| | | Market Snapshot
| Dow | 41989.96 | -11.80 | (-0.03%) | | Nasdaq | 17449.89 | +150.60 | (0.87%) | | SP 500 | 5633.07 | +21.22 | (0.38%) | | 10-yr Note | +5/32 | 4.16 |
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| | NYSE | Adv 1689 | Dec 995 | Vol 1.0 bln | | Nasdaq | Adv 2226 | Dec 2080 | Vol 7.8 bln |
Industry Watch
| Strong: Consumer Discretionary, Communication Services, Technology, Industrials, Energy, Materials |
| | Weak: Health Care, Financials |
Moving the Market
-- Gains in mega caps boosting major indices
-- Wait-and-see in front of tariff announcement tomorrow
-- Safe-haven buying in Treasuries
| Closing Summary
01-Apr-25 16:30 ET
Dow -11.80 at 41989.96, Nasdaq +150.60 at 17449.89, S&P +21.22 at 5633.07
[BRIEFING.COM] The stock market had a choppy start to April and Q2. The major equity indices traded above and below prior closing levels as investors wait on tomorrow's tariff announcements and digest this morning's economic data.
The market moved lower right out of the gate and selling increased in response to release of the ISM Manufacturing PMI (49.0%; Briefing.com consensus 49.8%; prior 50.3%). The report showed that manufacturing activity contracted in March while prices grew sharply for the second month in a row.
The data piled onto the market's growing fears about growth, which could translate into lower earnings prospects, that have been heightened by uncertainty on the tariff front.
Turnaround action in the mega cap space led the market higher. Apple (AAPL 223.19, +1.06, +0.5%), Microsoft (MSFT 382.19, +6.80, +1.8%), and NVIDIA (NVDA 110.15, +1.77, +1.6%), which comprise nearly 20% of the S&P 500 in terms of market cap, were among the influential winners.
Eight of the 11 S&P 500 sectors registered gains led by consumer discretionary (+1.1%), communication services (+1.0%), and technology (+1.0%). The health care (-1.8%) and financial (-0.2%) sectors were alone in the red at the close.
Treasuries settled with gains across the curve. The 10-yr yield dropped nine basis points to 4.16% and the 2-yr yield settled five basis points lower at 3.86%.
- Dow Jones Industrial Average: -1.3% YTD
- S&P 500: -4.2% YTD
- S&P Midcap 400: -5.9% YTD
- Russell 2000: -9.8% YTD
- Nasdaq Composite: -9.6% YTD
Reviewing today's economic data:
- March S&P Global US Manufacturing PMI - Final 50.2; Prior 49.8
- March ISM Manufacturing Index 49.0% (Briefing.com consensus 49.8%); Prior 50.3%
- The key takeaway from the report is that there is a bad mix of decelerating activity, rising prices, and weakening employment for the manufacturing sector. It is the kind of mix that will stir talk of stagflation.
- February JOLTS - Job Openings 7.568 mln; Prior was revised to 7.762 mln from 7.740 mln
- February Construction Spending 0.7% (Briefing.com consensus 0.4%); Prior was revised to -0.5% from -0.2%
- The key takeaway from the report is that the weakness in private residential spending was concentrated in multifamily construction.
Looking ahead to Wednesday, market participants receive the following data:
- 7:00 ET: Weekly MBA Mortgage Index (prior -2.0%)
- 8:15 ET: March ADP Employment Change (Briefing.com consensus 120,000; prior 77,000)
- 10:00 ET: February Factory Orders (Briefing.com consensus 0.4%; prior 1.7%)
- 10:30 ET: Weekly crude oil inventories (prior -3.34 mln)
Treasuries settle with gains across the curve
01-Apr-25 15:30 ET
Dow -130.07 at 41871.69, Nasdaq +61.06 at 17360.35, S&P -1.23 at 5610.62
[BRIEFING.COM] The Dow Jones Industrial Average is about 130 points lower ahead of the close. The S&P 500 is fractionally lower while the Nasdaq Composite sports a 0.4% gain.
Treasuries settled with gains across the curve. The 10-yr yield dropped nine basis points to 4.16% and the 2-yr yield settled five basis points lower at 3.86%.
