| | | Market Snapshot
| Dow | 41911.40 | -890.01 | (-2.08%) | | Nasdaq | 17468.32 | -727.90 | (-4.00%) | | SP 500 | 5614.56 | -155.64 | (-2.70%) | | 10-yr Note | +28/32 | 4.21 |
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| | NYSE | Adv 544 | Dec 2091 | Vol 1.4 bln | | Nasdaq | Adv 807 | Dec 3598 | Vol 8.6 bln |
Industry Watch
| Strong: Energy, Utilities |
| | Weak: Communication Services, Technology, Discretionary, Financials, Materials, Industrials |
Moving the Market
-- Renewed selling pressure after Friday's rally
-- Continued fallout in mega caps
-- Reacting to President Trump saying the US economy is going through a "period of transition" and declining to answer if the U.S. economy will experience a recession
-- Drop in yields on some safe-haven buying
-- S&P 500 falling below its 200-day moving average (5,734)
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Closing Summary
10-Mar-25 16:20 ET
Dow -890.01 at 41911.40, Nasdaq -727.90 at 17468.32, S&P -155.64 at 5614.56
[BRIEFING.COM] The stock market started the new week with sharp declines after Friday's rebound. Technical factors were in play as the Nasdaq Composite (-4.0%) moved further into correction territory (i.e. a 10% decline from its high) and the S&P 500 (-2.7%) dropped below its 200-day moving average (5,734) again. It's the first time the index closed below that key level since November 2023, marking a 8.7% decline from its all-time high.
Another factor that contributed to the selling activity was ongoing fears about economic growth after President Trump said in a weekend interview that the economy is going through a "period of transition" and he declined to answer directly if the U.S. will experience a recession.
Continued fallout in the mega cap space played a big role also. Tesla (TSLA 222.15, -40.52, -15.4%) tumbled 15% after Bloomberg reported sales are struggling in China and after UBS lowered its price target to $225 from $259. This left shares 53.7% lower than their record closing high of $479 on December 17.
NVIDIA (NVDA 106.98, -5.71, -5.1%), Microsoft (MSFT 380.16, -13.15, -3.3%), and Apple (AAPL 227.48, -11.59, -4.9%) were also among the losing standouts in the space.
The disappointing price action became its own downside catalyst, drawing in more selling interest that impacted many stocks. Nine of the 11 S&P 500 sectors registered declines and the equal-weighted S&P 500 slid 1.4%.
Some individual stocks avoided selling due to specific catalysts. Redfin (RDFN 9.77, +3.95, +67.9%) shares surged after news that Rocket Companies (RKT 13.35, -2.42, -15.4%) is acquiring RDFN for $12.50 per share in a stock transaction.
Expand Energy (EXE 99.09, +3.06, +3.2%) was another outperformer after news late Friday that it will replace FMC Corp. (FMC 41.58, +0.29, +0.7%) in the S&P 500, effective prior to the open of trading on Monday, March 24.
Treasuries saw some safe-haven buying in another manifestation of growth concerns. The 10-yr yield fell ten basis points to 4.21% and the 2-yr yield fell ten basis points to 3.90%. The rally in the Treasury market resulted in the lowest settlement for the 2-yr yield since early October while the 10-yr yield returned back below its 200-day moving average (4.234%).
There was no US economic data of note today.
- Dow Jones Industrial Average: -1.5% YTD
- S&P 500: -4.5% YTD
- S&P Midcap 400: -6.4% YTD
- Nasdaq Composite: -9.5%
- Russell 2000: -9.5% YTD
Looking ahead to Tuesday, market participants receive the following economic data:
- 6:00 ET: February NFIB Small Business Optimism Index (prior 102.8)
- 10:00 ET: January job openings (prior 7.600 mln)
Stocks try to move up ahead of close, but remain sharply lower
10-Mar-25 15:35 ET
Dow -842.56 at 41958.85, Nasdaq -696.95 at 17499.28, S&P -150.11 at 5620.09
[BRIEFING.COM] The market is trying to recover ahead of the close, but major indices still show solid declines. The S&P 500 is 2.7% lower and the equal-weighted S&P 500 is 1.3% lower.
