Market Review: January 15, 2025

Closing Recap

Wednesday, January 15, 2025

Index

Up/Down

%

Last

DJ Industrials

703.27

1.65%

43,221

S&P 500

107.00

1.83%

5,949

Nasdaq

466.84

2.45%

19,511

Russell 2000

44.06

1.99%

2,263

 

 

 

 

 

 

 

 

 

Massive stock outperformance on Wall Street Wednesday, with 10 of 11 S&P sectors sharply higher, paced by more than 2% gains in Financials, Technology, and Consumer Discretionary as investors cheered a “cooler” December core CPI inflation report (following a well-received PPI report on Tuesday) and strong earnings from large cap banks. The December consumer price index (CPI) report showed figures below consensus ests for core inflation (ex: food & energy), but headline figures did come in above consensus and the prior month. In fact, consumer prices increased +0.4% last month, the most in nine months as a +2.6% jump in the cost of energy products accounted for more than 40% of the increase in the CPI. Markets focused primarily on the core. No rate cut is expected at the Fed’s Jan. 28-29 policy meeting, but financial markets increased bets on a rate reduction in June following today’s data. U.S. stocks finished broadly higher, also cheered by strong bank earnings as JPMorgan Chase, Citigroup, Wells Fargo and Goldman Sachs all reported big profits that beat analysts’ expectations. The U.S. dollar slipped against a basket of currencies, Bitcoin prices topped $100,000, gold prices jumped 1% above $2,700 an ounce and U.S. Treasury yields fell. With today’s move, stocks got back above key technical levels and momentum once again came into play as investors chased stocks all afternoon. The S&P 500, the Nasdaq and the Dow all register biggest one-day percentage gains since Nov. 6

Economic Data

  • Dec Consumer Price Index (CPI) rises +0.4% (above consensus and prior month reading +0.3%) while on a Y/Y basis rises +2.9%, in-line with consensus and above prior month reading of +2.7%. The core CPI (ex: food and energy) rose an in-line +0.2% and was below the prior month +0.3% while Y/Y core rose +3.2% vs. est. and prior +3.3%. U.S. Dec real earnings all private workers -0.1% vs Nov +0.1% (prev +0.3%).
  • January Empire Manufacturing was -12.6 vs 3 expected. The prices paid index increased eight points to 29.1, and the prices received rose five points to 9.3. The index for future business activity climbed ten points to 36.7, with 53% of respondents expecting conditions to improve over the next six months. New orders fell 13 points to -8.6 with shipments retreating to -1.7.
  • The Fed released their Beige Book today. Employment ticked up on balance, with six Districts reporting a slight increase and six reporting no change. Contacts in several service industries, notably healthcare, continued to see job growth. Construction employment increased slightly, while manufacturing employment was flat. Wage growth picked up to a moderate pace in most Districts, though there were some reports that wage pressures had eased
  • The US Mortgage Bankers Association weekly data showed US applications index rose +33.3% in the week ended Jan 10, the mortgage purchase index climbs 26.9%, the mortgage refinance index climbs 43.5% despite the US average 30-year mortgage rate climbs 10 bps to 7.09% in Jan 10 week, highest since May 2024.

Commodities, Currencies & Treasuries

  • WTI crude oil prices rebounded, rising $2.54 or 3.28% to settle at $80.04 per barrel, its highest levels since August after slipping the last 2 trading days (but following a more than 6% rally the three days prior on supply disruption concerns) after EIA data showed us crude stocks fell to lowest since April 2022. Weekly EI inventory data showed U.S. weekly crude stocks off -2.0M bbls vs forecast of -1.0M bbl draw, gasoline stocks rose +5.9M bbls vs forecast of +2.0M bbl build and weekly distillate stocks up +3.1M bbls vs forecast of 0.8M bbl build. Crude has seen a strong start to the year, with the latest US sanctions adding to gains driven by a colder Northern-Hemisphere winter sending heating demand higher, and the steady fall in US stockpiles.
  • Feb gold prices rose $36.50 of 1.35% to settle at $2,717.80 an ounce. The U.S. dollar index (DXY) weakened as cooler-than-expected CPI data eased fears that inflation was accelerating and increased the chances the Federal Reserve could cut interest rates twice this year. A softer core reading coupled with producer prices data on Tuesday triggered a pullback in the dollar which fell below 109 after touching a 26-month high of 110.17 on Monday. The dollar was down around 1% vs. the Japanese yen after comments from the Bank of Japan Governor Kazuo Ueda, who said the central bank would raise interest rates and adjust the degree of monetary support if improvements in the economy and price conditions continue.

