Closing Recap

Wednesday, April 23, 2025

Strong gains back-to-back days for U.S. stock markets after President Trump appeared to soften his tone on Fed Chairman Powell and China trade talks, giving investors reason to feel optimistic. President Trump comments after the close yesterday said he has no intention of firing fed Chair Powell; saying he would like to see him be a little more active in terms of his idea to lower interest rates; and that this is a perfect time to lower rates. That got the ball rolling overnight. Trump also said China tariffs will drop if the two countries can reach a deal; Trump said, “145% is too high, it will come down substantially.” Trump’s comments came after Bessent told investors in a closed-door summit Tuesday that he sees a de-escalation in the US-China tariff situation. Trump expressed optimism that a trade deal with China could “substantially” cut tariffs, suggesting that a final deal will not “be anywhere near” current tariff rates. China will be very happy said trump, “we’re going to be very good with China.” Nothing concrete at this time, but markets were pleased with the apparent toned-down rhetoric (for the time being). Still, while stocks ended higher, major averages still finished well off their highs of the session at the bell.

Earnings season really picking up this week with 120 S&P 500 companies reporting before another onslaught the next 2-weeks, as TSLA jumped overnight, as weak results failed to dent optimism after CEO Musk said his time with DOGE was nearing and expected to be more involved with Tesla in May. Other big earnings this morning included Dow component Boeing (BA), which reported a smaller than expected loss boosting shares; better results in tech with SAP, VRT, MANH, PEGA all rising on results; BSX and ISRG rose in MedTech, while decliners included ENPH in solar as a standout to the downside. Earnings tonight from TXN in chips, CMG in restaurants and LVS in gaming before big movers tomorrow morning (CMCSA, MRK, PEP, PG, UNP, BMY, FCX among others).

Stocks dipped around 11:00 am after Treasury Secretary Scott Bessent reiterated comments from yesterday saying that high tariffs between the U.S. and China are not sustainable, as President Donald Trump’s administration signaled openness to de-escalating a trade war between the two countries. Bessent said the tariffs — 145% on Chinese products and 125% on U.S. products — would have to come down before trade talks can proceed, but said Trump would not make that move unilaterally. “Neither side believes that these are sustainable levels. As I said yesterday, this is the equivalent of an embargo and a break between the two countries in trade does not suit anyone’s interest,” Bessent told reporters. Scott Bessent has said: “In response to President Trump’s tariff announcements, more than 100 countries have approached us wanting to help rebalance global trade.”  Other countries are looking to negotiate as well. Vietnam’s trade minister spoke to U.S. Trade Representative Jamieson Greer, state media reported.

The Wall Street Journal this morning reported the Trump administration is considering slashing its steep tariffs on Chinese imports — in some cases by more than half — in a bid to de-escalate tensions with Beijing. President Trump hasn’t made a final determination, the people said, adding that the discussions remain fluid, and several options are on the table. One senior White House official said the China tariffs were likely to come down to between roughly 50% and 65%. The administration is also considering a tiered approach similar to the one proposed by the House committee on China late last year: 35% levies for items the U.S. deems not a threat to national security, and at least 100% for items deemed as strategic to America’s interest.

• March single-family home sales rose 7.4% to 0.724M unit annual rate, (vs. consensus 0.680M) as March home sales Northeast -22.2%, Midwest +3.0%, South +13.6%, West -1.4%; March new home supply 8.3 months’ worth at current pace vs Feb 8.9 months; median sale price $403,600, -7.5% from March 2024 ($436,400).
• The Fed Beige Book showed economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports; the outlook in several districts worsened considerably as economic uncertainty, particularly surrounding tariffs, climbed; prices increased across districts, with six characterizing price growth as modest and six characterizing it as moderate.

• Oil prices reverse lower with WTI crude -$1.40 or 2.2% to settle at $62.27 a barrel, erasing overnight gains after Kazakhstan said it will prioritize national interests over those of the OPEC+ alliance, a move that risks fueling further tensions within the cartel. Overnight saw prices rally after bigger than expected inventory drawdowns reported by API in the US, but Kazakhstan’s newly appointed energy minister said the country is not able to reduce production at its three largest projects as they are controlled by international oil majors. Also, Several OPEC+ members will suggest that the group accelerates oil output increases for a second consecutive month in June, three sources familiar with OPEC+ talks told Reuters.
• Treasury yields erased early losses, ending near the highs of the day with the 10-yr ending around 4.39% (off lows of 4.26% this morning right after the market open; the 2-yr yield up 7.7bps to 3.865%. Midday, the US Treasury sold $70B 5-year notes at high yield 3.995%, with a bid-to-cover ratio 2.41 (vs. prior 2.33), as Primary dealers take 11.12% of U.S. 5-year notes sale, direct 24.84% and indirect 64.04%

• Chinese electric-vehicle makers’ shares rose sharply (NIO, LI, XPEV, BYDDF) as one of the world’s largest auto shows kicked off in Shanghai. Xiaomi rose 6.9% while NIO was up 4.4%. BYD gained 3.9% and Geely Automobile advanced 2.8% supported by optimism over announcements by carmakers at the Shanghai Auto Show.

