Closing Recap

Thursday, March 13, 2025

New day, but same stock market concerns, same stock market outcomes with major averages tumbling all day! Ongoing recession fears/tariff concerns with trading partners have overshadowed anything else, putting pressure on stock markets as the S&P 500 (SPX) is now down over -10% from all-time highs of 6,147.43 on February 19^th and Nasdaq down roughly 14% from its December record high of 20,204. The tariff rhetoric started early this morning after President Trump threatened the E.U. with 200% tariffs on alcoholic beverages to counter the block’s announced 50% levy on American whiskey and motorcycles. Even signs of slowing inflation back-to-back days (CPI yesterday and PPI today), did nothing to boost hopes/sentiment. The money coming out of stocks has been pouring into “haven” assets, as gold prices hit record highs this afternoon approaching $3,000 an ounce while silver prices also jumped; Treasury prices climb as yields extend recent pullbacks. Today was another slow, steady stream of consistent selling pressure, with almost all eleven S&P sectors down. Adding to the tariff/recession fears markets are anxious as Senate Democratic leader Chuck Schumer said his party would block a Republican spending bill into a looming government shutdown on Friday night. Wild swings as Bloomberg noted with another bout of volatility hitting stocks, more than half of S&P 500 sectors are now contending with peak-to-trough losses of over 10%.

Recession fears in the U.S. are growing with amid consistent signs of slowing growth and tariff concerns, but Treasury Secretary Scott Bessent said Thursday that his previous comments about a “detox period” for the U.S. economy did not mean that a recession was necessary. “Not at all. It doesn’t have to be, because it will depend on how quickly the baton gets handed off. Our goal is to have a smooth transition,” Bessent said on CNBC. Still, markets continue to sell first and ask questions later with no notable bounce for US markets since the S&P 500 (SPX) February record highs and now down -10% from those levels. @bespokeinvest noted that “Polymarket betting markets have the odds of a US recession in 2025 up to 40% today. Was at 22% at the S&P’s high on 2/19. The rules: either the NBER declares a US recession before 12/31/25 or we get back-to-back negative GDP between the end of 2024 and the end of 2025.”

Sentiment readings all showing markets concerns and extreme fear (normally contra indicators, but stocks still no signs of bounce): 1) This week’s NAAIM Exposure Index number declined from last week’s reading: 68.80 (from 74.96) – recent peak of 99.24 from 12/11, trough reading of 64.10 to start the year on 1/1; 2) Bullish sentiment, or expectations that stock prices will rise over the next six months, fell to 19.1% (from 19.3%) and is below its historical average of 37.5%. Bearish sentiment, or expectations that stock prices will decline over the next six months, increased to 59.2% (from 57.1%), but remains above its historical average of 31%. Those Neutral fell to 21.7% from 23.6%. 3) Fear & Greed Index: 16/100 = Extreme Fear and Crypto Fear and Greed Index 20/100 = Extreme Fear.

• Weekly Jobless Claims fell to 220,000 from 222,000 last week and below consensus 225,000; continued claims fell to 1.870M from 1.897M prior week and consensus 1.900M and the 4-week moving average climbed to 226,000 from 224,500 prior week (previous 224,250).

• In Discount Stores: DG reported a wide Q4 EPS miss ($0.87 vs. $1.50 est.) though sales rose 4.5% y/y to $10.3B vs. est. $10.25B, though operating profit fell -49% y/y; company said it plans to close 96 Dollar General stores, while guides year below consensus at $5.10-$4.580 vs. est. $5.85; shares surged initially following results and helped boost other discount names (DLTR).
• In Specialty Retail: BBW reported Q4 revs of $150.4M, topping the $147.5M estimate and guided 2025 rev outlook mid-single-digit range, largely above analysts’ estimates of 2.6% rise. In mattress retail (SGI, SNBR, LEG), Piper noted its February Mattress Survey showed sales at -9.2%/-9.0% y/y on a mean/median basis – a notable reversal from the sales improvement in Jan/DEC. February was not only the worst month since Jan 2024, it also saw the biggest M/M sales deceleration since March 2022. Home furnishing stocks (RH, WSM, W) remain weak on slowing consumer spending fears/economy concerns.
• In Beverages: TAP was upgraded to Equal Weight from Underweight at Barclays saying the company’s earnings trajectory for 2025 appears more secure than appreciated and this "relative visibility has become increasingly compelling" in recent weeks. Shares of (STZ, BF) active after President Trump noted the European Union put a nasty 50% Tariff on Whisky and said if this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all wines, champagnes, & alcoholic products coming out of France and other EU represented countries; shares of PRNDY and REMYY declined overseas on the news.

• In the Oil E&P sector: BRY reported better 4Q24 EPS/EBITDA driven by higher realizations and volumes, plus lower costs, although CFO was light; in research, RRC was upgraded to Neutral at JP Morgan while the firm downgraded VET to Underweight (from Overweight) saying for its oil coverage, its updated EBITDA 2025-2026 estimates are -2% and -10% below consensus, while natural gas estimates are +18% and +7% above the Street. JPM’s top natural gas picks remain OW-rated AR, EQT, and EXE to play this its positive gas thesis. MUR announces strategic acquisition of floating production storage and offloading vessels in Gulf of America; reduces annual operating costs by approximately $60 million, reaffirms 2025 capital expenditure guidance.
• In Solar sector: NOVA shares fall on a Wall Street Journal report that the co is preparing restructuring talks with creditors that could include filing for bankruptcy; the company holds roughly $8.5 billion in debt.

