Market Snapshot
| Dow | 41964.63 | +383.32 | (0.92%) | | Nasdaq | 17750.79 | +246.67 | (1.41%) | | SP 500 | 5675.29 | +60.63 | (1.08%) | | 10-yr Note | +3/32 | 4.26 |
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| | NYSE | Adv 1874 | Dec 758 | Vol 116 mln | | Nasdaq | Adv 3016 | Dec 1300 | Vol 6.3 bln |
Industry Watch
| Strong: Industrials, Energy, Technology, Discretionary, Communication Services, Materials, Financials |
| | Weak: Health Care, Consumer Staples |
Moving the Market
-- Rebound in mega cap stocks after leading yesterday's declines
-- Reacting to FOMC decision at 2:00 ET and Fed Chair Powell press conference at 2:30 ET
-- Sharp drop in Treasury yields
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Closing Summary
19-Mar-25 16:30 ET
Dow +383.32 at 41964.63, Nasdaq +246.67 at 17750.79, S&P +60.63 at 5675.29
[BRIEFING.COM] The stock market rallied in the mid-week session. There was a positive bias in the early going and buying interest increased following the 2:00 ET FOMC decision and Fed Chair Powell's subsequent press conference.
The major indices closed near their session highs after the Federal Open Market Committee (FOMC) held rates steady, leaving the federal funds target range unchanged at 4.25-4.50% in a unanimous vote.
Fed Governor Waller dissented—not on the rate decision itself, but on the pace of balance sheet reduction. His preference to maintain the current level of securities runoff was overruled as the committee opted to slow the monthly runoff of Treasury securities from $25 billion to $5 billion starting April 1, while keeping mortgage-backed securities runoff unchanged at $35 billion.
The committee’s directive also acknowledged rising economic uncertainty while maintaining that the Fed remains attentive to both sides of its dual mandate.
The latest Summary of Economic Projections (SEP) complicates the narrative. The Fed lowered its 2025 GDP growth forecast from 2.1% to 1.7% while simultaneously raising its PCE inflation projection from 2.5% to 2.7% (core PCE ticked up from 2.5% to 2.8%). Despite this, the median estimate for the fed funds rate held steady at 3.9%, implying an expectation for two rate cuts this year.
Weaker growth estimates paired with a steady inflation outlook and rate cut projections indicates the central bank is more concerned with stubborn inflation than slowing growth.
During his press conference, Fed Chairman Powell again said that there is no rush to adjust policy. He warned that it is "going to be very difficult to have a precise assessment of how much inflation is coming from tariffs."
He indicated that it's "kind of the base case" that inflationary pressures from tariffs would be transitory, adding that the last time tariffs were imposed, the increase in prices was transitory.
Mega cap shares led the upside charge in equities, exhibiting rebound activity after leading declines yesterday. The Vanguard Mega Cap Growth ETF (MGK) closed 1.4% higher.
A sharp drop in rates also contributed to the upside bias in stocks. The 10-yr yield settled three basis points lower at 4.26% and the 2-yr yield settled six basis points lower at 3.98%.
- Dow Jones Industrial Average: -1.4% YTD
- S&P 500: -3.5% YTD
- S&P Midcap 400: -4.4% YTD
- Russell 2000: -6.6% YTD
- Nasdaq Composite: -8.1% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications -6.2%; Prior 11.2%
- Weekly EIA Crude Oil Inventories showed a build of 1.75 million barrels following last week's build of 1.45 million barrels
Looking ahead to Thursday, market participants receive the following data:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 220,000), Continuing Claims (prior 1.870 mln), Q4 Current Account Balance (Briefing.com consensus -$334.0 bln; prior -$131.4 bln), and March Philadelphia Fed Survey (Briefing.com consensus 10.0; prior 18.1)
- 10:00 ET: February Existing Home Sales (Briefing.com consensus 3.95 mln; prior 4.08 mln) and February Leading Indicators (Briefing.com consensus -0.2%; prior -0.3%)
- 10:30 ET: Weekly natural gas inventories (prior -62 bcf)
Treasuries settle higher in response to FOMC
19-Mar-25 15:35 ET
Dow +491.36 at 42072.36, Nasdaq +256.05 at 17760.16, S&P +62.92 at 5677.58
[BRIEFING.COM] The major indices pulled back from their session highs, but still show solid gains heading into the close.