• In Consumer Products: in tobacco, PM Q1 results top ests and raised its annual EPS view to $7.36-$7.49 from prior view $7.04-$7.17 thanks to its flagship heated tobacco product IQOS and products like nicotine pouch brand ZYN; its smoke-free business saw a 14.4% increase in shipment vols and 15% rise in net revs.
• In Restaurants: CAVA was upgraded from Market-Perform to Outperform at Bernstein, maintaining its tgt of $115 as believe the market is discounting near-term risks while undervaluing the long-term growth story; TXRH was downgraded to Neutral from Buy at Citigroup and cut tgt to $164 from $213 noting data suggest a soft patch for traffic/SSS (ex-weather) without upcoming catalysts and said beef risks are magnified.
• In Retailers: sector seeing a big bounce early (NKE, BOOT, SBUX, RH, W, EL) especially names with a big presence in China after US President Donald Trump said China tariffs will drop if the two countries can reach a deal. The president also said he had no intention of firing Federal Reserve Chair Jerome Powell. Also, helping, Reuters reported, citing State Media, Vietnam notes it has started trade talks with U.S. In luxury retail, Kering (PPRUF) Q1 comp. Rev. -14%, est. -11.9% and Q1 revs Eu3.88B, vs. Eu4.09B as Q1 Gucci comp rev. -25%, vs. vs. est. -23.6% (which weighed on luxury retailers).

• In Leisure Products: HOG shares rallied early being helped by India headlines; India Considers Offering Trump Harley-Davidson Concession. Harley-Davidson motorbikes could be about to get a whole lot cheaper in India. Officials are considering cutting tariffs on motorcycles with an engine capacity of 750cc or more to zero, Bloomberg reported overnight.

• In Oil Services: BKR delivered slightly better-than-expected Q125 adjusted EBITDA driven by strong IET margins despite a modest top-line shortfall and reiterated IET guidance for 2025, highlighting better visibility supported by its robust backlog and expectations for minimal tariff impacts; withdrew FY25 Service & Equipment guidance; WFRD Q1 EPS $1.03 vs. est. $0.86; Q1 revs fell -12% y/y to $1.19B vs. est. $1.189B; Q1 adj Ebitda $253M vs. est. $253.3M; appoints new CFO; Q1 operating income of $142M decreased 39% y/y; Q1 net income of $76M, a 6.4% margin, decreased 32% y/y.
• In Oil E&P Sector: EQT Q1 adj EPS $1.18 vs est. $1.02 on revs $1.74B vs est. $2.149B, FCF $1.151B; raises FY production by 25 Bcfe, lowers mid-point of capital spending by $25Mm; guides Q2 sales volume Bcfe 520-570 and FY sales volume Bcfe 2,200-2,300; said it plans to acquire the upstream and midstream assets of Olympus Energy in a deal valued at $1.8B; RRC delivered a modest (~3%/6%) beat on 1Q25 EBITDAX vs. Street, driven by slightly higher gas volumes and better price realizations. Overall, 2025 guidance is unchanged except for a small improvement in NGL realizations reflecting YTD momentum.
• In Solar: ENPH shares fell after the company missed Q1, and Q2 guide came in below estimates mainly due to weaker US demand and import tariffs starting later this quarter; guides Q2 revs $340-380Mm vs est. $376.01Mm; company said plans to offset 145% import tariffs on Chinese batteries by increasing next-gen battery ASP and sourcing non-China battery cells over next 4 quarters, but notes gross margin impact. In Research, Morgan Stanley downgraded RUN to EW from OW as believes the path for outperformance is limited, as it sees downside risks for growth due to the consumer-facing nature of the product; also, SEDG downgraded to Underweight reflecting its outlook for worsening end-market demand, potential negative impacts to earnings from tariffs, and heightened exposure to potential changes to the IRA.
• In Utilities: OKLO said OpenAI Chief Executive Sam Altman is stepping down as chairman of nuclear-energy startup Oklo, removing a conflict of interest and opening up the opportunity for future deals between the companies; FE was upgraded to Neutral from Underperform at Bank America saying pending Ohio legislation presents near-term transition risk, but the firm thinks Ohio rate case downside risk is priced in and believes Ohio legislation could prove to be a net positive to FirstEnergy’s regulated business long term. NEE reported a Q1 beat, boosted by rate hikes at its electric utility and increased power demand.

