Closing Recap

Tuesday, May 13, 2025

Following a nice bounce on China trade-war relief, or at least a trade-war pause, US equities saw some profit taking overnight ahead of the CPI test pre-market. Core CPI came in in-line yr/yr (the smallest yr/yr rise since February 2021) and slightly cooler mo/mo, prompting a small boost to US equity futures, which fairly quickly reversed back to flattish. US Supercore CPI also was generally in-line and traders continued to see two Fed cuts by year-end, with the first in September. It didn’t take long for a new round of trade headlines to hit the tape and deals with Saudi Arabia along with more positive China headlines generated a new bounce in equities. On sentiment today, the Fear & Greed Index rose to 70/100 (Greed) from 55 (Neutral) last week and 19 (Extreme Fear) last month while the upgrade/downgrade ratio has jumped to 58% so far this week from 38% last week as analysts chase the trade headlines. Mid-morning breadth favored advancers by about 3:2 while small caps underperformed but still gained. Technology, Communications and Consumer Discretionary were notable outperformers among S&P sector ETFs, while Consumer Staples, Real Estate and Health Care (due to UNH weakness) paced the underperformers with seven sectors gaining versus four declining.

In data of note today, Goldman cut its US recession odds from 45% to 35%, while raising its year-end S&P 500 target from $5,900 to $6,100 and its 2025 US GDP forecast from +0.5% to +1.0%. It also shifted its Fed cut forecast from three in 2025 to three across 2025-2026. On trade-war-induced volatility, @bespokeinvest notes the $QQQ has rebounded to less than 5% from its all-time closing high. Similarly, @DataTrekMB noted the $QQQ 13.8% rally since April 10th when it highlighted the three standard deviations downside over the prior 50 days, also suggesting there is more room to run. On equity allocation, @KobeissiLetter noted according to the AAII survey, individual investors’ equity allocation has dropped about six percentage points over the past two months to 64% (lowest since the 2022 bear market). It will be interesting to see how quickly this snaps back. Following yesterday’s gains, @RyanDetrick noted more than 50% of the stocks in the S&P 500 were back above their 200dma.

Heading into the last hour of trading, equities held solid gains for the second consecutive session. Breadth expanded to 2:1, still in favor of advancers while small caps continued to underperform with IWM (+0.8%) versus SPY (+0.95%) and QQQ (+1.8%). Technology (+2.3%), Energy (+1.99%) and Consumer Discretionary (+1.6%) were outperformers among S&P sector ETFs, while Consumer Staples (-1.14%), Real Estate (-1.19%) and Health Care (-2.58%) continued to lead the laggards with seven sectors still in the green. Unsurprisingly, given the sector disparity, growth outperformed value by a wide margin. The Russell 1000 Growth gained 1.77% versus its Value counterpart up only 0.11%. Tomorrow likely brings another round of trade headlines, but no big economic releases.

Lots of Wall Street firms weighing in on Fed rate cuts/outlook for the year today: 1) Barclays expects Fed to deliver one 25 bps interest rate cut in December this year vs prior forecast of two cuts in July and September after US-China trade agreement and also expects the Fed to deliver three 25 bps cuts in March, June and September in 2026. 2) JP Morgan weighs in as well, saying risk of U.S. recession is now below 50% and they see Fed rate cut in December vs prior view of September. JPMorgan now sees the unemployment rate peaking around 4.8% by Q2 of 2026. 3) Goldman Sachs said recession odds for the U.S. now cut to 35% from 45% and raised their S&P 500 year-end target from 5,900 to 6,100 (from 5,700 and 6,200 prior respectively), raised 2025 US GDP forecast from +0.5% to +1.0% and now sees three Fed cuts across 2025-2026 versus three in 2025 previously.

• April real earnings all private workers -0.1% vs March +0.6%. April CPI energy +0.7%, gasoline -0.1%, new vehicles 0.0%, food -0.1%, housing +0.5%, owners’ equivalent rent of primary residence +0.4%.

• WTI June crude futures gained overnight and held on to settle higher by $1.72/bbl, or +2.78%, at $63.67. A more benign CPI reading, incremental optimism around the China trade war and positive trade headlines emerging between the US and Saudi Arabia combined to propel futures higher on top of gains a day ago. No doubt there remains an overhang from trade uncertainty, but progress is progress, and a China trade war pause is progress, so buyers are back….at least until the supply side comes back to throw the market out of balance. Brent similarly gained today, settling +$1.67/bbl, or +2.57%, at $66.63.
• The U.S. dollar pulled back from sharp gains in the prior session on the “cooler” CPI inflation data as the dollar index (DXY) fell -0.75% to 101 against a basket of currencies, while the euro rose 0.85% at $1.1181. Treasury yields climbed all afternoon, with the benchmark 10-year rising over 4 bps to 4.5%, ending at the highs.

