Closing Recap

Thursday, May 15, 2025

U.S. stocks bounced nicely off morning lows, trading to highs of the month as the S&P 500 took out this week’s prior high, topping 5,900 (hit high of 5,924.21), rising for the 6^th time in the last 7 days (up 6% this month). The move follows a recent 9-day win streak at the end of April into early May and adding to the more than 1,100-point advance from the April 7^th lows (what a wild move). The Nasdaq Composite rebounded nearly 200 points off the morning lows before slipping late afternoon but remained up 9.5% this month paced by mega caps and a rebound in the AI related trade (see below). Ten of eleven S&P sectors finished higher, led by defensive names Utilities (XLU), Consumer Staples (XLV) and REITs (XLRE), boosted by a pullback in Treasury yields after topping around 4.54% this morning (but ended around 4.44%). On the macro front, heavy does of economic data today (more below), quiet on the trade/tariff news after deals/announcements earlier in week with China and Middle East visits/investment deals later in week. Next up on the agenda, expected tax cut headlines from the White House. Markets have rallied between 4%-6% this week heading into option expiration tomorrow where Goldman Sachs noted they estimate that over $2.8 trillion of notional options exposure will expire tomorrow (05/16), including $1.2 trillion of SPX options and $580 billion notional of single stock options. This option’s expiration will be the largest May expiration on record.

Treasuries rallied (sending yields lower) following generally weaker economic data, which support concerns over the economy on tariff uncertainties. The 2-year yield fell back below 4%, and the 10-year rate is -7 bps lower at 4.457%, below the 4.50% mark. Implied Fed funds remain little changed; however, the market is pricing in just two cuts this year beginning in September. Other big stories today included strength in footwear retail after DKS agreed to buy FL in $2.4B deal and better earnings from BIRK, BOOT; UNH extended declines on WSJ report it is under criminal investigation; WMT slumped after warning of higher prices due to tariffs; BABA fell on results; CSCO up on earnings.

The AI trade is back, helping propel the Nasdaq Composite more than 25% off its April lows now, led by the likes of NVDA, data center names and other chip players. The AI trade got an additional boost in recent days on reports Saudi Arabia and the Gulf countries are the next leg to the AI boom. Saudi Arabia and Nvidia/AMD to build AI factories to power next wave of intelligence for the age of reasoning as SDAIA to deploy 5,000 Blackwell GPUs and Humain to invest in AI factories with 500 mw capacity over next 5 years. Saudi also announced a $20B+ multi-year partnership with Saudi Arabia-based DataVolt during the Saudi-U.S. Investment Forum in Riyadh. Today, Qatar wealth fund plans to invest $500B in US over 10 years (didn’t specify invest plans). Trump also said today that he thinks the AI project with UAE will be special. This followed news during the Q1 earnings season from likes of META, MSFT, CSCO that they were not cutting spending in AI, which kicked off the rebound for the AI space, lifting names like AMD, AVGO, data centers DELL, VRT, SMCI, and power names NRG, OKLO, SMR bounce.

Investor sentiment weekly readings showed: 1) This week’s NAAIM Exposure Index reading declined to 70.56, falling from last week’s 81.06 – recent peak of 99.24 from 12/11 – recent trough from 4-17 of 35.16 – Last Quarter Average (Q1) of 72.50. 2) The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -8.5 vs -22.1 last week as Bulls rose to 35.9% from 29.4%, Neutrals rose to 19.7% from 19%, while Bears fall to 44.4% from 51.5%. 3) Daily Fear & Greed Index: 71/100 – Greed and Crypto Fear & Greed Index: 70/100 – Greed. The Atlanta GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 is 2.5% on May 15, up from 2.3% on May 8.

• Philadelphia Fed business conditions for May fell an improved -4.0 (vs. consensus -11.0) and vs April -26.4; the Philly Fed prices paid index for May rises to 59.8 vs April 51.0, new orders index for May improved to 7.5 vs April -34.2 and the employment index May 16.5 vs April 0.2; the six-month business conditions for May 47.2 vs April 6.9 and the six-month capital expenditures outlook 27.0 vs April 2.0
• Weekly Jobless Claims unchanged at 229,000, in-line with consensus and prior week as the 4-week moving average climbed to 230,500 from 227,250 prior week; continued claims climbed to 1.881M from 1.872M prior week (prev 1.879M) and the U.S. insured unemployment rate unchanged at 1.2%.
• The NY Fed’s Empire State current business conditions index -9.2 in May (vs. consensus -10.0) vs -8.1 in April; the new orders index +7.0 in May vs -8.8 in April; prices paid index rises to +59.0 in May vs +50.8 in April and the employment index at -5.1 in May vs -2.6 in April.
• U.S. retail sales growth slowed in April, edging up 0.1% h after an upwardly revised 1.7% surge in March, the Commerce Department’s Census Bureau said. Economists had forecast retail sales, which are mostly goods and are not adjusted for inflation, unchanged after a previously reported 1.5% jump in March. Estimates ranged from a 0.6% decline to a 0.4% gain.
• April industrial output unchanged (consensus +0.2%) vs March -0.3% (previous -0.3%); U.S. April mining output -0.3% (March +1.1%), utilities output +3.3% (March -6.2%); U.S. April capacity use rate 77.7% (consensus 77.8%) vs March 77.8% (previous 77.8%). U.S. April manufacturing output -0.4% (consensus -0.2%) vs March +0.4%.
• U.S. March Business Inventories +0.1% (vs. consensus +0.2%) vs Feb +0.2%; U.S. March inventory/sales ratio 1.34 months’ worth vs Feb 1.35 months; U.S. March business sales +0.7% vs Feb +1.0% (prev +1.2%).
• May NAHB Housing market index 34 (consensus 40) versus 40 in April (previous 40); the index of current single-family home sales 37 versus 45 in April (previous 45); index of home sales over next six months 42 versus 43 in April (previous 43); index of prospective buyers 23 versus 25 in April (previous 25).

