Closing Recap

Monday, May 12, 2025

Stocks finish at the highs, as both the S&P 500 and Nasdaq Composite hit their highest levels in two months after the U.S. and China agreed to slash their steep tariffs on each other for at least 90 days, tapping the brakes on a trade war between the two powerful global economies. Stock markets welcomed news at the 2-day meeting by Treasury Secretary Bessent and U.S. Trade Representative Jamieson Greer with counterparts in China where the U.S. said it will cut extra tariffs it imposed on Chinese imports last month from 145% to 30% for the next three months, the two sides said, while Chinese duties on U.S. imports will fall to 10% from 125%. President Trump portrayed Monday’s agreement as proof that his aggressive tariff strategy was paying dividends, after the U.S. struck preliminary pacts with Britain last week, and now China. President Donald Trump did say he does not expect U.S. tariffs on Chinese imports will return to 145% after the 90-day pause ends, adding that he thinks Washington and Beijing will have a deal. Still, Trump added that the U.S. tariffs on goods imported from China could still return to be substantially higher.

The reaction to the trade truce? The CBOE Volatility index (VIX) plunged, trading below the 20 level for the first time since March 28^th today, falling over -16.6% and hitting lows of around 18.14 as fear from just one month ago has for the time being, have been erased on trade deals, lower inflation and hopes for tax cuts and Fed rate cuts. Wall Street stocks jumped, and the dollar rose, while safe-haven gold prices fell -3.4% as the news eased fears. The risk tone today remained buoyant throughout the trading day following US-China tariff compromise as the dollar/yen pair posted its best day since March 2020, supported by short squeeze. Following the trade news, investors trimmed bets on Federal Reserve rate cuts, with an initial rate reduction now not seen until September and only a 50bps reduction seen by year’s end. Markets had been expecting a 25-bps cut at the Fed’s upcoming June meeting and two more over the course of the year. Top sector movers today were Technology (XLK), Consumer Discretionary (XLY) but rising over 4% as Mag7 names jumped, followed by Industrials (XLI) up around 3% and Energy (XLE) +2.58%. Utilities (XLU) and Consumer Staples (XLP) were the biggest laggards along with REITs (XLRE).

So far, 90% of S&P 500 companies have reported Q1 2025 results with 78% having reported earnings above analyst estimates, above the 5-year average of 77% and the 10-year average of 75%, while 62% of companies have exceeded revenue estimates, slightly below the 5-year average of 69% and the 10-year average of 64%. Barchart tweets: “Market Breadth soars with over 50% of S&P 500 stocks now trading above their 200-day moving average, the most in more than 2 months.”

• In Saudi Arabia, oil giant Aramco said it expects oil demand to remain resilient this year and sees further upside if the U.S. and China successfully resolve their trade dispute. In Iraq, the second biggest producer in OPEC, oil exports were on track to decline to around 3.2 million barrels per day (bpd) of crude in May and June in what would amount to a significant reduction from previous months.
• Gold prices tumbled, with June futures falling June gold prices fell -$116 or 3.46% to settle at $3,228 an ounce, as precious metals fell as the dollar spiked following the reduced 90-day tariff agreement between the U.S. and China. The dollar index (DXY) climbed all day, ending near highs +1.6% above 101.90, now off 4-year lows around 98 in mid-April, as the euro fell sharply by 1.5% to 1.1075. Bitcoin prices fell to lows below $102,000 this afternoon, down from morning highs above $104,400.
• The U.S. government posted a $258 billion budget surplus for April, up 23% from a year earlier, reflecting strong tax receipts in the final month of the tax season and surging collections of import duties, the Treasury Department said on Monday.

• In Specialty/Online Retailers: Toy retailers MAT, HAS advance, among beneficiaries of China/US trade talk truce; Nasdaq announced that SHOP will replace MDB in the Nasdaq-100 Index prior to market open on May 19; in home furnishing, Wayfair (W) was upgraded to Buy from Hold at Argus with a $40 price target saying reluctant to purchase new homes at elevated prices, many homeowners are upgrading furnishings which should benefit the online company. In Footwear & Apparel: big gain on the day for the industry given the easing tensions between the US/China on trade talks with 90-day reduction in tariffs for both sides as the U.S. will lower tariffs to 30% (from 145%) during the pause, while China will cut its tariffs to 10% (from 125%), lifting shares of NKE, SKX, DECK, among others; CROX was upgraded to Buy with $135 tgt at Williams Trading.
• In Broadline Retail: TGT was downgraded to Underperform at Bernstein and cut tgt to $82 from $92 saying in the short term, credit card data paints a bleak picture for Q1, dampened by poor weather, weak consumer sentiment, and a DEI-related strike in March. That’s before tariffs enter the frame, which means that TGT will likely have to lower guidance for the full year
• In Food & Beverages: BUD was upgraded from Neutral to Buy at Goldman Sachs saying they now expect deleveraging to accelerate significantly in FY25/26 thanks to a lower FX headwind post USD weakness YTD, CAPEX level remaining below $4B, a tailwind from its negative Net Working Capital.

• In Leisure Products: HOG shares jumped after the motorcycle maker
• In Autos: Sector jumps (GM, F, TSLA, NSANY, TM, BMWYY) as the U.S.-China truce trade is on, and the auto industry is center stage, thanks to its reliance on global production hubs and supply chains. Shares in German auto companies Mercedes and BMW both make sports-utility vehicles in the American south for the U.S. market and for global export. The cheaper SUVs they sell in China are manufactured locally. STLA said it aims to start producing the hybrid version of its Fiat 500 city car in November. Nissan (NSANY) will eliminate 11,000 more jobs than previously planned, NHK reported Monday, as part of a plan to restructure its flailing business.

