Closing Recap

Friday, February 21, 2025

U.S. stocks were better for sale all day as the Dow Jones Industrial Average declined over 700 points and both the Nasdaq and Dow Transports falling over 400 points amid a confluence of potential market factors leading to the selloff. Overall, there was lots of blood in the streets today with a broad-based market sell-off just two days after the S&P 500 posted back-to-back record closing highs. There wasn’t one specific news event that sent stocks lower, but a combination of several factors that potentially played into weakness. There was a broad flight to safety as gold prices pushed higher after early losses while bond prices also advanced, sending yields lower. One of the few standout sectors were food stocks with big gains in shares of HSY, MDLZ, CPB, KHC, and UTZ to name a few and consumer products like CLX, CL and PG. That was about it! However, there were several stories that added to today’s pullback.

On the weak side, 1) the Philly semiconductor index (SOX) tumbles over 3% to its 200-dma support of 5,125, along with weakness in AI data center related names (VRT, DELL, ETN, etc.) on some unsubstantiated market fears of slowing capex for the sector. 2) Another sector that was clobbered was Dow Transports, falling over 2.5% led by weakness in FDX and LTL freight/trucking stocks such as ODFL and SAIA on consumer fears after WMT guidance the day prior, and comments by JP Morgan raising AMZN competition fears. 3) It didn’t end there as stocks extended declines midafternoon after a report in the Daily Mail citing concerns of a new coronavirus with pandemic potential discovered in China. The article noted another coronavirus, HKU5-CoV-2, has been discovered in China and is “strikingly similar to the pandemic virus” and feared to be powerful enough to spread through humans, https://tinyurl.com/4msj54ut . Shares of vaccine makers (MRNA, PFE, NVAX) saw strength as the concerns pushed major US averages to lows early afternoon. When it rains, it pours and today was a culmination. 4) lastly, economic data disappointed ahead of PCE inflation next week, along with concerns into the weekend of any policy changes from the White House.

We are also heading into the busiest week of earnings season (on pure volume) coming up with NVDA highlighting, as well as several other companies including HD, CRM, SNOW, EBAY, LOW among others. Next week we get the PCE inflation report on Friday and the GDP results on Thursday. Economic data today was weak with consumer sentiment falling, inflation expectations rising, and housing data extending weakness. S&P 500 and European stock markets hit record highs on Tuesday but have declined since amid Trump’s latest tariff warning on pharmaceuticals, semiconductor chips and wood, which among other threats, has exacerbated fears of a broad trade war and unnerved investors.

• Jan Existing Home Sales reported at 4.08M unit rate, down -4.9% and below consensus 4.12M, down from Dec 4.29M figure; Jan inventory of homes for sale 1.18M units, 3.5 months’ worth; Jan national median home price for existing homes $396,900, +4.8% from Jan 2024.
• University of Michigan surveys of consumers sentiment final Feb 64.7 below consensus 67.8 and vs preliminary Feb 67.8 and final Jan 71.1; current conditions index final Feb 65.7 vs prelim Feb 68.7 and final Jan 74.0 and the expectations index final Feb 64.0 vs prelim Feb 67.3 and final Jan 69.3.
• University of Michigan surveys of consumers 1-year inflation outlook final Feb 4.3% vs prelim 4.3% and final Jan 3.3% and the 5-year inflation outlook final Feb 3.5% vs prelim 3.3% and final Jan 3.2%.

• April gold slipped -$2.90 to settle at $2,953.20 although gold finished the week higher by 1.9%. This marks the eighth consecutive week where gold closed higher–the longest stretch of weekly wins since August 2020, when the streak lasted 9 weeks. Bitcoin prices erased early gains, sliding 2.87% to around $95,000 late day.
• The 10-year yield dropped 8-bps today to 4.419%, down 5.7bps on the week and is now down 4-straight weeks (matches longest losing streak since December 2022) and is down 20-bps during that stretch. The shorter-term 2-yr yield dropped 7.2 bps today to 4.192%, down 6.6 bps on week and is down 5 of last 6 weeks.

