Closing Recap

Wednesday, May 07, 2025

U.S. stock markets got a late day pop, led by technology and semiconductors, and boosting major averages briefly to the highs of the day after a Bloomberg report the Trump Administration plans to rescind Biden-era AI chip curbs as part of a broader effort to revise semiconductor trade restrictions. The story noted the repeal seeks to refashion a policy launched under President Joe Biden that created three broad tiers of countries for regulating the export of chips from Nvidia (NVDA) and others, which notes that the Trump administration will not enforce the so-called “AI diffusion rule” when it takes effect on May 15 and instead plans to develop a new rule that would strengthen the control of chips abroad. Those headlines, 15 minutes before the bell, pushed major averages to the highs.

Prior to the late day spike/volatility, US equities enjoyed an overnight bounce off yesterday’s decline as hopes gained for some tariff de-escalation and expectations remained subdued ahead of today’s Fed rate decision. The pre-market probability of a cut was just 2%, with 98% no change, but markets continued to see the implied rate down to 3.165% by July 2026. Markets pared gains into the open but remained in the green with no economic news to sway views. Sentiment readings have diverged a bit with the sell-side upgrade/downgrade ratio running at just over 39% so far this week and a little better than 40% month-to-date versus 47.7% for the month of April and 56.3% in March. The Fear & Greed Index, though, is at 57/100 (Greed) for the second consecutive day versus 42 (Fear) last week and 4 (Extreme Fear) just a month ago. Early breadth favored advancers by just over 3:2. Small caps underperformed but were still in the green with led by Communications, Consumer Discretionary, and Financials as early outperformers among S&P sector ETFs, while Utilities, Energy, and Materials led the underperformers.

In data of interest today, it was Fed day and @bespokeinvest noted the S&P has fallen in the final hour of trading on the past eight Fed days. Perhaps today will be different given tempered expectations. The other recent trend noted by him may also play a role: since liberation day, the S&P has typically opened lower (average -0.27%) but rallied intraday (average gain open to close +0.28%). On the VIX and forward returns, @DataTrekMB noted when the VIX is high (+1-3 standard deviations), forward S&P returns are often good, but when it is +4 standard deviations (April 8th), forward returns are more choppy/negative over the next six months. Lastly, on the jobs market, @GlobalMktObserv highlighted the number of Americans who have lost jobs involuntarily and not expected to be recalled is near a four-year high (2.6Mm in April) and job losers not on layoffs have climbed by about 800K in three years.

Heading into the final hour, US stocks were waffling following mid-day volatility on trade-talk comments from Bessent and Trump on China and the Fed holding rates unchanged as anticipated as it sees both higher inflation and higher unemployment lurking. Without specifying which side of the dual mandate is taking precedence, though, the Fed just added to the uncertainty already in the market with more, “wait and see.” Following a pullback in equities on the initial headlines, Powell’s press conference did not stray far from expectations and equities shifted between gains and losses despite getting no answer to the question of prioritization of inflation versus labor market pressure as the door remained open to rate cuts later this year on higher downside risk. 

• Despite an above weekly oil inventory drawdown result, June WTI crude futures couldn’t buck the selling pressure and settled -$1.02/bbl, or -1.73%, at $58.07. Ongoing trade-conflict headlines continued to hit demand expectations as Trump continued to take a hard line on China, while the supply side inventory benefit was not enough to offset OPEC+ June quota increases and an expected ramp in Saudi production. Scotiabank sees global supply exceeding global demand by as many as 1 million barrels per day for the remainder of this year and into 2026.

• In Retail: IRBT reported Q1 revenue of $101.6M vs. Street $131.5M and as previously announced, the company are conducting a review of strategic alternatives, including, but not limited to, exploring a potential sale or strategic transaction, and refinancing the Company’s debt; RVLV announced mixed results, with revenue faring slightly below expectations and EBITDA better; the report showed tariffs are having a larger than expected impact on the business; COTY EPS missed ($0.01 vs. $0.05 est.) on weaker revs ($1.30B vs. $1.31B est.) and margins. Organic growth was -3% (vs. -2.6% est.).
• Housing related products/building materials: FBIN reported results as expected, but gave a very wide and substantially lower guidance range than what was provided last quarter; AZEK reported F2Q adjusted EPS of $0.45, above consensus of $0.43 driven by the adj. EBIT margin 131bps above our model at 20.1%, +$0.03 and revenues +8% YOY vs our +4% forecast, +$0.02; OC EPS beat ($2.97 vs. $2.87) on EBITDA $565mm vs. $555mm consensus with topline in line $2.53B vs. $2.52B. Q1 revenue up HSD vs. $2.5bn last year adjusted for glass reinforcements to discontinued operations and EBITDA margins low to mid 20s.
• Consumer Staples/Products: EPC cut its year forecasts after Q2 results fell short of expectations; FY25 adjusted EPS view to $2.85-$3.05 from $3.15-$3.35, cuts FY25 adjusted EBITDA view to $329M-$341M from $356M-$368M and lowers FY25 organic net sales view to flat to +1% from up 1%-3%.

