Market Snapshot
| Dow | 43006.28 | +485.60 | (1.14%) | | Nasdaq | 18552.73 | +267.57 | (1.46%) | | SP 500 | 5842.52 | +64.37 | (1.11%) | | 10-yr Note | -24/32 | 4.27 |
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| | NYSE | Adv 1756 | Dec 881 | Vol 1.2 bln | | Nasdaq | Adv 2924 | Dec 1421 | Vol 7.0 bln |
Industry Watch
| Strong: Materials, Industrials, Communication Services, Consumer Discretionary, Technology, Real Estate |
| | Weak: Energy, Utilities |
Moving the Market
-- White House Press Secretary Karoline Leavitt saying President Trump will give a one month exemption for auto tariffs going through USMCA
-- Responding to Fed's Beige Book for February, which estimated that economic activity "rose slightly" since mid-January
-- S&P 500 remaining above 200-day moving average
-- Some buy-the-dip interest after weak performance of late
-- Digesting this morning's economic releases
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Closing Summary
05-Mar-25 16:20 ET
Dow +485.60 at 43006.28, Nasdaq +267.57 at 18552.73, S&P +64.37 at 5842.52
[BRIEFING.COM] The stock market logged gains across the board. The S&P 500 jumped 1.1%, the Dow Jones Industrial Average registered a 1.1% gain, and the Nasdaq Composite rose 1.5%.
The session started a little slow, but buying increased in a noticeable way in the afternoon due to the following factors:
- White House Press Secretary Karoline Leavitt said President Trump will give a one month exemption for auto tariffs going through USMCA
- The Fed's Beige Book for February estimated that economic activity "rose slightly" since mid-January
- The S&P 500 remained above its 200-day moving average (5,728) at session lows
- Short-covering activity and buy-the-dip trading following recent declines
Mega caps benefitted from the afternoon uptick in buying, providing an added boost to the major indices. The Vanguard Mega Cap Growth ETF (MGK), which traded down as much as 0.8% at its worst level today, closed with a 1.5% gain.
NVIDIA (NVDA 117.30, +1.31, +1.1%) and Microsoft (MSFT 401.02, +12.41, +3.2%) were some of the top performers, contributing to the gain in the technology sector (+1.4%).
Seven S&P 500 sector registered gains greater than 1.0% and only two sector closed lower today. Energy (-1.5%) was the biggest laggard, dropping with oil prices ($66.27/bbl, -2.03, -3.0%) in a reflection of lingering worries about growth that may impact demand.
The muted action right out of the gate in equities was influenced by mixed headlines. There was also some hopeful buzz that there could be some tariff relief for the counties, yet reports also indicated that the relief won't be in terms of lower tariff rates, but would involve USMCA modifications instead.
The stock market was also reacting to a large German fiscal plan aimed at improving infrastructure and increasing defense spending that is in contrast to efforts by the U.S. to cut government spending. There was a huge plunge in Germany's bunds in response and the 10-yr bund yield jumped 28 basis points to 2.79%.
US Treasuries also settled with losses, leading the 10-yr yield to settled six basis points higher at 4.27%.
- Dow Jones Industrial Average: +1.1% YTD
- S&P 500: -0.7% YTD
- S&P Midcap 400: -3.4% YTD
- Nasdaq Composite: -3.9%
- Russell 2000: -5.8% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 20.4%; Prior -1.2%
- February ADP Employment Change 77K (Briefing.com consensus 145K); Prior was revised to 186K from 183K
- February S&P Global US Services PMI - Final 51.0; Prior 49.7
- February ISM Services 53.5% (Briefing.com consensus 53.0%); Prior 52.8%
- The key takeaway from the report is that the pace of expansion in the nation's largest sector accelerated in February, taking a little edge off the market's growth concerns; however, the acceleration in activity was also accompanied by an acceleration in prices.
- January Factory Orders 1.7% (Briefing.com consensus 1.3%); Prior was revised to -0.6% from -0.9%
- The key takeaway from the report is that it reflected not only a rebound in orders for nondefense aircraft and parts, but a nice pickup in business spending overall, evidenced by the 0.8% jump in new orders for nondefense capital goods excluding aircraft.
