Mid-Morning Look

Thursday, February 27, 2025

U.S. stocks very volatile in the first 60-minutes of trading, initially giving back overnight gains in spectacular fashion (taking out prior day lows) for a 3^rd straight day, as concerns about tariffs, profit taking, and interest rates after mixed economic data weigh on sentiment. A massive sell-off for major averages resulted in a more than 400-point roll for the Nasdaq off highs as NVDA gave back earnings related gains (which impacted shares of AI/data center names). Stocks have already put in a massive bounce off the lows, paring losses for Nasdaq and pushing the S&P back into positive territory. Stocks took a hit around 8:45 am this morning after President Trump announced that 25% tariffs on Mexico, Canada remain and will go into effect March 4^th (reducing hopes for another tariff delay).

Trump said on social media platform Truth Social, “Drugs are still pouring into our Country from Mexico and Canada at very high and unacceptable levels. A large percentage of these Drugs, much of them in the form of Fentanyl, are made in, and supplied by, China…We cannot allow this scourge to continue to harm the USA, and therefore, until it stops, or is seriously limited, the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled. China will likewise be charged an additional 10% Tariff on that date. The April Second Reciprocal Tariff date will remain in full force and effect. Thank you for your attention to this matter.” The headlines again took the wind out of the sails of a stock market that has pulled back the last 4 days (off the recent all-time highs for the S&P). Markets also digested lots of data at 8:30 am that included in-line Q4 GDP data, higher inflation readings for Q4 PCE (ahead of January PCE tomorrow morning) and very weak existing home sales data.

Sentiment in the market continues to worsen (despite the S&P 500 just roughly 3% from all-time highs) as the bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -41.2 vs -11.3 last week. Bulls fall to 19.4% from 29.2%, Neutrals fall to 20% from 30.3% and Bears surge to 60.6% from 40.5%. MikeZaccardi tweets: “AAII sentiment, bulls-bears, most bearish since September 2022, -41.2, nearly the worst since early 2009.” Energy (+1.47%) and Industrials (+0.89%) are early outperformers among S&P sector ETFs, while Communications (+0.09%), Technology (-0.68%) and Utilities (-0.80%) pace the underperformers with 9 sectors gaining versus 2 declining.

• Weekly jobless claims climbed to 242,000 from 220,000 prior week and vs. consensus 221,000; the 4-week moving average climbed to 224,000 from 215,500 prior week; continued claims fell to 1.862M from 1.867M prior and below the 1.872M estimate; insured unemployment rate unchanged at 1.2%.
• Durables Goods Orders for January rose +3.1%, above consensus +2.0% and vs Dec -1.8%; Jan Durables ex-transportation orders unchanged (cons +0.3%) vs Dec +0.1% and Jan Durables ex-defense orders +3.5% vs Dec -1.8% (prev -2.4%); Machinery orders +0.2%, electrical equipment +0.1%, defense aircraft/parts +1.9%.
• January Pending Home sales index falls -4.6%, worse than consensus -1.3%) and down -5.2% y/y.

