Closing Recap

Monday, March 17, 2025

After tumbling again last week, U.S. stocks opened the week quietly higher before grinding to the upside this afternoon as all eleven S&P sectors finished in positive territory in a broad-based rally, adding to Friday’s sharp gains. Energy, Consumer Staples, Healthcare, Industrials and Materials were the biggest winners, while gold prices hovered above $3,000 an ounce, having topped that level late Thursday for the first time. Today’s economic data was disappointing with weaker than expected retail sales, NAHB housing mkt index and sharply lower empire NY Fed manufacturing, all ahead of the FOMC rate policy meeting midweek (no rate change expected). Markets have been highly volatile the last 3-weeks, with the S&P falling -10% and Nasdaq -15% from recent highs, with President Trump’s tariff threats pushing the S&P 500 into its first correction since late 2023. Stocks found a short-term bottom on Friday before rallying, which continued into today…will it hold up? There was weakness in mega cap tech stocks (TSLA, AMZN, NVDA), keeping broader averages from rallying further while general market breadth was strong (4:1 advancers led decliners). There are several other central bank policy meetings this week as well including the Bank of Japan on Wednesday (along with the FOMC) and then the Bank of England, the SNB and Riksbank Announcement central bank policy meeting announcements. Overseas stocks gained after China reported robust economic activity for the start of year and announced plans to stimulate its economy. Nvidia’s annual GTC developers conference in San Jose, California started Monday while features a keynote from CEO Jensen Huang Tuesday. With today’s S&P 500 (SPX) advance, it marked the first back-to-back wins since February 18-19.

Strategy commentary ahead of FOMC meeting at UBS this morning saying the Fed appears to be facing worsening growth and inflation trade-off. Inflation expectations in the Michigan survey have jumped to their highest level since 1992, while unemployment expectations reached a level not seen since the 2008 recession. UBS thinks the FOMC on Wednesday will be particularly unyielding in its inflation resolve, as their core PCE forecast is likely to revise up to 2.8% and it is a bit too early to sound the alarm bell on growth (its own tracking for Q1 is 1.4% annualized). UBS expects the median dot will project only 1 cut this year (down from 2) and there is even some risk of no cuts.

***Reminder that March S&P futures (ES) will no longer be front month futures starting tomorrow as they roll to June (March expires formally on Friday but roll is underway all week).

• The March Empire State factory index falls to -20.0 (lowest reading since Jan 2024), well below the expected -1.9 reading and below the prior month of +5.7; prices paid rose to 44.9 vs 40.2; new orders fell to -14.9 vs 11.4; and reported six-month general business conditions fell to 12.7 vs 22.2.
• March NAHB Housing market index falls to 39 from 42 in February, which matched the consensus 42 estimate; March index of current single-family home sales 43 versus 46 in February (previous 46); March index of home sales over next six months 47 versus 47 in February (previous 46); index of prospective buyers 24 versus 29.
• January Business Inventories rose +0.3%, in-line with consensus and vs December -0.2%; Jan business sales declined -0.8% vs Dec +1.0% (prev +0.8%); Jan retail inventories ex-autos revised to +0.5% (prev +0.4%); Jan inventory/sales ratio 1.37 months’ worth vs Dec 1.35 months.
• The OECD lowers the global growth forecast to 3.1% this year from 3.3% expected previously. The forecast for 2026 was cut to 3.0% from 3.3% previously.

• April gold rises $5.00 or 0.16% to settle at $3,006.10 an ounce (recent ATH stands at $3.017.10 an ounce)
• Bitcoin nearly $2,000 recovery from morning lows, rising +1.8% at $84,750 late day.
• The U.S. dollar hovered near a five-month low against the euro ahead of this weeks Fed meeting; the euro, which has advanced in recent sessions, lifted by hopes of a German fiscal deal, was 0.4% higher at $1.0922. The common currency was just shy of $1.0947, it hit last week, its highest since October 11. On Monday the dollar was 0.1% higher against the yen at 148.80 yen, not far from the five-month low of 146.52 touched last week.
• The Bank of Japan is tipped to keep interest rates steady when it meets on Wednesday, but the conditions for another rate hike have been falling into place, with big Japanese firms offering bumper pay hikes in wage talks with unions for a third-straight year.

• In Beverages: PEP agreed to acquire prebiotic soda brand Poppi for $1.95 billion, adding to the prebiotic soft-drink market. Pepsi said the deal includes $300 million of anticipated cash tax benefits, bringing the net purchase price to around $1.65 billion. Additional terms of the acquisition weren’t disclosed. CELH shares jumped after signing agreement to expand sales and distribution to Belgium and Luxembourg.
• In Retailers: GES shares jumped after announced that its Board of Directors has received a non-binding proposal from WHP Global through its affiliate WHP Investments, LLC, to acquire for $13.00 per share in cash the outstanding shares of Guess? AEO announces $200M accelerated share buyback program; Forever 21’s U.S. operator on Sunday filed for bankruptcy due to for the second time in six years and said it would wind down operations in the country.