• Gold prices recovered from overnight losses, rising $38.30 or 1.2% to settle at $3,226.60 an ounce. Treasury yields hit a peak of 4.54% this morning before easing as low as 4.44% this afternoon, down 8bps on the day while both the long and short end of the curve saw yields slide. Bitcoin prices dropped back below $103,000while the dollar index (DXY) slipped slightly.

• In Apparel & Footwear: DKS agreed to buy smaller rival FL for $2.4B, an 86% premium to yesterday’s close as shareholders to receive $24 per share of Foot Locker. https://tinyurl.com/mrxasb2t (follows recent sneaker buyout of SKX, which agreed to sell itself earlier this month for $9.4 billion to 3G Capital) 0 DKS shares tumbled on deal. BOOT shares rallied despite a miss, (EPS $1.22 vs. est. 41.24 and comps +6% vs. est. +7.3%) as posted better margins of 37.1% vs. est. 36.5% and comp trends the last 2.5 months have accelerated; BIRK reported Q2 revs EU574.33M vs. est. EU567.6M and Q2 adj EBITDA EU200M vs. est. EU192.5M and said it plans to raise prices globally to fully offset the impact of the U.S. tariff of 10% on European Union-made goods, though notes the tariff rate after July 9, when the reprieve ends, is "extremely hard to predict".

• In Online delivery/services: IBTA reported Q1 results, whereby revenue came in 3% above consensus and EBITDA came in ~20% above consensus, while Q225 revenue and EBITDA guidance bracketed consensus.

• In Solar: NXT reported strong q4 results ahead of expectations and introduced FY26 guidance. Quarterly results benefited from strong execution, robust demand, and favorable sales mix, which skewed more heavily toward the U.S., all supported by a resilient backlog. CSIQ posted a Q2 EPS loss $34M compared with a profit of $12.4M a year ago; sees Q2 revs to be in range of $1.9B to $2.1B vs. est. $1.76B and for FY, sees total revs in range of $6.1B to $7.1B vs. est. $7.4B. Solar space in general was mixed today however.
• In Pipelines/MLPs: A group of indigenous communities in Western Canada will grab a stake in a key ENB natural gas pipeline. The Canadian energy company said Stonlasec8 Indigenous Alliance Limited Partnership, which currently represents 36 first nations groups in British Columbia, will invest 715M Canadian dollars, equivalent to about $511M, for a 12.5% interest in the Westcoast gas pipeline system. NFE shares tumble as the company missed on Q1 EBITDA amid weak volumes through core terminals in Puerto Rico and Brazil (reported Q1 EPS ($0.73) vs est. ($0.06), adj EBITDA $82Mm vs est. $231.8Mm on weaker revs).

• In Credit Cards: COF April domestic credit card net charge-offs rate 5.66%, Financial-30+ day performing delinquencies rate for domestic credit card 3.95% at April end, April auto net charge-offs rate 1.01%, and 30+ day performing delinquencies rate for auto 4.86% at April; DFS credit card delinquency rate 1.72% at April end and credit card charge-off rate 2.55% at April end. Citigroup Inc (C) said credit card charge-offs 2.70% in April and Citigroup Inc and credit card delinquency rate 1.41% at April end.
• In Asset Managers: Barclays’s noted the WSJ reported Empower, which oversees ~$1.8T in 401k-type assets which will allow private investments in retirement portfolios, with APO, PGHN, and BEN named among 7 total firms). While not the first, given Empower’s size (~$1.8T in 401k assets), views this as a positive for space. ARES and HLNE both downgraded to Perform from Outperform at Oppenheimer, noting shares have exceeded its prior targets and are at or above its modeled fair value.
• In FinTech: DLO shares jumped after results; as Q1 EPS $0.15 vs. est. $0.12; Q1 revs rose 18% y/y to $216.8M vs. est. $210.8M; announced a first-quarter net profit of $46.63M, more than doubling from a year earlier; Q1 gross margin 39%; Q1 Total Payment Volume reached a record $8.1B, up 53% y/y. FI shares tumbled after comments at JPM conference saying expect Q2 Clover volume growth to mirror Q1 (8%). hey noted a headwind from gateway conversion peaking in Q2, which is anticipated to ease in Q3.