• In Consumer Finance: COF reported 1Q Adj. EPS ahead of the Street driven by better credit costs and NII, offset by higher marketing and reiterated its views DFS acquisition synergies laid out at announcement as achievable; said views the US consumer as healthy.
• In Insurance: CB Q1 core EPS $3.68 vs. est. $3.23; Q1 total company premiums grew 5.7% in constant dollars; Q1 published combined ratio was 95.7% with underwriting income of $441M, a notable result given $1.6B of catastrophe losses.
• In FinTech: FIS was upgraded to Outperform from Perform at Oppenheimer with a tgt of $94 saying they like its announced acquisition of Issuer Solutions, which strengthens its offerings to banks, complements its debit processing capabilities, and expands its recurring revenue stream.

• NVAX said it believes its Covid-19 vaccine is approvable, based on recent conversations with the FDA. An FDA decision on the vaccine’s final approval was expected on April 1, but has been delayed, raising concerns about political interference in regulatory decisions related to vaccines.
• SMMT rises after saying its lung cancer drug candidate, ivonescimab, showed that it improved patients’ longevity without the disease worsening in a late-stage trial, meeting the primary goal of progression-free survival when tested in combination with a platinum-based chemotherapy.
• TEM shares rallied after announcing multi-year collaborations with British drugmaker AZN and Pathos AI where they will work together to build multimodal foundation model in oncology which can be used to gather biological and clinical insights, discover novel drug targets, develop therapeutics.

• In Life Sciences: TMO reported Q1 sales of $10.36B (flat reported, +1% organic) vs est. $10.23B as margins were a touch light, as Adj GM came in at 41.7% and Adj Operating margin was 21.9% on better EPS; cuts FY25 adjusted EPS view to $21.76-$22.84 from $23.10-$23.50.

• In Industrial, Aerospace & Defense: BA posted a smaller-than-expected Q1 loss (-$0.49 vs. -$1.29), helped by higher jet deliveries while reports Q1 neg adj free cash flow -$2.29B, vs. est. for negative -$3.42B and said it wants to boost output of its strong-selling 737 MAX jets to 38 a month in 2025; GD reported a 27% rise in Q1 profit, driven by recovery in its aerospace segment, as well as sustained strength in its defense business and said its aerospace unit, which makes Gulfstream business jets, posted a 45% increase in revenue y/y; OTIS reported mixed Q1 results as EPS beat/sales missed while raises year rev outlook; RTX was upgraded to Overweight from Equal weight at Morgan Stanley as it sees risk reward skew more positive after yesterday’s pullback. The stock largely underperformed the market (down 10% vs the S&P 500 of up 2.5%) on concerns about the financial impact of tariffs.
• In Metals & Mining: copper stocks rally (FCX, TECK, SCCO) as Copper hits three-week high, buoyed easing trade tensions between China and the US after Trump comments; copper prices on the London Metal Exchange (LME) reached an earlier peak of $9,481.5, the highest since April 3. It has gained more than 15% since hitting a 17-month low at $8,105 earlier this month; gold miners weakened as gold declined over 3% in profit taking.

• In Internet: The European Commission has found that AAPL breached its anti-steering obligation under the Digital Markets Act, and that META breached the DMA obligation to give consumers the choice of a service that uses less of their personal data; has fined Apple and Meta with EUR 500M and EUR 200M, respectively. AAPL was fined 500 million euros ($570 million) and META 200 million euros, as European Union antitrust regulators handed out the first sanctions under landmark legislation aimed at curbing the power of Big Tech.

• In Software: SAP reported solid Q1 results earlier tonight and reaffirmed its full-year guidance, which drove shares higher; MANH also delivered strong Q1 and reaffirmed the FY25 guidance lifting shares as well as both issued comments that mission-critical software spend will hold up better than feared. PEGA shares jump on results as Q1 adj EPS $1.53 tops est. $0.49 on revs $475.633Mm vs est. $356.6Mm. Piper lowered ests and price targets in Cloud App software sector across the board to reflect increasing near term headwinds to growth from tariff, policy, and AI adoption hurdles while upgraded BL to Neutral and downgraded ORCL to Neutral (from OW) saying could pressure margin and free cash flow in fiscal 2026 on cloud mix/rising capex.
• In Quantum Compute: IONQ shares popped after signs agreement with Toyota Tsusho Corporation to Advance Quantum Computing Opportunities in Japan; the co said the deal marks a pivotal step in the company’s global expansion, unlocking commercial opportunities in Japan’s multi-billion quantum market. The quantum names were notably higher RGTI, QBTS, QMCO, QUBT.

• Keybanc out with note on sector highlights: 1) In a recessionary scenario it sees 30-40% further downside risk to SOXX valuations looking at historical averages, which incorporates the last two recessions, including the financial crisis in ’08-’09 and the Tech Bubble in ’01-’02; 2) Aggregate inventory increased two days to 81, as inventories increased this quarter after declining in five of the previous six; 3) it is lowering its forecast of 2025 IC ex-memory revenues from 9% to 5%, reflecting tariffs and continued inventory destocking headwinds