• In Autos: LI was downgraded to Neutral from Outperform at Macquarie and lower FY25 volume ests; Q1 volume guidance of 88-93k in line with recent seasonal sales trends, but well below Bloomberg consensus of 131/111k; mgmt confirmed two new BEV SUV launches in 2025: i8 (July)/i6 (2H25)- less than Macquarie’s previous expectation for 3 new models. TSLA tgt lowered to $430 from $515 and RIVN to $11 from $13 at Mizuho in EV space saying tariff uncertainty and regulatory loosening in the EU might lead to softer demand for electric vehicles and autos

• In Utilities: NGG upgraded to Outperform from Market Perform at Bernstein saying despite its U.S. peers seeing a re-rating over the past year, National Grid has not re-rated and continues to trade at a discount to European regulated network peers. Southern California EIX is investigating whether an idle power line sparked the deadly Eaton fire in Los Angeles, a rare occurrence that could have major liability implications for the utility, WSJ reports.

• In Asset Managers/PE: BX was upgraded to Buy at UBS with a $180 PT as it believes the recent 27% sell-off in BX vs. peer avg of 30%) provides a window to invest in a premier alts platform with structural & scale advantages at a reasonable valuation (24x DE).
• In FinTech: AFRM shares slipped after Swedish fintech firm Klarna will be the exclusive provider of buy now, pay later loans for WMT, taking a coveted partnership away from rival Affirm, CNBC reported. Klarna, which disclosed its intention to go public in the U.S., will provide loans to Walmart customers in stores and online through the retailer’s majority-owned fintech startup OnePay
• In Crypto: MSTR said during the period between March 10, 2025, and March 16, 2025, the Company acquired approximately 130 bitcoins for approximately $10.7M in cash, at an average price of approximately $82,981 per bitcoin, inclusive of fees and expenses.

• BAYRY said it won FDA priority review for its application seeking expanded approval of its kidney-disease drug Kerendia in certain people with heart failure.
• INCY reported topline results from its two Phase 3 studies of Povorcitinibi in patients with Hidradenitis Suppurative, with the company noting STOP-HS1 and STOP-HS2 studies met their primary endpoint at both tested doses and that the data supports planned regulatory submission; shares slip as the placebo adjusted efficacy underwhelmed expectations.
• RNA presented updated study results on its RNA-based drug for people with Duchenne muscular dystrophy (DMD) mutated at exon 44. The drug showed increases in dystrophin production and reductions in a key muscle-damaging protein.
• In managed care: ELV was upgraded to Buy, $450 PT at Argus based on its attractive valuation, margin stability and growth opportunities amid aging population; said mgmt commentary at a recent investor conference indicate stronger EPS growth in Q125 due to seasonal factors.

• In Shipping, shares of ZIM, TRMD and STNG were active after the U.S. vowed to keep attacking Yemen’s Houthis until the Iran-aligned group ends its assaults on shipping. U.S. President Donald Trump launched military strikes against the Houthis on Saturday over the group’s attacks against Red Sea shipping. US strikes on Yemen-based Houthi militants will be “unrelenting” until the group stops targeting vessels in the Red Sea
• In Industrial Distributors: KeyBanc lowered price tgts on AIT to $275 from $325 and WCC to $205 from $245 citing higher conservatism amid ongoing macro uncertainty and to better align with a potential recovery scenario. While KeyBanc acknowledges that a recession would likely drive further significant downside across its entire coverage, the firm thinks investors could look toward Distributors as relative safe havens within the broader Industrials universe given the group’s high counter-cyclical free cash flow profile and historical sales and earnings resilience through modest downturns.
• In E&C and Industrial space: PRIM shares fell after late Friday announced CEO McCormick will be separating from Co effective 3/20. GNRC shares outperformed after Guggenheim upgraded to Neutral from Sell.

• In Chemicals: Mizuho said reflecting lower market and peer multiples, they reduce price targets for CBT, SEE, ASH, IFF, AXTA, APD, CE, EMN, DOW, LYB, OEC, OLN and adjust ests for select chemical/packaging names saying, U.S. industrial orders leading indicator back below 50 is also concerning for basic chemicals. Yesterday DOW pointed out to continued softness in macroeconomic conditions with no signs of recovery in MarQ25. We believe Winchester ammo continues to see weakness from consumer (especially lower income) & channel de-stocking. CBT operates plants in both Mexico & Canada serving auto supply chains so trim ests.

• In Semiconductors: INTC incoming CEO Lip-Bu Tan reportedly plans to restructure the co’s approach to AI, reduce middle mgmt. staff, and attract new customers for its foundry business, Reuters reported. Tan’s top priority is revamping manufacturing operations, plans to bring in new customers for manufacturing arm Intel Foundry. Later this week on Thursday, March 20, MPWR will host an analyst event and Keybanc suggested given the timing and location of the event, there is some anticipation that MPWR may announce that it will regain market share at NVDA on Blackwell Ultra. Keybanc said while there may be disappointment if MPWR does not announce it is back in, they believe the Company’s updated outlook for Enterprise Data to be flat in 2025 has largely derisked NVDA expectations in the model. AVGO shares fell after a report in The Information said GOOGL plans to work with a new firm to help design and produce some of its artificial intelligence chips: MediaTek. The article noted Google has butted heads with Broadcom over prices for TPUs.
• In Telecom & Media: NFLX was upgraded from Neutral to Buy and raised to $1,100 from $850 at MoffettNathanson and raised its estimates with greater confidence in the margin expansion story; tower stocks AMT and CCI were upgraded at Wells Fargo and raised its price tgts saying they are increasingly favorable on the tower sector throughout 2025 and heading into 2026, with optimism that carrier activity and domestic billings should improve.