Looking ahead to Wednesday, market participants receive the following data:
- 7:00 ET: Weekly MBA Mortgage Index (prior -2.0%)
- 8:15 ET: March ADP Employment Change (Briefing.com consensus 120,000; prior 77,000)
- 10:00 ET: February Factory Orders (Briefing.com consensus 0.4%; prior 1.7%)
- 10:30 ET: Weekly crude oil inventories (prior -3.34 mln)
Mega caps maintain positive posture while many stocks slide
01-Apr-25 14:55 ET
Dow -207.45 at 41794.31, Nasdaq -19.99 at 17279.30, S&P -24.79 at 5587.06
[BRIEFING.COM] The major indices continue to drift lower after reaching session highs around mid-day.
Some mega cap names have maintained a positive posture while many other stocks declined. The market-cap weighted S&P 500 trades 0.5% lower and the Invesco S&P 500 Equal Weight ETF (RSP) trades 0.7% lower.
The CBOE Volatility Index (VIX) increased as stocks declined, indicating hedging against further volatility. The VIX sits at 22.60.
S&P 500 slips to afternoon lows; Southwest Air, Intel, and Omnicom lag
01-Apr-25 14:30 ET
Dow -268.53 at 41733.23, Nasdaq -21.61 at 17277.68, S&P -23.36 at 5588.49
[BRIEFING.COM] The S&P 500 (-0.42%) is in second place on Tuesday afternoon, fading to afternoon lows in the last half hour.
Briefly, S&P 500 constituents Southwest Air (LUV 31.39, -2.19, -6.52%), Intel (INTC 21.79, -0.92, -4.05%), and Omnicom (OMC 79.54, -3.37, -4.06%) pepper the bottom of the standings. LUV was downgraded to Underperform at Jefferies this morning citing lowered Q1 and Q2 estimates, while OMC and advertising peers slip following cautious analyst commentary from BofA Securities.
Meanwhile, Tapestry (TPR 72.39, +1.98, +2.81%) is holding solid gains with consumer discretionary (XLY 198.68, +1.22, +0.62%) the lone bright spot on Tuesday as investors welcome upbeat results from PVH (PVH 76.18, +11.54, +17.85%) and news of a new CFO at Macy's (M 12.80, +0.24, +1.91%).
Gold slips slightly to $3,146 as tariff-driven rally cools
01-Apr-25 14:00 ET
Dow -97.48 at 41904.28, Nasdaq +100.21 at 17399.50, S&P +5.91 at 5617.76
[BRIEFING.COM] With about two hours to go on Tuesday the tech-heavy Nasdaq Composite (+0.58%) is still atop the averages, up about 100 points.
Gold futures settled $4.30 lower (-0.1%) at $3,146/oz, slipping from recent tariff-fueled strength.
Meanwhile, the U.S. Dollar Index is now little changed at $104.22.
On stumbles on co-CEO Marc Maurer departing; company still amid strong upward momentum (ONON)
On Holding (ONON -3%) stumbles today after announcing that co-CEO Marc Maurer will leave the Swiss athletic footwear maker in July following his 12-year tenure. The current CFO and the other co-CEO, Martin Hoffmann, will become the sole CEO of the company. Along with the leadership update, ONON made several other executive changes, naming a new Chief People Officer, Chief Innovation Officer, Chief Communications Officer, and Chief Supply Chain Officer.
- Investors are feeling the sting associated with the loss of Marc Maurer today. The outgoing co-CEO helped the company go public in 2021. While the IPO preceded a broader stock market sell-off in 2022, Marc Maurer helped to initiate a quick rebound, ultimately outperforming some of its closest rivals in NIKE (NKE) and Adidas (ADDYY).
- Focusing on innovation was vital to ONON's ability to outrun NKE, whose shoes started growing stale. Throughout 2022, when supply chain challenges weighed on revenue growth, ONON stayed committed to launching new running styles, which quickly saw significant traction with online customers and retail partners.
- Speaking of which, while NKE pivoted aggressively to DTC, ONON was strengthening ties with its wholesale partners, which resulted in the company reaching over CHF 1 billion in net sales within its wholesale channel, all while its DTC channel experienced rapid growth.