• In Restaurants; TXRH Q424 EPS of $1.73 exceeded consensus by $0.10 reflecting favorable restaurant margins (opex/rent) and G&A, with comps largely in-line; QTD comp slowed to +2.9%, running below consensus, and reiterated 2025 guidance except food inflation, which was raised to +3-4% from +2-3%. BJRI outperformed on better earnings results; KRUS was upgraded to Buy, from Hold, primarily due to valuation at Lake Street noting shares have sold off significantly since a positive Q1:F25 report and thinks they are at a compelling entry point. Citigroup added WEN on a "30-day positive catalyst watch" while keeping a Neutral rating on the shares with a $15.50 price target and also placed CMG on a "90-day positive catalyst watch" while keeping a Buy rating.

• In Online travel/Loding: BKNG reported strong 4Q results consistent with the trends universally observed in the travel sector as RNs and EBITDA exceeded Street estimates by 4% and 12%, respectively and company guided FY25E outlook with bookings/revenues at >8% and EBITDA margin expansion of “slightly below 100bps”.
• In Cruise stocks: Truist lays-out what might be a reasonable “worst-case” scenario for earnings and implied hit to stocks should such a tax be implemented (recall yesterday the sector declined following comments from Commerce Secretary Lutnick who said in Fox interview, “"You ever see a cruise ship with an American flag on the back? … None of them pay taxes … every supertanker. None pay taxes.") In such a case Truist assumes a 25% tax rate on the income earned from ships that depart from U.S. ports as part of their cruise itineraries, which it assumes are approx. 40% for CCL, 45% for NCLH, 65% for RCL and 20% for VIK (assume 40% of Ocean cruises and Ocean contributes approx. 50% of earnings).

• In Building Products: FIX reported 4Q24 adj EBITDA of $261M, which beat consensus of $209M while EPS of $4.09 was more in line, impacted by earn-out payments and EBITDA beat was driven by stronger than expected organic growth of 22%. FND reported Q4 profit that beat estimates and same-store sales were better than expected (EPS $0.44 vs est. $0.26 on revs $1.107B vs est. $1.086B, comps -0.8%).
• In Trucker/LTL sector: the sector was hit hard (ODFL, SAIA) after JP Morgan noted concern of AMZN entry into LTL saying most obvious risk is if this service launches for external users at some point in 2026 as it is pretty much impossible to put that disruptive idea back in the box. Two key examples are Amazon Shipping and Amazon Freight truckload brokerage, though notes, neither have impacted their peers. Also, TFII was downgraded by a few Wall Street firms (Bofa, UBS) given accelerating costs, likely flat earnings in 2025, and increasing loss of profitable small- to medium sized business customers, while seen as no longer having visibility to a path of significant margin improvement in their US LTL business (shares JBHT, LSTR, RXO, WERN, MRTN among names down).
• In Gov’t defense services, William Blair downgraded five names over contract uncertainty, lowering BAH, CACI, LDOS, PSN and GD to Market Perform from Outperform without price targets. Yesterday afternoon, Defense Scoop reported that all U.S. Department of Defense agencies have been instructed via a memo to undergo a review of consulting services on a contract-by-contract basis and terminate nonessential consulting programs. The firm says that while it is unclear what constitutes nonessential consulting services, DOGE and Treasury Department announced on “X” that it terminated a $1.9B, five-year IRS IT modernization blanket purchase agreement contract called EPPIS that included agile software development, cybersecurity, and cloud services.
• In Metals & Mining: Aluminum producer CENX reported 4Q EBITDA of $82M (includes +$12M nonrecurring settlement), vs. consensus estimates $76M and 1Q’25 EBITDA guided range of $75–85M is below consensus. CDE was upgraded to Outperform from Market Perform at Raymond James after Q4 results and announced the completion of its acquisition of SilverCrest Metals.

