Closing Recap

Thursday, March 20, 2025

It was a quiet day on Wall Street that saw U.S. stocks open lower, quickly rally on the open into positive territory, but faded late morning to close down on the day as major averages try to snap their 4-week losing streak heading into option expiration tomorrow (quadruple witching). Economic data was mixed with better housing and Philly Fed manufacturing data, while jobless claims missed estimates. It was a big week for central banks (more below) which was highlighted by the US Fed yesterday, keeping rates steady and holding its view for 2 rate cuts this year as growth fears overshadow inflation concerns. Now some big earnings after the bell with Nike (NKE) in retail, Micron (MU) in semiconductors, and Fed-Ex (FDX) in transportation giving a good gauge on consumer spending.

In stock news, government IT defense contractor stocks (BAH, CACI, SAIC) declined on concerns about federal funding cuts as Accenture in its results conceded that new procurement actions had slowed, hurting sales and revenue (they also reported weaker billings which weighed on the shares. TSLA shares fell again and remain on track for another losing week (hasn’t posted winning week since early January), while technology (XLK) was down the most today (AAPL, GOOGL, MSFT, AMZN lower). Restaurants advanced after DRI results and FIVE outperformed in retail on its earnings. It was relatively quiet in stocks news overall. Food service stocks stumbled (SYY, PFGC, USFD) after Sodexo lowered its yearly outlook saying sees organic revenue growth 3%-4%, down from prior range of 5.5%-6.5%.

In central bank news, the Bank of England held interest rates at 4.5% and warned against assumptions they would be cut over its next few meetings as it grappled with deep uncertainty hanging over the British and world economies. Noting the escalation of global trade tensions kicked off by the U.S., the Monetary Policy Committee voted 8-1 to keep rates on hold (which was widely expected). The Swiss National Bank cut its interest rate to the lowest since September 2022, reducing it by another 25 bps while policymakers didn’t offer specific signals on their next move.

Investor sentiment again bleak: The daily Crypto fear and greed index 49/100 = neutral while the Fear and Greed Index: 22/100 = Extreme Fear; The weekly bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -36.5 vs -40.1 last week as bulls rise to 21.6% from 19.1% and bears fall to 58.1% from 59.2%. Lastly, the weekly NAAIM Exposure Index number declined from last week’s reading to 64.64 (from 68.80) – recent peak of 99.24 from 12/11, trough reading of 64.10 to start the year on 1/1.

• The U.S. Q4 current account balance -$303.9B vs. consensus (-$325.5B) vs Q3 balance (-$310.3B).
• U.S. Feb Leading Economic Indicators (LEI) fell (-0.3%) vs. consensus (-0.2%).
• Weekly Jobless Claims climbed to 223,000 from 221,000 in prior week, vs. consensus 224,000; the 4-week moving average climbed to 227,000 from 226,250 prior week (previous 226,000); continued claims climbed to 1.892M from 1.859M prior week (est. 1.887M)
• Feb Existing Home Sales rose 4.2% to 4.26M unit rate, above the consensus 3.95M and above the January 4.09M; Feb inventory of homes for sale 1.24M units, 3.5 months’ worth; Feb national median home price for existing homes $398,400, +3.8% from Feb 2024.

• WTI crude oil rose $1.10 or 1.64% to settle at $68.26 per barrel
• The dollar rose broadly on Thursday, a day after the Federal Reserve indicated it was in no rush to cut rates further this year due to uncertainties around U.S. tariffs; the euro was lower.
• The Swiss franc weakened after the Swiss National Bank lowered its policy rate to 0.25%, while the Swedish crown was soft after its central bank maintained its interest rate.

• RIVN was downgraded to Neutral from Overweight at Piper as the firm says they like Rivian’s strategy and says the joint venture with VW helped de-risk the balance sheet…but the firm says they struggle to identify upside catalysts for the shares in 2025and aside from TSLA believes automaker stocks should be avoided.
• STLA was downgraded to Neutral from Overweight at Piper and lower tgt to $13 from $23 saying they believe it could take years for Stellantis to address the problems with its global brand, and in the meantime, the firm thinks the company’s margins could take longer than expected to recover.
• TSLA is recalling 46,096 Cybertruck vehicles in the U.S. to fix an exterior panel that could detach while driving; the recall is over issues of the cant rail – a stainless-steel exterior trim panel – delaminating and detaching from the vehicle.

• In Food & Beverages: shares of food service stocks (SYY, ARMK) declined after Sodexo (SDXAY) lowered its yearly outlook saying sees organic revenue growth 3%-4%, down from prior range of 5.5%-6.5% and sees operating margin to rise by 10 to 20 bps from prior rise of 30-40 bps; in beverages, Citigroup downgraded STZ to Neutral from Buy as believes the recent beer topline slowdown could linger with Hispanic consumer weakness, a soft US beer category, as well as looming tariff risk; the firm also upgraded SAM to Buy from Neutral as sees a clearer path towards volume/topline growth post better-than-expected flat depletions in Q4/2025TD, ahead of the national launch of Sun Cruiser in 1H’25 with significant advertising spend.
• In Restaurants: CAVA was upgraded to Overweight at JP Morgan, taking advantage of significant pullback and views the stock as a “buy now and own for the long-term” as it sees the current 367 units expanding well beyond a IPO-time stated 1,000 units and in fact discount back from 2,000/3,500 units in 2037/2043. DRI reported Q3 same-store sales and net sales estimates that fell short of consensus ($3.16B vs. est. 43.21B and comps +0.7% vs. est. +1.8%) and narrowed the annual profit forecast with midpoint below prior forecast.
• In Consumer Staples: Citigroup upgraded COTY in Consumer staples sector and updated its Top Picks following its rating changes as new top Buy-rated picks in order of preference are: KDP (moved to top pick), MNST, KO, SAM, CL, COTY, PG, PEP and remains Sell rated on CHD and KMBAt a sector level, the intra-quarter commentary from large-cap companies was subdued with concerns around a slowing US consumer, as well as a cautious tone on LatAm (especially Mexico) and Western Europe.

