Closing Recap

Monday, April 14, 2025

Hefty gains in U.S. stocks overnight disappeared by late morning on profit taking, though major averages managed decent gains by days end in subdued trading after the White House exempted smartphones and computers from U.S. tariffs, but President Donald Trump said that levies were still likely. Global technology stocks surged initially after the U.S. unveiled (late Friday) tariff exemptions covering 20 categories, including computers and laptops, as well as semiconductor devices, memory chips and flat panel displays. However, the Nasdaq declined more than -400 points off its morning high to turn negative early afternoon as we remain in an environment where market “rips” are met with larger “dips”. Midday comments from the Fed’s Waller noted, “with an under 10% average tariff, I would see limited effects on economic activity. I would support a limited monetary policy response.” He also said, “in scenario where tariffs drop down to 10%, inflation could peak at 3%.” Lastly, Waller warned “sustained tariffs could send inflation to 5%”. The comments were a little better than recent Fed members, but not enough bounce markets notably. Recent tit-for-tat tariffs between Washington and Beijing have stoked fears of higher component costs, softer consumer demand and the worst supply-chain disruption since the COVID-19 pandemic. The news has also rattled Treasury and currency markets with yields having soared the last week and the dollar has tumbled to multi-year lows. In addition to tariff headlines out of Washington and China, market investors look to earnings results this holiday shortened week. The CBOE Volatility index (VIX) fell over -20% late day, falling below the 30 level for the first time in 10-days as major averages clawed back those early gains ending sharply higher into earnings tomorrow from JNJ, BAC, PNC and Citi).

• WTI Crude oil futures edge higher $0.03 to settle at $61.53 a barrel (up 3.27% from its 52-week low of $59.58 hit Tuesday, April 8, 2025, but down 27.96% from 52 weeks ago), while Brent crude rises $0.12 or 0.19% to settle at $64.88 per barrel. Front Month Nymex Natural Gas for May delivery lost 20.20 cents per million British thermal units, or 5.73% to $3.3250 per million Btus, the lowest close since early February. Crude futures eked out modest gains in an up-and-down session, with U.S. tariff relief on electronic goods helping and a 150,000 barrels-a-day cut in OPEC’s demand growth outlook weighing on prices.
• Inflation expectations at the one-year horizon were higher at 3.58% in March from the previous month’s 3.13%, according to the New York Fed’s survey of consumer expectations. Median 1-yr inflation expectations highest reading since Sept. 2023. Mean unemployment expectations, probability that US jobless rate will be higher 1 year from now, +4.6% percentage points m/m to 44.0%, highest reading since April 2020. Median 1-year expected growth in household income -0.3 ppt to 2.8% in March.

• In Lodging/Online Travel: Goldman Sachs double upgraded CHH to Buy from Sell; downgrade Hyatt (H) to Sell and downgrade both MAR, HLT to Neutral from Buy in lodging amidst macro uncertainty. The brokerage reduced its outlook for the US Lodging C-Corps and Timeshares to reflect weaker consumer demand, geopolitical uncertainty, and negative read-across from US airlines. Goldman updated their 2025 RevPAR forecasts and lower US RevPAR estimates by ~125bps for 2025 and assume RevPAR trends deteriorate from 1Q through the remainder of 2025.
• In Theme Parks: Keybanc said their Domestic geolocation data tracking Theme Park Attendance appears neutral for DIS and slightly negative for CMCSA’s Universal. March’s attendance for Disney was 0% y/y (vs. -3% in February) and -8% y/y for Universal (vs. -9% in February). Attendance improved in Florida, while decelerating in California. Universal Studios Hollywood (CA) attendance decelerated -13% y/y compared to stable +3% y/y for Disneyland (CA), which we think is a function of Universal being more impacted by the California wildfires. We think this data suggests a slight downside to 1Q25 Theme Park estimates for Comcast Universal.

• In Aerospace & Defense: PLTR shares jumped initially after the Financial Times reported NATO acquires AI military system from Palantir – NATO is rapidly advancing its defense technology capabilities, completing the contract in just six months — “one of the most expeditious in NATO’s history,” according to the alliance. EH was upgraded to Buy from Hold at Deutsche Bank following recent pullback saying China appears to be in the early innings of cultivating a new eVTOL/UAM ecosystem, leveraging its existing industrial strengths across batteries, electronics, and drones. PSN was awarded a seat on a $1.5 billion contract by the Air Force Civil Engineering Center to help address PFAS contamination. 

