Mid-Morning Look

Monday, May 12, 2025

U.S. stocks on cruise control higher, as positive trade talks this weekend in Switzerland between US and China officials ended in a tariff truce that prompted massive risk taking on Wall Street, even after a more than 15% jump off the April “Liberation Day” lows, as major averages now firmly higher on the month! The U.S. and China ended this weekend’s high-stakes trade talks positively, as both parties agreeing to slash tariffs for 90 days. The U.S. will lower tariffs to 30% during the 90-day pause, while China will cut its tariffs to 10%, treasury Secretary Bessent said following a weekend of high-level talks (both sides agreed to a 115% cut, though the U.S. rate was higher to begin with). Bessent noted that “substantial progress” had been made between the two countries after lengthy talks. The result, a surge in global stock markets, a sharp rebound in the US dollar and Treasury yields, as well as commodity prices with oil and industrial metals surging, though haven assets like gold tumbling. Following the trade news, investors trimmed bets on Federal Reserve rate cuts, with an initial rate reduction now not seen until September and only a 50bps reduction seen by year’s end. Markets had been expecting a 25-bps cut at the Fed’s upcoming June meeting and two more over the course of the year, according to data from the CME. Next data points with stock market implications include the April Consumer prices (CPI) and producer prices (PPI) inflation readings this week.

Some of the biggest sector movers (in an overall strong broad-based daily gain), benefitting from the trade truce between the US/China for 90-day truce with lower tariffs included: transports big winners (Dow Transports +6% approaching 15,000) as flow of goods out of ports will relieve bottleneck concerns, boosting truckers, shippers, tankers, package delivery names (UPS, FDX, CHRW, JBHT, etc.); semiconductors as the Philadelphia Semi Index (SOX) up over 6% to 4,750 before paring gains, crossing above its 100dma resistance of 4,692; medical devices/life sciences rise (MDT, SYK, TMO, A, GEHC) as China is a critical supplier of raw materials and components for the pharmaceutical and medical device firms; big moves in retail/furniture retail W, RH, WSM as well as retailers/beauty names like NKE, EL, LULU, DECK; energy names rising with strength in oil prices (SLB, CVX, HAL), Meanwhile safe-haven gold prices fell more than 3 this morning as risk sentiment rose following the announcement of a temporary deal between the United States and China to reduce tariffs. Drugmakers also trending as President Trump signed an executive order (EO) related to most favored nation drug pricing claiming it will be “one of the most consequential Executive Orders in our Country’s History” and that drug prices will be reduced “almost immediately by 30% to 80%.

• In Transports: shares of U.S. shipping companies rise in premarket trade after the U.S. and Beijing agree to temporarily slash reciprocal tariffs as the U.S. will cut extra tariffs on China to 30% from 145%, while Chinese duties on U.S. imports will fall to 10% from 125%; measures effective for 90 days. Shares of shippers such as NMM, GOGL, and tankers TNK, INSW, DHT saw early strength. Truckers (JBHT, CHRW, ODFL) as well as package delivery (FDX, UPS) and rails (CSX, NSC, UNP) saw strength on the 90-day tariff truce.
• In Specialty/Online Retailers: Toy retailers MAT, HAS advance, among beneficiaries of China/US trade talk truce; Nasdaq announced that SHOP will replace MDB in the Nasdaq-100 Index prior to market open on May 19; in home furnishing, Wayfair (W) was upgraded to Buy from Hold at Argus with a $40 price target saying reluctant to purchase new homes at elevated prices, many homeowners are upgrading furnishings which should benefit the online company. In Footwear & Apparel: big gain on the day for the industry given the easing tensions between the US/China on trade talks with 90-day reduction in tariffs for both sides as the U.S. will lower tariffs to 30% (from 145%) during the pause, while China will cut its tariffs to 10% (from 125%), lifting shares of NKE, SKX, DECK, among others; CROX was upgraded to Buy with $135 tgt at Williams Trading.
• In Bitcoin/Crypto: KDLY shares surged after announced that it has entered into a definitive merger agreement with Nakamoto Holdings Inc., a Bitcoin-native holding company, to start a Bitcoin treasury strategy. Nakamoto is a new holding company founded by David Bailey. In partnership with BTC Inc, Nakamoto seeks to build the first global network of Bitcoin treasury companies. MSTR said it bought 13,390 Bitcoins for $1.34 Billion, or average $99,856, between May 5-11^th and now holds 568,840 Bitcoins acquired for $39.41 Billion, or Average of $69,28; American Bitcoin, a Hut 8 (HUT) subsidiary, announced that it has entered into a definitive merger agreement with Gryphon Digital Mining (GRYP) pursuant to which Gryphon will acquire American Bitcoin in a stock-for-stock merger transaction; big move in Bitcoin miners today WULF, CLSK, MARA, RIOT.

• AMZN +7%; along with other retailers, names on trade truce (EL, NKE, LULU, WSM).
• JBHT +9%; as truckers/transports rally on trade truce headlines
• NRG +22%; as Q1 adj EPS $2.68 tops the $1.49 estimate, on better adj Ebitda $1.126B vs. est. $924.5M and revs $8.585B vs. est. $7.826B while reaffirms guidance; also agrees to buy LS Power’s portfolio of natural gas generation facilities and power plant platform in a cash-and-stock deal with an enterprise value of about $12B.
• SHOP +12%; after Nasdaq announced on Friday that the company will replace MDB in the Nasdaq-100 Index prior to market open on May 19.

• CCI -4%; along with weakness in tower names (AMT, SBAC) as rising Treasury yields dampen interest in high dividend paying names.
• DG -4%; as discount retailers weaker
• DUK -2%; as broader utilities (outside of strength in nuclear names like NRG), seeing weakness as investors rotate into more riskier assets, out of defensives (staples, REITs, utilities)