The 10-yr yield settled three basis points lower at 4.26% and the 2-yr yield settled six basis points lower at 3.98% after Fed Chairman Powell again said that there is no rush to adjust policy, repeating a view that he's been espousing since late 2024.
Looking ahead to Thursday, market participants receive the following data:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 220,000), Continuing Claims (prior 1.870 mln), Q4 Current Account Balance (Briefing.com consensus -$334.0 bln; prior -$131.4 bln), and March Philadelphia Fed Survey (Briefing.com consensus 10.0; prior 18.1)
- 10:00 ET: February Existing Home Sales (Briefing.com consensus 3.95 mln; prior 4.08 mln) and February Leading Indicators (Briefing.com consensus -0.2%; prior -0.3%)
- 10:30 ET: Weekly natural gas inventories (prior -62 bcf)
Stocks climb, yields sink as Fed Chair Powell speaks
19-Mar-25 15:00 ET
Dow +459.65 at 42040.65, Nasdaq +307.56 at 17811.67, S&P +73.26 at 5687.92
[BRIEFING.COM] The equity market is near session highs at the index level as Fed Chair Powell answers questions after his prepared remarks.
The market has been hype-focused on trade policy of late and Mr. Powell acknowledged that it is "going to be very difficult to have a precise assessment of how much inflation is coming from tariffs."
He indicated that it's "kind of the base case" that inflationary pressures from tariffs would be transitory, adding that the last time tariffs were imposed, the increase in prices was transitory.
Treasury yields are sharply lower. The 10-yr yield moved to 4.26% from 4.32% before 2:00 ET.
FOMC stays put on rates, signals growing inflation worries
19-Mar-25 14:30 ET
Dow +224.05 at 41805.05, Nasdaq +198.69 at 17702.80, S&P +43.41 at 5658.07
[BRIEFING.COM] The FOMC made its policy rate decision. As expected, it voted to leave the target range for the federal funds rate unchanged at 4.25-4.50%. That was a unanimous vote; however, the directive indicates a dissent by Fed Governor Waller.
Mr. Waller did not disagree with the rate decision. Rather, he preferred to continue the current pace of declines in securities holdings. His view did not win out. The Fed decided today to reduce the pace of Treasury securities it will allow to runoff its balance sheet from $25 billion per month to $5 billion per month, starting April 1. The runoff for agency mortgage-backed securities was left unchanged at $35 billion per month.
Notably, the directive indicated that the uncertainty around the economic outlook has increased (in December it said the economic outlook is uncertain), but continued to assert that the Committee is attentive to both sides of its dual mandate.
The latter statement will be subject to debate given that the Summary of Economic Projections showed a downtick in the median estimate for 2025 real GDP growth from 2.1% to 1.7% and an uptick in the PCE inflation rate from 2.5% to 2.7% (core-PCE was increased from 2.5% to 2.8%). The interesting thing is that the median estimate for the fed funds rate was unchanged from December at 3.9%, which is tantamount to an expectation for two rate cuts.
So, the Fed lowered its growth outlook but left its rate cut outlook unchanged at the same time it raised its inflation outlook. What that implies to us is that the Fed is really more pre-occupied with the inflation side of its mandate than the growth side. If the Fed truly believed lower growth would tame inflation, it would have tempered its inflation outlook and perhaps even allowed for a third rate cut.
That didn't happen so, like many other things, the market will be left guessing as to the eventual outcome here, which, to be fair, is the position fed officials find themselves in as they await data that validates, or negates, the market's growth concerns stemming from the tariff policies.
Gold struggles for direction, settles slightly higher at $3,041.20/oz ahead of Fed decision
19-Mar-25 13:55 ET
Dow +104.31 at 41685.31, Nasdaq +116.68 at 17620.79, S&P +23.21 at 5637.87
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.67%) holds a narrow lead over the S&P 500 (+0.41%) as we approach two hours left in the session.
Gold futures settled narrowly higher at $3,041.20/oz, struggling for direction ahead of Fed decision at the top of the hour; yields are modestly higher ahead of the decision.
Meanwhile, the U.S. Dollar Index is currently up +0.6% to $103.89.
