Mid-Morning Look

Monday, April 07, 2025

Absolute market madness to kick off the trading week! U.S. stock markets opened significantly weaker (down between 3-5%), on track for its worst 3-day decline since 1987 until reports on major newswires citing White House economist Kevin Hassett saying President Trump is considering a 90-day pause in tariffs for all countries except China. Those “supposed” headlines turned markets higher on a dime, ripping more than 300 points in the S&P and more than 1,300 points for the Nasdaq Composite. However, the S&P 500 quickly reversed off highs, back down -1% after CNBC noted that White House officials not aware of Trump considering a 90-day pause in tariffs for all countries except China. CNBC Eamon Javers followed up around 10:35 after speaking to CNBC White House press secretary Levitt she called the report on the 90-day pause headlines “fake news” prompting a pullback off highs. The moves today in stock, bond, Treasury and crypto markets are hard to fathom, moving more like “meme” stocks than key indexes/markets. The S&P 500 (SPX) hit highs 5,246 off lows 4,835, the Nasdaq highs 16,292 off lows 14,784, the 10-yr Treasury yield off lows of 3.88% vs. highs 4.2%, Bitcoin lows of $74,500 to highs above $81,000 in chaotic opening hours of trading. Global markets tumbled overnight after last week’s carnage due to President Donald Trump’s sweeping tariffs announcement with 10% near-universal levies into effect as scheduled on Saturday and country-specific duties, which were larger than expected, to kick in Wednesday. If the S&P 500 were too close today around 4,915, the broad market index would be in “bear market” territory, joining the Nasdaq Composite and Russell 2000 which have already dropped more than 20% of highs.

In Wall Street economist/strategy calls: 1) Goldman Sachs raised its 12-month US recession probability to 45% from 35% while cut its 2025 GDP forecast to +0.5%; the firm forecasts 130bps of rate cuts in 2025 vs 105bps prior view saying if the US economy falls into recession, the Fed could slash rates by ~200bps over the next year. 2) Bank America said tariffs could cut 2025 S&P 500 earnings by ~10%; said U.S.-China tariffs and retaliation alone may hit earnings by ~9%, with Canada adding ~1%. The EU also plans countermeasures. Assuming flat growth, 2025 EPS is expected to be around $250. The S&P 500 target is lowered to 5,600 (range: 4,000–7,000) with a higher discount rate. 3) JPMorgan cut S&P 500 target to 5,200 from 6,500, putting the worst case at 4,000. 4) Evercore reduces their S&P 500 Price Target to 5,600 (from 6,800) and reduces 2025 EPSe to $255 (from $263).

Asian markets were hit hard last night, as the region was “a sea of red” as President Trump rejects market rout concerns and says tariffs will make America wealthy. Chinese stocks were particularly hard hit, with the Hong Kong tech gauge down 14% and the Hang Seng 10% lower. The Shanghai Composite and CSI 300 both slip more than 6%. Taiwan’s Taiex, coming off a holiday, tumbles near 10%.

• In Discount Stores: DLTR was upgraded from Neutral to Buy at Citigroup and DG to Neutral from Sell. For DLTR, says with ~50% of its product subject to significantly higher tariffs, the market reaction and investor instinct was extremely and unsurprisingly negative…but believes this higher-tariff-across-the-board environment is going to be positive for DLTR. For DG, in the near-term DG does not have the same tariff risk as most others in retail universe and may benefit from consumers trading down. JP Morgan upgraded FIVE to Neutral from Underweight with shares down -45% since September and models ests above the Street.
• In the Chemicals sector: UBS upgraded AXTA to Buy from Neutral (tgt to $40 from $42) as Axalta shares near pricing in its downside scenario already. About 35% of the company’s sales are linked with light and commercial vehicle production, but only half of this is for North America, which on an EBITDA basis is only 10% of total Axalta sales. LYB was downgraded to Sell from Neutral at UBS (tgt to $51 from $76) saying while demand has been weak for nearly two years, the company’s earnings are now getting more pressured by higher costs and continued new global supply. Piper downgraded shares of ASIX and MEOH and cut tgts and ests on nine chemical names (ASIX, CE, DOW, EMN, KWR, LYB, MEOH, OLN, WLK) saying tariffs instituted by the US and the likely retaliation and peripheral economic fallout from those tariffs have the potential to create long-lasting complications for the US chemical industry.

• MESA +42%; and Republic Airways agreed to merge in an all-stock deal, the companies said, in a move that would give them a larger fleet and boost efficiency in regional flying and crew management.
• QGEN +4%; guides Q1 2025 preliminary net sales rise 7% CER and adjusted diluted EPS results of at least $0.55 CER both above outlook despite challenging macro environment; FY25 adj diluted EPS outlook raised to about $2.35 CER (vs. prior outlook about $2.28 CER).
• NMAX +13%; as the recent IPO remains very volatile.
• ROKU +4%; was upgraded from Neutral to Buy w/ $100 PT at Redburn saying Roku has reached a level of financial maturity where it can now be valued on EBITDA and FCF multiples, for the first time providing a valuation floor to the stock.
• RYTM +2%; said its drug Imcivree notably reduced weight in patients with a rare obesity disorder caused by damage to the brain, meeting the main goal of a late-stage trial.

• HWM -5%; after the airplane supplier said it may halt some shipments if they are impacted by tariffs announced by U.S. President Donald Trump.
• LLY -5%; along with weakness in other obesity drugmakers (NVO, ALT, VKTX) after the Trump administration decided against allowing Medicare to pay for obesity drugs.
• MSTR -10%; after saying they expect to report a loss for Q1 and warned of more losses to come as the value of its Cryptocurrency holdings falls; noted it notched $5.91B in unrealized losses on its digital assets for the quarter that ended March 31.
• SLB -5%; extended declines in energy complex after the XLE declined over -14% last week; weighs on rest of energy sector on the day.