Closing Recap

Wednesday, March 26, 2025

US equity futures faded then recovered overnight just to fade again into the morning economic releases. A better Core Durable Goods report caused another dip but quickly reversed back to about unchanged. Another early roll in futures gave the day an early risk-off tone as the Fear and Greed Index continued to register Fear (30/100 today) versus Fear yesterday but Extreme Fear a week and a month ago. The Fed’s Kashkari didn’t do much to improve the tone, commenting that we’ve made a lot of progress bringing inflation down but there remains more work to do, and policy uncertainty is complicating the Fed’s job. He also stated the Fed ought to be able to reduce interest rates further in the next year or two. That’s not bullish in what seems an impatient market eager for rate cuts. Early breadth favored decliners by about 3:2 as eight of the eleven S&P sector ETF’s fell. Energy, Consumer Staples and Real Estate were early outperformers, while Communications, Consumer Discretionary and Technology led the underperformers. Small caps outperformed but were still in the red with IWM leading SPY and QQQ.

In data of interest today, it feels appropriate that Goldman should reduce its year-end target for the S&P 500 from 6,500 to 6,200, noting its economics team now expects the US effective tariff rate to rise by roughly 10pp to 13%, leading them to lower their 2025 US GDP growth forecast from 2.4% to 1.7%. They see the potential for the tariff rate to rise by about 15pp in an upside risk scenario. GS strategists also see a lower GDP growth forecast, higher tariff rate and higher equity risk premium on elevated uncertainty. On a more positive note, while the last few days of March have seasonally been softer historically into quarter-end, the early part of April has historically been stronger (though historically we also have not had this tariff overhang). Lastly, per @KobeissiLetter, the ratio of companies with insiders buying versus selling their own stock rose to 0.5 in March, marking the highest since June 2024 and a nice reversal from the 0.2 in January (lowest since 1988). Perhaps they see something others do not?

After new rounds of headlines noting potential auto tariff announcements as early as today rattled markets around midday, markets really never recovered and remained near lows. Heading into the final hour of trading, breadth widened and continued to favor decliners by almost 3:1 though Smallcaps were slightly outperforming in a generally down day with IWM (-1.04%) versus SPY (-1.19%) and QQQ (-1.84%). Sectors remained tilted negative with rotation to relative safety as Consumer Staples (+1.56%), Utilities (+0.68%) and Energy (+0.55%) were outperformers among S&P sector ETFs, while Communications, Consumer Discretionary and Technology were the largest underperformers with four sectors gaining versus seven declining. On a growth versus value basis, it was also a red day with value the outperformer but to the downside. The Russell 1000 Value faded by 0.23% while its Growth counterpart gave up 2.39%.

• February Durables orders rise +0.9% (above consensus -1.0%) but down from January’s +3.3%; February Durables ex-transportation orders +0.7% (cons +0.2%) vs Jan +0.1%; Feb Durables ex-defense orders +0.8% vs Jan +3.7% (prev +3.5%); Feb Durables shipments +1.2% vs Jan +0.7%; Feb nondefense cap shipments ex-aircraft +0.9% vs Jan -0.2%. Next up tomorrow, GDP data and then PCE on Friday!

• WTI May crude futures finished off the highs with a gain of $0.65/bbl, or +0.94%, to $69.65, but still enjoyed gains today following an unexpected inventory draw as refiners continue to ramp production while gasoline and distillate inventories also fell. A better Durable Goods report also helped provide support in an environment where investors are constantly searching for clues to recession odds. Today was a recession-off data day, so oil enjoyed some support on the demand side. Tariff headlines continue to dominate the demand-risk overhang but comments by US shale executives concerned the tariffs will also create chaos and threaten US oil output helped offset demand-side concerns.
• The U.S. dollar edged higher vs. the euro and other counterparts as investors weighed up uncertainty about the U.S. economic outlook and speculation over the timing and scale of potential U.S. tariffs. Next week, when U.S. President Donald Trump has threatened to impose a new round of tariffs on autos, chips and pharmaceuticals. The euro, which spent a week edging lower from a five-month high, dropped to $1.0745.

• BYDDF Chairman said the EV maker aims to double its sales outside China to more than 800,000 cars in 2025 and will look to overcome tariffs by assembling cars locally; BYD, which sold 417,204 units overseas in 2024, expects to see "a substantial rise" in its market share in Britain, as per Reuters.
• PRTS Q4 EPS loss (-$0.71) vs. loss of (-$0.15) y/y; Q4 sales fell -15% y/y to $133.5M; Q4 adjusted EBITDA of ($6.8) million vs. $1.0 million; not providing guidance for 2025 as the company is currently evaluating various strategic alternatives in response to inbound interest.
• RIVN spins out Micromobility Business into New Startup—Also, Inc.; Rivian drives toward launch of R2 and R3, company to be minority shareholder in California-based venture.
• TSLA announces Launch Event In Saudi Arabia on April 10

• In Discount Retail: DLTR announces an agreement to divest its Family Dollar business to Brigade Capital Management and Macellum Capital for roughly $1B (below the $9B it originally paid for it); also reports mixed earnings and guidance.
• In Video game retail: GME shares jumped as Q4 EPS was $0.30 topped est. of $0.08, while revs of $1.28B missed $1.48B est. and adj EBITDA $96.5M, which is up 10% y/y; but shares jumped after announcing its board has unanimously approved an update to its investment policy to add Bitcoin as a Treasury reserve asset.