• In Casinos and Gaming: WYNN Q1 adj EPS of $1.07 missed analysts’ forecasts of $1.24 as casino revenue fell to $1.04B from $1.12B as Vegas/Boston trends continued to be solid, but Macau continues to disappoint (shares were upgraded to Buy from Neutral at Bank America after the results).

• In FinTech: UPST shares fell as Q1 volumes and credit data remain strong, but a softer Q2 outlook coupled with a lack of full-year revenue flow through on higher interest income are the key source of weakness; Q1 results came in ahead of consensus both across revenues and margins, performance was driven by net interest income; JKHY Top line missed with Core Revs -1% vs the street, but bottom line beat on a combo of higher margins and opex control and FY25 guidance was reduced on a combination of lower hardware and delayed implementation of non-core projects.

• APLS shares fall on results; Adam Feuerstein notes “APLS Q1 Syfovre sales $130.2M, big miss. Sales were expected to be lower, but this looks like an even bigger shortfall."
• CRL announced a Cooperation Agreement with Elliott Investment Management L.P., Charles River’s largest investor, under which Elliott has agreed to customary standstill, voting, confidentiality, and other provisions and raises 2025 adj profit forecast to $9.30-$9.80 per share, from $9.10-$9.60 per share prior.
• DNLI reported 1Q EPS and announced completion of the rolling BLA submission for tividenofusp alfa (DNL310) in Hunter syndrome under an accelerated approval (AA) pathway but stock under pressure following appointment of Dr. Vinay Prasad as Director of CBER.
• ELAN Q1 revs $1.19B topped the $1.17B estimate and boosted its annual forecast to be between $4.51 billion and$4.58 billion vs prior expectation of $4.45 billion to $4.51 billion saying its outlook incorporates current estimate for tariff net impact between $16 million and $20 million to adjusted core profit
• HALO Q1 revenue of ~$265MM exceeded consensus estimates of $230MM, primarily driven by increased royalty revenue; increased 2025 financial guidance and announced a second $250MM share repurchase.
• JAZZ ported a 9% revenue miss, driven by seasonality factors and one fewer shipping week in the oncology segment, but the firm doesn’t see the Q1 update as thesis changing given the quarter is historically soft, thus it only trims its FY25 forecast 2%.
• NVO posted better-than-expected Q1 earnings but reduced its guidance for the year, saying it cut its outlook due to lower-than-planned branded GLP-1 penetration, which is impacted by the rapid expansion of compounding in the U.S.; said launched Wegovy in 25 countries, including three in the past month.
• PTCT reported 1Q25 results with total product and royalty revenue of $190mn, +11% above consensus of $171mn as topline beat was driven by stronger-than-expected results from the DMD (Duchenne muscular dystrophy) franchise (shares upgraded to Neutral from Sell at Citigroup post results).
• SRPT shares fell; cut their full-year outlook after results saying expects total net product revenue of $2.3B-$2.6B, down from its prior forecast of $2.9B-$3.1B; shares had fallen Tuesday after the announcement of Vinay Prasad as the new head of the FDA’s CBER weighed on the whole Biotech sector.
• TEVA posted Q1 profit slightly larger than expected ($0.52 vs. est. $0.46), helped by strong sales gains in a trio of its branded drugs to treat migraines, Huntington’s disease and schizophrenia; Q1 revs rose 2% y/y to $3.89B vs. est. $3.99B
• Sector overall was crushed Wednesday and remains under pressure. Goldman Sachs noted they see the FDA’s Director of CBER appointment of Dr. Vinay Prasad as deepening the trend of healthcare policy/regulatory uncertainty given Dr. Prasad’s statements and publications indicating a critical view of Dr. Marks’ flexible approach — particularly regarding cell and gene therapy (he has criticized the expanded approval of SRPT’s Elevidys), accelerated approval (AA) via surrogate markers (particularly for oncology), and vaccines.

• MASI reported a Q1 earnings and revenue beat, but tariffs were a drag on its margin outlook
• MYGN cut FY25 revenue view to $807M-$823M from $840M-$860M, (est. $846.39M); cuts FY25 adjusted EBITDA view to $19M-$27M from $25M-$35M noting a reallocation of resources away from Genesight will have more significant negative volume impacts than previously expected.
• OSCR shares jumped after a stronger Q1 result lifted shares.