• In Hardlines/Broadline Retail: Piper said they prefer WMT over TGT into Q1 results. The firm said while the recent reduction of China tariffs to 30% for (at least) the next 90 days is better news for TGT (vs. WMT), other big picture macro trends make US constructive into WMT earnings (on May 15) and cautious into TGT earnings (on May 21). All in, Piper expects a "meet and maintain" print for WMT, and a potential "miss and lower" print for TGT.

• In Autos: TSLA shares rose for a 5^th straight day as upside momentum lifting prices of large cap tech; sales of new Tesla vehicles in China dropped 58% from the previous week and 69% year-over-year during the week of May 5 to 11, the lowest level since January; HTZ shares fell Q1 adj EPS loss (-$1.12), vs. consensus loss (-$0.98); Q1 revenue fell -13% y/y to $1.81B vs. est. $2.01B; says on track to achieve positive adjusted corporate EBITDA by 3Q25. HMC shares fell after forecasts 59% decrease in FY26 profit.
• In Cruise lines (CCL, NCLH, RCL, VIK): Bank America said its aggregated credit and debit card data, monthly cruise spend in April increased +0.1% year-over-year. Looking at cruise spend sequentially, spend fell -15.3% vs March, compared to the 2015-2019 average of down -9.2%. Overall travel spend fell -6.4% in aggregate year-over-year with airline spend down -11% and hotel spend down -2.9%.

• In Utilities and Alternative Energy: PLUG reported 1Q earnings in line with guidance and expectations, with improving gross margins of -55% and said continues to see growing electrolyzer deliveries and demand in the EU, but the picture in the U.S. could turn murky yet again with the provisions in the new Budget Bill that recommend 45V credits to expire at the end of 2025. OKLO said Tuesday that it had finished drilling to gather information about the proposed location of its first nuclear plant in what the company called a “pivotal step” toward the production of commercial power. AEE announced ~5.6M shares at $94.00 for total deal size of ~$521.7M as part of forward sale; offering priced at 1.5% discount to stock’s last sale. SMR the latest nuclear related name jumping on better earnings (followed better NRG results the day prior).
• In Energy E&P: a good day/week for Energy (XLE), rising 2% today and +4.6% this week already behind surging oil prices; lots of Wall Street research as Mizuho added COP to top picks, upgraded shares of DINO, DK, and AR while downgraded MUR to Neutral saying post Q1 results, they see potential weakness for global oil prices but expect gas and refining fundamentals to improve over the next 12 months. Mizuho is lowering its oil price outlook for 2H25/1H26 by ~10-11% as accelerating oversupply likely overshadows any stabilization of demand, while raising its U.S. natural gas price forecast over the same period by ~15%. At HSBC, CVX was downgraded to Hold from Buy, retain Buys on SHEL, TTE, EQNR in global oils saying the sharp fall in oil prices since early April has raised pressure on oil majors’ financial frameworks, which were designed to work at USD70/b. Lastly, Piper upgraded EXE to Overweight from neutral and raised its tgt to $136 from $103 in Q1 E&P sector recap saying coming out of Q125 earnings, Piper adjusts its near-term commodity price forecast, maintain its LT mid-cycle oil ($70/bbl WTI) and raise mid-cycle gas to $3.50 (from $3.25).
• In Oil Refiners: VLO was upgraded to Buy from Neutral at Goldman Sachs and raised tgt to $154 from $127 as they are incrementally positive on the outlook for refining and oil supply and thinks consumer oil demand outlook is better than many fear. PBF was upgraded to Buy from Neutral at UBS and raised tgt to $26 from $20 citing strong improvement in refining fundamentals for the upgrade saying surplus heavy barrels drive wider heavy light spreads and lower crude prices drive higher demand for refined products. Lastly, Mizuho upgraded DINO and DK to Outperform in broader energy commentary today.