• In Managed care, shares of (UNH, CI, CNC, MOH, ELV rally as House Speaker Mike Johnson rules out the steepest Medicaid cut options in interview with CN last night. The speaker also said that he doesn’t expect the Senate will make changes to the House’s budget resolution. Speaker Mike Johnson has ruled out some of the biggest potential cuts to Medicaid for Republicans’ party-line package to enact President Donald Trump’s agenda.
• In Media: TKO slips after results; WBD Q4 adjusted EBITDA $2.7B vs $2.47B last year; said expects its streaming service business to reach at least 150Mm users by 2026 vs est. of 135.8M subscribers after added 6.4Mm direct to consumer subscribers, above estimates of 4.89Mm; PARA Q4 revenue $7.98B vs. est. $8.1B while operating income fell -68% y/y to $129M and adj OIBDA -22% y/y to $406M as revenue at its TV media segment fell by 4% from a year earlier, hurt by declines in the linear advertising market and fewer sporting events on CBS while added 5.6M subscribers during the quarter.
• In Software: AI reported total revenue that about met, margins beat, but revenue in the quarter was driven by significant growth in demo licenses, which is non-recurring revenue, growing ~50% q/q, while the subscription revenue, excluding demonstration licenses, it estimates declined LDD% y/y. CRM Q4 results mixed (EPS beat/revs miss) on weaker Q1 outlook, and guided FY26 CC subscription revenue growth of ~9%, below the consensus of 9.5%; Agentforce has over 3,000 paid customers, and all of CRM’s top 10 wins included Data and AI; Data Cloud and AI ARR reached $900M, growing 120% y/y. SNOW reported FQ4 beat on product revenue and FY26 product revenue guide $50M/$100M above consensus as mgmt noted stable consumption patterns, strong adoption of data engineering and AI features, and several large customers consuming beyond their commitments; Q1 revenue guide ($955M-960M) came in marginally below consensus ($961M).

• NCLH +3%; reported Q4 EPS $0.26 topping the $0.11 estimate as revs were reported at $2.11B, in-line with consensus expectations while guiding year EPS $2.05 vs. ests. $2.08; said continues to experience strong demand across itineraries and brands throughout 2025 and into 2026.
• NTNX +11%; delivered another solid beat/raise for Q2 and continues to benefit from the industry shift to HyperConverged Infrastructure, on top of share gains from key competitor VMware.
• NVDA +2%; delivered another beat and raise quarter as the company ramps Blackwell at a record pace (revs coming in at ~$11B) and Data Center revenue beating expectations (increased 16% q/q and 93% y/y), but gross margin guidance coming lower than anticipated.
• SNOW +8%; FQ4 beat on product revenue and FY26 product revenue guide $50M/$100M above consensus as mgmt noted stable consumption patterns, strong adoption of data engineering and AI features
• UHS +7%; 4Q strong, highlighted by an 8% EBITDA beat (or ~4-5% beat excluding higher SDPs), good underlying SS trends in both Acute and Behavioral, and strong cost controls. Additionally, 2025 guidance is above Street and assumes a modest reduction in SDPs.
• WBA +3%; shares edged higher after the Financial Times reported Sycamore Partners’ plans to separate Walgreens’ three main businesses into separate units with distinct capital structures after taking the pharmacy chain private.
• WBD +6%; Q4 adjusted EBITDA $2.7B vs $2.47B last year; said expects its streaming service business to reach at least 150Mm users by 2026 vs est. of 135.8M subscribers after added 6.4Mm direct to consumer subscribers, above estimates of 4.89Mm.

• FE -7%; on results as Q4 adj EPS $0.61 was below consensus $0.69 and Q4 revs $3.2B also missed Wall Street est. $3.53B while guided FY25 adjusted EPS $2.40 to $2.60 vs. consensus $2.89.
• IBTA -38%; downgraded by at least two Wall Street analysts following weaker than expected Q4 results and Q1 guidance as redemption revenue growth slowed from +76% in ’23 to +26% in ’24.
• MRNA -7%; after reports last night that the Trump administration is reevaluating the $590M contract for a bird flu vaccine awarded to MRNA in the final days of the Biden administration.
• PSTG -14%; reported Q4 top and bottom-line beat, Q1 guide was above views but 2025 rev guidance of $3.515B was below consensus est. $3.52B; Q4 subscription annual recurring revenue (ARR) $1.7B, up 21% y/y.
• TDOC -17%; as reported 4Q results that came in in line on the top line but missed adjusted EBITDA expectations, largely driven by weaker than expected profitability in BetterHelp (margins came in at ~8.7% vs. consensus of ~13%); full-year outlook also came in light vs. consensus.
• TNDM -31%; after reporting better quarterly results but 2025 guidance for revenue of $997M-$1.007B (up 10-11%) compared to consensus’s $1.01B, which includes $15-$20M of potential OUS headwinds as management transitions to direct operations, weighed on shares.