Thursday's economic lineup includes:
- 8:30 ET: January Trade Balance (Briefing.com consensus -$93.5 bln; prior -$98.4 bln), Revised Q4 Productivity (Briefing.com consensus 1.2%; prior 1.2%), Revised Q4 Unit Labor Costs (Briefing.com consensus 3.0%; prior 3.0%), weekly Initial Claims (Briefing.com consensus 234,000; prior 242,000), and Continuing Claims (prior 1.862 mln)
- 10:00 ET: January Wholesale Inventories (Briefing.com consensus 0.7%; prior -0.5%)
- 10:30 ET: Weekly natural gas inventories (prior -261 bcf)
MRVL, VEEV, ZS, MDB trade up ahead of earnings
05-Mar-25 15:30 ET
Dow +519.05 at 43039.73, Nasdaq +273.42 at 18558.58, S&P +70.01 at 5848.16
[BRIEFING.COM] The three major indices trade near session highs heading into the close. The S&P 500 sports a 1.2% gain and the Nasdaq Composite trades 1.5% higher.
Marvell (MRVL 89.72, +1.36, +1.6%), Veeva Systems (VEEV 219.91, +1.46, +0.7%), Zscaler (ZS 196.79, +2.89, +1.5%), and MongoDB (MDB 262.41, +8.03, +3.2%) are coming along for the broad rally this afternoon in front of their earnings reports after the close.
Retailer Victoria's Secret (VSCO 21.94, -1.44, -6.1%) has underperformed in front of its report.
News of postponed auto tariffs helps afternoon rally
05-Mar-25 14:55 ET
Dow +564.62 at 43085.30, Nasdaq +282.56 at 18567.72, S&P +74.25 at 5852.40
[BRIEFING.COM] The major indices are moving sideways near session highs after another leg higher a short time ago.
The most recent upside move coincided with White House Press Secretary Karoline Leavitt saying President Trump will give a one month exemption for auto tariffs going through USMCA.
The improvement has also likely been helped by short-covering activity after recent losses. Just about everything is participating in the ride higher, leading the equal-weighted S&P 500 to trade 1.1% above its prior close. Nine of the 11 S&P 500 sectors are higher and seven of them show gains greater than 1.0%.
Market holds gains as Fed's Beige Book signals slight economic growth, rising price sensitivity
05-Mar-25 14:30 ET
Dow +546.85 at 43067.53, Nasdaq +268.24 at 18553.40, S&P +67.81 at 5845.96
[BRIEFING.COM] The broader market consolidated afternoon gains following the release of the Fed's February Beige Book, released at the bottom of the hour; the report showed that overall economic activity rose slightly since mid-January. Consumer spending was lower on balance, with reports of solid demand for essential goods mixed with increased price sensitivity for discretionary items, particularly among lower-income shoppers. Currently, the S&P 500 is in last place, albeit on gains of 68 points vs. losses of 36 points at today's lows.
- Among other notable points from the report, employment nudged slightly higher on balance, with four Districts reporting a slight increase, seven reporting no change, and one reporting a slight decline.
- Contacts in multiple Districts said rising uncertainty over immigration and other matters was influencing current and future labor demand.
- Prices increased moderately in most Districts, but several Districts reported an uptick in the pace of increase relative to the previous reporting period. Many Districts noted that higher prices for eggs and other food ingredients were impacting food processors and restaurants. Firms in multiple Districts noted difficulty passing input costs on to customers. However, contacts in most Districts expected potential tariffs on inputs would lead them to raise prices, with isolated reports of firms raising prices preemptively.
- Overall expectations for economic activity over the coming months were slightly optimistic.
Currently, the yield on the benchmark 10-yr treasury note is is about 4 basis points at 4.283%.
Nasdaq rises ahead of Fed’s Beige Book as dollar declines, gold gains slightly
05-Mar-25 13:55 ET
Dow +293.62 at 42814.30, Nasdaq +164.90 at 18450.06, S&P +38.13 at 5816.28
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.90%) is atop the major averages, now up more than 160 points ahead of the Fed's Beige Book for March, which is due at the top of the hour.
Gold futures settled $5.40 higher (+0.2%) to $2,926.00/oz, helped along by fairly decent losses in the dollar.
Currently, the U.S. Dollar Index is down -1% to $104.49.
