Mid-Morning Look

Wednesday, March 05, 2025

U.S. stocks opened mixed, searching for direction following mixed economic data and anticipation ahead of tariff commentary later today. Shares of materials (XLB) among the biggest move to the upside behind strength in metals and chemicals after China unveiled its growth targets overnight and signaled plans to ramp up spending and Trump noted tariffs on copper and other metals. Note US Commerce Secretary Howard Lutnick said the Trump administration may pull back on some tariffs against Canada and Mexico later today in a limited fashion which helped push overnight futures higher initially. Economic data was mixed this morning as the ISM Services PMI was slightly above prior month and street as new orders edged higher (along with prices paid), while payroll data disappointed as slowed hiring dramatically in February, according to ADP‘s monthly private payrolls report. Only 77,000 jobs were added last month, roughly half the estimate and way below January’s upwardly revised 186,000. The market will likely look to Friday’s Nonfarm Payrolls for clarity after today’s mixed data points.

President Trump in his speech to Congress last night stated that tariffs will create disturbance and will require a period of adjustment; said he was looking to repeal the $52B Chips Act; he reiterated 25% tariffs for aluminium, copper, steel; also confirmed reciprocal tariffs for other countries starting on April 2nd; announced he was creating a new office for ship building in the White House with new tax incentives; spoke with top three automakers on Tuesday; wants to make interest payments on car loans tax deductible if made in US. China last night also busy as the country State Planner said they still have room for implementing stronger macro policies; and sets 2025 GDP target at about 5% and 2025 CPI target at 2% though notes achieving GDP target of around 5% will be no easy task; China will facilitate breakthroughs in areas like VR, advanced computing and RISC–V; said will lower banks’ RRR and interest rates at right timing.

The euro extended its rally on Wednesday, hovering at four-month highs around 1.0735 as Germany’s proposed 500-billion-euro ($531 billion) infrastructure fund boosted Europe’s growth prospects despite global trade tensions worrying investors. The news sent bunds rolling as the German 10-year yield up 29bps, the biggest one-day jump since 1994. The euro is up nearly 3% this week, already on track for its best week since November 2022. It rose 0.52% against the dollar on Wednesday to $1.0682. The currency is pricing in a more positive outlook for Europe’s economy going forward with the fiscal stimulus likely to provide more support for growth in the coming years. The fall in international oil prices continues today, with Brent joining WTI in trading below $70 a barrel, falling a 3^rd day as investors worried about OPEC+ plans to proceed with output increases in April, and U.S. President Donald Trump’s tariffs on trade partners.

• Private payroll data disappoints as the U.S ADP nonfarm employment change for February reported at +77k, below the prior month reading o +183k previous and economist estimates of +140k.
• January Factory Orders rose +1.7% vs. consensus +1.6% and vs Dec -0.6%, while Jan Factory Orders ex-transportation +0.2% vs Dec +0.3%, Jan factory orders ex-defense +1.8% vs Dec -0.6%, Jan non-defense cap orders ex-aircraft unrevised at +0.8%; Jan shipments unrevised at -0.3%.
• US Mortgage Bankers Assoc reported US mortgage market applications index rose +20.4% in the latest week; purchase index climbs 9.1%, refinance index soars to 784.2 as the average 30-year mortgage rate falls 15 bps to 6.73% in Feb 28 week, lowest since Dec 2024.
• US S&P Global Feb. Composite PMI at 51.6 vs 52.7 prior.

