Mid-Morning Look

Friday, February 28, 2025

U.S. stocks are trying to recover after massive weekly losses and put a rough month of trading behind it, as major averages hanging on to early gains to kick off the day. All important PCE inflation data for January (Fed’s preferred inflation data point) offered no real surprises, mostly in-line with estimates, though personal income surges, savings rate jumps, but spending declines. Market breadth more than 2:1 advancer leading decliners early, as ten of eleven S&P sectors are positive with only Healthcare lagging early. Treasury yields popped initially following the PCE data, but since back to 4.24% while the dollar is little changed. Bitcoin prices tumbled as low at $78,000 overnight, bring its drawdown to over 27% from this year record highs, but has since pared losses to back above $84,000. Despite the early gains to start the day, the S&P 500 is on track for -2.4% monthly loss, the Russell 2000 -6% MTD, the Nasdaq down nearly -5% MTD and the Dow Jones Industrial Average -2.4% for the month. Early bounce in semiconductors (SOX) up around 2% after tumbling -6% yesterday helping tech today. It has certainly been a busy week that included earnings results from AI posted company NVDA, mixed inflation/growth data in the US, signs of extreme pessimism by investors (contra indicators AAII data, fear & greed index and VIX rising) and more tariff headlines as President Trump confirmed yesterday that 25% tariffs on Canada and Mexico would come into force from March 4 and also said Chinese imports would face a further 10% levy, prompting officials in Beijing to promise “all necessary measures” in response.

• Inflation readings are mostly in-line as the January PCE price index y/y rises +2.5%, in-line with consensus and down from +2.6% in December while core Y/Y PCE was +2.6%, also in-line with consensus +2.6% and vs prior +2.8%. The Month-over-month PCE data showed headline PCE rose +0.3%, in-line with consensus and December reading and the core M/M PCE reading rose +0.3%, in-line with consensus +0.3% and vs Dec +0.2%.
• Chicago PMI climbed 6 points to 45.5 in February, a little better than expected 40.8 reading, and was the highest reading since September. The index bounced 2.6 points to 39.5 in January, breaking a string of three straight monthly declines to 36.9 in December which is the lowest since May’s 35.4.

• Cryptocurrency-exposed stocks slide as the latest rout in Bitcoin deepened, with investors rushing to safer assets in the wake of Donald Trump’s latest tariff threats. Bitcoin prices are down roughly 20% this month alone (worst since June 2022) and down 25% from its all-time highs less than 6-weeks ago of $109,241 on 1/20. Bitcoin fell as much as 7.7% overnight to lows of around $78,000 before paring losses back above $80K. Shares of MSTR, COIN, HOOD as well as Bitcoin miners MARA, CLSK, RIOT, HUT, CORZ, WULF, others have tumbled this month.
• In Utilities: the sector has fallen -2% this week, but bouncing today behind earnings results, as AES mixed with EPS beating but revs light and guided FY26 EPS $2.10-$2.6 vs. est. $2.03; group pressured this week behind weaker earnings from SRE and FE while EIX has remained pressured (bounces after mixed earnings overnight as well) along with nuclear utilities CEG, VST, NRG, etc. on slowing data center spending fears.
• In Financial Services: RKT 4Q adjusted earnings per share of $0.04 were in-line with ests while revs guide for Q1 is roughly in-line with current Street estimates at the midpoint while expense guide is ~7% higher and margin is expected to be flat q/q. RDFN reported Q4 EPS loss (-$0.29) vs. est. loss (-$0.23); Q4 revs rose 12% y/y to $244.3M vs. est. $242.5M; sees Q1 revenue $214M-$225M, below consensus $242.8M and sees Q1 total net loss is expected to be between ($94M-$83M); DLO was downgraded to Equal Weight at Morgan Stanley after the company reported weaker than expected results, missing consensus expectations by a wide margin, and follows its 60% rally over the past six months.
• In Solar: RUN reported 4Q results, with solar installation volumes largely in line, while storage capacity beat expectations; 2025 solar volumes are expected to remain flat as the U.S resi market has yet to show meaningful signs of a demand recovery; lowered its cash generation guidance for 2025 to $200-$500M, down $125M at the midpoint, as domestic content ITC is slower to ramp, cost of capital increases. ARRY shares fell, downgraded at Seaport after an across-the-board Q4 miss and lower guidance as sees FY revs $1.05-1.15B vs est. $1.127B, adj EBITDA $180-200Mm vs est. $225.45Mm and EPS $0.60-0.70 vs est. $0.79.

• ESTC +13%; shares jumped after reporting revenue that beat expectations by greater than 3%, driven by broad-based strength across the portfolio as its execution continued to improve.
• OMI +32%; Q4 EPS tops estimates and said it is in the process of selling its unit that distributes products to healthcare providers and manufacturers; also says its board has authorized a share repurchase worth $100M.
• SIG +11%; after Select Equity files 13D disclosing 9.7% stake and that it sent a letter to the company on Feb. 27, stating the company should explore strategic options for the business, including an “immediate sale.”
• SOUN +12%; closed out 2024 with strong results as revenue growth continues to land above expectations.
• TSLA +2%; after more than -28% decline on the year so far.

• ARRY 19%; shares fell, downgraded at Seaport after an across-the-board Q4 miss and lower guidance as sees FY revs $1.05-1.15B vs est. $1.127B, adj EBITDA $180-200Mm vs est. $225.45Mm and EPS $0.60-0.70 vs est. $0.79.
• DELL -5%; reported lower than expected revenue, driven by a sequential decline in CSG and flat ISG, though reported EPS exceeded consensus thanks to a surge in Storage revenue; shares fell after the company said it expects its gross margin rate to decline roughly 100 basis points on lower Q1 EPS/rev outlook
• DV -31%; Q4 results came below expectations, with both revenue and adj. EBITDA underperforming consensus by ~3% driven by a large customer implementing a broad-based cost-cutting initiative and a slowdown in brand advertising spend and guided 2025 below consensus.
• IOVA -25%; shares tumbled as total Q4 product revenue came in at the top end of guidance, though Amtagvi sales fell short of expectations, weighing on guidance and stock sentiment; Stifel now thinks the stock is pricing peak Amtagvi sales of less than $500mm.
• NTAP -13%; as Jan-Q revenue missed consensus estimates due to “inconsistent execution” in several deals during the quarter, resulting in pushouts to Q4; given weaker than expected Q3 revenues, mgmt lowered its FY25 revenue outlook to $6.49B-$6.64B, down from $6.54B-$6.74B, with GM/OM of 71%/28-28.5%.
• PRAX -39%; after saying independent data monitors recommended the discontinuation of a Phase 3 study involving its experimental treatment for essential tremors.
• RDFN -12%; Q4 EPS reported loss (-$0.29) vs. est. loss (-$0.23); Q4 revs rose 12% y/y to $244.3M vs. est. $242.5M; sees Q1 revenue $214M-$225M, below consensus $242.8M.