Mid-Morning Look

Thursday, March 20, 2025

U.S. stock futures were higher all night long, slid sharply early this morning (around 4:30 am) attributed to headlines from ECB President Lagarde on tariff impact on growth, before markets rebounded, picking up steam and pushing higher following another round of positive economic data. Markets looked strong overnight as investors tried building on the prior day gains post FOMC meeting, where the Fed kept rates unchanged (as expected) and maintained its outlook for 2 cuts in 2025. The Fed did note, though, that “uncertainty around the economic outlook has increased,” while Fed Chair Jerome Powell also said that President Trump’s tariff policies could delay efforts to bring down inflation. So far an early bounce for US markets with the S&P moving back to the 5,700 level.

In trade and tariff news, CNBC reported the European Union (EU) will delay implementing its first set of tariffs on goods from the U.S. until the middle of April, an EU spokesperson told CNBC Thursday. “The Commission has decided to align the timing of the two sets of EU countermeasures against US 232 tariffs on EU steel and aluminum.” The euro tumbles this morning vs. the dollar after recent surge; Bitcoin prices edge higher; oil prices are higher and gold prices steady, holding near all-time highs at $3,040 an ounce.

In central bank news, the Bank of England held interest rates at 4.5% and warned against assumptions they would be cut over its next few meetings as it grappled with deep uncertainty hanging over the British and world economies. Noting the escalation of global trade tensions kicked off by the U.S., the Monetary Policy Committee voted 8-1 to keep rates on hold (which was widely expected). The Swiss National Bank cut its interest rate to the lowest since September 2022, reducing it by another 25 bps while policymakers didn’t offer specific signals on their next move.

• The U.S. Q4 current account balance -$303.9B vs. consensus (-$325.5B) vs Q3 balance (-$310.3B).
• U.S. Feb Leading Economic Indicators (LEI) fell (-0.3%) vs. consensus (-0.2%).
• Weekly Jobless Claims climbed to 223,000 from 221,000 in prior week, vs. consensus 224,000; the 4-week moving average climbed to 227,000 from 226,250 prior week (previous 226,000); continued claims climbed to 1.892M from 1.859M prior week (est. 1.887M)
• Feb Existing Home Sales rose 4.2% to 4.26M unit rate, above the consensus 3.95M and above the January 4.09M; Feb inventory of homes for sale 1.24M units, 3.5 months’ worth; Feb national median home price for existing homes $398,400, +3.8% from Feb 2024.

• In Restaurants: CAVA was upgraded to Overweight at JP Morgan, taking advantage of significant pullback and views the stock as a “buy now and own for the long-term” as it sees the current 367 units expanding well beyond a IPO-time stated 1,000 units and in fact discount back from 2,000/3,500 units in 2037/2043. DRI reported Q3 same-store sales and net sales estimates that fell short of consensus ($3.16B vs. est. 43.21B and comps +0.7% vs. est. +1.8%) and narrowed the annual profit forecast with midpoint below prior forecast.
• In Consumer Staples: Citigroup upgraded COTY in Consumer staples sector and updated its Top Picks following its rating changes as new top Buy-rated picks in order of preference are: KDP (moved to top pick), MNST, KO, SAM, CL, COTY, PG, PEP and remains Sell rated on CHD and KMBAt a sector level, the intra-quarter commentary from large-cap companies was subdued with concerns around a slowing US consumer, as well as a cautious tone on LatAm (especially Mexico) and Western Europe.
• In Autos: CVNA ($225 tgt) and ACVA ($20 tgt) both upgraded to Overweight from Neutral at Piper following pullbacks in shares saying the companies can grow despite macro unease and higher tariffs; said most used car transactions don’t span international borders, and demand is relatively stable, regardless of the macro environment. RIVN was downgraded to Neutral from Overweight at Piper as the firm says they like Rivian’s strategy and says the joint venture with VW helped de-risk the balance sheet…but the firm says they struggle to identify upside catalysts for the shares in 2025and aside from TSLA believes automaker stocks should be avoided. STLA was downgraded to Neutral from Overweight at Piper and lower tgt to $13 from $23 saying they believe it could take years for Stellantis to address the problems with its global brand, and in the meantime, the firm thinks the company’s margins could take longer than expected to recover.

• DRI +7%; among top gainers in the S&P despite missing quarterly results and comps.
• FIVE +5%; 4Q comps and EPS were reported above expectations following their January holiday update. Looking ahead, comps are expected to show improvement benefiting from a focus on value and newness.
• JBL +5%; reported better Q2 core results as EPS $1.94/revs $6.7B topped consensus of $1.83 and $6.4B; raises FY25 core EPS view to $8.95 from $8.75 (est. $8.74); raises FY25 revenue view to $27.9B from $27.3B prior and above consensus $27.32B.
• META +3%; getting a bounce and helping lift Mag7 names early in rebound.
• PRA +49%; to be acquired by the Doctors Company for $25.00 per share in cash, in deal valued at $1.3B, roughly a 60% premium to prior day closing price; combined co will have assets of approximately $12B.
• QXO +5%; and BECN announced that they have entered into a definitive merger agreement under which QXO will acquire Beacon for $124.35 per share in cash in a $11B deal.

• AKBA -22%; as prices public offering of 25M shares at $2.00 per share.
• BAH -5%; gov’t IT service names extend declines (CACI, SAIC, LDOS) as US Government Service Administration said to review federal agencies top 10 highest paid consulting firms.
• MCHP -5%; after the company offered $1.35 billion in depositary shares and the semiconductor company said it will use part of the proceeds to repay debt.
• SCVL -3%; Q4 sales fell -6.1% y/y to $262.9M, missing the $275.9M est. while Q4 comp sales fell -6.3% and forecast lower FY guidance as sees FY25 EPS $1.60-$2.10, vs. est. $2.63 and revs $1.15B-$1.23B vs. est. $1.22B.
• SDXAY -17%; Sodexo lowered its yearly outlook saying organic revenue growth in North America was slower than it had initially expected citing more challenges in Education, with volumes remaining low, and in Healthcare with postponements in the opening of new contracts; guided FY organic revenue growth 3%-4%, down from prior range of 5.5%-6.5% (guides weighs on food service names ARMK, SYY).