Autodesk heads higher today as activist investor Starboard Value seeks meaningful changes (ADSK)
Autodesk (ADSK +3%) is enjoying a nice lift today after the WSJ reported that activist investor Starboard Value is looking to spark a proxy battle at the 3D computer-aided design (CAD) software developer. The news comes following a few disagreements between ADSK and Starboard, which has a $500 mln stake (~1% of shares) in ADSK, noting today in a letter to the shareholders that the stock is underperforming the broader software market in recent years.
- Starboard dove into many details underlying its disagreements, touching on consistently missed Investor Day targets, lack of management credibility, and past governance concerns. The hedge fund also noted that ADSK spends much more than its peers, causing operating margins to underperform the industry. On that note, Starboard mentioned that there was insufficient clarity surrounding the financial impact of ADSK's recent cost-cutting measures, which included trimming its workforce by 9%.
- Starboard sees tremendous value that ADSK is failing to extract. The company's software is a staple within the construction industry; it is also used extensively across other sectors where design is critical, such as automotive, media, and entertainment. Given its footprint, Starboard is looking for much better performance, particularly in terms of margins. The hedge fund plans to nominate directors for election at ADSK's upcoming Annual Meeting to push for 45% adjusted operating margins by FY28 (Jan) and higher incremental margins on top-line growth.
- This is not the first time Starboard has had complaints. Last year, the activist investor was adamant that ADSK oust CEO Andrew Anagnost, citing similar reasons from today for the shakeup. While Starboard did not mention the CEO in its letter today, Mr. Anagnost could have a fight on his hands. ADSK has survived past attempts by Starboard to keep its representatives off the Board, turning to the courts last summer, who ruled in ADSK's favor regarding not needing to reopen the window to nominate positions for a contested election at its Annual Meeting.
ADSK is coming off a disappointing Q4 report, headlined by several variables casting doubts on guidance, including tariff impacts and the consequences of its headcount reduction. At the time, Andrew Anagnost stated that ADSK would be reallocating the savings of its lowered headcount toward its strategic priorities, such as the cloud and AI. Clearly, Starboard does not approve of this direction, requiring more details involving these priorities.
Given its past success in achieving its demands, Starboard Value's letter today may mark the start of some meaningful changes at ADSK. While macroeconomic headwinds can inject volatility over the next few months, Starboard is confident that ADSK should be performing at a much higher level. Shareholders are in agreement, pushing shares higher today in anticipation of Starboard getting its way in some form.
Signet Jewelers shines with strong Q4 results and signals sales momentum in Q1 (SIG)
Signet Jewelers (SIG), the world's largest retailer of diamond jewelry, is sparkling today after reporting upside Q4 results and providing better-than-feared guidance for 1Q26 and FY26. After SIG issued weak Q4 guidance in mid-January, reflecting disappointing holiday sales, the stock really lost its luster with shares sinking to multi-year lows last week. Against these downbeat expectations and mounting growth concerns due to the soft consumer spending environment, the company surprisingly surpassed Q4 EPS and comp estimates, driven by an upswing in sales for January.
- When SIG lowered its Q4 revenue and same store sales outlook in January, the company noted that consumers were gravitating towards lower price points more than it had anticipated. This caused comps to decline by -2% during the holiday season, leading SIG to lower its Q4 comp outlook to -2.0% to -2.5%. Since the holiday season, though, SIG increased the depth of its assortment at key price points, and it also benefited from improved bridal trends.
- Consequently, Q4 comps came in at -1.1%, comfortably beating the downwardly revised forecast. More importantly, recently appointed CEO J.K. Symancyk commented that the positive trends SIG witnessed in January have continued into 1Q26 with growth seen across all categories. This bullish trend is evident in SIG's upside Q1 guidance for comps of +2.0% and adjusted EBITDA of $94-$106 mln.
- Mr. Symancyk, who was named as CEO last September and formerly served as CEO of PetSmart, also initiated a transformation strategy called "Grow Brand Love." The initiative will lean on new product styles and designs to drive and accelerate growth in the self-purchase and gifting categories, while expanding its leadership position in bridal. Additionally, SIG will focus on optimizing its real estate footprint by transitioning over 10% of its mall locations to off-mall. Expanding the e-Commerce channel will remain a priority as well,
- One main blemish is that SIG's FY26 EPS, revenue, and same store sales guidance was below expectations at the midpoint of their respective ranges. The conservative outlook is a function of SIG assuming that the measured consumer spending environment continues in FY26.
