Mid-Morning Look

Friday, May 30, 2025

U.S. stocks open lower following a busy morning/overnight of earnings results in both tech and retail, updates out of the ASCO cancer conference heading into the weekend meeting, a “cooler” than expected PCE inflation figure for April, and more uncertainty in regard to global trade/tariff following comments from President Trump. Futures were only down modestly overnight before selling pressure accelerated, as President Donald Trump accused China of violating its trade agreements with the U.S. The President tweeted on Truth Social, “I made a FAST DEAL with China in order to save them from what I thought was going to be a very bad situation,” Trump said, adding that “everybody was happy” with the pact. “The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!” Earlier this month, Trump slashed tariffs on Chinese goods from 145% to 30%, with Beijing cutting its tariffs on U.S. goods to 10% from 125%. The headlines sunk futures briefly before the Fed’s favorite inflation gauge, the monthly core PCE index, hit 4-year lows easing concerns over inflation (and maybe raising hopes it could prompt the FOMC to cut rates this year). The core Personal Consumption Expenditures index rose 0.1% rise in April, as expected while core PCE inflation dipped to 2.5% vs. a year earlier, also as expected, and the lowest since March 2021. The headline PCE also edged up 0.1% vs. March with PCE inflation cooling to 2.1% vs. 2.3%. Oil prices were stable on Friday, but on track for a second consecutive weekly decline. So far stock markets have bounced off lows, on track for solid weekly gains.

US Treasury Secretary Scott Bessent said trade talks with China are “a bit stalled,” and that a call between President Donald Trump and his counterpart Xi Jinping may be needed for the two countries to reach a deal. Regarding the tariff ruling, the administration could yet win the appeal but could also deploy alternative measures to institute or maintain tariffs. Specifically, the White House is considering using a provision of the Trade Act of 1974 that allows for levies of up to 15% for 150 days to address trade imbalances, The Wall Street Journal reported

Stocks are on track for a terrific month of returns, as coming into the day the S&P 500 and the Nasdaq are on pace for their best monthly showing since November 2023 (+6.16% and 9.91% respectively MTD), while the Dow is also set for a nearly 4% monthly advance. @MikeZaccardi tweets, “The S&P 500 loves May! Now up 12 of the last 13 instances, including this month’s 6.4% advance. Actually, the best May since at least 2009, best month since November 2023.”

Historical data: June historically is not a great month for equities as the S&P 500 has risen just 0.2% on average in June over the past three decades, compared with a 0.8% move in the other 11 months of the year, according to data compiled by Bloomberg. This upcoming month we get the Fed’s interest-rate decision June 18 followed by “triple witching” options expirations on the 20^th and the end of the month brings quarterly portfolio rebalancing. The adage “sell in May and go away” alludes to a six-month stretch ending in October that historically has been the worst time to own stocks. This time however, fund managers have reduced cash holdings and invested heavily in US stocks in recent weeks, Bloomberg noted…can that continue?

• April overall PCE price index m/m rises +0.1% (in-line with consensus +0.1%) vs March unchanged, while April core PCE price index m/m also rises +0.1% (vs. consensus +0.1%) and vs March +0.1% (prev unchanged).
• April personal income +0.8% above consensus +0.3% and vs March +0.7%.
• April Personal Spending climbs 0.2% m/m; in-line with est. +0.2%.
• U.S. Goods Trade Balance increased to -$87.62 billion in April… a record change.
• U.S Chicago PMI for May actual reading was weaker at 40.5 vs 44.6 previously and below the estimate 45.1.
• University of Michigan surveys of consumers sentiment final May 52.2 above consensus 51.0 and vs preliminary May 50.8 and final April 52.2; current conditions index final May 58.9 vs prelim May 57.6 and final April 59.8 and expectations index final May 47.9 vs prelim May 46.5 and final April 47.3
• University of Michigan surveys of consumers 1-year inflation outlook final May tumbles to 6.6% vs prelim 7.3% and final April 6.5% and the 5-year inflation outlook final falls to 4.2% vs prelim 4.6% and final April 4.4%

