Closing Recap

Wednesday, May 14, 2025

Today was a bit of a cooling off day as the massive 4-week stock market advance took a breather with the S&P holding steady around the 5,900 level, though the Nasdaq outperformed behind a few heavily market cap weighted names. Strength in technology, specifically three of the Mag 7 mega cap tech names TSLA, NVDA, and GOOGL were among the standouts to the upside, doing the “heavy lifting” most of the day as broader market breadth was actually negative with decliners outpacing advancers by a more than 2:1 margin. Stocks also managed to overlook another jump in Treasury yields as the 10-year yield peaked at 4.54% late day, while oil and gold prices fell.

In trade deal news, agreements signed by U.S. President Donald Trump and Qatar’s Emir Sheikh Tamim bin Hamad Al-Thani announced deals today, which will “generate an economic exchange worth at least $1.2 trillion,” the White House said in a fact sheet summarizing some of the deals’ details. Also, U.S. President Donald Trump, in an interview on Tuesday, said he could see himself dealing directly with Chinese President Xi Jinping on details of a trade pact. He also said that “potential deals” with India, Japan and South Korea were in the works. The headlines come after Washington and Beijing agreed to reduce tariffs drastically and adopted a 90-day pause on Monday.

In Sector news, Healthcare remains very weak on recent FDA and HHS hires, drug price reduction headlines out of Washington, among other concerns. @charliebilello notes, “the ratio of the US Health Care (XLV) sector to the S&P 500 is at its lowest level since January 2001. The Health Care Sector is down -8% YTD while the S&P 500 is back is upon the year. The Philly semi-index (SOX) rose again, now more than 22% off its April lows led by gains in NVDA, AVGO, AMD and others and above its 200dma resistance of 4,860. Technology, Consumer Discretionary, Industrials and Energy have been the big winners the last 2 weeks while defensive Consumer Staples and REITs have lagged along with healthcare. Transports have been huge winners on the trade talk improvement, as the Dow Transport Index is back above 15,000 and up over 10% this month alone. Next up in retail, earnings tomorrow from WMT and BABA.

• Oil prices fell after government data showed U.S. crude oil stockpiles rose unexpectedly last week, prompting investor concerns of excess supplies (especially after recent OPEC comments on production). WTI crude slipped -$0.52 or 0.82% to settle at $63.15 pr barrel. Weekly EIA inventory data showed weekly crude stocks up 3.5M bbls to 441.83M, vs forecast of 1.1M bbl draw; weekly gasoline stocks off 1.0M bbls to 224.71M, vs forecast of 0.6M bbl draw, and weekly distillate stocks off 3.2M bbls to 103.55M, vs forecast of 0.1M bbl build.
• Treasury yields climbed slowly and steadily all day, with the 10-year yield topping 4.52% ahead of key PPI inflation and retail sales data tomorrow morning. Bitcoin prices slid over -1% to $103,300 late day after highs above $104,200 earlier and the dollar index (DXY) was flat, clawing back from early losses.

• In Luxury Retail: Burberry (BURBY) shares jump after the luxury retailer posts FY adj. operating profit of 26M pounds ($34.6M) vs 11M pounds; said expects reduction in people-related costs, which could impact 1,700 roles globally; says still in early stages of a turnaround, with geopolitical developments making the economy more uncertain; notes significant improvement in comp sales in H2 vs H1 (shares of comp luxury names RL, TPR, CPRI, PPRUY, LVMUY, CFRUY were among names active on the results).
• In Furnishing/Specialty retail: Wayfair (W) was downgraded to Sell from Hold at Loop Capital driven by uncertainty related to tariffs as think the market is pricing in a much lower tariff for Vietnam than the original "reciprocal" rate of 46%, and most investors they speak with believe the rate will be well below the China rate – now 30%. In toys, FNKO was upgraded to Neutral from Sell at Goldman Sachs as it now views risk/reward as balanced, especially following the implementation of mitigation efforts by management and positive updates on the trade/tariff front with China this week. WMT to report earnings tomorrow morning.
• In Food & Beverages: KHC said it is spending $3B to upgrade its U.S. factories, its largest investment in its plants in a decade, even as executives say consumer sentiment is at its second-lowest point in 70 years, and it has cut sales and profit forecasts. Food stocks generally weaker across the board (CAG, CPB, GIS, HSY, KLG, THS) as investors extend rotation into riskier stocks and out of defensives.
• In Restaurants: WEN was downgraded to Neutral from Buy at Guggenheim saying it has been one of the better brands for franchisees to invest in over the past 20 years but in the firm’s opinion, the company needs a strategic rethink on the priorities of unit growth vs franchisee profitability. ARCO shares fell after mixed Q1 results as Consolidated Adjusted EBITDA was $91.3M, with an 8.5% margin on total revenues and revs totaled $1.1 billion, relatively flat versus the prior year in US dollars.

• In Lodging & Online Travel: ABNB announced at its 2025 Summer Release: 1) Airbnb Services, 2) re-imagined Experiences, and 3) a fully redesigned app that combines Home/Services/Experiences under a unified UI. ABNB’s investing $200–250M in ’25 to grow new offerings, that mgmt believes are $1B-plus revenue oppty.

