Mid-Morning Look

Tuesday, March 25, 2025

U.S. stocks are mixed to start the trading day, a far cry from the robust market open on Monday that saw all eleven S&P sectors post strong gains paced by large cap tech and Smallcap Russell 2000 as investors digest another busy day of economic data and guiding the impact of upcoming April 2^nd reciprocal tariffs on other countries. After an early bounce to highs of 4.37%, the 10-year Treasury yield has pulled back (after rising 8bps the day prior). Not much of a trading range for S&P futures overnight, holding steady while Europe was higher, and Asia was mixed. Not a surprise, but consumer confidence data was weaker this morning (as been evident from recent AAII, Fear/Greed index) as the Conference Board survey on consumer sentiment fell for a 4^th straight month and hit its lowest level since January 2021 (worse than the July 2022 period when inflation was 9%). Stocks got a boost Monday from more moderate comments from the Trump Administration on tariffs (targeted approach) which led to big move in cyclical stocks with Consumer Discretionary, Industrials, and Financials outperforming. As a result, Banks and Consumer Finance stocks acted very well with the BKX closing higher for the 7th straight session.

• March Richmond Fed factory index -4; vs. est. +1 and Richmond Fed regional business conditions -14.0; prices paid up to +3.75% vs. +2.23% prior; shipments down to -7 vs. +12 prior; employment down to -1 vs. +9.
• U.S. Jan wholesale inventories unrevised at +0.8%; U.S. Jan wholesale sales revised to -1.5% (prev -1.3%) and U.S. Jan wholesale stock-to-sales ratio unrevised at 1.33.
• January 20-metro area home prices +4.7% (consensus +4.8%) from year ago vs +4.5% in December (previous +4.5%) — S&P CoreLogic case-Shiller; January home prices in 20 metro areas +0.5% seasonally adj (consensus +0.4%) vs +0.5% in December (previous +0.5%). US January 20-metro area home prices non-adjusted +0.1% vs -0.1% in December (previous -0.1%).
• U.S. single-family home sales reached an annualized rate of 676K units, slightly below the consensus estimate 679K and compared to January’s rate of 664K units; Feb home sales Northeast -21.4%, Midwest +20.6%, South +6.6%, West -13.6%; Feb new home supply 8.9 months’ worth at current pace vs Jan 9.0 months; median sale price for U.S. homes was $414,500, representing a 1.5% y/y when the median price was $420,900.

• In Aerospace & Defense: UBS made several changes in European defense as upgraded Thales (THLLY) and Saab (SAABY) to Buy while downgrading Leonardo (FINMY) to Neutral. UBS adopts a hybrid top-down and bottom-up approach to modelling defense company financials given the rapidly changing outlook and the scale of industry change underway. UBS believes the greatest opportunities are in quality defense stocks over value.
• In Utilities & Solar: OKLO shares fell after posting a wider annual loss and noted that “significant” financial losses were expected into the near future. “We are an early–stage company with a history of financial losses, and we expect to incur significant expenses and continuing financial losses.” (the results/cash burn weighed on other nuclear names VST, CEG, NRG, TLN); AEP priced a 19.608M share Spot Secondary at $102.00. In solar, CSIQ posted Q4 adjusted EPS loss (-$1.47) vs. est. loss (-$0.24); Q4 revs fell -11% y/y to $1.52Bvs. est. $1.59B; Q4 Highest single quarter of e-STORAGE shipments to date at 2.2 GWh.

• CRWD +4%; was upgraded to Buy from Neutral at BTIG saying the company has demonstrated its dominance in the core endpoint security target market.
• CVNA +4%; was upgraded to Overweight at Morgan Stanley following with a price target of $280 (from $260) saying a sharp pullback in the share price presents a unique opportunity for investors to gain exposure to a leader in auto retail and fleet fulfillment.
• MBLY +5%; after Volkswagen said it would collaborate with automotive parts suppliers Valeo and MBLY to develop better driver assistance systems for its cars
• NET +3%; was double upgraded to Buy (from Underperform) at Bank America and raise PT to $160 from $60 citing differentiated AI offering, security momentum.
• UHS +4%; along with gains in THC, HCA as Deutsche Bank recommended buying the sector (HCA, THC, UHS) noting Healthcare facility stocks have been under enormous pressure both in the lead-up and post the election

• KBH -3%; reported a top and bottom line Q1 miss ($1.49/$1.39B revs vs. est. $1.57/$1.5B) and guided 2025 revenue in the range of $6.6B-$7B, down from its prior forecast of $7B-$7.5B but was close to in-line with Street ests $6.88B due to fewer new orders in the quarter.
• MURA -53%; said it is stopping late-stage trials testing its experimental drug, nemvaleukin, with MRK’s Keytruda, to treat ovarian cancer; says trial unlikely to meet main goal as interim analysis shows no significant improvement in overall survival in patients given the combo (10.1 months) vs just chemotherapy (9.8 months).
• OKLO -6%; posted a wider annual loss and noted that “significant” financial losses were expected into the near future. “We are an early–stage company with a history of financial losses, and we expect to incur significant expenses and continuing financial losses”
• SAVA -17%; said it will discontinue the development of its drug for Alzheimer’s disease.
• UNF -12%; after CTAS terminated discussions to acquire UNF in a deal that valued the uniform supplier at $5.3 billion, sending UniFirst shares down. UniFirst had in early January rebuffed a takeover proposal from Cintas for $275 per share in cash and said it was confident of its strategy as a standalone company.