- Marc Maurer is departing in the middle of ONON's three-year roadmap outlined in late 2023. The company's aspirations for 2026 revolve around winning the running segment of the footwear market through the launch of many new products, bolstering its Cloudmonster, Cloudsurfer, and Cloudrunner lines, each of which have already seen growth from +60-140% yr/yr in 2024. ONON is also looking to become a complete head-to-toe sportswear brand, having already realized over CHF 100 million in net sales from apparel last year.
Still, Marc Maurer leaves a company amid strong upward momentum, posting three straight quarters of accelerating top-line growth. Even though the macroeconomic environment is beginning to wobble, ONON is tracking ahead of its planned +26% three-year net sales CAGR, supported by a strong start to 2025. The company expects its momentum to persist, anticipating to continue outgrowing its three-year plan this year, albeit by 1 pt. Soon-to-be sole CEO Martin Hoffmann noted last month that its +27% top-line growth guidance for 2025 incorporates a certain level of prudency due to economic conditions, adding that when looking at preorders for the upcoming seasons, they signal robust growth rates that may be clouded by the macro environment.
Bottom line, the loss of co-CEO Marc Maurer is deflating. However, ONON has continued to demonstrate its ability to deliver accelerating revenue growth despite a global economy that has bogged down growth for many of its peers, reflecting brand loyalty and an innovative edge in the footwear space that can continue under Martin Hoffmann.
PVH surging today following Q4 results; upside guidance was the star of the show (PVH)
PVH Corp. (PVH +15%) is surging today after reporting Q4 (Jan) results last night. This fashion apparel company (Calvin Klein, Tommy Hilfiger) beat on EPS, but PVH broke its string of nine consecutive double-digit beats. Revenue fell 4.8% yr/yr to $2.37 bln, which was slight upside. We think the stock is being propelled bullish guidance, which was a surprise given the struggles we have seen from other fashion brands as consumers pull back on spend.
- Another catalyst was PVH saying it intends to enter into accelerated share repurchase (ASR) agreements to repurchase $500 mln in shares in 2025. The agreements are under the existing $5 bln repurchase authorization, of which $1.8 bln remains available. This ASR equates to roughly 14% of shares outstanding, which is a huge amount. The stock has been under pressure in recent months, but clearly management sees some value down here.
- Turning to the Q4 results, PVH said it delivered a strong holiday performance that beat expectations on a constant currency (-2% CC) basis, with growth in both its D2C and wholesale channels. PVH said it improved the relevance of sell through of its Fall 2024 product assortment across both brands. It also significantly increased profitability in North America.
- Starting with Calvin Klein, PVH started 2024 with what it describes as an "explosive" spring campaign featuring Jeremy Allen White driving record visibility and engagement, which CK continued to build on through the year. In Q4, CK featured Kendall Jenner, Idris Elba, Mingyu, among others. PVH elevated the brand in the marketplace, including the opening of a flagship store in Paris. Tommy Hilfiger also had a very strong brand building year, leaning into its classic American cool DNA.
- Despite good results in Q4, PVH concedes it's navigating global macro volatility, particularly in North America. Following a strong holiday, retail traffic trends in Jan-Feb took a step down, a dynamic affecting the entire sector. Also, PVH is seeing a post New Year slowdown in China that led to a step down in revenue. The trend has since stabilized at these new lower levels.
- Quickly turning to the guidance, the Q1 (Apr) guidance was generally in-line, but the full year adjusted EPS guidance EPS of $12.40-12.75 was pretty eye-popping. It was well above analyst expectations and that is despite an expected $0.20 FX impact. Revenue is expected to be flat or increase slightly and EBIT margins should be flat to up slightly with a stronger second half. PVH cites disciplined execution, strong European Order books, as well as structural cost efficiencies. The ASR will also reduce share count pretty aggressively, which helps the EPS number.
It has been a mixed earnings bag within the fashion apparel space in recent weeks. CPRI sold off on earnings, but TPR and RL did well. Also, OXM, which caters to higher income consumers, had a bad quarter last week. As such, we think investors were bracing for weak guidance given the pullback in consumer spend and with tariffs looming. Investors were pretty shocked to see PVH provide such bullish EPS guidance. It meant, at the mid-point, that the stock was trading at a P/E of just 5.1x, so investors have snapped up shares today.