• In Utility sector: group pressured most of the day as Treasury yields remain higher (10-yr around 4.5%), making high dividend paying sectors like utilities less attractive; Keybanc upgraded shares of both AEE, ETR to Overweight from Sector Weight on attractive growth, downgraded ED, EXC, and SO to Underweight on valuation and POR downgraded to SW from Overweight due to jurisdictional headwinds in utilities. The firm said following a volatile first quarter, the reporting season proved fairly uneventful, with most companies under coverage reporting results ahead of consensus estimates, maintaining FY guidance, and issuing constructive commentary. Tariffs, data centers/power demand, and IRA repeal dominated discussions.
• In Nuclear power: OKLO posts narrower Q1 EPS loss of (-$0.07) vs. ests of (-$0.10) and narrower y/y loss of (-$0.34), adding to gains from the prior day after the co said it had finished drilling to gather information about the proposed location of its first nuclear plant in what it called a " pivotal step" toward the production of commercial power.
• Paper & Packaging stocks outperformed, with IP, PKG, SW all rising after Truist noted, citing Fastmarkets RISI (RISI) reported that Georgia-Pacific (private), the fourth largest North American containerboard producer, will permanently close its Cedar Springs, GA containerboard mill (~800k tons of kraft linerboard, ~227k tons medium; 2.5% of North American capacity) effective August 1. Overall, Truist views the closure as positive for North American containerboard supply/ demand dynamics and believe it could be supportive of pricing.
• In Aerospace & Defense: Dow component BA advanced early after Qatar signs an aviation agreement to purchase 160 jets from the planemaker in deal valued over $200B, its largest order in history.

• In Asset Managers/Alt Advisors: BEN was upgraded to Buy from Hold at TD Cowen and raised tgt to $27 from $21.50 citing building flow momentum, immunized WAMCO run-off risk, potential better operating leverage, and improving free cash flow conversion for the upgrade. KKR was upgraded to Overweight at Morgan Stanley as lean into risk after sooner/better than expected tariff de-escalation with China that reduces tail risk; says shares positioned to catch secular tailwinds across private markets.

• ALLO was downgraded to Market Perform from Outperform at Citizens after earnings and provided corporate updates, including the push-out of the LD selection and futility analyses to 1H26 previously mid-2025).
• EXEL reported Q1 adj EPS $0.62 above consensus est. $0.44; Q1 revs $555.4M vs. est. $500.96M; said based on strong first quarter dynamics of CABOMETYX, they are increasing FY25 guidance for net product revenues and total revenues by $100M to $2.25B-$2.35B, from $2.15B-$2.25B.
• GSK said it will acquire liver-disease treatment efimosfermin from Boston Pharmaceuticals for up to $2 billion to expand its portfolio. GSK said that it will pay the U.S. biotech company $1.2 billion up-front, and that the deal includes potential success-based milestone payments of $800 million.
• GRAL shares fall on results as revs fall short of consensus; Q1 EPS ($3.10) vs est. ($4.09), adj EBITDA ($98.7Mm) vs est. ($91.35Mm) on revs $31.8Mm vs est. $35.2Mm; reiterated its full year 2025 guidance.
• INCY and NVS entered into settlement agreement with respect to litigation initiated by Novartis as INCY to pay Novartis $280M in royalty settlement; royalty rate on Jakafi sales in U.S. reduced by 50% from 2025 under settlement agreement; says reduced royalty payable for Q1 2025 about $14.9M – SEC filing
• NVO said that it will work with the biotech SEPN to develop oral GLP-1 obesity drugs. Under the deal, Septerna, which specializes in making small molecule drugs, is eligible to receive about $2.2B from Novo, including more than $200M in upfront and near-term milestone payments.
• In Medical Equipment: OMCL was upgraded to Overweight from EW at Wells Fargo and raised PT to $35 from $31 on attractive risk/reward saying while OMCL faces bookings & tariff pressures, 2025 may be a ‘max pain’ year as trade deals and strengthening robot demand could be positive catalysts for 2026. ALC shares fell early as results miss; Q1 EPS $0.73 vs. est. $0.76; Q1 revenue $2.45B vs. est. $2.52B; cuts FY25 EPS view to $3.05-$3.15 from $3.15-$3.25 (est. $3.24); raises FY25 revenue view to $10.4B-$10.5B from $10.2B-$10.4B.

• Smartphone shipments to the U.S. surged 30% in March as manufacturers Apple, Samsung and Motorola rushed to bring more devices into the country in anticipation of steep import tariffs, Counterpoint Research said on Wednesday. Apple alone airlifted a record $2B worth of iPhones from India in March, leveraging India
• Databricks said it would buy database startup Neon in a deal valued at about $1 billion, aiming to strengthen its analytics platform with technology that can help develop and use artificial intelligence agents more easily.
• PERI was upgraded to Buy from Neutral at Roth and raised its price target to $14 from $9 saying believes the business has turned the corner and is positioned for a return to positive y/y comparisons, with growth acceleration accompanied by margin expansion.
• In Telecom/Communications: ADTN last night said files non-timely 10-q with U.S. SEC; notes plans to restate consolidated financial statements as of and for years ended December 31, 2024, and December 31, 2023

• ARM gained ground on AMD and INTC in the microprocessor market last quarter, according to Citi. Drawing on estimates from Mercury Research, Citi said Arm’s share of the processor market expanded to 13.6% in Q1 from 11.8% in Q4’24. Those gains ate into Intel and AMD’s slices of the market. Intel’s share fell 182 basis points to 65.3% in the first quarter, the lowest since Citi began modeling the industry in 2002. Meanwhile, AMD’s share decreased quarter over quarter to 21.1% from 22.1%, the Citi analysts found
• NVDA continues its bounce, helped after yesterday’s announcement the company was partnering with Saudi Arabia’s state-backed Humain on a 500-megawatt data-center project. Nvidia said the project would be powered by several hundred thousand of its most advanced graphics-processing units over the next five years. It was announced AMD also would be supplying semiconductors to Humain in a $10 billion project.
• SMCI shares surged as announced a $20 billion+ multi-year partnership with Saudi Arabia-based DataVolt during the Saudi-U.S. Investment Forum in Riyadh. The deal focuses on accelerating the adoption of rack-scale total liquid cooling IT solutions for AI data centers.