Market Snapshot
| Dow | 41433.17 | -478.23 | (-1.14%) | | Nasdaq | 17436.09 | -32.23 | (-0.18%) | | SP 500 | 5572.07 | -42.49 | (-0.76%) | | 10-yr Note | -27/32 | 4.281 |
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| | NYSE | Adv 1070 | Dec 1543 | Vol 139 mln | | Nasdaq | Adv 2092 | Dec 2248 | Vol 9.2 bln |
Industry Watch
| Strong: |
| | Weak: Health Care, Industrials, Consumer Staples |
Moving the Market
-- Trade war tensions remain top of mind; President Trump said the U.S. will be imposing a 50% tariff on imports of steel and aluminum, starting tomorrow, instead of 25%
-- Still worried about growth and earnings prospects
-- Rebound in some mega caps
-- Mixed action in Treasuries
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Closing Summary
11-Mar-25 16:30 ET
Dow -478.23 at 41433.17, Nasdaq -32.23 at 17436.09, S&P -42.49 at 5572.07
[BRIEFING.COM] The stock market logged declines, again. The market has been in a steady downtrend as trade war tensions intensify and growth concerns increase. The former was relevant today after President Trump announced that the US will impose a 50% tariff on Canadian steel and aluminum imports, starting Wednesday, instead of the originally proposed 25%.
The escalation follows a retaliatory measure by Ontario, which imposed a 25% tariff on exports of electricity to the U.S. in response to the originally planned 25% tariffs on Canadian imports.
Investors were also dealing with warnings about corporate earnings from several airlines and a few retailers. Delta Airlines (DAL 46.68, -3.65, -7.3%), American Airlines (AAL 11.46, -1.04, -8.3%), and Southwest Airlines (LUV 30.53, +2.35, +8.3%) lowered their Q1 revenue outlook.
Dick's Sporting Goods (DKS 198.97, -12.05, -5.7%) and Kohl's (KSS 9.15, -2.90, -24.1%) disappointed with full-year guidance after reporting their quarterly results.
The CBOE Volatility Index (VIX) spiked above 29.5 today, indicating preparation for further downside in the market.
It wasn't all bad in the equity market, however. The Nasdaq Composite traded above its prior close at its high of the day, propelled by rebound buying in some mega cap names. Tesla (TSLA 230.58, +8.43, +3.8%) and NVIDIA (NVDA 108.76, +1.78, +1.7%) were among the standouts.
Reviewing today's economic data:
- February NFIB Small Business Optimism 100.7; Prior 102.8
- January JOLTS - Job Openings 7.740 mln; Prior was revised to 7.508 mln from 7.600 mln
Wednesday's economic data includes:
- 7:00 ET: Weekly MBA Mortgage Index (prior 20.4%)
- 8:30 ET: February CPI (Briefing.com consensus 0.3%; prior 0.5%) and Core CPI (Briefing.com consensus 0.3%; prior 0.4%)
- 10:30 ET: Weekly crude oil inventories (prior -2.33 mln)
- 14:00 ET: February Treasury Budget (prior -$129.0 bln)
Treasuries settle lower; yields move up
11-Mar-25 15:35 ET
Dow -267.56 at 41643.84, Nasdaq +100.41 at 17568.73, S&P -8.52 at 5606.04
[BRIEFING.COM] The Nasdaq Composite (+0.6%) is back in positive territory heading into the close.
Treasuries settled the session with losses. The 10-yr yield settled eight basis points higher at 4.29% and the 2-yr yield settled four basis points higher at 3.94%.
On a related note, the U.S. Treasury started this week's note and bond offering slate with an underwhelming $58 bln 3-yr note sale ahead of tomorrow's $39 bln 10-yr note reopening.
Staging a recovery effort
11-Mar-25 14:55 ET
Dow -114.93 at 41796.47, Nasdaq +216.65 at 17684.97, S&P +21.30 at 5635.86
[BRIEFING.COM] The stock market is engaged in a recovery effort (the second one today). Like the first one, it has been influenced by a turnaround in the small-cap stocks and mega-cap stocks, which have been among the hardest hit areas over the past month.