After experiencing a disappointing holiday season, sales began to improve in January and SIG is seeing those positive trends continue into Q1, particularly for the bridal market, leading to a strong forecast for the current quarter.
General Mills misses the mark in Q3; faces a slowdown in snacking and inventory headwinds (GIS)
A slowdown in snacking and strong-than-anticipated retailer inventory headwinds led to General Mills (GIS -1%) delivering an unappetizing Q3 (Feb) report, missing revenue expectations and registering a sharp pullback in consolidated volumes. The weakness endured during Q3 is also spilling over into the final quarter of the year, underpinning the consumer packaged goods giant's lowered FY25 (May) guidance after already reducing it in late January.
At the same time, tariff headwinds loom. GIS commented today that even though new U.S. tariffs on steel and aluminum and Chinese imports are not projected to be material to its FY25 results, it has not included any fallout from potential tariffs that are currently paused, keeping a layer of uncertainty around near-term results.
- In Q3, EPS came in at $1.00, translating to a minor beat, a reversal from the double-digit upside GIS registered last quarter. This was not overly surprising, given that GIS announced in December that it would accelerate its investments over the next couple of quarters to sustain its market share momentum and position the company for sustainable growth in FY26. Also, last quarter's big beat was largely attributed to timing, which was not expected to continue during the back half of FY25.
- More surprising was that every segment saw volumes contract yr/yr in Q3. North America Retail was the laggard, recording a 6% decline, while all other divisions fell by 1%. The result was a 5% decline in reported and organic revenue yr/yr to $4.84 bln, missing expectations for the second time in four quarters.
- Weakening snacking demand mostly fueled the decline in North America Retail volume. GIS cautioned last month that it noticed softness in snacking but was unsure of the magnitude. Peers also warned of the trend. PepsiCo (PEP), which owns the Frito-Lay banner, noted last month that after five years of rapid growth in snacking, it encountered a noticeable slowdown. Also, J.M. Smucker (SJM) commented last month that consumers bought fewer snacks in JanQ, reflecting more cautious and selective behavior.
- On a side note, snacking peers reporting earnings next month could endure a similar material slowdown in the category, including Conagra (CAG), Hershey Foods (HSY), Kraft Heinz (KHC), Mondelez (MDLZ), and PEP.
- Additional headwinds weighed on GIS's other segments in Q3. In North America Pet, retailer inventory challenges suppressed growth. In North America Foodservice, GIS dealt with a material deceleration in demand in away-from-home channels. In International, robust market share in most regions was offset by headwinds from a less favorable consumer environment in China, GIS's largest market outside North America.
- For the remainder of FY25, GIS is not expecting improvement. The company sliced its organic net sales growth to down 1.5-2.0% from flat to up 1.0% and adjusted EPS growth in constant currency to fall by 7.0-8.0% versus its prior forecast of declining by 2.0-4.0%.
GIS's Q3 report reflects a challenging demand landscape ripe with stubborn headwinds and elevated tariff-related uncertainty. Inflationary pressures are eating into consumers' budgets while geopolitics are triggering a pullback in spending, both much more so than the increased use of GLP-1 weight loss drugs; GIS mentioned that it did not notice much change in snacking due to GLP-1 use but rather frail consumer confidence. As such, GIS may remain pressured until consumer confidence begins to recover, which would mean that tariff uncertainty and inflation must ease.
Ollie’s Bargain Outlet surges following Q4 results, comps decent in a tough retail environment
Ollie's Bargain Outlet's (OLLI +11%) is trading sharply higher after Q4 (Jan) earnings results. OLLI reported in-line EPS while revenue grew just 2.8% yr/yr to $667.1 mln, which was light of expectations. In fairness, OLLI benefitted from an extra week last year. Backing that out, revenue was up 8.5% yr/yr. The FY26 guidance was mixed with downside EPS and in-line revs. It also guided to FY26 comps of +1-2% and 75 new store openings vs 50 in FY25.
- Same store comps in Q4 came in at +2.8%, in-line with internal expectations. Its consumables business continues to be very strong with housewares, food and candy, electronics being its best-performing categories. However, big-ticket items have been a little softer. In terms of household income segments, OLLI says the trade down continues as it is seeing and retaining more higher income consumers ($100K+). Its low income cohort has been stable.
