Closing Recap

Friday, January 31, 2025

U.S. stock markets did an about face this afternoon, sliding to lows and erasing morning gains following tariff headlines! U.S. stocks were strong all morning/early afternoon, with the S&P 500 reclaiming the 6,100 level (moving to within 20 points of all-time highs) in a stunning rebound following Monday’s stock market plunge on China’s AI DeepSeek competition concerns, which sunk technology/chip stocks. The Nasdaq Comp recovered all of its -3% losses from Monday, nearing the 20,000 level again and the Dow approached the 45,000 level. All was moving well until late day tariff headlines out of the White House pressured stocks and erased gains, pushing major averages lower in a week that was filled with an FOMC meeting (no surprises as rates held steady), December PCE inflation data (in-line with ests, but a tad higher than prior month), record gold prices (back above $2,800 an ounce), tariff concerns for trading partners (supposed 25% to Canada/Mexico this weekend), and earnings (AAPL, META, MSFT, TSLA, CAT, BA among them). Results from 178 of the S&P 500 Index are done thus far, with the next 2-weeks jam packed with most of the others including AMZN, GOOGL, MRK, AMGN, AMD CMG, UBER, PYPL, QCOM, COP, among the headliners for next week. Despite today’s reversal lower, and ending the week down, all major averages closed January higher! For the week, the S&P 500 fell 1%, the Nasdaq declined 1.64%, and the Dow climbed 0.27%. For the month, the S&P +2.7%, the Nasdaq +1.64%, and the Dow +4.7%.

In trade/tariff news, Reuters reported midday that President Trump is expected to issue tariffs against Canada and Mexico that will begin on March 1, sources familiar with planning note, pushing out the expected tariffs of 25% this weekend. The Reuters report indicated the President is expected to announce a process for countries to seek exemptions for certain imports. However, around 1:30 this afternoon, the White House denied the Reuters report saying the tariffs are still set for this weekend. The White House said tariffs on Canada and Mexico will be set at 25% and that tariffs on China will be set at 10%. Stock markets reacted in turn, falling to lows amid the uncertainty heading into the weekend. European markets posted a monster January as the German DAX ends January +9.16% at 21,732.05, the CAC 40 rises 7.72% in January to 7,950.17 and the FTSE 100 index rose 6.13% this month to 8,673.96.

• December Personal Income rises +0.4%, in-line with consensus +0.4% and above Nov +0.3% while the Personal Spending rose +0.7% topping consensus +0.5% and above Nov +0.6%; the December personal saving rate 3.8% vs Nov 4.1% and real consumer spending +0.4% vs Nov +0.5%.
• The Q4 employment cost index +0.9%, in-line with consensus +0.9% and vs Q3 +0.8%; Q4 benefit costs +0.8% vs Q3 +0.8% (prev +0.8%) and Q4wages/salaries +0.9% vs q3 +0.8% (prev +0.8%).
• Chicago PMI for January was reported at 39.5, above the prior month 36.9, but below the 40 estimates (marked the 14^th month in a row under 50 reading/expansion and 28 of last 29 months under 50).

• Treasury yields surged late in the day, paced by biggest moves at the long end of the curve with the 10-yr ending up over 5.4bps to 4.566%, and the 30-yr +6bps to 4.82%, while the shorter term 2-yr rose over 3bps to 4.23%. For the month, the 10-yr yield dipped 1.1bps to end at 4.566% and the 2-yr dipped 1.4bps to 4.235% this month.
• The U.S. dollar index (DXY) rose +0.3% back above 108, gaining vs the euro and yen while the Mexican peso and Canadian dollar was choppy as markets braced for the implementation of President Donald Trump’s tariff threats. Trump said on Thursday he will impose 25% tariffs on imports from Mexico and Canada from Saturday if the two countries do not crack down on the flow of illegal migrants and the drug fentanyl into U.S. territory. The Canadian dollar is down around 5-year lows versus the buck at C$1.4477 and was set for a weekly decline of nearly 1%. The Mexican peso posted its worst weekly performance since October. The dollar strengthened 0.3% to 154.76 against the Japanese yen while the euro dipped to around $1.0378 vs. the dollar.