Entering today, the Russell 2000 was down 11.3% over the last month while the Vanguard Mega-Cap Growth ETF (MGK), which we'll use as a proxy for the performance of the mega-cap stocks, was down 11.9%.
It hasn't hurt to hear that reports suggest Ukrainian officials are ready to accept the the U.S. proposal of a 30-day truce, but it stands to reason that some participants are trading opportunistically around the idea that the market has gotten oversold on a short-term basis and is due for a bounce.
In any case, the S&P 500, which briefly dropped into correction territory (more than 10% drop from a prior high), has advanced nearly 100 points, or 1.8%, off today's low at 5,528. The Vanguard Mega-Cap Growth ETF (MGK) is now up 1.1% for the session after being down as much as 1.3%. The Russell 2000 is up 0.5% after being down as much as 0.9%.
Stocks tick up as Ukraine accepts U.S. truce; Teradyne, Expedia lag
11-Mar-25 14:30 ET
Dow -372.96 at 41538.44, Nasdaq +49.77 at 17518.09, S&P -21.65 at 5592.91
[BRIEFING.COM] The major averages have perked up a little in recent trading in reaction to reports that Ukraine has agreed to a US-proposed 30-day truce. Currently, the S&P 500 (-0.39%) is only down 22 points.
Briefly, S&P 500 constituents Teradyne (TER 88.13, -16.84, -16.04%), Expedia Group (EXPE 164.12, -12.48, -7.07%), and Moderna (MRNA 33.90, -2.06, -5.73%) pepper the bottom of the standings. TER slips after this morning's Analyst Day guidance wasn't as robust as hoped, while EXPE falls as airline companies detailed slowing travel demand.
Meanwhile, CrowdStrike (CRWD 332.51, +23.65, +7.66%) is one of today's top gain getters despite a dearth of corporate news; shares were down circa -32% from the mid-February highs heading into today's session.
Gold up 0.7% as weaker dollar, recession fears drive gains
11-Mar-25 14:00 ET
Dow -582.58 at 41328.82, Nasdaq -91.72 at 17376.60, S&P -60.21 at 5554.35
[BRIEFING.COM] The Nasdaq Composite (-0.53%) is today's best-performing major average, albeit in a losing effort on losses of 92 points.
Gold futures settled $21.50 higher (+0.7%) to $2,920.90/oz, propelled by recession concerns as well as a weaker dollar.
Currently, the U.S. Dollar Index is down about -0.6% to $103.27.
Dick's Sporting Goods' soft guidance ripples across sports and athletic footwear stocks (DKS)
Dick's Sporting Goods (DKS) continued to distance itself from the field in 4Q25, delivering strong results and showing that it was once again a winning retailer during the holiday shopping season. The company's downside FY26 guidance, on the other hand, has the stock sporting some sizable losses, sparking concerns that demand for athletic footwear, equipment, and athleisurewear will soften as macroeconomic uncertainties rise.
In a show of confidence, DKS announced a new five-year share repurchase program for up to $3.0 bln and it increased its quarterly dividend by 10%. Indeed, the company remains quite bullish about its longer-term prospects, stating that its business has incredible momentum and that it sees tremendous strength in the U.S. sports industry. However, the shareholder-friendly capital allocation plans, and upbeat commentary aren't enough to take the focus off DKS's soft guidance amid a very skittish market.
- In terms of the Q4 results, there is very little to complain about. In fact, comps of +6.4% supported the company's largest sales quarter in its history and reflected an acceleration in growth from last quarter's +4.2% mark. The strong comps were driven by a 4.4% increase in average ticket and a 2% increase in transactions.
- Despite operating in a highly promotional retail environment, gross margin remained firm, expanding by 39 bps yr/yr to 34.96%. The solid margin performance is a testament to DKS's high-quality product assortment -- one of its key competitive advantages.