• In Chemicals: Sector higher in general (CE, LYB, DOW, FMC) after China unveiled its growth targets overnight and signaled plans to ramp up spending. MOS was upgraded to Equal Weight at Barclays noting since their downgrade to Underweight in January on relative unattractive valuation levels at that point in time, shares have since corrected by ~15% (vs. NTR -5% and the S&P500 Index by -5%) and sees a relatively attractive entry point. Seaport Global downgraded a handful of chemical names, lowering ASH, FUL and PPG to Neutral from Buy reflecting several concerns including that tariff policies could drag on Industrial Coatings demand in particular, and that competitive dynamics in Specialty Additives remain very challenging in the Chinese coatings market.
• In Retailers: ANF board has approved a new $1.3 billion share-repurchase program but shares slip after forecasting annual sales growth and EPS ($10.40-$11.40 vs. est. $11.30) below estimates as consumer spending remains weak; sees FY25 operating margin in the range of 14% to 15%, compared with 15% reported in 2024. FL Q4 adj EPS of $0.86 topped the $0.72 estimate but sales of $2.24B missed the $2.32B estimate as sales fell -4.6% y/y while comp sales rose +2.6% and guided FY26 EPS $1.35-$1.65 vs. est. $1.72. ROST reported a bottom-line beat on materially better SG&A vs. expectations owing to the sale of a packaway facility, but guided Q1 comps and EPS below (citing a weakening of sales trends in January into February), also guiding the FY below, guiding to +2% comps at the high-end vs. the Street’s +3%. BYON downgraded to Hold from Buy at Needham as it sees the risk-reward in shares less favorable given the significant reduction to its revenue estimates over the past 6 months, which lowers the potential payoff in this turnaround story.

• CMRX +69%; as agreed to be acquired by JAZZ for $8.55 per share in a deal valued at about $935M to further diversify their oncology portfolio.
• FCX +6%; copper prices jump over 5% after President Donald Trump suggested imports of the metal could be subject to a 25% tariff; also, China unlocked more fiscal stimulus on Wednesday, promising greater efforts to support consumption; Beijing said it is determined to grow by another 5%-or-so this year.
• GM +3%; rebound early after tumbling on Tuesday after Commerce Secretary Howard Lutnick hinted on a tariffs compromise with Canada and Mexico.
• HII +11%; after President Trump comments last night in speech to create office of shipbuilding, offer tax incentives.
• MRNA +8%; after CEO Stephane Bancel bought ~160,000 MRNA shares at roughly $31 per share valued at over $5Mm, SEC filing showed late Tuesday and Paul Sagan, Director, bought 31,620 shares for $1,004,251 at $31.76/share on Mar 03 ’25.
• NVO +3%; said as part of its ongoing efforts to ensure patients who need Wegovy, or semaglutide, injection 0.25 mg, 0.5 mg, 1 mg, 1.7 mg, and 2.4 mg can access it, Novo Nordisk launched NovoCare Pharmacy, a direct-to-patient delivery option that offers cash-paying patients of Wegovy at a reduced cost of $499 per month.
• PRTS +38%; after saying it is engaged in a process to explore strategic alternatives to maximize shareholder value, including a possible sale of the company.

• AVAV -17%; shares tumbled on results and lower guidance; Q3 EPS $0.30 missed consensus of $0.66; Q3 revs $167.6M below consensus $206.4M and cuts FY25 EPS view to $2.92-$3.13, from prior $3.18-$3.49 (est. $3.43) and cuts revs to $780M-$795M from $790M-$820M.
• CPB -2%; lowered its annual sales and profit forecasts as it now expects fiscal 2025 net sales to rise between 6% and 8%, compared with its previous forecast range of 9% to 11% growth; lowered its adjusted EPS forecast to between $2.95 and $3.05, from prior expectations of $3.12 to $3.22.
• CRWD -10%; as FQ4 beat on top- and bottom-line metrics but issued mixed FY26 guidance as revenue was guided above, but margins were guided below due to investments in platform resiliency, AI efficiencies; ARR grew 23% YoY to $224M of net new ARR, leaving existing or renewed ARR flat versus 3Q at roughly $4B.
• INTC -3%; after President Donald Trump saying on Tuesday U.S. lawmakers should dismantle the $52.7 billion semiconductor chips subsidy law.
• THO -15%; as cuts FY25 EPS view to $3.30-$4.00 from $4.00-$5.00 (est. $4.48), while FY25 revenue view was narrowed to $9B-$9.5B from $9.0B-$9.8B (vs. est. $9.43B) and cuts FY25 consolidated gross profit margin view to 13.8%-14.5% from 14.7%-15.2%.