• In Consumer Staples: in products, CL reported better-than-expected Q4 profit of $0.91 per share vs. est. $0.89 while revs of $4.944B slipped from $4.95B y/y and below ests $4.98B; Q4 North America business net sales decline 1%, while for Latin America, sales down 7.2% in qtr; said expects FY25 net sales to be flat, below analysts’ expectations of a 1.3% increase. In Food, HSY was downgraded to Underweight from Neutral at Piper (tgt to $120 from $153) and cut MDLZ to Neutral from Overweight (tgt to $63 from $70) saying believes recently elevated cocoa costs will last longer than initially anticipated, adding incremental pressure on the company’s’ earnings.

• In Oil Services & Equipment: BKR reported a Q4 top/bottom line beat (EPS $0.70/$7.4B vs. est. $0.63/$7.07B); said its industrial and energy-technology unit posted sales of $3.49B, up 8% from last year, boosted by strong liquefied natural-gas orders and a gas-infrastructure award. Overall orders grew to $7.5B, up 12% q/q and 9% y/y. In LNG, Morgan Stanley stays Overweight on NEXT and downgraded EE to underweight noting last week, the US LNG permitting pause was lifted, opening the door to potential new FIDs. Baker Hughes reports that the U.S. rig count is up 6 from last week to 582 with oil rigs up 7 to 479, gas rigs down 1 to 98 and miscellaneous rigs unchanged at 5.
• In Utilities/Solar/Alternative Power: ENPH was upgraded to Neutral from Sell at Guggenheim saying investor expectations for the upcoming fiscal year appear to be more reasonable and they now view shares as fairly valued.

• In Credit Cards: Visa (V) Q1 top and bottom-line results beat ($2.75/$9.5B vs est. $2.66/$9.341B); Q1 revenue growth of 11% organic FXN (vs. HSD guidance) driven by an acceleration in cross-border volumes to +16% YoY (up 300bps QoQ), US payments volume to +7% (up 200bps QoQ); raised FY 2025 revenue growth outlook to LDD.
• In Insurance: HIG reported 4Q24 operating EPS of $2.94 vs. consensus of $2.64E ($3.06 YoY); posted significantly lower than expected cat losses ($80M vs. $179M consensus est.) provided upside, as well as 240bps of core L/R improvement and Mutual Funds upside (company did not reference 1Q25 wildfire loss); ALL said to sell group health business to Nationwide for $1.25B; said the sales are expected to generate $450M financial book gain; sale to reduce adjusted net income return on equity by 75 basis points.
• In Crypto: CIFR shares jump after the bitcoin mining company announced a $50 million PIPE investment from SoftBank that will support the high-performance computing business. COIN is acquiring Spindl, an onchain ads and attribution platform. Today, it’s too difficult for builders to find quality users/distribution.

• BIIB and Eisai said the European Commission has asked regulators to examine additional safety data on the Alzheimer’s treatment Leqembi before rendering an approval decision.
• CTKB was double downgraded to Sell at Goldman Sachs saying believes the consensus expectation for a top-line recovery in 2025 is too steep, particularly as competitors with larger R&D budgets and commercial reach have a number of recent and upcoming launches potentially impacting CTKB’s ability to continue market share gains
• MTSR, a weight loss drug developer, opened at $25.50 after its 15.28M share IPO priced at $18.00.
• NVS reported strong 4Q results, with Core EPS of 1.98, 9% ahead of company-compiled consensus EPS of $1.81 driven by top-line volume growth (volume +15pp) and slightly boosted by positive prior period adjustments for channel mix. Guides 2025 mid to high single-digit net sales growth and high single-digit to low double-digit core operating profit growth on a CER basis
• RVTY shares fall after guiding 2025 profit and revs below views; sees FY EPS to be in the range of $4.90-$5.00 per share, vs. estimates of $4.99, and revs to be in the range of $2.80B-$2.85B vs. est. $2.87B.
• VRTX said it won U.S. approval for the first new non-opioid painkiller in decades as the FDA approved its suzetrigine to treat moderate to severe acute pain. The drug is set to be sold under the brand name Journavx. Vertex will charge $15.50 per pill, or $217 for a week’s prescription.
• WBA shares fell after saying it would be suspending its quarterly cash dividend.

