Mid-Morning Look

Tuesday, March 04, 2025

U.S. stock markets remain in “risk-off” sell-mode, as the S&P 500 drops to fresh 2025 lows, with the main focus for Wall Street and investors remaining the macro, tariff headlines, slowing US growth as well as Ukraine, Israel. Trump’s 25% tariffs for Canada/Mexico were implemented today and doubled 20% levy on China kicked in, sparking retaliation. Trade tensions weighed heavily in Europe, as the German DAX and FTSE 100 pulled back sharply overnight after hitting all-time highs the day prior, as Europe caught up with the US stock market downdraft on trade war fears. President Trump imposed 25% duties on Canadian and Mexican imports following a 30-day pause. He also implemented a second round of 10% duties on Chinese imports to increase the blanket tariffs on that nation to 20%. The moves drew fast retaliation from Canada, which brought in a sweeping package of counter-tariffs on US products, some with immediate effect. Canada said it will impose retaliatory tariffs on US imports from today, starting with 25% tariffs on C$30b of US imports, then 21 days later an additional C$125b of US imports and will remain in place until the US trade action is withdrawn. China imposed tariffs of up to 15% on a raft of U.S. farm products, including trading curbs, and blacklisted more than 20 U.S. companies in response to the US moves. Shares of financials, autos, homebuilders, materials, among the hardest hit sectors on trade ware concerns. Volatility has picked up, as there has been a 1% intraday decline at some point in the day in the QQQ every day now for 9 straight days (and fell below its 200dma support for the first time since August of $492.20), while the VIX jumps over 11% to 25.40 before paring gains. The S&P 500 index is down 7 for the last 9 days, falling more than 6% from recent all-time highs (and testing its 200dma support of 5,725). The Nasdaq drops further during that same stretch, down 10% from its record high on December 16th and fell more than 1,000 points alone from yesterday’s high print of 18,992.30.

Looking back a few weeks the slowing growth concerns/inflation fears started with CPI, retail sales, WMT guidance and continued with a bearish ISM yesterday (slower orders/higher prices) while the Atlanta Fed GDP estimate was revised to (-2.8%) from +2.3% as recently as February 19^th, a sharp downward revision following recent data points. Add on top of this high valuations for Wall Street and the unravelling of NVDA/AI semi/nuclear/data center trade. Following the weaker growth data points, traders have added to bets on interest-rate cuts from the Federal Reserve amid concern about the impact of US trade tariffs on global economic growth. Oil extended its slump on concerns over a bruising global trade war and OPEC+ announced it will proceed with a planned output increase in April, reviving halted production.

• In Retail: TGT Q4 adj EPS $2.41 topped the est. $2.25 on better revs $30.92B vs. est. $30.38B; Q4 comparable sales growth 1.5%. Digital comparable sales grew 8.7% vs. est. +8.3%; sees year comp sales growth around flat vs. est. +1.7%; sees year EPS $8.80-$9.80 per share, largely in-line with Wall Street’s $9.31; CEO says on US tariffs notes the consumer will likely forecast price increases over the next couple of days. In Electronics Retailers: BBY Q4 EPS of $2.58 topped the consensus $2.40 on better revs of $13.95B vs. est. $13.68B (but down from $14.65B a year prior); Domestic revenue fell to $12.72B from $13.41B y/y, while international revenue decreased slightly; guided 2026 EPS ests to $6.20$6.60 vs. est. $6.58. ONON reported Q4 EPS/revenue that beat analysts’ estimates.
• In Labs & Diagnostics: Citigroup with several ratings changes as they upgraded CRL from Sell to Neutral (tgt to $175 from $155) as thinks headwinds from the large pharma customer group (~30% of revenues) with regard to IRA caution / pipeline restructuring are well understood by investors; they downgraded DGX from Buy to Neutral w/ $185 PT saying margin headwinds tied to the LifeLabs and the level of dilution related to Haystack launch will pressure margins and earnings growth. Citi also upgraded LH from Neutral to Buy (tgt to $300 from $250) saying in the Labs industry, utilization rates have been running high post-pandemic with no signs of slowing down and believe LH is well positioned to capitalize on that through its core diagnostics business.

• CAPR +11%; said the U.S. FDA has granted Priority Review to its drug to treat a heart condition associated with Duchenne muscular dystrophy (DMD).
• GTLB +1%; Q4 beat on revenue, operating income, and EPS driven by GitLab Ultimate adoption and improved cost efficiencies and issued its full-year FY26 guidance, projecting 24% revenue growth and 44% operating income growth, in line with FactSet consensus, but guided EPS $0.03 lower y/y at the midpoint and $0.10 below ests.
• OKTA +18%; after printed a robust FQ4 led by cRPO growth of 15% Y/Y that crushed guidance of ~9% Y/Y while Q1 cRPO guidance was well above consensus, and management now anticipates FY26 revenue growth of ~9-10% Y/Y vs 7% previously, sending shares higher (and prompting upgraded on Wall Street; Mizuho).
• ONON +3%; reported Q4 earnings and revenue that beat analysts’ estimates; Q4 adjusted EPS CHF 0.33 vs. (CHF 0.05) last year; Q4 revenue CHF 606.6M vs. CHF 447.1M y/y; sees FY25 adjusted EBITDA margin 17%-17.5%; annual forecasts for sales and adjusted Ebitda margin were also generally in line with projections.
• SE +5%; following quarterly results and guidance.
• WBA +7%; is nearing an agreement with private equity company Sycamore Partners to go private in a $10B deal, The Wall Street Journal reported and could see Sycamore pay $11.30-$11.40 per share, could be announced as soon as Thursday https://tinyurl.com/55h6esua

• C -7%; as big banks among the worst decliners in the S&P in trade war impact concerns to consumer (GS, JPM).
• EBS -16%; shares dropped following a y/y decline in Q4 revs to $194.7M from $276.6M a year ago, sees Q1 revs $200M-$240M (est. $279M) and guides FY25 revenue $750M-$850M, below consensus $1.13B.
• GCT -5%; reported mixed Q4 results and provided guidance that was below expectations as Q1 revenue was guided to $250M-$265M, below the $281.4M consensus estimate, implying a significant deceleration in the growth rate and results below expectation
• ILMN -3%; was among the 10 companies placed on China’s “unreliable entity” list, prohibiting it from exporting or importing in China or from making new investments in the country (retaliation for US tariffs on the country).
• MSTR -4%; along with weakness in COIN, MARA, others as crypto names falling with Bitcoin below $83,000.
• SOUN -10%; delayed its 10-K annual report citing “complexity” of accounting for some of its acquisitions plus weakness in its internal control over financial reporting, which it had previously disclosed.