Mid-Morning Look

Monday, March 24, 2025

U.S. stocks are off to a strong start on the week as Bespoke investment noted “today is set to be the strongest Monday morning opening Gap higher for the S&P 500 $SPY since 10/17/22.” The upside move comes following a spike into the close last Friday, helping the S&P 500 index end the day higher and snap its 4-week losing streak prior. All eleven S&P sectors are in the “green”, with more than 2.9% jump for consumer discretionary (on TSLA bounce), while the CBOE volatility index (VIX) touches three-week low; last down -4% at 18.50. With the early gains, the S&P 500 (SPX) moved back above its 200dma resistance of 5,750. U.S. stock indexes opened higher on Monday, helped by signs the Trump administration is taking a measured approach on tariffs against its trading partners, while investors awaited economic data for clues on the health of the economy and inflation. Stocks rallied on tariff optimism over the weekend as press reporting Apr 2 announcement will be more “target” than feared.

The US dollar and treasury yields advanced following the better S&P Global PMI readings, with the 10-yr yield topping 4.32% and the euro dipping below 1.08 vs. the dollar to nearly 3-week lows and dollar extending gains vs. Japanese yen to 150.20 (highest in 3-weeks). U.S. business activity picked up in March, but growing fears over import tariffs and deep government spending cuts continued to weigh on sentiment and prospects for the rest of the year. Business activity picks up in March amid warmer weather, manufacturing inputs price measure near two-year high, employment at businesses lackluster as caution reigns. Bitcoin also joining the “risk-on” appetite, rising +3.5% above $88,000 to best levels since early March. Good start for stocks following weak confidence, sentiment readings after the S&P fell -10% and the Nasdaq nearly -15% from recent all-time highs.

• Home Improvement retail: Piper lowered price tgts for HD to $418 from $435, LOW to $269 from $296 and FND to $90 from $103 saying the backdrop for large-ticket remodel projects continues to point to stability in 2025 following two highly challenged years. To the positive, cash-out refis have stabilized Y/Y- Q4 2024 accelerated to +$4.5B Y/Y – following 2023 down -$100B. However, upper income consumer sentiment has fallen significantly in Feb/MAR which appears to be pressuring big ticket spending for homeowners (furniture, appliances, mowers, etc.). All in, Piper sees potential for comp weakness in 1H for the sector.
• In Oil E&P and Equipment sector: Peyto Exploration (PEYUF) was upgraded to Outperform from Market Perform at BMO Capital noting the company’s extensive hedging program and peer-leading cost structure has allowed the company to fund its capital program, reduce debt, and maintain its healthy dividend despite the ongoing weakness in western Canada natural gas prices. BMO also upgraded OVV to Outperform from Market Perform with a price target of $57, up from $55. Saying its portfolio is more focused now than any time in its history, with core positions in the Midland and Montney. CIVI was downgraded to MP at BMO as thinks Civitas needs a higher oil price to achieve a re-rating. RBC Capital upgraded NOV to Outperform and downgraded shares of LBRT to Sector Perform.

• LUNR +20%; reported Q4 revenue of $54.6M compared with $30.7M y/y and said IM-3, its third moon lander mission, remains on track, which is expected roughly one year from now.
• NUE +5%; STLD was upgraded Steel Dynamics to Buy from Neutral at UBS with a $149 price target and upgraded NUE to Buy from neutral (tgt to $160 from $156) saying tariff protection for U.S. steel and aluminum has exceeded the firm’s expectations since the election.
• OKLO +10%; after saying it is initiating a Pre-Application Readiness Assessment with U.S. Nuclear Regulatory Commission (NRC) for its Aurora Powerhouse reactors.
• PINS +5%; was upgraded to Buy from Neutral at Guggenheim and raise tgt to $40 saying user-growth trends remain healthy and the firm expects monetization of the user base to grow at above-market rates from 2025-27 (also notes shares down -19% from recent peak).
• TSLA +10%; bouncing after closing lower for the 9^th straight week last Friday.
• VSAT +9%; was upgraded to Buy from Hold at Deutsche Bank with a $15 price target saying sees multiple paths for the company to create equity value by materially deleveraging its balance sheet through asset monetization.

• LMT -2%; Melius and bank America both downgraded LMT to Neutral from Buy (and cut tgt) as Bofa said it remains wary of Lockheed Martin’s recent quality of earnings, the loss of all 6th Gen manned tactical aircraft programs and lack of company-specific catalysts in the near-term
• LSPD -4%; is revising its FY25 revenue outlook lower to reflect year-over-year growth of 18%, down from the previously expected 20%, primarily due to these impacts on transaction-based revenue.
• ME -50%; filed for filed for Chapter 11 bankruptcy protection in the U.S. to help the $50 million company sell itself and that co-founder and CEO Anne Wojcicki had resigned after multiple failed takeover bids.
• SMCI -3%; was downgraded to Sell from Neutral at Goldman Sachs and cut tgt to $32 from $40 noting shares are up 38% year-to-date, making it the best performing stock in Goldman’s hardware coverage, and now views Super Micro’s risk/reward as unfavorable, seeing downside risks on valuation, competition, and margins.
• UBX -34%; after saying UBX1325 was non-inferior to Aflibercept at week 24; UBX1325 did not meet statistical non-inferiority on avg of weeks 20 and 24, the primary analysis endpoint.