• Investment banking: Morgan Stanley double upgraded HLI to overweight (from underweight) while double downgraded MC to Underweight noting the robust capital markets rebound they expected in 2025 is not playing out as anticipated. Ever-changing tariff talk is creating whiplash for CEOs trying to plan strategic decisions. Volatility likely pushes out deal launches. However, stocks appear oversold against our new base case. The firm now expects investment banking volumes relative to nominal GDP to revert to three-decade historical averages in 2026, with 2025 improving y/y but remaining well below trend.
• In Crypto: JP Morgan upgraded IREN to Overweight from Neutral (but lower tgt to $12) and downgraded CIFR to Neutral from OW (tgt cut to $8) as the firm updated ests and price targets to reflect CQ424 results, changes in bitcoin price and the network hashrate, and other company specific announcements; the firm lowered price tgts on MARA to $18 from $23, RIOT to $13 from $16 and CLSK to $12 from $17.

• Vaccine makers (MRNA, BNTX, NVAX) shares active after Axios reported the White House is withdrawing President Donald Trump’s nominee to lead the U.S. Centers for Disease Control and Prevention, Dave Weldon a noted vaccine critic.
• In Dental sector: XRAY and ZIMV were both downgraded from Buy to Hold at Needham saying they don’t expect dental market growth to improve in the near-term; says with XRAY and ZIMV both seeing below-market growth and no meaningful upside catalyst to drive near-term multiple expansion, they downgrade.
• In Healthcare Services: OSCR was downgraded to Equal Weight from Overweight at Wells Fargo and cut tgt to $16 from $20 as believes the current legislative and regulatory uncertainty in the exchange market adds considerable risk to the story and at a minimum could make it hard for the stock to outperform.

• In Heavy Duty machinery: Shares of CMI, PCAR move lower after the EPA said it is starting efforts to reverse the Biden administration’s vehicle emissions rules that would force automakers to build a rising number of electric vehicles. Jefferies noted that if 2027 regulations are rescinded, the prebuy will not happen leaving the industry to revert to underlying transport economics. Without a prebuy, sees downside risk to estimates.
• In Aerospace & Defense: OSIS shares declined after Culper Research tweeted, they were “short OSI Systems $OSIS, which makes and electronic security, screening, and inspection systems under the Rapiscan and AS&E brands”.
• In Agricultural Chemicals: Goldman Sachs initiated CTVA ($59 PT), FMC ($51 PT) and MOS ($31) at Buy in agricultural chemicals space with Neutral rating on CF ($86 PT) and a sell rating on NTR ($53 PT) as favor defensive and value names. Goldman said believes the ag macro is still in the process of settling lower from the peak caused by the Russia/Ukraine War. Using corn as a proxy, a more settled state would be the 3-$4/bushel range where the commodity traded during 2014-2020. 2) Spring 2025 is likely better than expected (excluding FX) given the increased expectations for corn acres and the short Fall application window.
• Paper & Packing: Jefferies positive on IP saying the see multiple levers to drive profit reset and path for shares to double; said analysis gives them better clarity on the earnings power when IP’s profit reset is complete in 2027, and it could see shares doubling; remains confident with IP as its Franchise Pick.

• In Security Software: SentinelOne (S) shares declined after mixed Q4 results and weaker guidance; posted Q4 ARR miss and a 16M FY26 ARR guide below; $100K+ customers grew 25% in the quarter to 1,411; FY26 guidance calls for $1.007B to $1.012B, below street expectations for $1.026B.
• Enterprise Software: PATH shares tumbled after delivered soft FQ4:25 results, bookings, and guidance that fell short of consensus estimates; reported lower FQ4 ARR results and FY26 ARR guidance (9.2% y/ y growth vs consensus 12.4%). MSFT was upgraded to Buy at Davidson from Neutral and raised tgt to $450 as believes the company has moved to a more rational capex strategy and is the best positioned Mag6 for a slowing consumer.
• In Semiconductors: INTC shares rise; after 3 months of searching for a CEO, INTC announced Lip-Bu Tan, former CEO of Cadence Design Systems, will succeed Pat Gelsinger at the helm, while also receiving a seat on the company’s board. INTC also noted that current interim Co-CEOs David Zinsner and Michelle Johnston Holthaus will return to their prior roles of CFO and CEO of INTC products.
• Quantum computer space active: QBTS forecast stronger-than-expected quarterly revenue which helped boost shares and lifted comps such as QMCO shares declined following a “short” call from Kerrisdale Capital
• In the Optical Sector: FN shares rose after guidance and said it has entered into a transaction agreement with the Amazon affiliate to acquire the block of shares at an exercise price of about $208.48 apiece; warrant expires 10 years from now and allows for vesting in multiple tranches over the term of the warrant based on payments to co from either AMZN or its affiliates.