Foot Locker jumps today on decent turnaround progress; however, consumers grow more cautious (FL)
Foot Locker (FL +4%) jumps from yesterday's one-year lows following double-digit earnings upside in Q4 (Jan) and encouraging improvements related to the footwear retailer's Lace Up turnaround plan. There are still pressing issues ahead for FL, keeping a lid on further appreciation today. The company cautioned that consumers grew more cautious and sensitive as it moved into February, hurting its QTD numbers. As a result, FL projected weak FY26 figures, predicting adjusted EPS and revs below consensus. On a lighter note, FL did target +1.0-2.5% same-store sales growth this year, consistent with estimates. Silver linings like this were seen throughout the company's Q4 report, slightly outshining the many concerning consumer trends.
- FL maintained positive comps in Q4, registering a +2.6% increase, bolstered by a +3.6% jump across the company's global Foot Locker and Kids Foot Locker banners. Management mentioned that a strong build during peak holiday sales underpinned the gains. Encouragingly, at Champs Sports, Q4 marked the second straight quarter of positive comp growth since the banner's repositioning started. Total revenue fell 5.7% yr/yr to $2.25 bln, just under analyst expectations due to lapping the 53rd week in 2023, FX headwinds, and store closures.
- Gross margins were another silver lining, expanding by 300 bps yr/yr in Q4, led by merchandise margin recovery as FL lapped higher promotion levels. Meanwhile, FL's cost-savings plan continued to flow to its bottom line, generating $35 mln of savings in Q4. As a result, adjusted EPS surpassed FL's outlook of $0.70-0.80, reaching $0.86 in the quarter.
- FL's Lace Up plan continues to show promising progress. During FY25, FL returned to positive enterprise comp growth, gross margin expansion, and positive free cash flow, all of which it anticipates will continue in FY26. Components of the plan include opening reimagined stores, where the emphasis is more on basketball, refreshing existing stores, re-tooling its loyalty program, and extracting further savings.
- FL touched on the many successes of these pillars. For example, the response to its reimagined doors has been "extremely positive." Furthermore, its rewards program was accompanied by increased purchase frequency and a step-up in FL's sales capture rate in Q4.
- The company plans to accelerate its reimagined store openings, complete around 300 additional refreshes, continue improving its rewards program, and achieve $60-70 additional savings in 2025.
- However, due to the dynamic economic backdrop, FL is proceeding carefully. Consumers still respond positively to compelling activations, key shopping events, and product launches. However, between these events, they are spending more cautiously. As a result, FL plans to slow its investment cadence across some of its technology initiatives, balancing the near and long-term business needs and ensuring it prioritizes its Lace Up strategies.
FL's Q4 report was a step in the right direction. Its Lace Up plan is showcasing noticeably uplifting progress. Nevertheless, the economic environment could cap near-term growth, making it challenging for the stock to bounce back aggressively.
CrowdStrike struck down after issuing soft outlook as impact from last year's outage linger (CRWD)
CrowdStrike (CRWD) is getting struck down after issuing soft guidance for 1Q26 and FY26 as the cybersecurity company continues to feel the effects of last July's outage that crashed millions of Windows operating systems around the world. In the wake of that event, CRWD sought to temper the blow to its financials by launching a "customer commitment package program" that offered one-time discounts. Those discounts will continue to create a headwind to annual recurring revenue (ARR), especially in the first half of this year.
At the same time, CRWD plans to ramp up investments in marketing and AI infrastructure, while higher taxes will also impact its profitability. Taken altogether, these factors caused the company to guide Q1 and FY26 EPS well below expectations.
- As far as 4Q25 goes, CRWD turned in a solid performance, beating EPS and revenue estimates as subscription revenue surpassed the $1.0 bln mark for the first time. Specifically, subscription revenue jumped by 27% yr/yr to $1.01 bln.
- From a product perspective, the company is seeing strong interest in its Cloud Security, Identity Security, and LogScale NextGen SIEM products, which generated ARR growth of 45%, 20%, and 115%, respectively. Increasingly, customers are adding on more tools as they consolidate the entire cybersecurity stack onto CRWD's Falcon platform. This is illustrated by the fact that CRWD's module adoption rates grew to 32% and 21%, respectively, for seven or more and eight or more modules.
