Closing Recap

Tuesday, April 08, 2025

Fear gripped investors on Thursday, reversing more than 4% early gains for the S&P 500 and Nasdaq to turn sharply negative this afternoon ahead, and ending the day weak on tariff fears (a 7.5% move off highs)! Bulls dropped the ball failing to hold strong gains early as U.S. stocks continue to hang on every word related to tariffs with today being no different. The day started favorably as markets looked to snap their 3-day losing streak after news of trade talks with several countries once again fueled hopes that the hefty tariffs could be negotiated lower. Positive talks on trade/tariffs with Japan, Vietnam, Israel, Cambodia and today South Korea helped sentiment early, pushing major averages up between 3%-4% across the board and managed to overlook saber rattling rhetoric from China overnight where their Commerce Ministry said it “resolutely opposes” U.S. President Donald Trump’s threat of escalating tariffs and vowed to take countermeasures to safeguard its own rights and interests. “The U.S. threat to escalate tariffs on China is a mistake on top of a mistake,” the statement said, according to a CNBC translation. “China will never accept it. If the U.S. insists on its own way, China will fight to the end.” Markets reacted negatively this afternoon as the White House Press Secretary said 104% additional tariffs will go into effect at midnight because China has not removed its retaliation. The 104% additional tariff will be collected starting tomorrow April 9^th. The news against China (which was not a surprise), weighed heavily on Materials (XLB), Energy (XLE) and Retailers (XRT) the most, but all eleven S&P sectors turned negative after all had been higher earlier. Treasury yields pushed higher this afternoon after a lackluster auction with the 10-yr yield rising to highs around 4.26% and the 30-yr up 10bps to 4.72%. When it was all said and done, the Nasdaq dropped 1,200 points from high to low, the S&P more than 300 points from high to low and the Dow erased gains falling under 38,000 and down over 4,200 points in the last 4 days alone!

• U.S. WTI crude oil futures fell -$1.12 or 1.85% to settle at $59.58 per barrel, giving up early gains and are lower for a fourth straight session as the U.S. trade dispute with China shows no sign of easing, with the U.S. intending to impose an additional 50% tariff on China at midnight. "China has said they will continue the fight against tariffs and some traders fear they could slow or halt U.S. crude purchases altogether." Brent Crude futures settle at $62.82/bbl, down $1.39, or 2.16%.

• Apparel & Luxury retail: LEVI reported mixed earnings (Q1 EPS $0.38 vs. est. $0.28; Q1 revs rose 3.1% y/y to $1.53B vs. est. $1.54B) and backs outlook for year (upgraded at JP Morgan citing the 50% pullback the last 9-months); RL was upgraded from Equal Weight to Overweight at Wells Fargo, saying its taking advantage of the 30-35% sell-off as believe RL carries some of the best brand heat KPIs in its Softlines space.
• In Off-price/discount retail: ROST was upgraded from Equal Weight to Overweight at Wells Fargo (tgt to 4150 from $140) due to its more defensive nature, downside support on valuation and levers in place to sustain/beat current Street forecasts.
• In Specialty Retail: SIG was downgraded from Overweight to Equal Weight at Wells Fargo due to its highly discretionary nature and sensitivity to economic downturns. On top of the category issues, SIG has struggled to generate positive comps the past several years and is dealing with a structural pressure point in their industry.

• In Leisure products: Stifel said RCL, OSW, IGT, FLUT viewed as "best in class" in gaming and leisure against recession/tariff fears. The firm noted with the recent severe market pullback coupled with a cloudy consumer backdrop, investors are searching for high-quality/lower-risk names that have potentially been overcorrected. Stifel said it has identified four names (RCL/OSW/IGT/FLUT) that should be viewed as “best in class” even if the current uncertain operating environment persists.

• In Oil Services & Equipment: NEXT said it had signed an agreement with Saudi Aramco 2223.SE to supply 1.2M tonnes per annum (MTPA) of LNG from Train 4 at the Rio Grande LNG Facility for 20 years; SLB was upgraded to Overweight at Wells Fargo saying risk/reward, L48 vs international positioning and valuation favor large cap diversified; the firm downgraded LBRT to Equal Weight from Overweight with a price target of $11.
• Coal stocks got a boost (BTU, AMR ) after President Trump will sign executive orders on Tuesday aimed at boosting the country’s coal industry. He plans to sign several executive orders directing the Interior and Energy Departments to take action to support the industry https://tinyurl.com/5yj2f3rw
• In Utilities: JP Morgan downgraded Dominion (D) to Underweight while upgraded WEC to Neutral (from UW) saying amid elevated macro uncertainty and a defensive pivot in positioning, WEC’s lack of rate case exposure and supportive WI regulatory environment screen favorably. The firm also upgraded SO to Neutral from Underweight as JPMC’s equity strategy team highlights a preference for defensive equities positioning. Within JPMC’s utilities coverage, SO’s favorable regulatory backdrop, service territory’s economic fortitude, size/scale, and B/S strength present compelling blue chip defensive attributes during this period of market uncertainty.