Nine of the 11 S&P 500 sectors are lower with losses ranging from 0.6% (consumer staples) to 4.3% (technology).
The energy sector has outperformed today despite selling in crude oil. WTI crude oil futures dropped 1.6% to $66.06/bbl.
Separately, market participants receive the following data on Tuesday:
- 6:00 ET: February NFIB Small Business Optimism Index (prior 102.8)
- 10:00 ET: January job openings (prior 7.600 mln)
Selling continues to build; yields drop
10-Mar-25 15:00 ET
Dow -1050.76 at 41750.65, Nasdaq -842.80 at 17353.43, S&P -187.09 at 5583.11
[BRIEFING.COM] Losses continue to accelerate for the major indices. The Dow Jones Industrial Average is down more than 1,000 points.
Downside action has become its own selling catalyst as the major indices fall further below key technical levels.
Meanwhile, buying has increased in Treasuries. The 10-yr yield is down 10 basis points to 4.22% and the 2-yr yield is down 10 basis points to 3.90%.
S&P 500 drops as Palantir, Delta sink; Regeneron gains on positive Dupixent trial
10-Mar-25 14:25 ET
Dow -870.08 at 41931.33, Nasdaq -758.77 at 17437.46, S&P -159.90 at 5610.30
[BRIEFING.COM] The S&P 500 (-2.77%) is in second place on Monday afternoon.
Briefly, S&P 500 constituents Palantir Technologies (PLTR 75.24, -9.67, -11.39%), Delta Air Lines (DAL 48.95, -4.33, -8.13%), and KKR (KKR 107.01, -8.26, -7.17%) dot the bottom of the average. PLTR is caught up in the outsized losses among tech stocks today, while DAL caught a tgt cut out of Bernstein to $66 from $75.
Meanwhile, Regeneron Pharma (REGN 738.57, +31.06, +4.39%) is near the top of the standings after the company and Sanofi (SNY) announced positive results from the pivotal ADEPT Phase 2/3 trial evaluating the investigational use of Dupixent in adults with moderate-to-severe bullous pemphigoid.
Gold slips to as tariff concerns weigh on precious metals
10-Mar-25 14:00 ET
Dow -812.94 at 41988.47, Nasdaq -767.54 at 17428.69, S&P -158.20 at 5612.00
[BRIEFING.COM] With about two hours to go on Monday the tech-heavy Nasdaq Composite (-4.22%) is firmly lower and at the bottom of the major averages
Gold futures settled $15.60 lower (-0.5%) to $2898.50/oz, as concerns have bubbled about a possible wider tariff levy on precious metals owing to President Trump's aluminum and steel tariffs.
Currently, the U.S. Dollar Index is up about +0.1% to $103.98.
Applied Materials flirts with 52-week lows despite a $10 bln buyback plan and dividend hike (AMAT)
Applied Materials (AMAT -3%) gets swept up in the broader market pullback today as it flirts with 52-week lows despite raising its quarterly dividend by 15% and authorizing $10 bln for repurchases. Following the hike, AMAT's annual dividend yield is 1.2%. Meanwhile, its $10 bln buyback program translates to around 8% of its market cap. It also supplements its previous authorization, which had roughly $7.6 bln remaining.
AMAT recently reported decent Q1 (Jan) results, clearing top and bottom-line estimates. However, its Q2 (Apr) revenue guidance of $6.7-7.5 bln was somewhat lighter than expected, with the midpoint representing a minor qtr/qtr contraction, AMAT's first since 1Q24. Updated export restrictions on China proved the culprit, slashing an estimated $400 mln in revenue in FY25 (Oct). While the China-related setback had a meaningful impact on the stock, which sold off by over 8%, there are still many reasons to take a more optimistic view.
- AI demand remains elevated. Management mentioned last month that early AI deployment underpinned an approximately 20% jump in global semiconductor sales last year, with the market staying on track to surpass $1 trillion in annual revs by 2030. Several themes are emerging due to the AI boom, including surging demand for high-performance DRAM, high-bandwidth memory, and advanced packaging. AMAT touts a leadership position across these areas.