• In Utilities: NRG shares jumped on earnings as Q1 adj EPS $2.68 tops the $1.49 estimate, on better adj Ebitda $1.126B vs. est. $924.5M and revs $8.585B vs. est. $7.826B while reaffirms guidance; also agrees to buy LS Power’s portfolio of natural gas generation facilities and power plant platform in a cash-and-stock deal with an enterprise value of about $12 billion; the results boosted other nuclear names (CEG, VST, OKLO), while broader regulated utilities saw weakness amid rising Treasury yields (AWK, LNT, ATO, DUK, ED, CMS shares all fell).
• In Transports: shares of U.S. shipping companies rise in premarket trade after the U.S. and Beijing agree to temporarily slash reciprocal tariffs as the U.S. will cut extra tariffs on China to 30% from 145%, while Chinese duties on U.S. imports will fall to 10% from 125%; measures effective for 90 days. Shares of shippers such as NMM, GOGL, and tankers TNK, INSW, DHT saw early strength. Truckers (JBHT, CHRW, ODFL) as well as package delivery (FDX, UPS) and rails (CSX, NSC, UNP) saw strength on the 90-day tariff truce.
• In Metals & Mining: Precious metals mining stocks dropped as gold falls, with demand for haven assets declining as the US and China agree to lower tariffs on each other’s products for 90 days (shares of AEM, NEM, CDE, GOLD, AU among gold miners falling); industrial metals however rise (FCX, SCCO, TECK, SCCO, AA, CENX, BHP, VALE) on the truce agreement news; in stock news, PAAS will acquire MAG Silver Corp (MAG) in a transaction valued at approximately $2.1 billion, the companies said on Sunday. The U.S. and China agreed to slash tariffs on each other’s goods for 90 days and continue trade talks.
• In Agriculture & Machinery Sector (DE, CAT, AGCO, MOS, NTR), the U.S. Department of Agriculture (YSDA) issued a lower-than-expected forecast for domestic corn supplies next year, though farmers are planting more of the grain this spring amid uncertainty over Chinese demand for soybeans. The agency pegged U.S. corn ending stocks at 1.8 billion bushels by Sept. 1, 2026, in its first forecast for the 2025-26 crop year. Analysts had expected 2.02 billion, according to a Reuters survey. The USDA estimated 2025-26 soybean ending stocks at 295 million, compared to analysts’ estimates for 362 million.
• In Aerospace & Defense: Shares of Dow component BA along with AER, CRS, GE and TGI all making 52-week highs today.

• Financial Services: NBIS shares jumped after a report in The Information said that ClickHouse is targeting a new funding round at a $6B valuation, with Khosla Ventures expected to lead. Nebius Group holds a 28% stake in ClickHouse, a company it originally founded and later spun off in 2021. FRGE was upgraded from Neutral to Overweight w/ $30 PT at Piper citing valuation and growing momentum in private markets. ACIW was upgraded to Buy from Neutral at DA Davidson with an unchanged price target of $60 saying after the 20% pullback, following "strong" Q1 results, the firm views the risk/reward as more attractive.

• Pharmacy benefit managers (CVS which owns Caremark, UNH which owns OptumRx and CI which owns Express Scripts) were weaker after President Trump said he plans to cut out the middleman to reduce drug costs. Trump said selling directly to Americans will lower drug prices. The Trump executive order today appears designed to broaden the direct-to-consumer market, where patients pay drugmakers cash for medicines without using normal drug channels, and without payment from insurers.
• AMPH was downgraded to Neutral from Overweight and lowered tgt to $30 from $45 noting the company has seen continued setbacks on the pipeline front, including the two most recent CRLs on AMP-007 and AMP018, which along with AMP-002 were key to offsetting erosion for the generic portfolio.
• BAYRY said that it will discontinue the production of active ingredients of crop protection products at its Dormagen site, which are available at lower prices on the global market, resulting in 200 job cuts. Its Dormagen site currently employs around 1200 staff.
• CTMX shares surge after announcing positive interim data from phase 1 dose escalation study of EpCAM antibody drug conjugate (CX-2051) candidate in patients with Advanced Colorectal Cancer (CRC)
• TEVA was upgraded to Overweight from Neutral at JP Morgan and raise tgt to $23 from $21 saying after the co’s recently announced cost-cutting program providing much-needed clarity on the drivers of the company’s margin expansion in 2026/2027.

• In Hardware & Software: General outperformance for the technology sector given the broader stock market strength, lifting risk assets and high beta sectors; in stock news, the WSJ reported AAPL is considering price increases for its fall iPhone lineup, a step the company plans to couple with new features and designs; AI plays were notably strong with data center movers (CRWV, VRT, DELL, SMCI) and chip names; ALAB was upgraded to Overweight at Morgan Stanley with $99 tgt on positive AI view post recent correction.
• Semiconductors were very strong with the SOX index rising over 7% to 4,780, with big gains in ARM, NVDA, AMD, AVGO in the AI plays as well as analog names seeing continued strength from late last week after MCHP reported quarterly results that beat and the CEO said he see a bottom for the industry, boosting shares of TXN, ADI, ON, MPWR;  equipment names also strong with AMAT, ASML, LRCX, KLAC jumping.
• Keybanc noted their April Notebook ODM Analysis showed April unit shipments were -15% m/m, +2% y/y, below KEYB’s expectations; PC NB unit shipments of 13.8M (-15% m/m) were lower than the firm’s estimate of 14.4M (-11% m/m) due to tariff-related uncertainty in the first half of April. Quanta shipped 3.3M, in line with KEYB’s estimates of 3.3M, due to the pull-in demand from both HP and ASUS. Compal shipped 2.2M, lower than the original expectation of 2.5M, as customers remained uncertain under the tariff backdrop.