• The House Energy and Commerce Committee voted Wednesday to advance the healthcare portion of the GOP tax bill in a 30-to-24 party-line vote. The bill now heads to the House Budget Committee, which will meet Friday morning to combine it with legislation from other committees advancing Trump’s priorities — namely the extension of tax cuts and new tax breaks for tips and overtime.
• BHVN shares fall after the FDA extended the Prescription Drug User Fee Act (PDUFA) date for the company’s troriluzole application by three months as now expects an FDA decision in the fourth quarter. The FDA’s Division of Neurology 1 also informed the company that it plans to hold an advisory committee meeting, but no date has been scheduled. The FDA didn’t raise any new concerns in its letter.
• ISRG announced the promotion of President Dave Rosa to Chief Executive Officer, effective July 1, 2025. At that time, current CEO Gary Guthart will become the executive chair of Intuitive’s Board of Directors, and current Board Chair Craig Barratt will become lead independent director.
• MRK announces phase 3 KEYNOTE-B96 trial met primary endpoint of progression-free survival (PFS) in patients with platinum-resistant recurrent ovarian cancer whose tumors expressed PD-L1 and in all comers; the study also met secondary endpoint of overall survival (OS) for patients whose tumors express PD-L1.
• TXG announces patent litigation settlement agreement with BRKR; expects Bruker to pay $68M in equal qtrly installments between Q3 o 2025 & Q2 2026.

• In Machinery/Ag sector: DE cut the lower end of its annual profit forecast saying they see annual net income to now be between $4.75B-$5.5B, compared to its prior forecast of $5B-$5.5B citing softer demand for its tractors from farmers opting to rent machines instead; had reported Q2 revs $12.76B topping the consensus of $10.79B and EPS of $6.64 vs. est. $5.58 and net income $1.8B vs. est. $1.515B.
• In Aerospace & Defense: Emirates is in talks with Musk’s SpaceX to get Starlink on flights – Bloomberg; in defense, LMT shares rise after President Trump said the U.S. is examining possible development of twin-engine warplane to be known as F-55, as well as upgrade to its LMT-made F-22 Raptor called F-22 Super; NASA awards launch service task order for Aspera’s galaxy mission to RKLB with max contract value $300M.

• In AI/Data Center news: CRWV reported Q1 revenue of $982M was 15% above the consensus estimate, increasing 420% y/y as demand for the company’s Cloud Platform continues to accelerate but shares slipped after saying is looking to spend $20B-$23B this year on AI infrastructure and data center capacity; said now expects 2025 revenue growth >160% Y/Y%, materially above the Street’s +140% forecast. Kerrisdale Capital tweeted this morning it was long STX an AI & data center play, operating in a duopoly, growing 30%+, a technological generation ahead of its rival, trading at 11x ‘26 P/E
• In IT Services & Consulting: DXC shares tumbled as reported a solid quarter with revenue and adj. EPS above Street estimates, as well as showing improvement in its book-to-bill, but given an uncertain macro and its mix towards larger products, issued weaker guidance as sees Q1 revs $3.04-3.09B vs est. $3.118B, adj EBIT mgn 6.0-7.0% and adj EPS $0.55-0.65 vs est. $0.77 and lower year outlook. DT reported better Q4 results and gave FY26 guidance for total revenue, ARR, operating income, and FCF that were all above Street consensus.
• In Software: KVYO 11M share Secondary priced at $34.00; RBRK was downgraded to Neutral from Outperform at Mizuho but raised tgt to $86 from $75 noting shares have appreciated a material 165% since its 2024 IPO and 29% YTD, and with the shares at all-time highs, Mizuho now views it as fairly valued; CRWD was also downgraded to Neutral at Mizuho saying recent checks have moderated while some potential risk factors have emerged, and yet the shares have been remarkably robust. Cybersecurity firm Proofpoint to buy European rival Hornetsecurity for $1B as it eyes IPO https://tinyurl.com/5b84a8m8
• In Semis: sector slipped -0.57%, but there were a few bright spots; ASMIY says it plans to pass on any cost increases related to tariffs to its value chain, including customers, its CEO and finance chief told Bank of America in a meeting. ASMIY is Europe’s second-largest supplier of semiconductor equipment; ASM makes wafer fab processing equipment which is a key to chipmakers; competes with players such as AMAT, LRCX and most exposed to US markets among peers ASML.