- AMAT anticipates related revenue to eventually rise in the +30% range for the equivalent wafer fab capacity. The company noted that the bulk of spending on the aforementioned themes has yet to unfold. Still, it has already observed a positive impact, believing it outperformed the market across these themes and within ICAPS (IoT, Communications, Automotive, Power, and Sensors) end markets in 2024, excluding China.
- China is shaping up to be a lasting headwind. The current administration is seeking more restrictive semiconductor curbs in China on top of the previous administration's initial controls, which already eroded China-related sales. AMAT commented that the ability of U.S. companies to serve China remains constrained, further limited by updated results announced in December and January. While AMAT forecasted a $400 mln hit to revenue this year, sales may be clipped further on additional restrictions.
- While not using the same language as AMAT, its peers project a similar normalized pace of growth from China in 2025. For instance, in January, ASML (ASML) remarked that it has been experiencing a normal order intake for the region recently. Similarly, Lam Research (LRCX) stated last week that China's total percentage of revs this year will be down yr/yr, partly due to some softening in spending and new regulations, which are expected to clip $700 mln off revs.
Even though markets have been pulling back sharply over the past few weeks, the consensus from prominent tech firms over that period has been that AI demand continues to accelerate. AMAT may endure some downward pressure over the near term, particularly if the major indices continue to weaken. However, current prices offer a decent entry point for long-term investors wanting to capitalize on the immovable AI-related tailwind.
Tesla running out of exits as sales slump spreads around the world (TSLA)
The exuberance that surrounded Tesla (TSLA) following the election of Donald Trump last November is far in the rearview mirror now as the road becomes increasingly bumpy for the EV maker. After the calendar flipped to 2025, a relentless storm of negative developments has battered shares of TSLA, which have crashed by nearly 40% on a year-to-date basis, and there doesn't appear to be any relief on the near-term horizon in terms of the news cycle. Over the weekend, Bloomberg reported that TSLA's business in China is speeding in reverse with shipments plunging by 49% in February.
This report comes on the heels of another Bloomberg report from last week that disclosed a 76% collapse in sales in Germany for February. On the home front, where TSLA has long dominated the EV market, the cracks that have emerged are widening and Elon Musk's rising status and time commitments within President Trump's sphere isn't helping the stock's cause.
- If ever there was a time for Musk to recalibrate and return his focus fully back to his struggling EV company, this would be it. In China, TSLA's second largest market at about 20% of total sales, intensifying competition is continuing to take a major toll. According to the Bloomberg article, TSLA's market share in China has slid to less than 5%, while BYD Company (BYDDF) is growing its market share.
- A stale product lineup that completely leans on the Model 3 and Model Y in China has opened the door for BYDDF and other upstart Chinese EV makers, such as NIO (NIO), XPeng (XPEV), and Li Auto (LI), to steal market share by launching innovative, less expensive EVs that feature cutting edge software. As an example, XPEV's January deliveries soared by 268% yr/yr, bolstered by strong demand from its recently launched MONA M03, which generated deliveries of over 15,000 units.
- Meanwhile, Musk's allegiance to President Trump -- which was initially viewed as a positive due to the anticipation of regulatory favorability towards TSLA -- is alienating a growing swath of potential customers. Last Friday, the Wall Street Journal published an article that included a very concerning data point from consulting firm Strategic Vision. Specifically, the firm noted that in 2022, 22% of car shoppers said that they would "definitely consider" purchasing a Tesla for their next vehicle. That percentage has since dropped to just 7%.
- An eroding brand is the last thing that TSLA needs right now. The EV maker is already contending with a high-interest rate environment, stiff competition, and the prospects of tariffs increasing its cost of goods. A silver lining in TSLA's downside Q4 earnings report from late January was that COGS per vehicle reached its lowest level ever at less than $35,000, driven by raw material cost improvement. Still, automotive gross margin slid by 350-bps to 13.6% as price cuts and lower ASPs more than offset the manufacturing cost improvement.
Mired in one of its worst slumps in recent history, CEO Elon Musk has been mostly missing in action and TSLA's shareholders are bailing on the stock. During the Q4 earnings call, Musk stated that 2025 may be viewed as the most important year in the company's history, making his lack of focus all the more puzzling. TSLA still has some potential game-changing growth catalysts ahead of it with the anticipated launch of its mass market Model 2 vehicle later this year, and then Cybercab next year. However, the market is losing confidence that these launches will materialize in the stated timelines, and/or whether they will be potent enough to drive robust growth amid the strengthening headwinds.