- ARR also surpassed expectations, increasing by 23% to $4.24 bln. However, the issue is that net new ARR decreased by 20% to $224.3 mln, due to the impact of the aforementioned customer commitment package promotion. For Q1, the company is anticipating a typical seasonal decline of 21-23% for net new ARR.
- While CRWD stated that it expects net new ARR growth to reaccelerate in the back half of FY26, creating momentum into FY27, the company opted not to provide FY26 ARR guidance. This may be causing some uneasiness among investors who may be worried that a meaningful number of customers that are currently on the customer commitment package won't renew their contracts when the promotion ends.
The main takeaway is that CRWD is still contending with outage-related uncertainties and given the rising anxieties around economic growth, concerns surrounding contract renewals are only being amplified.
Ross Stores inches higher despite weak guidance; a soft outlook was likely priced in already (ROST)
Ross Stores (ROST +1%) is modestly higher following its Q4 (Jan) report last night. This off-price retailer reported mostly in-line results when you back out a gain from the sale of a packaway facility. Comps came in at the high end of guidance. However, weak guidance for Q1 (Apr) and the full year was disappointing. ROST did announce a 10% dividend increase, but it was a lackluster report overall. Jim Conroy took over as CEO on Feb 2 and it looks like he has his work cut out for him in the new year.
- Let's start with the Q4 comps. They came in at +3%, at the high end of the +2-3% prior guidance. Comps benefitted from higher traffic. Also, customers responded positively to improved assortments of branded. For the holiday season, ROST noted that cosmetics, home, and children were the best-performing areas. In a bit of a surprise, apparel trailed the chain average.
- Comp guidance was disappointing for both Q1 at -3% to flat and for the full year at -1% to +2%. ROST said that it was pleased with the holiday selling period. However, sales trends began softening later in January and into February. ROST believes the softness is primarily due to macro pressures impacting consumer confidence, resulting in a pullback in discretionary spending.
- The good news is that ROST expects some of the weaknesses could be transitory in nature. Also, a silver lining is that the volatile environment could result in more opportunities for ROST to purchase closeout merchandise and benefit future quarters.
- Operating margin is another metric we watch closely. In Q4, it came in at 12.4%, which was flat yr/yr. However, that gain on the sale of a packaway facility boosted operating margin by 105 bps. The resulting 11.35% was in line with prior guidance of 11.2-11.5%. ROST expects Q1 operating margin to be 11.4-12.1%, a bit below 12.2% in the prior year period.
We think the modest move higher in the stock despite the weak guidance is because investors were likely already expecting a cautious outlook given the weak guidance we saw recently from WMT and TGT. Its off-price peer TJX also offered lackluster guidance last week. Furthermore, shares of ROST pulled back quite a bit in February (from $153 to $136 heading into this report), so a lot of this was likely priced in already.
Another off-price peer, Burlington (BURL) reports before the open tomorrow. We suspect we will see weak guidance as well. The one caveat is that Burlington is particularly sensitive to weather. BURL was once called Burlington Coat Factory, so outerwear is still a key part of its assortment. BURL's cold weather businesses represent almost a quarter of sales, which is significantly higher than its peers. February was quite cold, which might help its guidance.
Thor Industries packs up and heads to 52-week lows on gloomy Q2 numbers, slashed guidance (THO)
Thor Industries (THO -15%) posts back-to-back EPS misses on its tenth consecutive quarter of yr/yr revenue compression in Q2 (Jan), enough to send investors packing today as shares sink to 52-week lows. THO's gloomy FY25 (Jul) outlook is adding kindling to today's fire sale, slashing its EPS target by $0.85 at the midpoint and revenue estimate by $150 mln. Management's tone flipped from its relatively optimistic view last quarter, noting today that despite the RV Industry Association's (RVIA) recent upward revision to its 2025 shipment forecast, it remains more cautious in its outlook for the remainder of CY25. Underpinning its glass-half-empty view is the recent drop in consumer confidence, which fell sharply in February, and considerable uncertainty surrounding tariff policies. Meanwhile, higher cost of ownership and elevated interest rates add further headwinds into the mix.