• In Crypto: COIN announced that the SEC has agreed to drop its enforcement case against the company, pending the approval of its commissioner. In 2023, the SEC charged Coinbase with operating an unregistered securities exchange and for failing to properly register its crypto staking program. Overall crypto related stocks, miners were under pressure most of the week tumbling on Friday (CLSK, CORZ, HUT, HIVE, IREN, MARA, RIOT).
• In REITs: AMH reported Core FFO in line with consensus and same-store growth trends were also relatively in line as occupancy picked up and led to modest improvement in lease rate growth. Initial 2025 Core FFFO missed expectations by 1.3% at the midpoint; FR upgraded to Neutral from Sell at Goldman Sachs on the back of Q424 earnings, raise PT to $59 from $52 noting that FR has recently shown the ability to lease up speculative development projects and resume select new development starts. GLPI reported 4Q24 AFFO of $0.95 which was $0.01 ahead of consensus and management issued FY25 AFFO/share guidance of $3.83-$3.88/share, which is 0.9% below consensus at the midpoint.  VICI reported 4Q24 AFFO that was in line with consensus (and KBCM) at $0.57/share, management issued initial FY25 AFFO guidance that is 0.65% above consensus at the midpoint

• Healthcare Services & Facilities: HIMS shares slipped following a recent SEC Filing that’s showed Andrew Dudum, 10% owner, Director, CEO, on February 18, 2025, sold 175,661 shares in Hims & Hers for $10,230,063. Following the Form 4 filing with the SEC, Dudum has 97,687 shares held directly. Also hurting shares further, FDA confirms Ozempic & Wegovy shortages are fully resolved.
• In Insulin sector: PODD reported Q4/24 revenue of $597.5M (+17.2% Y/Y), beating street estimates of $582.5M as US OmniPOD revenue of $443.7M (+12.4% Y/Y) was slightly ahead of Canaccord’s $441.5M estimate and OUS OmniPOD revenue of $142.0M (+33.5% Y/Y) bested their estimate of $139.8M. Management’s FY25 guidance was generally in line with  expectations,
• In Medical Equipment & Supplies: GKOS shares fell after results as Truist noted core iStent headwinds limited Q4 rev upside, but IDose ($16M v. $13M CNS) doubled q/q keeping the steepening iDose trajectory (key to story) into ’25 “intact.” GKOS’ lofty val. may limit tolerance for anything but incr. good news (I.E. LCD iStent headwinds). GH has sued rival NTRA in a California federal court for allegedly stealing trade secrets related to cancer-detection blood tests, Reuters reported. In a lawsuit filed Thursday, Guardant said its scientists poached by Natera transferred thousands of confidential files to the company to develop competing tests
• BLUE announces a definitive agreement to be acquired by Carlyle and SK Capital as Bluebird stockholders to receive $3.00 per share in cash and a contingent value right of $6.84 per share in cash payable upon achievement of a net sales milestone, contingent upon offer conditions.
• SLRN confirms that the private affiliate of investor Tang Capital Partners, Concentra Biosciences, has proposed to acquire it for $3 per share in cash, a 38.2% premium to its last closing price.

• In Online/Internet: MELI shares jumped after reported strong 4Q results with revenue and EBIT above Street estimates by 3% and 33%, respectively and total GMV grew +56% ex-FX in 4Q, while units sold was up +27% (1-pt deceleration on 3-pt tougher comp) on better margins. GOOGL shares slipped after Reuters reported EU antitrust regulators are set to charge Alphabet’s unit Google with breaching EU rules aimed at checking the power of Big Tech after proposed changes to its search results failed to address their concerns and those of their rivals.
• In Content Design space: AKAM reported mixed results, with noisy trends across the underlying businesses, leading shares down 7%. 2025 revenue and EPS guidance came in below consensus, partially driven by significant FX headwinds; was also downgraded to neutral from Buy at Bank America after results and guidance.

• FIVN exceeded expectations in Q4, delivering strong revenue growth of 16.6% Y/Y fueled by better-than-expected performance in healthcare and consumer verticals along with a contribution from the finalization of deployments for a major customer; also, focus on AI is paying off, AI adoption represents 9% of enterprise subscription revenue (up 46% Y/Y) and achieving a 100% attach rate on new logo deals
• GLOB reported mixed Q4 results as revenue was a touch lighter than expected due to FX headwinds, but favorable below-the-line items helped drive the EPS beat; also provided weaker than expected Q1/FY25 guide which factors in FX headwinds, softer spending at Disney, and political/economic uncertainty in LATAM.
• RNG delivered in line Q424 results while guiding FQ125 and F25 below consensus; Q4 NG OM of 21.3% (+80bps y/y) and record FCF represented Q4 highlights; ARR of $2.49B (+6.9% y/y) reflected continued a meaningful decline in growth for its core market-leading UCaaS product as a result of a slowing TAM.