- Another competitive advantage rests in the company's real estate and store portfolio. In particular, DKS's large format "House of Sport" stores are providing a differentiated shopping experience that's enabling it to gain market share. Over the past year, DKS estimates that it picked up about 50 bps in market share to command total market share of just under 9%. After opening seven House of Sport locations in 2024, which offer batting cages, climbing walls, ice rinks, and other experiences, DKS is planning to open 16 more in 2025.
- Expanding its real estate footprint is only one piece of the investment puzzle. DKS also intends to focus on its footwear business by investing in new marketing initiatives and leaning on a dedicated focus on footwear across its in-store and digital channels.
The main takeaway is that DKS's downside FY26 guidance is signaling that demand for sporting goods is poised to slow, which is not only weighing on shares of DKS, but it's also hitting shares of Foot Locker (FL), Academy Sports + Outdoors (ASO), NIKE (NKE), and Adidas (ADDYY),
Asana loses its CEO and issues weak revenue guidance, prompting a sharp pullback today (ASAN)
Asana (ASAN -24%) is losing its CEO and past four months of gains today as shares tumble following Q4 (Jan) results and news that its co-founder, CEO, and Chairman Dustin Moskovitz will be transitioning to the sole position of Chairman upon hiring a replacement CEO. At the same time, the workforce management software developer issued mixed guidance for the upcoming quarter and FY26, projecting earnings above consensus in both instances -- likely reflecting its recent decision to trim its workforce by around 5% -- but predicting revenue that missed the mark.
- ASAN's Q4 numbers were still decent. Revenue of $188.3 mln, a 10.1% increase yr/yr, met the high end of the company's prior $187.5-188.5 mln forecast. Meanwhile, ASAN's adjusted earnings broke even in the quarter, better than its $(0.02)-$(0.01) prediction. Non-GAAP operating margins jumped by over 800 bps yr/yr to an operating loss margin of just 1%. Mr. Moskovitz expects the company to reach non-GAAP profitability in Q1 (Apr), projecting adjusted EPS of $0.02.
- Non-tech verticals underpinned revenue growth in Q4 as they continued to outpace overall growth, climbing by 15% yr/yr. Some of ASAN's fastest-growing verticals included manufacturing, energy, consumer retail, and media. Also supporting sales growth in the quarter was ASAN's ongoing progress in its enterprise customer acquisition, with its $100,000 cohort expanding by 20% yr/yr, an acceleration from last quarter.
- Like many tech firms, AI remains pivotal to current and future growth. The outgoing CEO mentioned that momentum surrounding AI exceeded expectations, with hundreds of its largest customers actively running workflows powered by AI Studio. Notably, Mr. Moskovitz was struck by the breadth of AI demand across all segments. Looking ahead, ASAN is forming a dedicated sales team for AI Studio to pounce on the outsized opportunity, especially as the general availability of AI Studio launches later in Q1.
- Given the incredible AI demand, ASAN's revenue outlook is discouraging, anticipating Q1 revs of $184-186.5 mln, a slight sequential dip, and FY26 revs of $782-790 mln, an 8.6% increase yr/yr at the midpoint, down slightly from an 11.0% jump in FY25. Underlying the guidance is no material change to the current macroeconomic or spending climate, which is somewhat worrisome, given the increasing risks of a macroeconomic slowdown. Also, ASAN is optimizing its go-to-market by reallocating some resources, which can take several quarters before benefits are realized.
Today's disappointment centers on guidance and Dustin Moskovitz's departure as CEO. The co-founder has been at ASAN through it all, supporting the company's 2020 IPO and its struggles during the rising interest rate environment that followed. As the market shifts away from riskier assets, ASAN has been getting punished, down considerably from levels before its +40% surge following Q3 (Oct) results in December. Investors are not only concerned about the growing risks of a deteriorating macroeconomic picture but also about the direction ASAN will take without its co-founder at the helm, potentially keeping a lid on near-term appreciation.
Delta Air Lines and competitors encounter strengthening leisure travel demand headwinds (DAL)
Already in a fragile state due to persistently high interest rates and inflation, consumers are becoming even more cautious as economic growth concerns arise amid President Trump's tariff push. Up until now, travel demand had remained impressively resilient, but some consumers have now reached a breaking point, and the fallout was on display last night and this morning when a slew of airlines cut their Q1 outlooks.