Rocket Companies losing some fuel today, stock lower on deal to acquire Redfin (RKT)
Rocket Companies (RKT -13%) is under pressure today after the Detroit-based fintech platform (mortgage, real estate, personal finance) agreed to acquire struggling digital real estate brokerage Redfin (RDFN). It was a pretty hefty premium at $12.50/sh, or an equity value of $1.75 bln. Redfin closed Friday at $5.82 and it seems Rocket shareholders are unhappy about the premium and that this is an all-stock deal.
- One of Redfin's attractive features is the heavy online traffic it generates. Rocket expects to benefit from Redfin's nearly 50 mln monthly visitors. The ability to cross-sell that traffic with Rocket Mortgage loans is a key benefit of the deal. Also, Redfin offers a staff of 2,200+ real estate agents across 42 states. In recent years, Redfin has expanded into the brokerage area using a quasi for-sale-by-owner model by charging sellers a lower commission but sellers do more of the work.
- Rocket expects the addition of Redfin will generate significant revenue synergies across search, real estate brokerage, mortgage origination, title and servicing. Rocket will match homebuyers with real estate agents and loan officers across the combined companies. Rocket also gains consumer insights across a data repository of 100 mln properties. RKT expects this data will strengthen its AI models and enable a more personalized experience.
- By the numbers, Rocket expects the combined company to achieve more than $200 mln in run-rate synergies by 2027, including $140 mln in cost synergies from rationalization of duplicative operations. In addition, Rocket expects more than $60 mln in revenue synergies from pairing its financing clients with Redfin real estate agents. The goal is to drive clients working with Redfin agents to Rocket's mortgage, title and servicing offerings.
- In addition to the premium being paid, we suspect investors are a bit worried about buying a company with exposure to a struggling real estate market. Redfin said recently that the mortgage rate lock-in effect is fading. However, homes are lingering on the market longer as demand is slowing and fewer people are buying homes. Redfin has cited economic uncertainty, tariffs, reductions in the federal workforce, return to office mandates etc. Also, home prices remain unaffordable for many. Deals are falling through more often. Home purchases were canceled in January 2025 at the highest January rate since 2017.
- Zillow (ZG) has done a great job by diversifying more into rentals, which makes sense because rental demand tends to pick up when housing sales slow. Zillow's rental business has been booming. Redfin also has gotten into rentals, but its business is struggling. In a bit of a twist, Redfin recently inked a deal to list Zillow rental ads on Redfin. Redfin plans to restructure its rentals segment and lay off 450 rentals employees. We mention this because rentals is another area where Redfin has struggled and RKT investors are likely are not thrilled about it.
While we see some benefits for Rocket by driving robust Redfin traffic to Rocket's mortgage, title and servicing offerings, Redfin has not performed well. It just provided downside Q1 guidance in late February. The real estate market is tough right now and this spring selling season is expected to be weaker than most. Also, Redfin's rental business has been struggling. We see the allure in creating a mini-Zillow, but performance needs to improve and this premium was pretty rich.
Cognizant Tech bucks today's sell-off following Mantle Ridge's over $1.0 bln stake (CTSH)
Cognizant Tech (CTSH +3%) tacks on decent gains today after the WSJ reported on Friday after the close that Mantle Ridge, an activist firm, amassed an over $1.0 bln stake in the IT services and consulting company. Mantle Ridge has been active in CTSH for a few years, beginning to build its stake in the back half of 2022. A few months later, CTSH appointed a new CEO, Ravi Kumar, who successfully pivoted from stabilization to growth. This was most apparent in 2024 as the company's top line started with a 1.1% decline yr/yr in Q1, only to end with a 6.8% increase in Q4, its best quarter since 2Q22.
- As an IT consulting firm similar to Accenture (ACN) but considerably smaller, CTSH has taken advantage of the current cloud and AI shift unfolding across the business landscape. While its workers are predominately located in India, roughly three-quarters of its annual revenue is derived from the U.S. Similar to ACN, which has been adding AI specialists, CTSH has been investing in its workforce to ensure it capitalizes on supporting businesses' desire to implement digital and AI capabilities.
