Mid-Morning Look

Wednesday, May 21, 2025

U.S. stocks opened lower, but as has been the case on recent gap downs overnight for US futures, investors bought the dip initially, helped by a mid-morning trade headline that the EU prepares trade proposal for U.S. to steer momentum into talks. U.S. equity futures opened weaker across the board following a move higher in 10-year yields (10-yr hit 4.55%) after a hotter UK inflation print and reports that Israel is preparing to strike Iranian Nuclear facilities. The U.S. dollar also extended losses as the euro rises along with safe havens such as the Japanese yen, the Swiss franc and gold after U.S. President Donald Trump failed to convince Republican holdouts to back his sweeping tax bill. The S&P 500 (SPX) snapped its 6-day win streak on Tuesday and market breadth has remained weak thus far. In stock news, retailers active with GOOS are rising on earnings results this morning while TGT, VFC, LOW and TJX slip on results. Stock markets still remain weak heading into busy day of Wall Street conferences and Fed speakers.

Oil prices rally, with Brent above $66 a barrel earlier after CNN reported that new US intelligence suggests Israel is preparing for a potential strike on Iranian nuclear facilities. It wasn’t clear that Israeli leaders had made a final decision to carry out the strikes, the report added. Gold also gained in haven demand, rising $20 to around $3,304. Inflation fears remain after UK 10-year yields rise following a “hotter-than-expected” CPI reading in April which prompted traders to pare bets on interest-rate cuts by the Bank of England. UK inflation jumps in April to its highest level since January 2024 as British annual inflation rate hit 3.5% in April, as the increase from 2.6% in March was the largest between two months since 2022. Traders were also wary of U.S. officials potentially angling for a weaker dollar at Group of Seven finance minister meetings under way in Canada.

• In the Defense sector, President Trump announced the development of the “Golden Dome” missile defense system. “The Golden Dome will be capable of intercepting missiles even if they are launched from other sides of the world and even if they are launched from space.” Hypersonic, ballistic, and cruise missiles can all be targeted and “knocked out of the air,” added the president, who plans to move fast. While no companies were called out specifically by the President, LHX was mentioned by Sen. Jim Banks (R., Ind.) at the event.
• In Semiconductors: WOLF shares tumbled after the WSJ reported that the company is reportedly preparing to file for Chapter 11 bankruptcy within weeks, as it struggles to manage a $6.5B debt load. The company has been negotiating with creditors but has rejected several out-of-court debt restructuring proposals https://tinyurl.com/248nz7md ; SMCI hinted it was planning to expand its domestic manufacturing operation as President Donald Trump pushes to return production to the U.S. In an interview with The Wall Street Journal published Tuesday evening, CEO Charles Liang said the company would consider expanding production in states such as Mississippi and Texas as costs in Silicon Valley climb.
• In Hardware: Morgan Stanley raised its price tgt on DELL to $126 from $89 ahead of earnings saying they expect a slight April Q beat but unchanged FY guide as DELL balances AI infra momentum w/ mixed (positive leaning) trad infra checks & volatile tariff backdrop; for HPQ raise tgt to $29 from $25 ahead of earnings. COHR was added to Positive Catalyst Watch at JP Morgan. KEYS Q2 results topped expectations ($1.70/$1.31b topping ests $1.65/$1.28B), driven by strong sales in its communications segment.

• DY +14%; raised its FY26 revs outlook to rise by 12.5%-15.4%, or between $5.29B-$5.43B, above its prior outlook for a 10%-13% rise in revenue on the back of strong demand and a better-than-expected first quarter (for Q1, recorded a 10% rise in contract revenue to $1.26B vs. est. $1.19B).
• GOOS +20%; reported EPS/sales above prior year as its DTC channel performed better than expected, as revenue grew 5.1% to C$998.9M in FY25, topping analyst expectations of a more modest rise to C$974.4M.
• KEYS +5%; Q2 results topped expectations ($1.70/$1.31b topping ests $1.65/$1.28B), driven by strong sales in its communications segment.
• LHX +2%; as President Trump announced the development of the “Golden Dome” missile defense system. While no companies were called out specifically by the President, LHX was mentioned by Sen. Jim Banks (R., Ind.) at the event.
• TOL +1%; reported strong Q2 results (EPS of $2.50 vs. est. $2.86 on better revs of $2.74B) and reiterated full year outlook while saying it continues to expect to deliver 11,200 to 11,600 units this year.
• XPEV +13%; on better outlook as expects to deliver between 102K-108K vehicles in Q2, or about 237.7% to 257.5% higher y/y and guided Q2 revs of 17.5B-18.7B yuan vs. ests. 16.85B yuan.

• NFE -13%; after being disqualified from an auction held by the Puerto Rican government to secure temporary power generation, according to a Bloomberg report.
• PANW -6%; reported Q3 revenue growth of 15% Y/Y, slightly above the Street’s ~14.5% estimate as product revenue growth of 16% Y/Y was much better than expected this quarter and easily surpassed the Street’s +8% Y/Y forecast, but Subscription/Support revenue was slightly below.
• TGT -6%; as earnings results missed and cuts outlook; Q1 adj EPS $1.30 missed consensus $1.65 on revs $23.85B vs. est. $24.35B; Q1 comparable sales decreased (-3.8%) vs. est. (-1.08%) and lowers FY adj EPS view to $7-$9, vs. prior $8.80-$9.80 and est. $8.43; sees FY sales declining by low-single digit, saw growth.
• TTWO -3%; shares slipped after announcing a proposed underwritten public offering of $1B of shares of its common stock.
• UNH -5%; after a report in The Guardian finds insurer quietly paid facilities that helped it gain Medicare enrollees and reduce hospitalizations. In several cases identified by the Guardian, nursing home residents who needed immediate hospital care under the program failed to receive it, after interventions from UnitedHealth staffers https://tinyurl.com/3zu9enmm  
• VFC -13%; after forecasting a bigger-than-expected Q1 loss and warning investors it was rushing products to the US to beat the 90-day window of tariff pauses/guides Q1 revenue (5%) to (3%) vs. last year and sees Q1 adjusted operating loss ($125M) to ($110M).
• WOLF -67%; after the WSJ reported that the company is reportedly preparing to file for Chapter 11 bankruptcy within weeks, as it struggles to manage a $6.5B debt load. The company has been negotiating with creditors but has rejected several out-of-court debt restructuring proposals https://tinyurl.com/248nz7md