Mid-Morning Look

Thursday, March 13, 2025

U.S. stock markets remain very volatile, tumbling on the open (QQQ made it a 16^th straight session that it has seen a 1% intraday move in either direction) after a rare bounce for the S&P and Nasdaq on Wednesday, as investors concerns about tariffs and the economy are overshadowing a significant drop in prices and inflation. After the “cooler” CPI February inflation reading on Wednesday, the February Producer Price Index (PPI) showed even a sharper decline in prices this morning. The data popped US futures initially before reversing and moving back below overnight lows. Not helping this morning was more tough tariff rhetoric as President Trump noted “the European Union put a nasty 50% Tariff on Whisky and said if this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all wines, champagnes, & alcoholic products coming for the EU”. The harsh tariff talks back and forth between trading partners including Canada, China, Mexico and the EU, ahead of worldwide reciprocal tariffs in April remains a market concern. In other cautious headlines, 1) Senate Democratic leader Chuck Schumer said his party would block a Republican spending bill into looming shutdown on Friday night, 2) Kremlin aide Yuri Ushakov said that a proposed ceasefire between Ukraine and Russia would only give a breathing space for Ukrainian forces. 3) Disappointing guidance in software space overnight (ADBE, S, PATH decline on results). In a CNBC interview this morning, Treasury Secretary Bessent said the White House is focused on the ‘real economy’ and not concerned about ‘a little’ market volatility. Stock markets holding in the red, failing to bounce thus far with the S&P 500 lows down near -10% from February highs.

Sentiment readings show: 1) This week’s NAAIM Exposure Index number declined from last week’s reading: 68.80 (from 74.96) – recent peak of 99.24 from 12/11, trough reading of 64.10 to start the year on 1/1; 2) Bullish sentiment, or expectations that stock prices will rise over the next six months, fell to 19.1% (from 19.3%) and is below its historical average of 37.5%. Bearish sentiment, or expectations that stock prices will decline over the next six months, increased to 59.2% (from 57.1%), but remains above its historical average of 31%. Those Neutral fell to 21.7% from 23.6%.

• Weekly Jobless Claims fell to 220,000 from 222,000 last week and below consensus 225,000; continued claims fell to 1.870M from 1.897M prior week and consensus 1.900M and the 4-week moving average climbed to 226,000 from 224,500 prior week (previous 224,250).

• In Heavy Duty machinery: Shares of CMI, PCAR move lower after the EPA said it is starting efforts to reverse the Biden administration’s vehicle emissions rules that would force automakers to build a rising number of electric vehicles. Jefferies noted that if 2027 regulations are rescinded, the prebuy will not happen leaving the industry to revert to underlying transport economics. Without a prebuy, sees downside risk to estimates.
• Investment banking: Morgan Stanley double upgraded HLI to overweight (from underweight) while double downgraded MC to Underweight noting the robust capital markets rebound, they expected in 2025 is not playing out as anticipated. Ever-changing tariff talk is creating whiplash for CEOs trying to plan strategic decisions. Volatility likely pushes out deal launches. However, stocks appear oversold against our new base case. The firm now expects investment banking volumes relative to nominal GDP to revert to three-decade historical averages in 2026, with 2025 improving y/y but remaining well below trend.
• In the Oil E&P sector: BRY reported better 4Q24 EPS/EBITDA driven by higher realizations and volumes, plus lower costs, although CFO was light; in research, RRC was upgraded to Neutral at JP Morgan while the firm downgraded VET to Underweight (from Overweight) saying for its oil coverage, its updated EBITDA 2025-2026 estimates are -2% and -10% below consensus, while natural gas estimates are +18% and +7% above the Street. JPM’s top natural gas picks remain OW-rated AR, EQT, and EXE to play this its positive gas thesis. MUR announces strategic acquisition of floating production storage and offloading vessels in Gulf of America; reduces annual operating costs by approximately $60 million, reaffirms 2025 capital expenditure guidance.

• BIDU +2%; as Reuters reported TSLA is working with Chinese tech giant BIDU to improve the performance of its advanced driving assistance (ADAS) system in China.
• DG +6%; after mixed results and commentary; reported a wide Q4 EPS miss ($0.87 vs. $1.50 est.) though sales rose 4.5% y/y to $10.3B vs. est. $10.25B, though operating profit fell -49% y/y; guidance better than feared.
• FN +12%; said it has entered into a transaction agreement with the Amazon affiliate to acquire the block of shares at an exercise price of about $208.48 apiece; warrant expires 10 years from now and allows for vesting in multiple tranches over the term of the warrant based on payments to co from either AMZN or its affiliates.
• INTC +16%; after 3 months of searching for a CEO, INTC announced Lip-Bu Tan, former CEO of Cadence Design Systems, will succeed Pat Gelsinger at the helm, while also receiving a seat on the company’s board.
• MRNA +5%; along with gains in other vaccine makers NVAX, BNTX after the White House withdraws Dave Weldon, a vaccine critic, for CDC director.
• NEM +3%; as gold miners outperform with gold prices moving back near all-time highs; bounce off 3-week lows the day prior lifting precious metals.

• AEO -1%; posted a top- and bottom-line Q4 beat, with stronger sales, GM and SG&A. Comp grew +3% YoY, with Aerie +6% and AE +1% and inventory ended lean (-0.6% YoY), but sees FY25 revenue to decline in the low-single digit percentage range, vs. ests for a 2.97% rise.
• NOVA -28%; after the WSJ reported the Co is preparing restructuring talks with creditors that could include filing for bankruptcy (notes the company holds roughly $8.5B in debt, according to the report).
• OSIS -6%; after Culper Research tweeted, they were “short OSI Systems $OSIS, which makes and electronic security, screening, and inspection systems under the Rapiscan and AS&E brands”.
• PATH -16%; after delivering soft FQ4:25 results, bookings, and guidance that fell short of consensus estimates; reported lower FQ4 ARR results and FY26 ARR guidance (9.2% y/ y growth vs consensus 12.4%).
• S -4%; shares declined after reporting mixed Q4 results and weaker guidance; posted Q4 ARR miss and a 16M FY26 ARR guide below; $100K+ customers grew 25% in the quarter to 1,411; FY26 guidance calls for $1.007B to $1.012B, below street expectations for $1.026B.