• In the Sports sector: The Boston Celtics are being sold to an ownership group led by private equity executive Bill Chisholm. The deal values the Celtics franchise at $6.1 billion. Majority owner Wyc Grousbeck will stay on as team CEO and governor through 2028. Shares of MSGS advanced in reaction (owns Knicks).

• In Industrials: TITN reported Q4 revs $759.9M, above consensus of $728.2M on gross margin 6.7%; guided FY26 EPS (-$1.25-$2.00) vs. est. loss (-$0.69); In Building Products: QXO and BECN entered into a definitive merger agreement under which QXO will acquire Beacon for $124.35 per share in cash in a $11B deal.
• In Defense: gov’t IT service names extend decline (BAH, CACI, SAIC, LDOS) as US Govt’ Service Administration said to review federal agencies top 10 highest paid consulting firms; Truist noted recently; the group fell further this afternoon as Defense Secretary Pete Hegseth said he was canceling some Gartner (IT), McKinsey contracts (raiding fears of what other contracts would be cancelled). Overall, Secretary of Defense Pete Hegseth announces, "the termination of $580M in DoD contracts and grants that do not match the priorities of this President or this department."
• In Transports: ZTO downgraded to Neutral at JP Morgan following the recent share price rebound, which has seen a 6% outperformance against the MSCI China index since March. While ZTO’s FY24 results were a beat, JPM sees the company’s strategic shift to focus more on volume growth, creating challenges, by potentially diluting margins and possibly risking its market proposition. In Airlines, LUV was upgraded to Neutral from Sell at UBS as they believe their increasingly assertive changes raise the potential for improving financial performance despite the weaker cyclical backdrop facing the airlines currently.
• In Metals & Mining: copper prices hitting near all-time highs; FCX was upgraded to Overweight at JP Morgan with a $52 price target reflecting its view that tariff risk is likely to maintain premium pricing for the company’s US-based footprint for the foreseeable future, coupled with its expectation of L-T supply challenges supportive of a favorable thru-cycle pricing environment for the industry. In Steel producers, WS shares fell after Q3 results missed saying adj EPS $0.35, vs. est. $0.48; Q3 revs fell -15% y/y to $687.4M vs. est. $711.4M and Q3 Adjusted EBIT of $25.3M down from $66.9M y/y. MP tgt raised to $29 from $22 at BMO Capital citing the positive US backdrop for rare earths.

• In Alternative Managers/PE: KKR was upgraded from Equal Weight to Overweight at Wells Fargo saying bullishness reflects favorable growth outlook supported by fundraising supercycle, attractive entry point with a more reasonable valuation and an upcoming changeover from negative to positive data points.
• In Insurance: PRA to be acquired by the Doctors Company for $25.00 per share in cash, in deal valued at $1.3B, roughly a 60% premium to prior day closing price; combined co will have assets of approximately $12B. ALL reported February catastrophe losses $92M, -91% m/m with February total catastrophe losses, after-tax $73M and total catastrophe losses for February year-to-date were $1.17B or $922M, after-tax.

• In the CDN Sector: Oppenheimer upgraded NET to Outperform from Perform with a $150 price target following a transfer in analyst coverage as believes the company is seeing continued success with its platformization strategy and ease of adoption, which allows customers to add new modules with a single click. Opco downgraded FSLY to Perform from Outperform as sees a few operational hurdles for the company in 2025, including: risk with successful expansion of the Security and Compute/Observability portfolios and its adoption; ability to combat the industry norm of high teens decline in CDN pricing.

• In the EMS Sector: JBL reported better Q2 core results as EPS $1.94/revs $6.7B topped consensus of $1.83 and $6.4B; raises FY25 core EPS view to $8.95 from $8.75 (est. $8.74); raises FY25 revenue view to $27.9B from $27.3B prior and above consensus $27.32B.
• Quantum computing stocks tumbled led by IONQ, RGTI, QBTS, QMCO, QUBT after NVDA CEO Huang said the company will open a quantum computing research lab in Boston, where it plans to collaborate with scientists from Harvard University and the Massachusetts Institute of Technology. Huang made the announcement at Nvidia’s annual software developer conference in San Jose, California, where Nvidia held a day of events focused on quantum computing.
• In IT Services & Consulting: ACN raises the lower end of FY25 revenue growth forecast to 5% to 7% vs prior expectations of 4% to 7% (est. was 5.7%) and said Q2 revs rose 5% y/y to $16.66B, vs. est. $16.62B and reports generative AI new bookings of $1.4 bln in Q2 – but shares fell on big bookings miss (fell -3% y/y to $20.9B vs street at $22.9B) which came from both consulting and managed services, while gross margins weak.
• In Semiconductors: MPWR raised its Q1 revenue outlook to $630.0M-$640.0M from prior $610.0M-$630.0M view at Analyst Day while also raised its Q1 operating expense outlook; MCHP offered $1.35 billion in depositary shares and the semiconductor company said it will use part of the proceeds to repay debt. SoftBank Group (SFTBY) acquired chip company Ampere Computing for $6.5B, a U.S. chip startup founded by the former president of INTC As part of the deal, Ampere’s biggest investors, ORCL and CG, will sell their respective positions in the company SoftBank said.