• In Leisure Products: DOOO shares jumped early as quarterly revenues fell by 20% to C$2.1 billion, but by less than analysts expected, which had forecasted a decline to C$1.98 billion; suspended its guidance for fiscal 2026 due to continued trade uncertainties after reporting lower sales in North America.

• In Solar & Utilities: a day after weaker CSIQ results, JKS reported Q4 EPS loss (-$0.32); Q4 sales -3.9% y/y to $2.83B vs. est. $3.37B and below $4.62B a year ago due to lower average selling price of solar modules; the company expects Q1 module shipments to be between 16.0 gigawatt (GW) and 18.0 GW.
• In Refiners: PSX is expected to nominate two new directors to its board as the proxy fight with activist Elliott Investment Management intensifies, the Wall Street Journal reported.

• In Banks: CNOB was upgraded to Outperform at KBW saying shares are trading at considerable discounts to both peers and its historical medians despite key metrics broadly screening in the top quartile of the SMID-cap bank sector.
• In Real Estate: The National Association of Realtors’ (NAR) updated its policy which allows sellers to delay IDX/syndication marketing, while keeping listings visible to other MLS participants. Bank America said they see the development as neutral to slightly positive for ZG, easing CCP rollback concerns & removing an overhang for stock. Keybanc noted, while this exemption does delay marketing listings through IDX and syndication (which Zillow uses), this isn’t the only way Zillow obtains listings data.
• Specialty Finance: IVR cuts dividend to $0.34 from $0.40; Bank America with a note as adj estimates for CODI, GHLD (lower tgt to $13 from $15), SAFE (lower tgt to $25 from $28), PMT and IVR

• LPTX reports positive updated data from Sirexatamab colorectal cancer study and also reported Q4 results.
• SMMT was upgraded to Buy at Citigroup with $35 tgt on HARMONi-2 fundamentals. Citi had downgraded shares to Neutral in Q324 given a less favorable risk/reward following the significant positive stock re-rating post-WCLC, which it believes was the right call.
• VKTX announced the completion of subject enrollment in its Phase 2 clinical trial of the oral tablet formulation of VK2735, the company’s dual agonist of the glucagon-like peptide 1 (GLP-1) and glucose-dependent insulinotropic polypeptide (GIP) receptors. Viking expects to report data from the study in the 2H’25.
• In Life Sciences: Sartorius (SOAGY) and French subsidiary Sartorius Stedim Biotech shares slip after JP Morgan takes cautious stance on profits and sales ahead of Q1 results; the firm said it expects Q1 underlying EBITDA to come 3% below consensus for Sartorius and 4% below consensus for Sartorius Stedim Biotech on lower revs

• In Materials: CMP announces cost structure reductions to align with current business needs; company eliminates over 10% of corporate workforce positions; said to shutter fire retardant business; expects run-rate cost savings for trailing 12-month period ended dec. 31, 2024 of $11M-$13M; CX was downgraded to equal weight from Overweight at Morgan Stanley in cement citing an uncertain macro backdrop & growing evidence of capex deceleration in Mexico.
• In Chemicals: WLK was downgraded to Neutral from Overweight at Piper and reduced the tgt to $120, updating its model to reflect the release of Q424 and FY2024 earnings, updates in company guidance, its own set of industry channel checks and an updated outlook for the US and global economies. ASH was upgraded to Overweight at JP Morgan and raised tgt to $71 (from $68) and added to analyst focus list as views the weakness in Ashland’s businesses as more transient rather than structural.

• Software Gaming: PLTK shares were double upgraded from Underperform to Buy at Bank America and raises tgt to $6.50 as the co boasts the industry’s highest profitability (30% EBITDA margins), the industry’s largest DTC platform, and three of the largest and longest running franchises in mobile gaming history.
• Software: GLBE was upgraded to Overweight at Morgan Stanley but lower tgt to $46 (from $55) calling it a high-quality growth story at an undemanding multiple with poor market sentiment/believes estimates and sentiment are de-risked following the company’s Investor Day. ADSK shares active after Starboard Value is nominating three directors to its board, the activist investor said, rekindling its proxy battle with the company.
• IT Services & Consulting: WIT won a 10-year deal worth 500 million pounds ($645.4 million) from British insurer Phoenix Group, the company said on Wednesday, announcing its second mega deal this financial year. VRT shares fell after Barclays earlier said sees revenue and margin pressure alongside lower investor expectations.
• In Semiconductors: QCOM has launched an antitrust campaign against ARM, arguing Arm is guilty of anticompetitive behavior, Bloomberg reported https://tinyurl.com/y6d8z38v ; TSM said construction on a third Arizona plant slated to begin this year and plans to start operations at second Arizona plant, for 3-nanometer chips, by 2028; NVDA China sales face threat from Beijing’s environmental curbs, Financial Times reported.