• In Brokers & Exchanges: Private equity firm KKR will buy post-trade services company OSTTRA in a $3.1 billion deal, SPGI and CME announced on Monday. SNEX agreed to acquire the futures brokerage R.J. O’Brien for an equity value of about $900 million, funding the deal through a combination of $625 million in cash and about 3.5 million shares of its common stock and will also assume up to $143 million of R.J. O’Brien’s debt.
• In Payments: TOST announced an agreement with Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee’s Neighborhood Grill + Bar®, IHOP®, and Fuzzy’s Taco Shop® restaurants, to implement Toast technology at Applebee’s locations nationwide; JP Morgan downgraded FLYW and LSPD to Underweight noting adverse student immigration policy, but the trends likely won’t improve near-term assuming U.S. visa flow could be directly and indirectly impacted by trade war headlines. For LSPD, notes a higher mix of discretionary spend exposure, including complex retail stores (E.G., bike shops) subject to tariff uncertainty.

• Manage care stocks (UNH, HUM, CNC), which had been stronger in the last 2 weeks on market uncertainty, saw some profit taking today and were among the weaker sectors early in the S&P 500.

• In Rare Earth Materials: Shares of TMC, MP jump after a report Trump plan to stockpile deep-sea critical metals to counter China; US drafting order to collect ‘nodules’ from Pacific seabed for minerals used in battery supply chains. https://tinyurl.com/2dup7f7z ; ESI was upgraded to Buy at Truist with $24 tgt as believe recent market volatility has created an opportune entry point for what we view as a relatively high-quality name with strong and sustainable organic growth potential, particularly within Electronics business
• In Materials/Paper Sector: IP announces exclusive negotiations to divest five European corrugated box plants to satisfy regulatory commitments from the acquisition of DS Smith Plc. Jefferies previews the quarter saying that they think FX will be a tailwind in results, but believe the overall setup is tough as staples cos are reporting weaker volumes and destocking. That said, Jefferies sees CCK and IP as bright spots in our coverage that are positioned for a strong quarter and are trading at trough multiples.
• In Metals & Mining: Gold miners (AEM, AU, GFI, GOLD, NEM) giving back some recent gains as gold prices pullback off record highs; GFI said it is preparing to cease operations at its Damang mine after an application to extend its lease was rejected by the Ghanian government. Gold Fields said it had engaged extensively with authorities since receiving the rejection notice to confirm that its lease extension application met all the statutory requirements for such an extension.

• In Smartphones: AAPL shares jumped, upgraded at Keybanc saying last Friday’s announcement of exception from tariffs on smartphones is probably the best-case scenario they can think of for AAPL, which makes it unlikely that its prior downside PT would be achieved, and takes a big risk off the table.
• In Hardware: Citigroup said they expect a rally in the group on Trump administration reciprocal tariff exemptions on PCs, smartphones and 20 other products announced over the weekend from the 125% tariff on Chinese imports and 10% baseline tariff on imports for other countries, while the 20% tariff on all Chinese goods remains in effect. Citi lowered its data center CAPEX & PC models ~5%/2% to reflect macro-induced weak demand; downgraded CRCT to Sell; prefers AI server exposed stocks to enterprise as many enterprises maintain a fixed IT budget; top coverage picks are CSCO, APH, and COHR
• In Telecom & Media: CMCSA was downgraded to underweight at Wells Fargo and cut tgt to $31 from $37 saying the cable company is being pulled into a convergence investment cycle w/ higher mobile cost to re-accel broadband; trim C&P, while NBCU also faces challenges as ’25/’26 EBITDA is -4%/-5% vs Street. Keybanc said they are more positive on AMT, CHTR, CCOI into Q1 earnings in Comm services and infrastructure and more cautious on DIS, VZ, WBD and that they like the defensive trades favoring Towers and Cable heading into Q125 earnings; would be more cautious on Data Centers, Media, and Wireless.
• In Semiconductors: INTC entered into a definitive agreement to sell 51% of its Altera business to Silver Lake, a global leader in technology investing in transaction valuing Altera at $8.75B. Note Intel acquired Altera around 10 years ago in an all-cash deal valued at $16.7B. overall, the Philly semi-index (SOX) posted early gains, up over 1% above 4,000 in choppy trade.
• In China tech and retail (BABA, BIDU, JD, PDD), shares of stocks advanced as China’s President Xi Jinping has urged China and Vietnam to work together to ensure smooth trade between the two countries, according to state news agency Xinhua.