• In Asset managers: AB preliminary assets under management decreased to $781 billion during April 2025 from $785 billion at the end of March. The 0.5% decline in AUM was primarily driven by firmwide net outflows, mainly within the institutional and retail channels, with private wealth also experiencing slight outflows; VRTS reported preliminary assets under management (AUM) of $163.7 billion and other fee earning assets of $2.1 billion for total client assets of $165.8 billion as of April 30, 2025.
• In Insurance Brokers: Goldman Sachs said to lean into fee-oriented insurance brokers as non-fee insurers are more exposed to tariffs, inflation, and a potential recession as they upgraded AON to Buy as they expect stronger than consensus 2026 organic growth and free cash flow, driven by talent investments, NFP acquisition synergies, and an eventual capital markets recovery. They also upgraded RYAN to Buy given its exposure to the growing E&S market, which should drive organic and total revenue growth, plus margin expansion. Lastly, they downgraded BRO to Neutral as organic growth may revert to peer levels.

• CYTK said a Phase 3 trial testing its investigational therapy aficamten against a commonly used beta blocker in patients with obstructive hypertrophic cardiomyopathy met its primary endpoint.
• ITOS and GSK are ending the development of an anti-TIGIT antibody, after interim results from a Phase 2 lung cancer trial did not show clinically meaningful improvements. STAT news notes the news adds another mark against TIGIT as a solid target for next-generation cancer drugs.
• XENE announced Phase 3 topline results from its most advanced program has been pushed to early 2026 from originally planned 2H25. Additionally, an investigator-sponsored study (IST) of azetukalner in major depressive disorder (MDD) failed to meet the primary endpoint based on fMRI.

• UNH shares tumbled in the managed care sector after announced the appointment of Stephen J. Hemsley as its chief executive officer (CEO), effective immediately, following Andrew Witty’s decision to step down as CEO for personal reasons and suspended its 2025 outlook/ said medical costs of many Medicare Advantage beneficiaries remained higher than expected (CI, CVS, ELV, HUM, MOH, CNC all tumbled).

• In Internet/social media: PINS shares slipped after the Information reported GOOGL may unveil next week a feature that shows images designed to give people ideas for fashion and other types of designs, citing a person familiar with the matter. GCT shares jumped on results/guidance as Q1 adj EPS $0.83 vs est. $0.52, adj EBITDA $33.2Mm vs est. $26.25Mm, on revs $271.9Mm vs est. $259.8Mm, though guidance midpoint below.
• In Telecom: Samsung Electronics (SSNLF) launches its slimmest flagship model to date, complete with enhanced artificial intelligence features; the S25 Edge launch is designed to appeal to increasing demand, especially from consumers in their 20s and 30s, for more portable smartphones.

• In the 3D sector: DDD shares tumble after reported Q1 adj EPS loss (-$0.21) vs. est. loss (-$0.14) on revs $95M (missing the $99.45M est.) saying revs reflect a continuation of challenging top-line pressures as many customers are delaying their capital investments in order to get greater clarity around potential tariff impacts; the company also withdrew its Fy25 guidance
• In Quantum compute sector: RGTI shares fell as the quantum computing firm’s 1Q revenue missed expectations ($1.5M vs. est. $2.55M) and posted Q1 operating income (-$21.6M) s. est. (-$16.4M); shares of IONQ, QUBT, QBTS move in sympathy.
• In Internet Security: CYBR reported a top and bottom line beat for Q1, raised its FY25 EPS outlook while backed its revenue outlook; RPD reported Q1 ARR that missed street expectations by $4M, resulting in a sequential decline in ARR as multiple 7-figure deals pushed out of the quarter and macro uncertainty impacted mid-market customers, leading to a reduced view on the full-year top-line outlook and reiterated op. income guide (guided 2025 ARR to $865M (+3% y/y) at the midpoint vs. consensus $877M (+4% y/y)).

• INDI reported mixed 1Q results and guided 2Q lower as uncertainty regarding tariffs has created significant auto headwinds, including a reduction in production at multiple OEMs as Global SAAR is expected to decline 1.6% in 2025, OEMs have paused shipments into the U.S. and tariffs are expected to increase auto pricing on average by 9%, resulting in lower demand.
• SMCI bounced after Raymond James initiated at Outperform and $41 tgt saying doing business as “Supermicro,” has emerged as a market leader in AI-optimized infrastructure. AI platforms now comprise nearly 70% of Supermicro’s revenue, and is also expanding its share of the branded AI server market
• WDC authorizes new $2.0B share repurchase program
• WOLF bounces early after the Financial Times reported creditors in the U.S. chipmaker offered roughly $600M to refinance a large convertible bond coming due in 2026, to pre-empt a potential bankruptcy filing https://tinyurl.com/yc2sbjw9