• In Banks: Earnings season right around the corner with JPM, WFC, MS results expected this Friday morning. WFC was upgraded to Overweight (from Neutral) at Piper and JPM, FITB, ONB highlighted as well-positioned into the quarter. Piper said the events of the past week have completely upended the group’s story (or at least confidence in it) and certainly alter investors’ focus into the coming earnings season. Tariff issues and economic outlooks now take center stage. In Alt Managers/PE: BX was upgraded to market outperform from market perform at Citizens, along with financial services peers ARES and EVR.

• In Mortgage lending/Finance: Barclays said it remains Overweight on balanced businesses (PFSI), and upgrade RKT to EW from UW on potential upside from its announced acquisition of COOP. Given the evolving macro, the firm is cautious on mortgage credit as it adds an incremental layer of risk to credit normalization for MIs. At JP Morgan, GHLD was upgraded to Neutral from Underweight and ESNT to Overweight from Neutral saying the lower rate outlook could lead to substantially higher originations volumes while for ESNT, the stock’s lower multiple and reduced credit risk as higher coupon mortgages refinance for the upgrade.
• Title Insurers: KBW upgraded FNF, FAF, PFSI to Outperform noting title insurers have fallen more meaningfully (-13%) since 4/2 vs the equal-weighted S&P down -10%. Since a weakening economy usually results in lower rates and is positive for title insurers, assumes the declines are due to concerns about commercial activity.

• PCRX shares jumped after announcing that it has settled its litigations with Fresenius Kabi USA, LLC (Fresenius), Jiangsu Hengrui Pharmaceuticals Co., Ltd., and eVenus Pharmaceuticals Laboratories, Inc. related to patents for EXPAREL(R) (bupivacaine liposome injectable suspension).
• Pharma resumed coverage at Goldman Sachs as LLY, JNJ, MRK assumed coverage at Buy and Neutral ratings on ABBV, BMY, PFE as sees a constructive backdrop for pharma stocks as recession uncertainty is driving focus on pharma’s defensiveness and it sees attractive entry points across the space after the recent sell-off. Key to watch: upcoming Q125 earnings, potential IRA-related headwinds.

• In Drug Retail: WBA reported quarterly results but withdrew guidance; CVS named United Parcel Service executive Brian Newman as its new chief financial officer, in the first top management change for the health insurer under the leadership of CEO David Joyner.

• In E&C Sector: Piper initiated PWR (OW, $286 PT), MTZ (OW, $134 PT) and PRIM (OW, $75 PT) while Neutral rated on MYRG ($124 PT) in specialty infrastructure service companies as believes these specialty contractors are benefiting from key infrastructure development trends including: I) electrification; ii) load growth; iii) rising renewable penetration; iv) aging infrastructure; and v) aging utility workforce. Between transmission, distribution, generation, data centers, and telecom, Piper estimates a >$200B annual market opportunity.
• In Airlines: SKYW upgraded to Buy (from Neutral) given its more defensive business model at Goldman Sachs and downgraded AAL to Sell (from Neutral), given its high operating leverage and weaker balance sheet. Goldman said while they lower its revenue outlook for the industry, it thinks the Airlines will be more resilient relative to prior slowdowns as it is more consolidated, less levered, and revenue is more diversified.
• In Truckers/rails: Citigroup upgraded shares of rail, truckers and logistics companies, raising the rating on UNP, ODFL and KNX to Buy from neutral and upgraded SNDR and WERN to Neutral from Sell saying transports were already setting up for a difficult Q1 earnings season, even before the worse-than-expected tariffs. Citi says despite the uncertainty, the sharp sell-off has made transport stocks more attractive on both an absolute and relative basis. UBS provided an LTL Q1 Preview (SAIA, ODFL, XPO), revising down 2025 and 2026 EPS saying the biggest driver of changes for the LTLs is softer than expected volume, with most companies highlighting a further downshift in industrial demand in March. UBS does not believe conditions have changed much in April, which causes US to reduce Q1 and Q2 tonnage estimates for ODFL and XPO by ~4 pp.
• In Industrial Metals: AA was double downgraded from Buy to Underperform at Bank America and slash tgt to $26 from $58 on lower aluminum/alumina prices and valuation multiples. The firm also goes to No Rating on US Steel (X) as it is no longer trading on fundamentals following the news that CFIUS will be conducting a fresh review of the previously announced acquisition of X by Nippon Steel Corp.

• US listed Chinese stocks BABA, BIDU, PDD, SINA, NTES, JD and more have tumbled significantly in recent weeks amid the rising global trading and tariff tensions between the US and China, with no apparent near-term resolution in sight.

• AVGO announces $10B share repurchase authorization
• MRVL entered into a transaction agreement for the sale of its Automotive Ethernet business for a purchase price of $2.5 billion in cash to Infineon.
• MU shares jumped after telling U.S. customers it plans to impose a surcharge on some products to account for U.S. President Trump’s new tariffs, Reuters reported citing four sources familiar with the matter said. Micron’s overseas manufacturing sites are largely based in Asia, including China, Taiwan, Japan, Malaysia and Singapore.
• MX said it plans to shut down display business by end of Q2, to liquidate MagnaChip mixed-signal ltd; expects 30%-35% reduction in annualized operating expenditures as compared with 2024.