Delta Air Lines (DAL) started the barrage of guidance cuts after the close yesterday, slashing its Q1 EPS outlook to $0.30-$0.50 from its prior forecast of $0.70-$1.00 while lowering its revenue growth projection to 3-4% from 7-9%. United Airlines (UAL), American Airlines (AAL), and Southwest Air (LUV) followed suit this morning with each company lowering their expectations for Q1.
- The main issue that's creating turbulence for each of these airlines is that domestic leisure travel demand has softened recently, especially within lower income consumer cohorts. This should impact LUV disproportionately given that it has virtually no international exposure. However, unlike DAL, UAL, and AAL, its stock is trading sharply higher due to another significant development.
- Specifically, LUV also announced that it's ending the "bags fly free" service that famously distinguished itself from its competitors. While Rapid Rewards A-List preferred members will still be offered two free checked bags, and A-List members will get one free checked bag, customers who do not qualify for either group will be charged for their first and second bags. The changes, which will take effect on May 28, 2025, and have been pushed by activist investor Elliott Investment Management, will provide LUV with a new, significant revenue stream.
- Whether the new baggage fees lead to some market share losses remains to be seen, but LUV's lack of revenue diversity has put it at a major disadvantage relative to the other major carriers. On that note, DAL commented that ongoing strength in the premium, loyalty, trans-Atlantic, and Pacific businesses should help to soften the blow from the downturn in domestic leisure. In Q4, premium revenue growth outpaced main cabin growth at 8% compared to 2%.
- The sweeping layoffs that have hit the government sector are also hurting travel demand. UAL highlighted this headwind, estimating that government-related travel has plunged by 50%. While the government vertical only accounts for about 2% of UAL's total business, that percentage climbs to about 4-5% when tacking on all the consultants and adjacent industries that go along with it. Therefore, the impact to UAL's Q1 revenue will be material.
- The good news is that fuel prices have dropped considerably in recent weeks. DAL stated that oil prices are down by about $10/barrel from peak levels during the quarter, providing some relief on the cost side. Additionally, the industry continues to ratchet capacity lower, which will help to align supply with demand.
The airline industry has enjoyed a boom period over the past few years as consumers have shifted their spending towards experiences and as corporations have returned to in-person meetings. Cracks that have emerged in that bullish cycle over the past couple of quarters are now widening as the impact of tariffs have amplified consumers' anxieties about the economy.
Oracle pulls back following Q3 earnings/guidance miss, but robust RPO bodes well for FY26-27 (ORCL)
Oracle (ORCL -6%) is lower following its Q3 (Feb) report last night. ORCL reported a slight EPS miss. This was its third miss in the past four quarters relative to consensus, although EPS was within guidance, albeit on the lower end. Revenue rose 6.4% yr/yr to $14.13 bln, which was a bit light. Oracle also provided downside guidance for Q4 (May). We did not get a lot of color on the call, but Oracle did mention some one-time tax events and FX has been an issue lately.
- There were definitely some positives as well. Oracle announced a 25% increase to its quarterly dividend to $0.50/sh which computes as roughly a 1.4% yield. And probably the most promising aspect was Oracle's bullishness on FY26 and FY27. While not providing formal guidance, Oracle said its confidence in meeting its $66 bln revenue target for FY26 is now stronger than ever and represents 15% growth. More importantly, Oracle raised its FY27 sales growth outlook to around 20%.
- Oracle was bullish on its infrastructure cloud services, which now sports annualized revenue of $10.6 bln. OCI consumption revenue was up 57% as demand continues to dramatically outstrip supply. Also, Oracle now expects that the component delays that have slowed cloud capacity expansion this year should ease in Q1 (Aug) FY26. Oracle described growth in the AI segment of its infrastructure business as extraordinary. GPU consumption revenue is now nearly 3.5x last year's.
