Mid-Morning Look

Friday, March 07, 2025

U.S. stocks opened flattish after early volatility following the monthly nonfarm payroll report, as the S&P 500 index (SPX) opened back below its 200dma support of 5,732, before rebounding slightly. Semiconductors got good news, especially in the AI space after AVGO reported a quarterly beat/raise result (just a day after the SOX index fell -4.5%). Slowing U.S. economic growth remains an investor concern, but todays jobs data was “better-than-feared” as U.S. nonfarm payrolls increased 151k in February, just shy of expectations for 160k, but follows above prior month reading of 125k (was 143k) in January. The unemployment rate edged up to 4.1% from 4.0% and average hourly earnings were up 0.3% from 0.4% (was 0.5%). The annual pace edged up to 4.0% y/y from 3.9% (was 4.1%) y/y. The labor force dropped -385k after the 2,197k pop prior. The US Dollar index (DXY) extends weekly losses, down -0.45% to 103.58, lowest levels since election day; the Euro rises +0.8% to 1.0873 and up a whopping 4.8% this week alone vs. the dollar! Following this morning’s February payroll report, The Federal Reserve may wait until June before restarting rate cuts and will reduce short-term borrowing costs a total of three times before the year. Traders before the report had thought a May start to Fed rate cuts was a bit more likely than putting them off until June. A busy day ahead for markets with President Trump and trade advisors already out talking tariffs, with Fed speakers on deck as well.

• The February unemployment rate 4.1% (above consensus 4.0%), while wages were mostly in-line as U.S. February average hourly earnings +4.0% from year earlier (est. +4.1%) and February average hourly earnings all private workers +0.3% from prior month (est. +0.3%).

• In Refiners: Piper lowered prices targets for DINO, DK, MPC, PARR, PBF and VLO saying with two months in the books in the Q1, the firm is adjusting its Q1 2025 and 2025 estimates for the refiners in-line with margins to date and the increase in 2025 full year margins. While significant market volatility year-to-date doesn’t exactly provide encouragement on the shelf life of Piper’s estimates, at present it sees a downside to Q1 estimates, but generally 10%-15% upside for the remainder of 2025. The firm says Valero remains at its top pick.
• In Home Furnishing/Housewares Retail: COOK reported a downbeat 2025 forecast and finance chief change; Q4 revs grew 3% y/y to $168.6M, topping Wall Street consensus of $164.8M but guided 2025 revs $595-$615M and adj EBITDA of $75-$85M, missing analysts’ views of $628.2M and $88.4M, respectively. Wayfair (W) upgraded to Buy from Hold at Jefferies and raised PT to $47 from $45 saying with top-tier market share gains, a new paid loyalty program, compelling B2B traction, and underrated physical retail expansion, the firm has fresh optimism for EBITDA growth above the Street.

• DVN +3%; energy stocks seeing a rebound as oil prices recover off multi-month lows after President Trump postpones import tariffs on a range of goods from Mexico and Canada for another month, easing one of the bearish factors behind the recent selloff that include OPEC+ plans to start unwinding cuts next month.
• GAP +11%; reported a strong Q4 EPS beat, with Sales/GM/SG&A all better than consensus (only Athleta didn’t beat), with mgmt noting continued market share gains, and guiding above to +8-10% FY25 EBIT growth. Merch margin increased +20bps (lightest since 3Q22) with YoY inventory higher (first time since 3Q22).
• W +3%; upgraded to Buy from Hold at Jefferies and raised PT to $47 from $45 saying with top-tier market share gains, a new paid loyalty program, compelling B2B traction, and underrated physical retail expansion, the firm has fresh optimism for EBITDA growth above the Street.
• WBA +6%; agreed to be acquired by an affiliate of Sycamore Partners in transaction valued up to $23.7B. WBA shareholders will receive total consideration consisting of $11.45 per share in cash at closing of the Sycamore transaction and one non-transferable right to receive up to $3.00 in cash per WBA share.
• WOLF +9%; said it is reducing headcount by about 180 employees, primarily in materials operations, at both the Durham and Siler city locations and in Q3, expects to take a one-time charge relating to a litigation settlement; targets FY26 capex of $150M-$200M; reconfirming business outlook for Q3.

• COST -5%; reported Q2 profit that trailed Wall Street expectations ($4.02 vs. est. $4.11) while the company reported that its February comp (ex. fuel) increased 8.6% in the US
• FNKO -10%; reported a 4Q beat, but guided 2025 below the Street due to 20% tariffs on China goods–retaliatory tariffs on Vietnamese goods would represent further downside; guidance for 1Q25 was below consensus.
• GCO -22%; shares fell after guiding FY26 adjusted cont ops EPS $1.30-$1.70 (est. $2.35), while expects FY26 total sales to be flat to up 1% compared to FY25.
• HPE -20%; shares tumbled after Q1 earnings and Q2 guidance missed Wall Street expectations and said it would begin a cost-cutting program that will reduce its overall headcount by about 5%, or about 2,500 jobs; guided Q2 revs $7.2-7.6B vs est. $7.934B and adj EPS $0.28-0.34 vs est. $0.50.
• IOT -8%; after reported Q4 earnings and revenue (adj EPS $0.11/$346.3M vs. est. $0.07/$335.33M) that topped Wall Street targets while fiscal 2026 sales guidance just met expectations.
• LUNR -17%; shares tumbled as its IM-2 mission arrived at the moon’s surface successfully but appears to have an unplanned orientation due to challenges in the final descent phase