Mid-Morning Look

Tuesday, February 18, 2025

U.S. stock futures were higher overnight but have since pared gains as remain mixed/little changed ahead of a busy week of earnings, FOMC meeting minutes, economic data, and as markets keep close eyes on Ukraine/Russia peace possibility as well as any comments from White House on further trade/tariffs headlines. Early leaders include Energy (XLE)m Industrials (XLI) and Utilities (XLU) while communications (XLC) and Consumer Discretionary (XLY) lag; crypto stocks slide behind a pullback in Bitcoin while gold prices extend its move higher to fresh record levels. The yield on the benchmark 10-year Treasury notes briefly dipped then pushed higher after the New York Fed’s February Empire State business conditions index came in at a stronger-than-expected 5.7, versus -12.6 in January. April gold prices +0.9% or $26 to $2,927 an ounce (off recent intraday highs $2,968.50). Goldman Sachs Group Inc. raised its year-end gold target to $3,100 an ounce on central-bank buying and inflows into bullion-backed exchange-traded funds.

Oil futures edged higher as OPEC+ considers delaying output increases and Kazakhstan’s crude exports through Russia were slowed by a Ukrainian drone attack. Also, top US and Russian officials started meeting in Saudi Arabia on Tuesday to discuss how to end the war in Ukraine. US Secretary of State Rubio, NSA Waltz, Middle East envoy Witkoff represent Washington, while Moscow has sent Foreign Minister Lavrov and aide to President Putin Ushakov. Washington has insisted the talks do not represent the start of negotiations but said they had been organized to see whether Russia was “serious” about ending the war. Russian President Putin has already demanded that Ukraine withdraw its troops from the four annexed regions and renounce its bid to join NATO as part of any prospective peace deal. Ukraine President Zelenskyy has said his country will not recognize any agreements reached from talks it is not involved in.

Bank America said in its global fund manager survey that investor “cash levels are at 15-year lows as investors bullish, long stocks. Bank America said cash levels (3.5%) plunge to the lowest since 2010 and equity investors rotate to bond sensitives & Europe as 82% say no recession, 77% expect Fed cuts, US exceptionalism peaks (89% say US stocks overvalued), and trade war seen as no more than a (#1) tail risk. Fear of global recession at a 3-year low, 52% expect soft landing for global economy, 36% no landing, 6% hard landing; optimism on rates in ’25 endures, 27% expect one Fed rate cut in ’25, 51% expect two or more cuts, vs 1% saying Fed hikes. On Asset Allocation: Overweight stocks (35%), UW bonds (11%), UW cash (2stdev below average); Says investors “long Mag7” remains #1 most crowded trade; but best performing asset classes in ’25 now ranked global stocks (34%), gold (22%), US equities (18%), and best performing equity indices now ranked EuroStoxx (22%), Nasdaq (18%), Hang Seng (18%)… shows peak in investor conviction of US exceptionalism.”

• U.S. February NAHB Housing market index 42 (below consensus 47) versus 47 in January; the index of current single-family home sales 46 versus revised 50 in January (previous 51); index of home sales over next six months 46 versus revised 59 in January (previous 60); index of prospective buyers 29 versus revised 32 in January.

• In Consumer Finance: Monthly Master Trust card data shows BAC credit card delinquency rate was 1.48% at January end and credit card charge-off rate were 2.43% in January; COF January net charge-offs 6.12% vs. 5.71% y/y and said delinquencies 4.61% vs. 4.78% y/y; DFS January credit card delinquency rate 1.80% and credit card charge-off rate 2.63% at Jan end – SEC filing; JPM credit card delinquency rate 0.88% at January and credit card charge-off rate 1.64% in January.
• In Health Services: HIMS was downgraded to Equal Weight from Overweight at Morgan Stanley saying that while it continues to have a favorable view of the Hims & Hers platform, the strong momentum in the company’s business is now adequately appreciated in the shares. WGS shares rose after guiding FY25 revenue $350M-$360M, above consensus $338.77M and growth in exome/genome volume and revenue of at least 30%; Adjusted gross margins between 65%-67%. NEO shares tumbled on results as Q4 revs fall just short of consensus while backs its year revs and Ebitda outlook.

• ETR +6%; Q4 profit topped estimates (EPS $0.66 vs. est. $0.64) citing lower operating expenses and higher electricity demand (expenses fell to $2.07B from $2.47B y/y) and forecast its full-year 2025 profit between $3.75-$3.95 per share vs. est. $3.91.
• HEES +13%; said it received a superior proposal from HRC in an offer that includes $78.75 cash and 0.1287 Herc shares per H&E share (total $104.89 per share); URI said it will no longer pursue the acquisition of HEES and will restart its repurchase program (HEES to pay $63.5M termination fee to URI).
• INTC +10%; after the Wall Street Journal reported that TSM and AVGO are mulling potential deals that would break the US chipmaking giant in two. https://tinyurl.com/ms8wv9m7
• SLDB +48%; reported initial results from a study of its experimental gene therapy for Duchenne muscular dystrophy, showing increases in a lab-made version of the dystrophin protein and improvements in muscle and heart-related biomarkers.
• SMCI +13%; among top gainers in the S&P 500 early on, adding to gains last week post earnings.
• STZ +3%; after Warren Buffett’s Berkshire Hathaway disclosed new investment in the company after market close on Friday as purchased 5.62M shares in Q4 as the stake worth $1.24B as of filing.
• WGS +29%; after guiding FY25 revenue $350M-$360M, above consensus $338.77M and growth in exome/genome volume and revenue of at least 30%; Adjusted gross margins between 65%-67%.

• BLKB -9%; reported mostly in-line Q4 results for EPS/revs but shares fell on disappointing guidance as sees FY25 EPS $4.16-$4.35, below consensus $4.67 and guides FY25 revenue $1.115B-$1.125B, vs. consensus $1.21B.
• CAG -7%; after cutting its year EPS view to $2.35, below prior view of $2.45-$2.50 citing supply constraints and foreign exchange rates saying they experienced interruptions in customer service for frozen meals containing chicken and vegetables in Q3 due to supply issues on two product platforms
• FLR -7%; shares fell after saying they swung to a Q4 profit after revenue rose, but adj EPS of $0.48 missed the consensus estimate of $0.78 (revs rose to $4.26B from $3.82B y/y but below ests $4.42B); said results include equity method earnings of $2.11B; guided year EPS $2.25-$2.75 for 2025, below consensus $2.91.
• MDT -8%; beat Wall Street estimates for quarterly profit on strong demand for its heart and diabetes devices but only maintained its annual profit forecast unchanged in the range of $5.44-$5.50 per share.
• RCUS -15%; shares slipped after their 13.6M stock offering priced $11 each, a 16% discount to last close as the co-plans to use gross proceeds of ~$150M to develop its experimental kidney cancer drug and for other purposes.
• RSI -4%; after the Co noted in filing Colombian President Petro issued a temporary decree on 1/24 imposing a 19% Value-Added Tax (VAT) to be collected on player deposits made in the country with operators of games of chance and luck operated over the Internet.