- RPO was a standout metric in Q3. This was Oracle's strongest booking quarter ever by a huge margin as it added $48 bln to its backlog. Its RPO balance is now $130 bln, up from $97 bln last quarter and $80 bln last year (+63%). And this does not include any contracts with Project Stargate. Oracle sees RPO as the leading indicator of demand for its cloud services, while its live data center count and power capacity is the leading indicator of the conversion of RPO to revenue.
- Growing its power capacity is critical in terms of expanding its data centers. Oracle expects that its available power capacity will double this calendar year and triple by the end of next fiscal year. As Oracle brings more capacity online, revenue will clearly accelerate. Oracle says it's the destination of choice for both AI training and inferencing because its Gen 2 cloud is faster and, therefore, cheaper than competitors.
Our takeaway from this Q3 report is that, while the EPS/revenue numbers did miss the mark, underlying demand seems quite brisk. That was very evident in its robust RPO growth and in the general commentary on the call. Also, while the Q4 guidance was a letdown, the comments about FY26 and increased guidance for FY27 were comforting to hear. Oracle is a large company and companies this size rarely talk about revenue growth accelerating two years out. The stock is lower today on the near term results/guidance, but its comments about how OCI demand continues to dramatically outstrip supply speaks well for the long term.
Kohl's plunges as new CEO grounds FY26 expectations amid a comprehensive turnaround (KSS)
Mirroring the move following last quarter's results, Kohl's (KSS -20%) is selling off to fresh multi-year lows today despite delivering a sizeable bottom-line beat in Q4 (Jan). Market participants are disgruntled today by the department store chain's gloomy FY26 earnings, revenue, and same-store sales growth forecasts, anticipating comps to drop by 4-6%, extending the company's woes following a -6.5% decline in FY25.
While the big earnings beat in the quarter was encouraging, it was completely erased by KSS's dismal FY26 earnings outlook, predicting $0.10-0.60, less than half of the $1.50 it registered in FY25 despite the company reportedly cutting 10% of its corporate workforce in late January. Meanwhile, revs of $14.32-14.63 bln translates to a 6% drop yr/yr at the midpoint, similar to the 7% decline recorded in FY25. To make matters worse, KSS also sliced its dividend by 75%. CEO Ashley Buchanan, who took over from Tom Kingsbury on January 15, wanted to ground expectations surrounding the company's turnaround plan, which he noted would take time.
- KSS's comeback centers on three main pillars. The first two items revolve around offering a more balanced assortment and reestablishing the banner as a leader in quality. These moves resemble what Macy's (M) has been doing with its First 50 stores, which attempt to cater more to consumer demand. Macy's First 50 has been performing well, consistently outpacing non-50 comp growth, signaling to KSS that implementing certain enhancements can rekindle consumer demand.
- KSS is rebalancing its assortment to work toward these goals, building on familiar brands like Sonoma and Flex. KSS will still offer its national brands but cut back on its list of exclusives and coupons, pointing to the percentage of sales from coupons reaching an all-time high in 2024. KSS is starting to reverse these coupon exclusions to simplify the shopping experience while also reducing the complexity of its offers to provide better clarity over price and value.
- The third component of KSS's turnaround is enhancing its omnichannel platform. Consumers have expressed frustration over the lack of consistency regarding inventory. Management mentioned that it will be managing inventory tightly but looking to restore trip assurance through greater supply chain agility. Accompanying this move will be an optimized store layout.
- CEO Ashely Buchanan believes the actions the company is undertaking in 2025 are steps in the right direction but acknowledges that more moves are still required to unlock KSS's full potential. Mr. Buchanan noted that more details would follow on additional initiatives throughout the year.
After an earnings miss and slashed guidance last quarter, investors were skeptical the incoming CEO Ashley Buchanan could reinvigorate the Kohl's banner, keeping selling pressure active as shares steadily sunk to new 52-week lows throughout the months since. KSS's underwhelming FY26 guidance highlights the work cut out for Mr. Buchanan. While KSS has thus far managed to avoid a takeover, given its ongoing struggles, going private is not entirely off the table, especially following last week's news of Walgreens Boots Alliance (WBA) being purchased by a private fund. As such, plenty of uncertainty surrounds the future of KSS, not helping fuel a convincing rally soon.
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