Mid-Morning Look

Friday, March 14, 2025

U.S. stocks open the day in positive territory, holding overnight gains on optimism the spending bill in Washington DC will pass today after Democrats backed off their rhetoric and try to avoid a gov’t shutdown, funding it to thru September. Still, major averages in the U.S. are on track for big weekly losses (all down over -3%) as concerns over the consumer slowing adds to fears about tariff impacts. We heard about the slowing consumer from retail sales a month ago, followed by WMT, TGT, COST, and airlines DAL, AAL this week and as apparent in the recent jobs data. In the lone piece of economic data Friday, University of Michigan Sentiment (March-prelim) fell to the lowest since November 2022 (not necessarily a surprise after recent AAII, fear/greed data) while long-run inflation expectations hit a 32-year high. Gold prices popped above $3,000/oz for the first time in a historic safe-haven rally as bonds have been rallying for weeks (pushing yields lower). China stimulus hopes to signal another rally in Asia this week, the catalyst being the announcement of a Monday news conference by economic policymakers on measures to boost consumption.

After the European Central Bank cut interest rates for the 6^th time last week, ECB policymaker Robert Holzmann said he backs keeping interest rates unchanged next month as higher trade tariffs and more government spending raise the risk of a new surge in inflation. In currencies, the euro rallied on rising prospects that German parties will agree a 500B euro historic fiscal deal that could boost defense spending and revive growth in Europe’s largest economy. The euro rose 0.49% to $1.0902 against the dollar, up about 5% this month alone!

In stats this morning, @charliebilello noted “The S&P 500 has now fallen over 10% from its peak on February 19, the biggest drawdown since 2022. This is the 30th correction >5% off of a high since the March 2009 low. They all seemed like the end of the world at the time.” The SPX fell 1.4% Thursday, the 10th daily decline in 2025 with a loss above 1%.

• On inflation expectations, big jumps as the University of Michigan surveys of consumers 1-year inflation outlook prelim March 4.9% vs final Feb 4.3% (highest since 5% in Nov ’22) and the University of Michigan surveys of consumers 5-year inflation outlook prelim March 3.9% (highest since Feb 1993 says CNBC) vs final Feb 3.5%.

• In Telecom & Cable: CHTR resume coverage with a Buy, $425 PT at Citigroup saying Charter should benefit from accelerating FCF growth from the current trough in 2025, improving financial flexibility to resume share repurchases, and retaining positive strategic optionality if the category further consolidates. TMUS downgraded to Neutral, PT $268 unchanged at Citigroup as T-Mobile continues to generate favorable growth relative to the category and its competitors but cites valuation for its downgrade.
• US listed China stocks (BABA, BIDU, JD, NTES, PDD) advanced after China’s benchmark stock index rallied the most in two months. The Nikkei Index jumped 263 points to 37,053, the Shanghai Index surged 60 points to 3,419, and the Hang Seng Index advanced 497 points to 23,959. The Shanghai Composite Index rises 1.39% this week to 3419.56 (up 7 of last 9 weeks); Nikkei 225 Index rises 0.45% on week snapping 3-week losing streak. Beijing said that it would hold a press conference on increasing consumption on Monday (hopes for more stimulus coming giving investors optimism).

• CCI +8%; was upgraded by a few Wall Street analysts after strong Q4 results, sold its small cells business to EQT Active Core infrastructure fund and fiber solutions business to Zayo Group Holdings for $8.5 bln in aggregate; said to cut annual dividend to $4.25/shr in Q2, proposed $3.0B share repurchase program.
• DOCU +13%; posted a slightly better quarter with large billings beat which flowed through to the FY and slightly weaker guide which was better than feared.
• PTON +8%; was upgraded to Buy from Hold at Canaccord with an unchanged price target of $10 saying Peloton is the clear leader in the connected fitness industry, which it invested in early on and built a 6M loyal member base that has a high margin recurring revenue stream.
• RBRK +22%; reported a top and bottom-line Q4 beat and meaningful FY26 guide above as Q4 ARR beat by $33M, similar to the prior three quarters, and accelerated 1 pt to 37% growth and Q4 operating margin of -11% beat by 17 pts while FY26 ARR guided $42M above (guided Q1 revs $259M-$261M vs. est. $246.1M).
• RDUS +103%; announced it had entered into a definitive merger agreement with Toyota Tsusho America, Inc., a U.S. subsidiary of Toyota Tsusho Corporation, under which TAI will acquire all shares of RDUS in an all-cash transaction for $30.00/share, representing a ~120% premium to today’s closing price.
• SMTC +16%; the quarter was pre-announced and slightly ahead of the street but the guide on top and bottom line is slightly ahead and much better than feared.
• ULTA +7%; Q4 results top expectations on robust sales during holiday season, as Q4 comp sales rose +1.5% y/y, driven by double-digit growth in Fragrance, was a solid acceleration, though posted roughly -11% y/y EPS decline, while Q1 expectations were for flattish comps (boosting beauty names ELF, EL).

• DG -2%; pulls back after bouncing the prior day on mixed earnings in dollar stores.
• KSS -1%; extends weekly decline after tumbling midweek on earnings and lower guidance; retailers mixed to mostly lower, underperforming broader markets so far (TGT, GAP, AEO weak).
• STRO -13%; announced a near-50% reduction in headcount, discontinuation of the luvelta program across multiple indications, and the refocusing of development efforts on three currently preclinical candidates.
• XPOF -35%; shares tumbled after the company widened its Q4 loss (-$0.19 vs. est. $0.39) and issued a 2025 outlook that missed Wall Street’s expectations as sees yearly revs $315M-$325M vs. est. $339.5M