 

Macro

Up/Down

Last

WTI Crude

2.54

80.04

Brent

2.11

82.03

Gold

36.50

2,717.80

EUR/USD

-0.0016

1.0291

JPY/USD

-1.49

156.47

10-Year Note

-0.134

4.653%

 

Sector News Breakdown

Retail, Consumer Staples & Restaurants:

  • In Food sector: controversial red dye number 3, which has been linked to increased cancer risk, will be banned by the FDA effective Jan. 15, 2027, in food and drugs. This comes on the heels of a similar headline re alcohol earlier this month. Several food names active early given the news including candy makers HSY, MDLZ, sport Drinks: KO, PEP (and Doritos), KDP snacks/yogurt/other such as GIS, SJM, MDLZ, as well as cereals like KLG which owns Froot Loops and KHC which owns Capri Sun and Kool-Aid.

Leisure, Gaming & Lodging:

  • Casino & Gaming: Jefferies notes Missouri going live in Online Sports betting in 2025, new states considering legalization (MN, TX, GA, SC, OK), DD% growth in earlier states, in-game betting growth and steadily growing iGaming (higher margins vs OSB). The firm ests. a US OSB TAM of $33.2B and expect a 12% long-run growth rate, while it ests. a US TAM of ~$16B and mid-teens long run avg. growth rate per capita for iGaming. The firm remains bullish on the group with buys on DKNG, RSI, GAMB and SRAD and rolls out its 2026 estimates, where its forecasts are ~3% above consensus on average. Separately, DKNG, FLUT shares declined late morning on news that the state of Maryland proposes to raise sports betting tax rate to 30% from 15%.

Energy

  • The EIA said global oil markets face a smaller surplus this year than previously expected, with inventories set to grow by 725,000 barrels a day in 2025, rather than the 950,000 barrels a day projected before, the adviser to major economies said in a monthly report on Wednesday. Separately, OPEC notes 2024 global oil demand climbed by 1.5M bpd (vs. prior forecast 1.61M bpd and leaves 2025 global oil demand growth forecast at 1.45M bpd.
  • In Energy Equipment and Drilling: Evercore ISI downgraded shares of VAL, RIG, NE, HP, SLB, and NOV to In Line from Outperform noting oilfield services have been hit with the dual negatives of a low growth NAM contending with a rapidly consolidating customer base and capital restraint internationally that has ended any semblance of a coordinated global upcycle for the industry. The fear is another leg down in activity will see pricing pressure in areas that have to date been somewhat immune.
  • In Utilities: EIX was upgraded to Neutral from Sell at Ladenburg based on valuation following the recent sell-off in the stock. With Edison trading at a 34% P/E discount Ladenburg believes the stock reflects reasonable worst-case outcomes associated with the current California wildfires. The Utility group (XLU) overall advanced over 1.5% following the sharp decline in Treasury yields following the CPI data.

Banks, Brokers, Asset Managers:

  • Several large cap banks with earnings results today:
  • BK Q4 adj EPS $1.72 vs. est. $1.56; Q4 assets under mgmt $2 trillion; total fee revenue grew 9% to $3.51 billion y/y; Q4 net interest rose 8% to $1.19B; assets under custody and administration were $52.1 trillion in the fourth quarter, 9% higher than last year.
  • BLK Q4 adj EPS $11.93 vs. est. $11.22; Q4 revenue rose 23% y/y to $5.68B vs. est. $5.58B; assets under management edged up to a record $11.55 trillion in Q4; Adj operating margin was 45.5%, up from 41.6% y/y; reported $281B of client inflows in Q4, topping ests and bringing net inflows for the year to a record $641B.
  • Citigroup (C) to buy back $20B in stock; said Q4 FICC sales & trading revs $3.48B vs. est. $2.94B; reported Q4 EPS $1.34, above consensus $1.24 and revs $19.6B vs. est. $19.51B; Q4 CET1 capital ratio 13.6%, Q4 ROCE 5.4% and Q4 RoTCE 6.1%.
  • GS Q4 net revenues $13.87B above est. $12.37B; Q4 FICC sales & trading revs +35% y/y to $2.74B vs. Bloomberg est. $2.44B; Q4 EPS $11.95 vs. est. $8.22; Q4 credit loss provision $351M; Q4 Net interest income rose 75% y/y to $2.35B vs. est. $2.11B; said they have “met or exceeded almost all targets set in strategy to grow the firm 5 yrs ago”; said for asset & wealth management, expect to drive high-single-digit annual growth in medium-term.
  • JPM Q4 EPS $4.81 vs. est. $4.04; Q4 revenue $42.8B and managed revenue $43.7B vs. est. $41.56B; Q4 FICC sales & trading revs $5.01B, vs. est. $4.37B; Provision for credit losses $2.63B, vs. est. $3.04B, Return on equity 17% and Return on tangible common equity 21%, EST 17.2%; notes client asset net inflows totaled $486B in 2024.
  • WFC Q4 EPS $1.43 vs. est. $1.35; Q4 net interest income $11.84B vs. est. $11.7B; Q4 revs $20.38B vs. est. $20.59B; Q4 commercial banking revenue $3.17B, corporate and investment banking revenue $4.61B and wealth & investment management total revenue $3.96B; non-interest expense fell 12% to $13.90B y/y.

