Mid-Morning Look

Wednesday, April 16, 2025

After a brief 2-day rally was stopped in its tracks yesterday, U.S. stocks are weaker again today, pulling back amid weakness in technology stocks, and ongoing uncertainty related to tariff impacts on a global scale. US futures overnight bounced off lows after China expressed openness to trade talks with the U.S., but under certain conditions. Beijing wants the Trump administration to show more respect, including curbing disparaging remarks from officials. The news provided a brief bounce before headlines out of tech weighed again. Technology stocks are the biggest drags on markets/sentiment to start the day, led by declines in AMD, NVDA and ASML. NVDA and AMD shares tumbled on chip export restrictions to China as NVDA announced it is set to take a $5.5B charge after the U.S. restricted exports of its H20 AI chips to China and other markets. The restriction also impacts AMD‘s MI308 artificial intelligence chips to China as AMD said expects these export controls to result in charges of up to $800 million. Reuters notes China generated $17B in revenue, or 13% of Nvidia’s total sales, in its last fiscal year. Also, equipment names fell as ASML Q1 net bookings missed estimates at 3.9B euros; said that tariffs were increasing uncertainty around their outlook for 2025 and 2026 but maintained its annual guidance. Thew news has the SOX index down -3.5% this morning to around 3,880.

Gold prices making fresh all-time highs this morning as the Tariff standoff continues, with June futures rising more than 2.7% to $3,325 (hit high $3,334.20 an ounce). In other trade talk news, Japan is set to begin tariff negotiations with the United States in Washington on Wednesday. Trump said he would personally attend the meeting. “Japan is coming in today to negotiate Tariffs, the cost of military support, and ‘TRADE FAIRNESS’,” he said in a post on Truth Social. Japan has been hit with 24% levies on its exports to the United States although these rates have, like most of Trump’s tariffs, been paused for 90 days. But a 10% universal rate remains in place as does a 25% duty for cars, a mainstay of Japan’s export-reliant economy. Oil prices rise on potential for US-China talks, Iraq output cut plan.

• March industrial output declined -0.3% vs. consensus drop of -0.2%; the March capacity utilization rate was reported at 77.8% vs. consensus 78.0% and March manufacturing output +0.3% (in-line w/ consensus +0.3%).
• Feb Business Inventories rose +0.2%, in-line with consensus and vs January +0.3%; Feb inventory/sales ratio 1.35 months’ worth vs Jan 1.36 months; Feb business sales +1.2% vs Jan -0.6%.
• April NAHB Housing market index jumps to 40 vs. consensus 37 and above the 39 reading in March; April index of current single-family home sales 45 versus 43 in March (previous 43); April index of home sales over next six months 43 versus 47 in March (previous 47).

• In Machinery: Morgan Stanley upgraded CAT to Equal Weight from Underweight and URI to Overweight from EW but still see weaker non-resi backdrop. The firm downgraded AGCO, REVG to Underweight from EW, and PCAR to EW from Overweight to account for cross winds of macro uncertainty and idiosyncratic headwinds. Ahead of the quarter, Morgan Stanley Q1 EPS is ahead of consensus for 3 stocks, in-line for 6, and below for 10, suggesting risk/rewards are skewed to the downside across the group overall. Morgan views construction equipment OEMs (CAT, TEX, OSK) as having the most downside risk in a recession scenario and views Commercial Vehicles (PCAR, CMI, ALSN, REVG) as most at risk of surprising negatively in CQ125.
• In Defense sector: Morgan Stanley upgraded LMT to Overweight from Equal Weight and downgraded GD to Equal Weight (from OW) and named NOC as their top pick in defense. The firm upgraded Defense to Attractive from In-Line as contemplate a $1 trillion US Defense Budget and potential for increased international exports. The firm said they prefer Defense primes to Government Services companies and initiate coverage of Amentum (AMTM) and V2X (VVX) with a relative Underweight rating. The firm said they see accelerated Defense imports as a ripe oppty for countries to potentially ease their relative trade imbalances with the US.
• In Oncology/Biotech, President Trump issued an executive order pushing for 13 years for small molecules before Medicare Price cut eligibility, vs 9 years currently, seen as a boost for oncology companies. Currently, small molecules are at a disadvantage vs biologic – biologics have 13 years after approval before price cut eligibility, vs only 9 years for small molecules.

• ALV +7%; after earnings as Q1 adj EPS $2.15 above consensus $1.67; Q1 revs $2.578B vs. est. $2.51B; guides FY25 organic sales growth was up 2%; around 3% negative FX effect on net sales.
• HTZ +16%; after Pershing Square Capital disclosed 12.7m share stake in the car rental company.
• ICAD +67%; to be acquired by RDNT for $3.61 per share in $103M deal; iCAD stockholders will receive 0.0677 shares of RadNet common stock for each share of iCAD common stock they hold.
• MP +11%; President Trump signed an executive order for a Commerce Department investigation into critical mineral supply chains and methods to boost US production while cutting reliance on imports. The latest order covers rare earth elements, uranium as well as processed critical minerals and derivative products.
• NEM +3%; as gold miners surge (AU, AEM, GOLD etc.) with gold prices making new all-time highs.
• PERI +9%; posted upside to Q1 estimates saying it expects revenue/AEBITDA of $88M/$1.5M vs consensus $83.7M/$0.8M as growth engines (DOOH, CTV) drove the upside.
• TRV +3%; reported adj EPS $1.91, handily topping the $0.79 consensus as revs rose 5% y/y to $11.8B above the $10.84B estimate as net written premiums rose 3% to $10.515B; noted Catastrophe losses came to $2.266 billion pre-tax, which weighed on adj income.

• ASML -6%; Q1 net bookings missed estimates at 3.9B euros ($4.4 billion) vs. ests 4.89B euros; said that tariffs were increasing uncertainty around its outlook for 2025 and 2026 but maintained its annual guidance; guided Q2 sales of 7.2B-7.7B euros, vs. analysts’ expectations of 7.73B.
• IBKR -10%; shares fell as margin balances declined ~12% into April and net interest income (NII) came in a bit light vs. consensus at $770M, rising 3.1% y/y, along with an EPS miss ($1.88 vs. $1.91) while positive included total customer accounts 3.62M, +8.4% q/q, announced a 4 for 1 stock split and raised its dividend.
• JBHT -7%; as Q1 profit falls 7.6% on higher costs, contract service weakness, though EPS and revs did top consensus (Q1 EPS $1.17 vs. est. $1.14; Q1 revs fell -1% y/y to $2.92B vs. est. $2.9B); results were slightly better than expected on stronger than anticipated results in the intermodal segment.
• NVDA -6%; after US blocked the chip maker from selling H20 chips to China which NVDA reported will lead to a $5.5B write-down.
• WIT -4%; after reporting Q4 consolidated revenue rose 1.3% to 225.04B rupees ($2.63B) vs. analyst ests at 226.21B rupees; net profit for the quarter rose 26% to 35.7B rupees, compared with analysts’ mean estimate of 33.38B rupees.