Closing Recap

Friday, March 28, 2025

It was another bloodbath on Wall Street as a combination of several negative factors/concerns weighed further on investor sentiment as major averages declined all day without a notable bounce, led by weakness in technology. With today’s pullback, the S&P 500 finished the week lower, now down for the fifth time in the last six weeks after hitting all-time highs in mid-February. The same factors that plagued sentiment early this week came into play again today with inflation fears, AI bubble concerns, slowing consumer growth/spending, and tariff impact on the economy. Nine of the eleven S&P sectors were down sharply, led by Technology, Communications and Consumer Discretionary while Utilities and Healthcare were the lone gainers. Gold prices also hit all-time highs, with their first close above $3,100 an ounce, while bonds rallied (yields fell) and Bitcoin/crypto tumbled.

Numbers for the Core Personal Expenditure (PCE) Index, the Federal Reserve’s go-to inflation indicator, came in hotter than expected. U.S. Core PCE for February rose to 0.4% month-over-month, beating the 0.3% forecast from analysts. Yearly Core PCE also surpassed expectations, rising to 2.8% against an estimated 2.7% increase. Also, the University of Michigan sentiment reading edged higher as well for both 1-yr and 5-yr expectations. This, coupled with the upcoming reciprocal tariffs on trading partners next week (including the 25% levies on autos this week) remain an albatross around the neck of the market.

In addition to the disappointing “sticky” inflation figures out of the PCE and University of Michigan inflation expectations, technology stocks were pummeled for a third straight day, led by concerns of slowing demand, spending in the AI data center sector, as evident by today’s previously highly anticipated Coreweave (CRWV) IPO which opened at $39, below the 37.5M share pricing of $40 after initially being indicated as high as $49. Shares of semiconductors (ARM, NVDA, AVGO) in the AI space, as well as data center names (VRT, ETN, SMCI) and nuclear power names (CEG, VST, OKLO) have all tumbled this week. Even mega cap tech names AAPL, AMZN, GOOGL, META, MSFT fell. Technology and Consumer Discretionary have been big laggards thus far in 2025, with Tech (XLK) -11.25% YTD and Consumer Discretionary (XLY) -12.17% YTD. Bespoke Invest tweeted: “Nasdaq 100 $QQQ now up just 1% from its 3/13 low and down 3% over the last six months.”

The Atlanta GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.8% on March 28, down from -1.8% on March 26. The alternative model forecast, which adjusts for imports and exports of gold as described here, is -0.5%. After recent releases from the US Census Bureau and the US Bureau of Economic Analysis, the nowcast of the contribution of net exports to first-quarter real GDP growth declined from -3.95 percentage points to -4.79 percentage points in the standard model and from -1.92 percentage points to -2.53 percentage points in the alternative model.

• Little hotter readings in core PCE as Feb core PCE price index rises +0.4% above consensus +0.3% and vs January +0.3% while the core PCE y/y rose +2.8% above consensus +2.7% and vs Jan +2.7%; Feb PCE services price index ex-energy/housing +0.4% vs Jan +0.2%.
• February Personal income climbs 0.8% m/m, topping the +0.4% estimate while Personal Spending climbs 0.4% m/m vs. est. +0.5%; Feb real consumer spending +0.1% vs January -0.6% (previous -0.5%); February personal saving rate 4.6% vs January 4.3%.
• University of Michigan surveys of consumers sentiment final March 57.0 (consensus 57.9) vs preliminary March 57.9 and final Feb 64.7; current conditions index final March 63.8 vs prelim March 63.5 and final Feb 65.7; and consumers expectations final March 52.6 vs prelim March 54.2 and final Feb 64.0.
• University of Michigan surveys of consumers 1-year inflation outlook final March 5.0% vs prelim 4.9% and final Feb 4.3% and 5-year inflation outlook final March 4.1% vs prelim 3.9% and final Feb 3.5%.

• Brent Crude futures settle at $73.63/bbl, down 40 cents, 0.54%, while WTI crude oil fell -$0.56 or 0.8% to settle at $69.36 per barrel (up about 1.58% on the week); natural gas prices rose 1% for the week.
• After surging as high as 4.4% earlier in the week, the benchmark 10-year Treasury yield fell -11bps today, hitting lows of 4.25%, posting a weekly decline after inflation data today remained “sticky” while economic growth faces potential headwinds from a new wave of tariffs expected to be announced Wednesday.
• Crypto markets slumped, with Bitcoin falling over 4% to lows below $84,000 as latest US inflation data weighs on sentiment.

• RACE was upgraded to Overweight at Barclays saying yesterday’s guidance confirmation underscores unique (relative) safe-haven status and is a strong sign of confidence amid great uncertainty in EU Autos, while the recent 20% correction offers good entry point in this context.

• OXM shares fell, downgraded to Sector Weight from Overweight at Keybanc after earnings saying although Q4 revenue and adj. EPS were better than the Street’s expectations, the FY25 guide assumes sales growth within Lilly and Emerging Brands, and declines for both Johnny and Tommy alongside pressure from tariffs, lower full-price sales, and SG&A growth from stores and costs from Lyons DC, scheduled to open in Q425.

