Mid-Morning Look

Monday, March 10, 2025

More selling pressure to start the week as U.S. stocks open sharply lower, extending declines after major averages fell the last 3-weeks as the risk-averse mood can be seen across several asset classes. After hitting all-time highs for the S&P 500 index (SPX) on February 19^th at 6,147, US stock markets have tumbled, with a more than -7.5% pullback for the S&P (lows around 5,660 this morning), a more than -11% drawdown for the Nasdaq and the Russell 2000 down 15% from record highs, attributed to uncertainty and risk related to Trump policy impacts (tariffs/spending cuts) and is supported by weaker macro data. Zero lift at all on the open or overnight for US futures, taking out Friday lows after the S&P 500 registered its biggest weekly percentage decline since September last week down -3.08% while Nasdaq down -3.45%, Dow down -2.37% and the Russell 2000 was -3.89%. The CBOE Volatility index (VIX) rises over 14% this morning, topping Friday’s high of 26.56. With today’s moves, major averages once again handily below key technical levels as the S&P (SPX) drops below its 200dma support of 5,735 and Nasdaq 100 drops below its 200dma support of 20,252). Defensive sectors such as Utilities, REITs (both benefit from lower yields) as well as Consumer Staples higher, while Technology, Consumer Discretionary, Communications and Financials are hammered, led by Mag 7 stocks (NVDA, AAPL, AMZN, META, GOOGL, TSLA and MSFT). Treasury prices rise as yields tumble with no bounce for stocks thus far.

Recession fears hitting the market today following comments from President Trump in a Fox on Sunday interview after being asked in a “Sunday Morning Futures” if he was expecting a recession this year, Trump replied: “I hate to predict things like that. There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing, and there are always periods, it takes a little time; re inflation, You may get it. In the meantime, guess what? Interest rates are down.” Overall, uncertainty on the economy and economic policy is elevated as evident in recent market commentary/data, which is keeping major averages under pressure and investor fears high. The US dollar is little changed at 103.80 following a 4.4% slide vs the euro. Market looks toward inflation data this week with CPI and PPI Wednesday and Thursday as well as Michigan inflation expectations on Friday. In Canada, Mark Carney is the new leader of Canada’s ruling Liberal party. The former head of the Bank of Canada and Bank of England, vowed to maintain tariffs on US imports “until the Americans show US respect.” This statement comes just two days before the US tariffs on steel and aluminium are set to take effect

• In Industrials: Barclays said they favor HVAC, Aerospace, Defensive self-help while wary of AI / Electricals, Industrial capex (inc. O&G), Non-resi buildings exposure. The firm lowered price targets on a number of Short Cycle Industrial / Industrial capex related names and downgraded EMR to Underweight from Equal Weight (tgt to 4110 from $135) noting the company has the highest sales exposure in the group to oil and gas, where the capex outlook could be soft for the rest of this decade. In terms of specific stocks, they think the risk / reward is attractive at CARR, GTES, HON, LII, MMM, while see downside risk at EMR, ETN, OTIS, ROK, VRT.
• In REITs: outperforms (XLRE) early before paring gains, helped by lower Treasury yields/rates boosting dividend paying sectors; Jefferies upgraded CPT, IRT to Buy from Hold, based on improving supply forecasts. This is evident in better YTD blended spreads (vs Q424) from recent multifamily updates. With Sunbelt job & population growth exceeding Coastal’s broadly, at the same time supply finally recedes, Sunbelt rent growth should accelerate in ’26/’27. 2H25 should show stronger signs of stabilization, driving earnings and multiple expansion closer to historical premiums.

• CPB +2%; as defensive food stocks outperform early (GIS, CAG, KHC, MDLZ, PEP, KLG)
• CTSH +2%; Bloomberg reported late Friday that activist investor Mantle Ridge has built a stake of more than $1 billion in the technology services firm.
• MLYS +53%; after the drug company said two trials of its experimental hypertension medicine, lorundrostat, met their main goals.
• PTGX +39%; after reporting positive topline results from a Phase 2b study of icotrokinra, conducted by partner JNJ said the study met its primary endpoint of clinical response in all icotrokinra dose groups evaluated.
• RDFN +77%; as RKT agrees to a $1.75B deal for real estate broker RDFN in an all-stock transaction for a value of $12.50 per Redfin share. Under the terms of the agreement, each share of Redfin common stock will be exchanged for a fixed ratio of 0.7926 shares of Rocket Companies Class A common stock
• TRVI +47%; said its therapy, Haduvio, met the main goal in a mid-stage trial testing in patients with a type of chronic cough; says therapy showed statistically significant reduction in 24-hour cough frequency.
• VRN +12%; and Whitecap Resources (WCP) agreed to combine their companies in a 15 billion Canadian dollar deal ($10.44 billion), including debt, that will enlarge their Alberta oil and gas footprint. Under the terms of the agreement, Veren shareholders will receive 1.05 common shares of Whitecap for each of their own.

• COIN -10%; along with weakness in MSTR, MARA, CLSK, RIOT and other crypto names as Bitcoin extends losses for a fifth consecutive session after President Donald Trump’s long-awaited order to create a strategic Bitcoin reserve disappointed the market and weighed on digital currencies.
• DXCM -8%; said late Friday it had received a warning letter from the U.S. FDA following inspections of its two manufacturing facilities in San Diego, California and Mesa, Arizona.
• LUNR -18%; extending last week’s selloff after it ended a lunar mission early following a flawed landing, the second setback for the company following a similar problem last year.
• NVO -10%; after released fresh trial results for its CagriSema developmental weight-loss drug; said CagriSema helped obese or overweight type 2 diabetics lose an average 15.7% of their weight in a late-stage trial.
• TSLA -8%; as stock now down more than 50% from all-time highs of $488.54 on December 18^th as the selling pressure has accelerated in recent weeks.