- In terms of FY26 cadence, OLLI says Q1 (Apr) has gotten off to a sluggish start but momentum has started to build. OLLI faces tougher comparisons in June/July from the lapping of strong air-conditioner sales last year. Then in the back half, the comparisons start to ease a bit from lapping the liquidation events from the Big Lots store closures. As a result, comps could be in the lower end of the +1-2% range in 1H and at the midpoint to the higher end of that range in the back half.
- Consumers remain under pressure and are seeking value. Many retailers are closing stores or shutting down entirely. Tariffs are creating uncertainty across the retail landscape. OLLI says it thrives in this environment. Ollie's is the destination for any type of disruption, whether it's consumers under pressure, excess inventory resulting from store closures, tariff pressure etc.
- Management made a good argument that the closeout market is massive and there will always be merchandise available for a variety of reasons, whether it be innovation, packaging changes, shifts in consumer demand, store closures, tariffs etc. These are just some of the drivers of the closeout market. While sources of products are constantly changing, the availability of closeouts is stable and consistent.
- OLLI also noted that, with so many retailers closing stores or going bankrupt in the past year, there is a lot of abandoned customers' merchandise, real estate and talent in the marketplace. OLLI recently announced a deal to acquire 40 additional store leases of former Big Lots locations. They come with below-market rents and long-term leases for 20-30 years.
While the headline numbers for Q4 and the FY26 guidance were a bit lackluster, we think investors are pleased with the +2.8% Q4 comp given the compressed holiday season and one fewer week this year. Also, OLLI seems to be benefitting from some upheaval in the retail space generally with tariffs, inflation, competitor troubles. OLLI argues that close-out retailers handle these conditions better than most.
Corning upgrades its Springboard plan, raises its Q1 guidance; bucks broader market pullback (GLW)
The glass is half full at Corning (GLW +1%) following its upgraded high-confidence Springboard plan and raised Q1 guidance. The specialty glass and advanced optics manufacturer outlined its Springboard plan at the outset of FY24, pursuing growth of $8 bln in annualized sales run rate by the end of 2028. From this initial plan, GLW formulated a non-risk-adjusted goal, which required perfect timing of secular trends, successful adoption of GLW's technology, and volume growth across all of its businesses of $5 bln in annualized sales by the end of 2026.
To better ground expectations, GLW outlined a more attainable plan, what it dubbed its high confidence plan, which included adding over $3 bln in annualized sales and reaching operating margins of 20% by the end of 2026. At the end of Q4, GLW had already added $2.4 bln to its annualized sales run rate from its Springboard base, making it more likely that the company would step up its high-confidence plan.
- Today, GLW now expects to add over $4 bln in annualized sales while still registering operating margins of 20% by the end of next year. The higher expected sales should accompany stronger EPS and cash flow than initially anticipated at the start of its Springboard plan. Additionally, GLW pushed its non-risk-adjusted goal to $6 bln.
- There are favorable demand trends underneath GLW's upgraded plan. In Optical Communications, which represented a third of total FY24 revenue, heightened adoption of Gen AI products inside data centers is fueling rapid growth. This business centers on fiber optic cables, vital components in data centers, as they enable high-speed, low-loss data transmission, which is pertinent to AI and cloud computing.
- Meanwhile, in Display Technologies, which comprised just over a quarter of FY24 revenue, GLW noted that it successfully hiked prices during the back half of last year to help drive profitability amid a weaker yen environment. GLW's manufacturing facilities are located across Asia, making it critical for the company to hedge its yen exposure to maintain a stable dollar net income. On that note, GLW stated that it is on tract to record net income of $900-950 mln this year, paving the way for 25% net income margins.
- GLW also announced the launch of its new Solar Market-Access Platform. With this new platform, GLW anticipates more than doubling its revenue from around a $1 bln revenue stream last year to a $2.5 bln stream by 2028. Factors behind this goal include GLW commercializing new wafer products that already boast committed customer agreements, leading to an estimated positive impact on performance in 2H25.
Against the backdrop of macroeconomic uncertainty and ailing consumer sentiment, GLW's upgraded high-confidence Springboard plan and raised Q1 guidance, anticipating EPS near the high end of its $0.48-0.52 forecast and revs to exceed its prior $3.6 bln estimate, is refreshing, allowing its stock to buck the current market pullback today. There are still many things that need to go right for GLW to reach its more ambitious outlook, including stabilized consumer electronics and automotive markets. However, its upgraded plan is an encouraging step toward that goal.
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