• In Aerospace & Defense: ASTS shares jumped after saying that the Federal Communications Commission (FCC) has granted it special temporary authority permitting testing service in the US with partners AT&T and Verizon Communications. BAH shares slipped as Q4 earnings/rev topped consensus but narrowed its FY adj. EBITDA $1.31B to $1.33B from prior $1.30B to $1.33B and narrowed EPS to $6.25-$6.40 from $6.10-$6.30. PLTR shares hit all-time highs this afternoon, topping $85 for the first time.
• In Chemicals: OLN shares fell after guided MarQ25 adj EBITDA midpoint at $160M vs $227M consensus and reported DecQ24 adj. EBITDA of $193M vs $174M consensus hurt by lingering impact from Hurricane Beryl. EMN Q2 EPS beat on in line revenue and said is on track with 2025 commitment of $75-$100mn EBITDA growth while guided FY EPS $8-$8.75 vs. est. $8.47; PPG reported Q2 EPS of $1.61 vs $1.65 consensus and guided FY 2025 EPS below consensus; guides FY organic up LSD and Q1 organic slightly down to flat; APD was upgraded to Outperform from Market Perform at Bernstein with a $375 price target noting investors voted for change at the company’s general meeting, and for the key directors proposed by Mantle Ridge.
• In Metals & Mining: FCX downgraded to Hold from Buy at Argus saying deceleration in electrification initiatives and political challenges pose threats for volumes in the near-term but expects copper demand to remain elevated in the long-term given global growth in electrification initiatives; U.S. Steel (X) Q4 adj EPS loss (-$0.13) vs. est. loss (-$0.26); Q4 revs $3.51B vs. est. $3.24B; Q4 adj Ebitda $190M and sees Q1 adjusted EBITDA $100M-$150M; said Q1 North American Flat-Rolled segment results are expected to decrease. Late day, President Trump has said we will put tariffs on steel, aluminum, and copper in either February or March.
• In Homebuilders: BZH reported FY1Q25 results and provided Q2 guidance below Street expectations. The company sold fewer homes than it expected in the quarter and spent more on incentives for the sales it made (Q1 EPS $0.10 vs. est. $0.31; Q1 revs rose 21% y/y to $469.0M vs. est. $464.9M).

• In Software: TEAM shares jumped after reporting another strong quarter of Cloud and DC outperformance driven by continued stabilization in SMB and paid seat expansions, solid enterprise execution, and migration activity; Q2 revenue growth beat guidance by 4%, the largest margin since early 2022 while Cloud revenue grew a better-than-expected 30% Y/Y and easily beat the Street’s ~26% forecast and issued better Q3 revenue and margin guidance; APPF posted Q4 revenue beating slightly, but unit ads coming in slightly weak, though issued better than feared 2025 revenue growth guidance ~17%, vs. expectations of mid-teens.
• In Communications & Networking: VIAV shares jumped, upgraded to Buy at Needham after earnings results saying there is evidence the NA Service Provider recovery is well underway and the balance of its smaller verticals appearing past bottom (sees Q3 revenue $276M-$288M vs. est. $255.6M).

• Bloomberg reported US officials are probing whether Chinese AI startup DeepSeek bought advanced NVDA semiconductors through third parties in Singapore, circumventing US restrictions on sales of chips used for artificial intelligence tasks, people familiar with the matter said https://tinyurl.com/2uhjbdnx
• INTC posted strong Q4 results, which exceeded expectations, and guided Q1 lower, with meaningful declines across all 3 major segments (DCAI, CCG, NEX); Q4 benefited from PC pull-ins ahead of anticipated tariffs, while lowered guidance was due to the impact of tariffs, macro concerns, PC inventory digestion.
• KLAC reported a $0.45 beat for FQ2, capping off CY24 with solid acceleration in its Semi Process Control business; reported record F2Q25 revenue of $3.08B, up 23.7% yoy (+7.0% sequentially), driven by leading-edge and AI demand. Results mirror strong reports from ASML and LRCX.