Insurance & Services:

  • In Consumer Finance: DFS reported credit card charge-off rate 2.55% at Dec 2024 end and its credit card delinquency rate 1.76% at Dec 2024 end; JPM reported charge-offs for December of 1.63% and delinquencies 0.84%; BAC credit card delinquency rate was 1.46% at Dec 2024 end and credit card charge-off rate was 2.53%.
  • In Real Estate Servies: COMP raises Q4 revenue view to $1.36B-$1.39B from $1.225B-$1.325B and raises Q4 adj EBITDA view to $15M-$18M from $0-$10M, in turn boosting its yearly outlooks.

REITs:

  • Morgan Stanley with REIT sector changes as they upgraded CBRE (top pick), DOC, NNN to Overweight, MAC was upgraded to EW from UW, and downgraded both SAFE and GLPI to EW from OW saying REITs now trade at a -20% discount to the S&P vs a 5-year average of +0%, partly due to half the expected earnings growth. Key themes are: 1) pockets of accelerating growth; 2) CRE transaction recovery; and 3) debt refinancing headwinds. Favored segments: senior housing, residential, shopping centers & CRE service companies; stay Overweight industrial & cold storage on what’s in the price.
  • Data Center REITs: Deutsche Bank upgraded DLR to Buy from Hold (PT to $194 from $185) while lowered PT for AMT to $235 from $210, CCI to $96 from $116 and SBAC to $233 from $260 in towers saying admittedly, their August 2023 downgrade of DLR was premature, and the stock remains what they would argue the preferred/most widely held name among the group. The firm said they believe Tower valuations reflect many negatives amidst weak investor sentiment, but the stocks lack imminent catalysts to re-rate.

Biotech & Pharma:

  • KROS shares fell after saying it has voluntarily halted all dosing in the TROPOS trial, a Phase 2 clinical trial of cibotercept in combination with background therapy in patients with pulmonary arterial hypertension, including the 1.5 mg/kg and placebo treatment arms, based on the ongoing safety review.
  • VCEL shares fell as delivered preliminary Q4/24 revenue of $75.2M-$75.7M, an increase of 15.7%-16.5% Y/Y, compared to consensus estimates of $77.9M; Burn Care prelim results were announced to be $40M, below Canaccord’s estimates of $41.9M.

Healthcare Services & MedTech movers:

  • In Managed Care (UNH, HUM, ELV, CVS), Cantor noted the next potential catalyst around January 15 as CMS will release enrollment data for 2025; in this year, they view strong enrollment growth as a negative given risk of adverse selection. The firm notes ELV has guided to above market growth; view market as 5-6%, HUM has guided to 5%-10% losses, CVS believe could be close to the midpoint of their range and UNH has guided to 7-8% growth.
  • Healthcare Services: NEO provided FY25 guidance of revenue of $735M to $745M (vs. $728M est., assuming 11% to 13% growth) and adj EBITDA of $55M to $58M (vs. $56M est., assuming 43% to 51% growth); is updating its Long-Range plan of revenue growth of 12% to 13% annually. TEM shares rose after the company launched its FDA-approved in vitro diagnostic device, xT CDx, available for all ordering clinicians in the U.S.
  • In MedTech: ISRG shares jumped as guided preliminary Q4 revenue $2.41B above consensus $2.2B saying 2024 worldwide da Vinci procedures grew approximately 18% y/y; placed 493 da Vinci surgical systems, of which 174 were da Vinci 5 systems, in Q4, an increase of 19% compared with 415 y/y. MYGN guided prelim Q4 revs $209M-$211M vs. est. $212.9M and forecasts 2025 revs between $840M-$860M vs. est. of $876.7M.
  • Drug Distributors: MCK reaffirms 2025 outlook ahead of presentation later today; Adj EPS $32.40-33.00 vs FS $32.68 and operating profit growth at +10-15%. Long term EPS target 12-14% growth. US Pharma FY25 operating profit growth +9-11%. Reiterates Prescription Technology Solutions op profit growth at +11-15%. Reiterates Medical-Surgical Solutions the low end of +6-8% FY25 operating profit growth.
  • Life Sciences & Tools: Shares of WAT, TMO, BRKR and others declined after the U.S. Commerce Department said Wednesday it is imposing new export controls on biotechnology equipment and related technology because of national security concerns tied to artificial intelligence and data science. Washington has raised concerns that China could use U.S. technology to strengthen military capabilities and help design. The new export controls, which restrict shipments to China and other countries without a U.S. license, are for high-parameter flow cytometers and certain mass spectrometry equipment.