- Like last quarter, headline numbers reflected macroeconomic headwinds. THO registered EPS of $(0.01), below analyst estimates of a minor profit, on revs of $2.02 bln, an 8.6% decline yr/yr. While THO did flip back to delivering revenue upside in Q2, posting a modest improvement from the 14.3% drop in Q1 (Oct), it came on lower gross margins, contracting by 100 bps sequentially to 12.1%.
- THO has been aligning production with end demand to avoid piling up dealer inventories. The result has been dealer inventories across North America remaining materially below historical norms. During Q2, THO shipped 28,013 towable units, a 27.6% jump yr/yr but only 3,526 motorized RVs, a 20.5% decline. Similarly, European shipments tracked 27.8% below last year's levels.
- Camping World Holdings (CWH), a major RV dealer, commented last week that it is maintaining discipline in ensuring its inventories align with demand. However, potentially creating a future headwind for THO and other RV OEMs, such as Winnebago (WGO), is used inventory. CWH added that it continues to see healthy foot traffic and lead volumes, attributing the green shoots to its used inventory. Furthermore, CWH has noticed owners hanging onto their RVs for longer, dampening new RV demand. Also, CWH mentioned that if tariffs increase prices on new units, demand will grow for its used inventory.
- The added wrench of tariffs, combined with ailing consumer confidence, clipped THO's FY25 guidance. The company anticipates EPS of $3.30-4.00 and revs of $9.0-9.5 bln, translating to an 8% yr/yr decrease at the midpoint, 2 pts worse than its previous forecast. Discouragingly, last quarter THO was optimistic that the second half of FY25 would be much brighter than the first half. However, THO cautioned that this might not pass if consumer confidence does not begin to tick higher, which is exactly what unfolded.
THO and the RV industry are dealing with headwinds that are not only failing to subside but are also growing stronger. Tariffs are injecting plenty of uncertainty in the broader markets lately, having a similar effect on THO. Management maintained a bullish long-term view of the industry, as interest has remained elevated since the pandemic, with RV owners shifting toward a younger demographic. We also like THO for the long term for similar reasons. However, short-term uncertainty can lead the company to bounce along the bottom for an extended period.
AutoZone's mixed Q4 report looks better when looking under the hood (AZO)
AutoZone (AZO) is displaying impressive resiliency in the face of another tariff-induced selloff across the broader stock market after the auto parts retailer reported mixed 2Q25 results. At first glance, the relative strength looks rather surprising given that AZO missed EPS expectations for the third consecutive quarter. Furthermore, AZO's same store sales of +0.5% came up just short of analysts' estimates.
However, the primary driver behind the EPS and same store sales misses is tied to greater-than-anticipated foreign exchange headwinds, rather than operational issues. With 813 stores in Mexico and 136 in Brazil, AZO has significant exposure to foreign currency fluctuations -- in particular, a stronger U.S. dollar against the Mexican Peso and Brazilian Real is pressuring AZO's results.
- When looking at AZO's results on a constant currency basis, its performance looks much better. For instance, total same store sales were +2.9% in constant currency, with strong international comps of +9.5% compared to (8.2)% on a reported basis. Despite the current FX headwinds, AZO plans to keep its foot on the gas in terms of international store expansion. After opening 13 new stores in Mexico and 4 in Brazil in Q2, AZO is planning to open another 100 international stores in FY25.
- Another area of strength is the domestic commercial business, which sells parts and services to repair shops through its stores, hubs, and distribution centers. Expanding this business has been a focal point for AZO and that strategy is paying off as domestic commercial sales grew by 7.3% in Q2. An aging U.S. vehicle fleet and an apprehensive consumer who would rather repair an existing car than add a large car payment to their monthly budget is helping to support this business.
- The domestic DIY business has been a soft spot for AZO, driven by weakness in product categories that are more discretionary in nature, such as accessories, appearance chemicals, and tools. This business, though, continues to gradually trend in the right direction. Following a -0.4% comp in Q4, domestic DIY comps swung into positive territory last quarter at +0.3% and edged higher again in Q2 to +0.5%.
The main takeaway is that the FX headwinds tarnished AZO's headline numbers, but when looking under the hood, its results were actually quite solid. AZO is experiencing healthy growth in its international and domestic commercial business, while the DIY business is showing steady improvement. AZO has momentum behind it, but tariffs could throw a wrench in the company's performance this year.
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