Progress Software bounces off nine-month lows after posting a healthy beat-and-raise in Q1 (PRGS)
Progress Software (PRGS +8%) bounces off nine-month lows reached yesterday as shares advance toward March highs on better-than-expected Q1 (Feb) numbers and uplifting guidance for next quarter and FY25 (Nov). The software provider was coming off a disappointing quarterly report, mired by lighter-than-anticipated FY25 earnings guidance. With shares trending roughly +30% higher over the trailing six months ahead of Q4 results, this was enough to ignite an extended correction, ultimately pushing shares 20% lower YTD as of yesterday's close.
However, Q1 saw notable improvements from last quarter, as top-line growth accelerated and adjusted earnings zoomed past estimates. Additionally, PRGS lifted its FY25 EPS outlook. While the figure is not where analysts initially expected in January, it was an encouraging development given the caution surrounding the economic environment and the fact that PRGS has stayed relatively conservative in its earnings guidance over the past several quarters.
- Headline performance was sturdy, with revenue expanding by 28.9% yr/yr, a nice uptick from +21.1% in Q4 to $238.02 mln, tagging the high-end of PRGS's $232-238 mln guidance. Earnings blew away PRGS's $1.02-1.08 target, inching 4.8% higher yr/yr to $1.31. Management chalked up the outperformance to quicker-than-expected ShareFile integration and disciplined expense management, part of which arose due to the quick integration of ShareFile.
- PRGS's $875 mln acquisition of ShareFile last year is providing a major boost, predominately pushing the company's annualized recurring revenue 48% higher yr/yr in constant currency in Q1. ShareFile is a file-sharing platform used across businesses to collaborate on content. The purchase was met with selling pressure, given that it represented over a third of PRGS's market cap at the time of acquisition. However, it has thus far been hitting its mark, with full integration on track with PRGS's original 12-month timeframe announced in September.
- ShareFile is expected to continue acting as a tailwind for PRGS, predicting the business to add around $250 mln to its total revenue in FY25, all of which is SaaS recurring revenue, bolstering the company's dependable revenue stream to comprise over 85% of total revenue. Furthermore, as a SaaS platform, ShareFile carries excellent gross margins of over 80%. Meanwhile, PRGS expects to reach 40% operating margins for ShareFile by the end of FY25, supporting its improving bottom line in Q1 and raised FY25 guidance.
- Speaking of which, PRGS projected promising numbers for Q2 (May) and FY25. The company expects adjusted EPS of $1.28-1.34 for the upcoming quarter on revs of $235-241 mln, translating to a 36% jump yr/yr at the midpoint. PRGS reiterated its FY25 revenue guidance of $958-970 mln but pushed its earnings forecast $0.25 higher to $5.25-5.37.
PRGS put on a much better showing in Q1 than Q4, kicking off FY25 on the right foot. The macroeconomic environment can cause medium-term volatility. However, PRGS is not seeing any disruption from the uncertain environment, particularly related to its minor federal government business. As such, it is well-positioned to continue its outperformance in subsequent quarters, especially as it continues to integrate ShareFile.
Goodyear Tire ticks higher today following an analyst upgrade; expects growth in 2H25 (GT)
Goodyear Tire (GT +4%) is burning some rubber today following an analyst upgrade at Deutsche Bank to "Buy" from "Hold." However, Briefing.com notes that the tire maker remains stuck in neutral as it contends with a macroeconomic landscape ripe with headwinds, from increased low-end tire imports flooding the market to uncertainty surrounding tariffs. At the same time, OEM production continues to reset to a lower base.
Nevertheless, GT is confident it can achieve certain targets despite its formidable operating environment.
- The Goodyear Forward plan is already bearing fruit. The plan centers on cost performance by streamlining its operating model to address duplication of effort and excess costs. The plan also focuses on improving GT's top-line growth. For perspective, GT has not posted yr/yr sales growth since 1Q23. Throughout 2024, GT exceeded its plan goals, resulting in $350 mln of FY24 segment operating income growth ($200 mln when backing out insurance recoveries). GT is not letting off the gas in 2025, expecting to deliver $750 mln in cost benefits this year.