• In Chemicals: Keybanc noted Chemical Market Analytics (CMA) released its monthly chlor-alkali report, showing stability in domestic caustic soda prices (OLN, WLK most impacted). The U.S. caustic soda index rolled over in May, in line with CMA’s forecast. They view the settlement as positive following the $20/ton increase recorded in April. For now, caustic soda prices remain elevated given soft demand for chlorine due to weak Durables and construction markets. For June, CMA still expects prices to fall $5/ton. TROX was upgraded to Overweight from Neutral at JP Morgan saying they think that TiO2 prices are likely to move higher either in Q2:25 or in Q3:25 after a two-year period of decline. LYB was downgraded to Hold from Buy at Argus, noting with the company’s global exposure, they believe shares will continue to face uncertainty in the coming quarters over looming tariff threats and recent financial results have been lackluster at best.
• In Semis: AMBA posted strong F1Q results and higher F2Q guidance, as it continues to see strong growth from its IoT segment driven by strong edge AI demand, which is being offset by moderating growth in Auto; raised its FY26 (Jan) rev growth outlook to +22% at the midpoint vs. mid to high teens % growth previously. MCHP raises Q1 guidance as sees adj EPS $0.22-$0.26 up from prior view $0.18-$0.26 and revs from $1.02B-$1.07B to $1.04B-$1.07B vs $987.62M est. MRVL reported FQ1 results and provided a Q2 guide, largely in line with expectations as Data Center results were in line and grew 76% y/y driven by deployments of AWS Trainium 2.

• PATH +4%; reported good F1Q results, with ARR modestly ahead of expectations and revenue and OM solidly above the Street, while FY guidance ticked up across the board, and the FQ2 outlook was also ahead of expectations.
• RRGB +66%; shares jumped as Q1 results showed solid execution and improving operations, though management maintained a cautious outlook amid consumer softness; 2025 revenue guidance was lowered (to $1.21B-$1.23B from $1.225B-$1.25B) but EBITDA and restaurant margin guidance held steady
• STRZ +18%; following Q4 results and subscriber numbers last night.
• U +8%; was upgraded to Buy at Jefferies and raised tgt to $29 from $22 based on the view that the improved Vector ad model can drive accelerating revenue growth in FY26 and beyond and believes the risk-reward is favorable as it sees potential for significant EBITDA upside.
• ULTA +14%; shares rallied after reporting a top and bottom-line beat (Net sales rose 4.5% to $2.8 billion in the quarter and same-store sales grew 2.9%) and raised the high end of its prior FY25 revenue outlook as well as its full year EPS range.
• ZS +7%; after reported better than expected FQ325 results, with non-GAAP EPS of $0.84 (consensus $0.76) on revenue of $678.0M (consensus $667.0M), up 23% y/y, billings growth of 25% y/y (consensus 21% y/y), and issued upbeat guidance for FY25.

• AEO -2%; posted a wider Q1 EPS loss of (-$0.29) and pulled its FY guidance earlier this month, citing an uncertain economy, and said it was writing off $75M in Spring/Summer merchandise.
• COO -12%; downgraded to Neutral from Overweight at JP Morgan and cut tgt to $76 from $110 after reporting another mixed update as better the fiscal Q2 results were overshadowed by a lowered organic sales outlook for both CooperVision and CooperSurgical.
• EOSE -7%; sells 18.75M shares at $4.00 to raise $75M; offering priced at 11.4% discount to stock’s last close.
• ESTC -13%; Q4 revenue of $388M beat the midpoint of guidance by 2.2%, showing ~50bps of deceleration to +16.0% y/y growth, RPO grew +14% y/y (+13% CC), showing a 100bps deceleration and cloud revenue of $181.5M was ~$0.6M below expectations, while also lowered F’26 revenue expectations.
• GAP -20%; after the company reported solid quarterly results but predicted a tariff impact of up to $300 million and revealed weakness at Banana Republic and Athleta.
• NMAX -20%; after files for resale of up to 121 mln shares of class b common stock by selling stockholder.
• NTAP -1%; shares slid after Q4 EPS and sales slightly topped consensus expectations, but issued weaker guidance as sees Q1 revs $1.455-1.605B vs est. $1.61B and adj EPS $1.48-1.58 vs est. $1.65; sees FY revs $6.625-6.875B vs est. $6.86B and adj EPS $7.60-7.90 vs est. $7.72.
• REGN -17%; and SNY shares fell after saying Itepekimab met primary endpoint in one of two COPD Phase 3 trials; AERIFY-1 trial met the primary endpoint of significantly reducing moderate or severe acute exacerbations by 27% compared to placebo at week 52; said AERIFY-2 Phase 3 trial did not meet the primary endpoint.
• SMMT -21%; after saying its experimental lung cancer therapy ivonescimab in combination with chemotherapy showed a positive trend in overall survival, but without achieving a statistically significant benefit in a global late-stage trial; STAT news ivonescimab has not yet demonstrated a survival benefit for patients in study.