Industrials & Materials

  • In Aerospace & Defense: shares of FTAI tumbled as much as 30% this afternoon after short seller Muddy Waters announced a short position in the company saying the company’s financial reporting is "highly misleading," as its revenue from "true" maintenance and individual off-the-rack module sales are "materially lower than reported." https://muddywatersresearch.com/research/2025/mw-short-01152025/ ; LUNR and VSAT shares jumped this afternoon after said receives $4.82B NASA contract award.
  • In Trucking: Stifel with Q4 preview for LTL trucking sector saying heading into Q424 earnings, its channel checks suggest that last year finished with relatively soft fundamentals, losing some sequential momentum in demand, with sub-seasonal volumes. The market still appears to be moving sideways and intra-quarter reports from the public carriers corroborate that view. The firm downgraded XPO to Hold from Buy saying shares currently trade near peak valuation. Notes stock price appreciation following the election have been given back across our trucking coverage with valuation multiples of KNX, LSTR, SNDR, and WERN compressing from peak levels as demand uncertainty heightens early in the new year, in our view.
  • In Shipping: B Riley noted shipping rates recovered after a seasonally slow Q324 — but not nearly enough to satisfy investors, with rates lower on a Y/Y basis. Firm notes they would expect a sequential rebound in 2025, where the supply/demand outlook remains in favor of the fleet operators but lower on a Y/Y basis. Despite a tough 2024, thinks INSW (Buy, $75 PT) should see the benefit of its blended fleet, which includes VLCCs, Suezmax vessels, and MRs, in 2025 and thinks profit margins should remain elevated for STNG (Buy, $90 PT) in Q424.
  • In Homebuilders and Building products sector: BECN shares jumped after building products distributor QXO proposes to acquire Beacon for $124.25 per share in cash as the proposal implies a total transaction value of ~$11B (Beacon later confirmed the offer and reiterates rejection of the unsolicited bid). The overall housing sector (LEN, Z, TOL) got boost following “cooler” CPI inflation data, pushing Treasury yields lower and making interest rate sensitive sectors more attractive for the time being.

Technology

  • TikTok plans to shut its app for U.S. users from Sunday, when a federal ban on the social media app could come into effect, unless the Supreme Court moves to block it, according to reports. The outcome of the shutdown would be different from that mandated by the law. The law would mandate a ban only on new TikTok downloads on Apple or Google app stores, while existing users could continue using it for some time.
  • Security Software: SentinelOne (S) downgraded from Buy to Neutral at UBS and cut tgt to $25 from $30 noting shares were -21% between Q3 EPS and year end as investor views on competitive dynamics in the endpoint space faded and optimism in CY25 growth drivers, including the Lenovo partnership, waned.
  • Quantum Computer names volatile again (IONQ, QBTS, QMCO, QUBT, RGTI) after MSFT said Tuesday that 2025 would be the year for its business customers to become " quantum-ready" by preparing their organizations for the eventual technological leap. In a blog post, Microsoft said "we are right on the cusp of seeing quantum computers solve meaningful problems and capture new business value." As we look toward the next 12 months, the pace of quantum research and development is only going to accelerate, making this a critical and catalyzing time for business leaders to act,” said MSFT. Note the year-long rally in quantum computing stocks paused last week after NVDA CEO Jensen Huang said the technology’s practical use was likely two decades away.

Semiconductors:

  • Semiconductors as a whole (SOX) outperformed, rising over 2% in a broad market rally with big gains for ARM, AMD, NVDA, MU, TXN, TSM and many others.
  • LASR shares slipped on guidance; sees prelim Q4 revenue $46M-$48M, below consensus est. of $52M and says gross margin and adjusted EBITDA expected below Q4 guidance.
  • LRCX was downgraded to Peer Perform from Outperform at Wolfe Research due to its greater relative exposure to NAND, where it has become incrementally bearish, and its view that street ests for CY25 and CY26 are too high.
  • PI reiterates Q4 revenue and adjusted EBITDA guidance ahead of Needham growth conference; forecasts Q4 adj EBITDA within guidance of $13.6M-$15.1M and forecasts Q4 rev within prior guidance of $91M-$94.0M.
  • The U.S. plans to unveil more regulations to keep chips made by TSM, SSNLF and other producers from flowing to China – Bloomberg.

_________________________________________________________________

Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.