• In Chemicals: CC shares fell as posted mixed Q1 results (EPS missed/revs beat) Q1 adj net income $19M vs. est. $28.1M and announced it is cutting its dividend by 65%. TROX was downgraded from Outperform to Market Perform at BMO Capital saying while Q1 was modestly better than expected the implications for Q2 are worse given expectations for high-cost inventories tied to Botlek and the Mining business; AXTA Q1 EPS and EBITDA beat on slightly lower sales, guided Q2 adj EBITDA below consensus and lowers FY revenue guidance; MOS Q1 EPS beat on light revenue while reaffirms FY volumes and capex guidance.

• In Internet: GOOGL shares tumbled late morning and was pressured all day after Bloomberg reported that an AAPL executive’s testimony pointed to artificial intelligence taking market share from traditional search. Apple’s Senior Vice president of Services Eddy Cue testified in a Department of Justice lawsuit against Google that searches in Apple browsers fell for the first time as people turn to AI for their search queries. This comes as the DOJ investigates the longstanding partnership between Apple and Alphabet, in which Alphabet pays billions for Apple to use Google as its default search partner.
• Chinese Internet names were weaker (BABA, BIDU, NTES, PDD, etc.) as Barron’s noted China announced new stimulus measures and lowered interest rates on Wednesday as the trade war with the U.S. continues. It wasn’t enough to lift some of the country’s biggest shares. China’s central bank also took steps to allow banks to lend more as part of a package that the government said would stabilize the market.

• ANET Q1 earnings and revenue topped Wall Street estimates but shares fell after the networking equipment company said adj gross margin and operating margin may decline in Q2; maintained FY25 guidance.
• CRWD said it will cut about 500 jobs, or 5% of its global workforce, as part of a plan to drive efficiencies in the business; said it expects to incur $36 million to $56 million in charges tied to severance payments, employee benefits and non-cash charges for stock-based compensation.
• EA delivered Q4 Bookings/Op Income that was 15%/18% above consensus, driven by a return to growth in EA’s largest franchise, EA Sports FC; initial FY2026E guide for $7.8B in Bookings (midpoint) was 2.5% above consensus, as growth in the EA SPORTS portfolio, The Sims, Battlefield, and Skate helped.
• JAMF delivered a solid Q1 with revenue reaccelerating, margins ahead, and the guidance maintained despite macro uncertainty, lifting shares.
• LITE reported strong Q3 results with revenue and adj-EPS above the high end of management guidance as cloud-related demand remains strong while networking/telecom end markets continue to gradually recover; Q4 revenue guidance is modestly above consensus with improving operating margin.
• Unity Software (U) posts Q1 revs $435M vs. est. $415.7M, while guided Q2 revenue $415M-$425M, vs. consensus $427.27M and sees Q2 adjusted EBITDA of $70M-$75M.

• CRUS reported upside results/outlook as Q4 sales/EPS 12%/42% ahead, average top-line result 12% ahead of guidance the last five Qs; guided Q1 down 13% Q/Q (-1% Y/Y) to $360M, 6% better than consensus; Q4 revs led by boosted amp and 22nm smart codec.
• ENTG guided Q2 EPS $0.60-$0.67, below consensus of $0.71 and revs $735M-$755M below consensus $823.5M after reporting both a top/bottom line miss for Q1.
• MRVL said it is postponing a previously scheduled investor day conference, citing a "dynamic macroeconomic environment," and narrowed its Q1 rev forecast range to be approximately $1.875B, within a range of plus or minus 2%, compared to the prior range of plus or minus 5%, but maintained the midpoint of its outlook (shares were downgraded to Neutral at Cantor and tgt to $60 from $125).
• SMCI reported revenue at the high-end of its downwardly revised guidance ($4.6B vs. est. $5B) as mgmt attributed the shipment delays to customers evaluating the next generation Nvidia Blackwell GPU platforms; guided; guides Q2 lower and cuts FY25 rev view to $21.8B-$22.6B from the $23.5B-$25B prior.
• Bank America noted March’25 SIA data showed strong month corrects weaker start of the year, Q125 up +19% YoY; total/core semis grew +16%/+16% MoM, driven by strong unit growth, memory was +14% MoM, driven by DRAM as NAND stayed weak. After record Q424, Q125 came in -2% QoQ (+164bps vs seasonal), driven by Logic +10% QoQ and total units/ASPs -3%/+1% QoQ. In March, total/core/memory semis units were +8%/+13%/-2% YTD, as total/core/memory semis ASPs were +13%/+24%/+23%.