- CTSH is coming off an impressive year, with Q4 marking the high point for yr/yr large deal signings and bookings. The company's two largest segments, Health Sciences and Financial Services, led the way in Q4, with discretionary spending improving meaningfully in Financial Services. Large deals totaled ten in Q4, up from six in the year-ago period.
- A weak point from Q4 was its adjusted operating margins, which contracted by 40 bps yr/yr to 15.7%. Increased compensation costs were the leading factor in dragging down margins. On the bright side, margins did tick 40 bps higher sequentially in Q4, even as CTSH continues to invest in AI and M&A. CTSH also anticipates around 20-40 bps of margin expansion in FY25, with the growing adoption of AI to drive better productivity and even higher margins over time.
- Speaking of AI, CTSH believes its Gen AI capabilities are gaining momentum, noting that at the end of Q4, it boasted over 1,200 early Gen AI engagements compared to 1,000 at the end of Q3. Management sees demand for AI services expanding across industries as use cases proliferate, citing potential examples of predictive analytics, drug discovery in health care, and credit scoring and fraud detection in financial services. Some of CTSH's current customers include Toyota (TM) and McDonald's (MCD).
In a world growing dependent on AI and cloud technologies, businesses may need to increasingly depend on IT consulting firms like CTSH to ensure they are not left behind. Interestingly, CTSH has already appreciated by +10% on the year when incorporating today's jump, which is far better than the approximately 5% drop incurred by ACN. Even though investors have been growing concerned about macroeconomic stability lately, CTSH has plenty to offer, potentially supporting a move back to all-time highs over the near term.
Gap surges on impressive Q4 results as turnaround momentum gains steam (GAP)
Apparel firm Gap (GAP +13%) is surging today on robust earnings and sales upside in Q4 (Jan). The company has been in turnaround mode for several quarters, appointing a new CEO in 2023, who outlined a comprehensive strategy to return to what can separate Gap from its peers. During its turnaround, Old Navy's comps flipped positive, becoming a main profit driver. At the same time, Gap delivered steady margin improvements. Now, after a year of fixing its fundamentals, Gap mentioned that it is ready to allocate its attention to continuous innovation, paving the way for long-lasting upward momentum.
- What stood out most from Gap's Q4 report was its +3% comparable sales growth, which surpassed estimates and accelerated from +1% in Q3 (Oct), helping the company close the year out with positive comps each quarter. This level of consistency supported Gap's eighth consecutive quarter of market share gains, a testament to management's ability to adapt to fashion trends and craft a marketing campaign that has resonated with consumers.
- Nearly every banner posted positive comp growth in Q4, a similar trend from last quarter. Old Navy, comprising over half of total sales, registered +3% comp growth, touting continued wins in active and denim categories. Gap, the company's second-largest banner, led the way with a +7% comp, illuminating its brand reinvigoration playbook; CEO Richard Dickson mentioned that the brand is back in the cultural conversation. Banana Republic and Athleta reversed roles in Q4, with the former registering +4% comps compared to a -1% drop last quarter and the latter delivering -2% comps versus a +5% jump in Q3.
- Management noted that there is still work to do to improve Athleta and position it for upward momentum. Conversely, at Banana Republic, the company enjoyed a notable improvement in its women's business while also building on its strength in men's.
- Gap is still traversing a dynamic economic landscape, evident by its relatively conservative FY26 revenue guidance, projecting growth of just +1-2% following a 1% increase in FY25. The company cautioned that the fluidity of the economy it endured last year will likely hold throughout 2025. However, regarding tariffs, Gap was not overly concerned, noting that during FY25, it sourced under 10% of its products from China and less than 1% from Canada and Mexico combined. The company's FY26 guidance already includes any expected margin impact, albeit small, from tariffs.
Like last quarter, Gap's Q4 results further reflected encouraging turnaround progress. The holiday season clearly provided positive momentum heading into 2025. Even though some banners could take longer than others to realize their full potential, including Banana Republic and Athleta, we like the moves CEO Richard Dickson has been making and view the stock as attractive even though today's pop places shares back in their previous trading range as continued momentum can begin to propel Gap above resistance around $25.00.
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