• In REITs: CPT was upgraded to Buy and FRT downgraded to Neutral at Citigroup saying given the favorable supply backdrop, dynamic macroeconomic background, and disparate valuations, the firm sees unique opportunities across its coverage. The firm said its team determined the “winners” that would move on to each round with the Fabulous Four comprised of AMH, PLD, SBAC, and WELL. Separately, SKT upgraded to Buy at Goldman Sachs driven by SS NOI growth staying higher for longer and successful acquisitions, and downgrade KRC to Neutral as believes a recovery in office markets, particularly San Francisco, is not likely in near-term.
• In Crypto: Just continued weakness for Bitcoin miners all throughout March, with more than 20% declines alone for IREN, HIVE, HUT, and over 30% for CORZ, WULF, all falling again sharply today as Bitcoin prices fell over 3% below $84,000.
• In FinTech: PYPL shares slipped sharply to 7-month lows after a senior European lawmaker said the European Union could charge fees on the company as part of a tariff dispute with the United States.

• BMY receives positive CHMP opinion for the subcutaneous formulation of Opdivo® (nivolumab) across multiple solid tumor indications.
• CVAC announced that the European Patent Office has confirmed the validity of the company’s European patent EP 3 708 668 B1 subject to amendments to specify the scope of protection.
• For LLY, advisers to the European Medicines Agency voted to deny the approval of Kisunla, its treatment for early Alzheimer’s disease saying the benefits did not outweigh the risks of potentially fatal events due to brain bleeding, the advisers said.
• LXRX announces exclusive license agreement with NVO for LX9851; Lexicon eligible to receive up to $1B in upfront and development, regulatory and sales milestone payments, including $75M in upfront and near-term milestone payments.
• MIST shares tumble after the FDA declined to approve its nasal spray to treat a type of heart condition and had called for an inspection of the facility that performs the testing of the drug.

• In Construction & Engineering: AGX shares jumped after being upgraded to Buy at Lake Street due to the share price pullback and strong Q4 results last night, which demonstrated Argan’s ability to drive higher gross margins and EBITDA; firm noted AGX mgmt was increasingly bullish on the new project pipeline and expects several new power plant projects to be awarded within the next six months
• In Aerospace & Defense: RKLB shares rise after the U.S. Space Force’s Space Systems Command awarded contracts to Rocket Lab USA and Stoke Space as each receive a $5M order to conduct initial capability assessment. AIR reported Q3 adj EPS of $0.99 vs. Street $0.96, driven by lower revenue ($678M), more than offset by higher operating margins (9.7% vs. our 9.3%). In Gov’t IT Services, LDOS
• In Government IT Services: LDOS shares fell along with ORCL after Bloomberg reported the U.S. Department of Defense plans to terminate a plan to use Oracle software to manage its civilian workforce as part of the Pentagon’s cost-cutting efforts. In 2020, Leidos (LDOS) said it would provide services and support for the initiative, with a total potential value of about $75M; shares of BAH, CACI, SAIC, KBR remain pressured in the gov’t IT Services sector on continued fears of reduced government spending. https://tinyurl.com/bdzcjtxs

• In Semis: nonstop selling pressure for the sector as the SOX index falls over 3% in broad tech sell-off; WOLF shares tumbled around 50% after saying it maintains what it called a constructive dialogue with the White House and the Commerce Department to secure federal funding. Wolfspeed was expecting to receive the first tranche of the Chips Act funding in mid-2025.
• In Software: BRZE Q4 results beat expectations with 22% revenue growth to $160.4M vs. est. $155.7M (but from 23% growth y/y on better earnings and cRPO of $505.2M, up 23% y/y vs. est. $502.2M and billings of $176.7M, up 13% y/y, versus the consensus of $184.2M; agrees to acquire OfferFit for $325M.
• Security Software: CHKP upgraded to Outperform at BMO Capital and raised tgt to $275 from $245 given increased confidence in durable growth, driven by investment in key areas, new leadership, and a reasonable valuation; believe that CHKP can grind higher over the next few years.
• In the Semiconductor-equipment sector: Jefferies upgraded AMAT to Buy (PT to $195 from $185) while downgrading KLAC to Hold (PT to $725 from $875) while raised PT for LRCX to $100 from $95, while lower CAMT PT to $85 from $120 and ONTO to $175 from $245. The firm is refreshing its WFE outlook ahead of Q125 EPS season to account for the rapidly changing landscape at the leading edge as well as China. Jefferies raises its WFE estimate for 2025 to $105B (from $103B) as better DRAM and TSMC CAPEX help offset a weakening China outlook and leading-edge CAPEX cuts from Intel and Samsung. DRAM continues to be strong, driven by HBM and DRAM for HPC. NAND is starting to see a recovery driven by the upgrade market for 200 layers.
• In Internet: Piper provides hypothetical merger combination between ETSY. The firm said with ETSY stock lagging the last 3 years and GMS declines intensifying (profitability still solid with high 20’s EBITDA margins), we examined a theoretical ETSY+EBAY combination. Ultimately, M&A could be an elegant solution for growth woes. While Piper says it believes the likelihood of an outright transaction is relatively low, for ETSY, returning to growth on a standalone basis in this environment could be tough.