock at offering price of $20.13 per share.
• NCNO -24%; shares tumbled after results and guidance as Q4 revs of $141.4M were in-line (up 14% y/y) on a 16% acceleration in subscription revs but guided Q1 revs of $138.75M-$140.75M, below consensus $145.2M, up 9% y/y at the midpoint (prompting some Wall Street downgrades)
• NMAX -42%; shares finally give back some gains after a monstrous two-day rally after pricing their IPO at $10 on Monday. NMAX had surged 179% yesterday to $233 (which followed a more than 800% surge on Monday).
• RIVN -6%; reaffirms its 2025 delivery range guidance after announcing Q1 deliveries of 8,640 vehicles, down -36% y/y but in line with company and Wall Street estimates of roughly 9K; Rivan made 14,611 vehicles, up from 13,980 produced y/y.
• TSLA -2%; Q1 deliveries fell -13% y/y to 336,681, below the consensus est. 390,343 as Model 3/Y deliveries fell -12% y/y to 323,800 (est. 381K) while other models’ deliveries fell -46% q/q to 12,881; Q1 production fell -16% y/y to 362,615 vehicles vs. est. 412K.