Mid-Morning Look

Monday, March 03, 2025

U.S. stocks opened sharply higher to start the trading day, week and new month, adding to the late day surge on Friday where major averages jumped in the final 30 minutes of trading to pare weekly losses…but stocks have pulled back since as several stock market concerns remain. One stock market fear remains tariffs, as Commerce Secretary Lutnick said Mexico/Canada have done a reasonable job on the border but notes there will be tariffs on Mexico/Canada on Tuesday but says President Trump will determine at what levels; China tariffs are set until they end fentanyl trafficking into the US (and China promising retaliatory tariffs). Meanwhile, Ukraine and USA tensions increase after Zelinsky left the White House without a US deal last week and spoke to EU leaders this weekend. On the data front, the Prices Paid component of the Feb ISM Manufacturing report came in at the highest level since June 2022 (per CNBC), raising further inflation fears as the reading jumped to 62.4 from 54.9 in January. Meanwhile new orders for February posted the biggest drop in new order since March 2022, falling to 48.6 from 55.1 in January adding to slowing growth concerns, Growth fears popped up again last Friday after Atlanta’s Fed Model forecast for Q1 GDP was revised to -1.5% (from prior +2.3%). Despite the rising inflation data/the slowing growth fears appear to be carrying more weight early as the US dollar and Treasury yields tumble, possibly on prospects the Fed may look to rate cuts to thwart economic slowing.

After Bitcoin dropped by 25% recently from $106K on 1/31 to $79K on Friday, prices jumped on Sunday more than 10% after President Donald Trump said that his recent executive order on digital assets directed his team to create “a Crypto Strategic Reserve” that will hold Bitcoin, Ethereum, and other Cryptocurrencies such as XRP, Dogecoin, Solana and Cardano. Bitcoin had has fallen 16% in the past week, its biggest weekly drop since the collapse of the FTX crypto exchange in November 2022. However, as stock markets slid on the open, Bitcoin prices rolled as well, paring gains to under $90,000. Lots of market uncertainty keeping stock markets choppy and volatile, including tariffs, growth, geo-political, policy, weaker GDP revision, retail sales, jobs and lower confidence. Recall the recent AAII survey dropped from 29.2% last week to 19.4% for bullish sentiment, the lowest reading since March 2023 (regional bank crisis) while the bearish sentiment exploded from 40.5% last week to over 60% now. April gold rose 1.7% to $2,897 an ounce after falling -3.5% last week following eight weeks of gains.

• January Construction Spending fell -0.2% M/M vs. consensus unchanged and vs Dec +0.5% (prev +0.5%); January private construction spending -0.2%, public spending +0.1%
• S&P Global February final manufacturing PMI at 52.7 (vs flash 51.6)

• In Food & Beverages: KR announced the departure of Chief Executive (CEO) Rodney McMullen after a board investigation of his personal conduct. The company did not disclose what the conduct was but said it was “inconsistent with Kroger’s Policy on Business Ethics”.  NOMD reported stronger-than-expected Q4 volume growth while EPS in the period were helped by FX tailwinds, and mgmt slightly boosted its FY25 EPS view. Deutsche Bank upgraded DEO to Hold from Sell as believes Diageo is fundamentally one of the best positioned companies in European staples and upgraded BUD to Buy from Hold as believes the company is steadily building a track record of strong delivery, despite prior exogenous challenges. CMG was upgraded to Overweight at Morgan Stanley and the price target was boosted to $70 saying unit growth is a clear strong suit for CMG, which should continue and support valuation, while says CMG will likely be a leader in deploying automation at substantial scale, in a way that restrains costs, drives margins and throughput.
• In MedTech: BSX announces an agreement to acquire the remaining stake of privately held SoniVie (had owned 10% prior); the transaction consists of an upfront payment of ~$360M for the 90% stake not yet owned and up to $180M upon achievement of a regulatory milestone. HOLX was downgraded to Hold from Buy at Argus citing a higher risk to the management’s FY25 outlook as the company has reduced its revenue guidance due to slower sales of mammography capital equipment.

• ASTS +2%; after the company signed an agreement with Vodafone to create a jointly-owned European satellite service business.
• CPRI 7%; shares bounced after Bloomberg reported Prada (PRDSY) is moving closer to buying Versace from Capri Holdings after agreeing to a price of nearly $1.6B, Bloomberg reports, citing people familiar with the matter. https://tinyurl.com/3njdtctn
• INTC +3%; shares climbed after Reuters reported NVDA and AVGO are running manufacturing tests with Intel, two sources familiar with the matter told Reuters. https://tinyurl.com/5n8ddfxs  
• MLCO +6%; was upgraded to Overweight at Morgan Stanley, but trim tgt to $6.70 from $7.50 noting the company has shown market share gains in Q4 and Q1, which could continue; also, Macau’s gaming bureau reported February gross revenue from games of fortune in the region was up 6.8% y/y to 19.744B patacas (also lifting shares of WYNN, LVS and other casinos).
• MSTR +4%; along with gains in other Bitcoin related stock movers COIN, HOOD, MARA, RIOT, CLSK, HUT, IREN, etc. after President Donald Trump said on Sunday that his recent executive order on digital assets directed his team to create “a Crypto Strategic Reserve”.
• PTGX +3%; and TAK said their experimental drug called Rusfertide achieved the efficacy goals of a Phase 3 study in patients with polycythemia vera, a type of blood cancer that causes the overproduction of red blood cells.

• FTAI -3%; downgraded from Buy to Hold at Stifel saying shares have had a wild ride as the stock rebounds from the “short attack” a few weeks ag that caused investors to focus on the sustainability of the aerospace margins.
• FTRE -14%; shares fell after guiding 2025 revs $2.45B-$2.55B, below consensus of $2.73B after Q4 revs missed consensus ($697M vs. est. $703.2M).
• KR -2%; as announced the departure of Chief Executive (CEO) Rodney McMullen after a board investigation of his personal conduct.
• NOVA -52%; after reported weaker Q4 results with Ebitda $9.68M vs. est. $164.9M and said to reduce annual cash costs by $70M; said substantial doubt exists regarding ability to continue as “going concern” for at least 1 year; hired a financial advisor to help manage certain aspects of debt management & refinancing efforts.
• RC -27%; after the company cut its dividend in half (to $0.125 from $0.25) and reported an unexpected Q4 loss of ($1.90) per share from (-$2.63) y/y but Wall Street had been expecting a profit of $0.15; (stripping out one-time items, the adjusted loss was (-$0.03) vs. est. $0.19).
• SEDG -5%; said Ariel Porat has taken a Personal Decision to step down as CFO.
• XPEV -5%; along with NIO, LI in the Chinese EV sector after monthly delivery data.