- GT is reinvesting its savings into new product lines, five of which are set to launch this year. The products revolve around high-margin SKUs and premium-tier tires, which should help bolster its margin profile. Management mentioned that coverage at the premium end of the tire market is a massive opportunity and remains steadfast in making it happen. The company conceded that it has had its share of stumbles trying to extract gains in this market segment but is using these setbacks as an experience to journey ahead without losing its footing this time.
- GT aims to reach 10% segment operating income margins for the year, supported by new products and its Goodyear Forward plan.
- The current year is shaping up to be slightly more favorable than last year. On the consumer side, GT expects overall global growth in 2025, with a stronger European and Asian market. The U.S. market will likely continue to see volatility relative to imports. As such, GT expects a flat first half of the year, with growth materializing during 2H25. From a commercial standpoint, GT expects replacement demand to stabilize, progressing throughout the year. As such, it should see a similar growth cadence as its consumer business.
Plenty of uncertainty could spark unforeseen setbacks related to GT's goals this year. The first half of the year will remain muted, putting outsized pressure on the back half of the year to experience a noticeable uptick in demand for GT to hit its marks. However, GT may be in the early stages of stabilization. With its Goodyear Forward plan extracting meaningful savings benefits, the company is well-positioned for a considerable bounce once demand conditions begin to recover.
Arm Holdings plc down despite reportedly seeing its data center CPU share tripling this year (ARM)
Arm Holdings (ARM -3%) heads lower despite the company telling Reuters today that its data center CPU market share will swell from roughly 15% in 2024 to 50% by the end of this year. The report comes at a time when The Information noted today that major cloud providers, i.e., Amazon AWS (AMZN), Microsoft Azure (MSFT), and Google Cloud (GOOG), are beginning to show restraint in AI-related spending. The report comes just a few months after these hyperscalers announced or reaffirmed plans to hike their AI spending in 2025, with the total figure expected to reach as high as $320 bln, up an estimated 40% yr/yr.
However, the landscape is changing. The Information stated that some of these Big Tech companies that were quick to pour funds into AI deployments two years ago are starting to take a step back and assess their returns on investment before shelling out additional capital. Meanwhile, lingering fallout from the DeepSeek announcement in January remains. The Chinese startup shook the AI industry when it performed similarly to flagship U.S.-based AI models despite spending only a few million dollars on training. DeepSeek is open-source, like Meta AI, which can undercut the pricing on models from OpenAI and other closed-source alternatives. Enterprises are starting to look at these more seriously as a way to reduce overall AI costs.
Still, just because enterprises are potentially looking into spending less on AI does not mean that they are not steadfast in their commitment to ensuring their respective leadership positions in the industry. In fact, tilting toward cost efficiency could be a net positive for ARM.
- What separates ARM's CPU architecture from x86 alternatives developed by Advanced Micro (AMD) and Intel (INTC) is its efficiency. AI is incredibly power-hungry, which puts pressure on the industry to develop products that can do more but use less power. In February, ARM touched on the DeepSeek breakthrough, noting that it will be a net benefit for AI and ARM primarily because it drives efficiency, making it easier to run AI applications where power is constrained.
- ARM does not make chips but licenses its architecture to chip designers like NVIDIA (NVDA) and Apple (AAPL), then takes a royalty on unit sales. As such, it does not have to ramp production to meet its ambitious data center market share goal. Instead, it only needs its customers to look toward designing more power-efficient using its architecture.
- However, ARM has been looking into creating its own chips. Last month, FT.com reported that ARM was looking into launching chips this year after securing Meta Platforms (META) as one of its first customers. ARM's plans include competing with Qualcomm (QCOM), one of its largest customers, to sell data center CPUs to META. Barring any setbacks, by leaning on licensing while selling its own chips to META, ARM has the potential to upend the AI space and ultimately reach its 50% market share target.
An uncertain economic environment may be dampening the mood around hyperscalers' appetites for AI spending. However, ARM is in an attractive position, touting considerable efficiency advantages over alternative CPU architecture to support a potential run toward cementing its 50% market share in the data center CPU space.
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