| | | Market Snapshot
| Dow | 38314.86 | -2231.07 | (-5.50%) | | Nasdaq | 15587.79 | -962.82 | (-5.82%) | | SP 500 | 5074.08 | -322.44 | (-5.97%) | | 10-yr Note | +25/32 | 3.99 |
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| | NYSE | Adv 233 | Dec 2357 | Vol 1.9 bln | | Nasdaq | Adv 692 | Dec 3693 | Vol 11 bln |
Industry Watch
| Strong: -- |
| | Weak: Energy, Financials, Industrials, Materials, Technology, Discretionary, Health Care |
Moving the Market
-- Responding to trade war heating up; China retaliated with 34% tariff on US imports
-- Safe-haven trading shaping market action; Treasury yields sinking, oil prices dropping
-- Recession fears growing
| Closing Summary
04-Apr-25 16:30 ET
Dow -2231.07 at 38314.86, Nasdaq -962.82 at 15587.79, S&P -322.44 at 5074.08
[BRIEFING.COM] The major equity indices registered significant declines for the second consecutive session on above-average volume. The Nasdaq Composite (-5.8%) entered a bear market after dropping more than 20% below its peak. The S&P 500 fell 6.0% and the Dow Jones Industrial Average dropped more than 2,000 points.
China retaliated against U.S. tariffs with its own 34% duty on imports, heightening the trade war and tempering hopes that tensions may ease soon. Global slowdown worries are also intensifying as a results, leading to a risk-off bias in today's broad retreat.
Oil prices sank (-7.5% to $62.02/bbl), Treasury yields dropped (2-yr note yield -5 bps to 3.67%, 10-yr note yield -7 bps to 3.99%), and the CBOE Volatility Index (VIX) surged above 45.0.
The trade war and slowdown fear overshadowed today's economic data even though nonfarm payroll growth accelerated to 228,000 (Briefing.com consensus 130,000) in March. To be fair, downward revisions to growth figures from January and February removed some of that report's shine.
The market was not placated by commentary from Fed Chair Powell indicating that did not seem too concerned with the recent volatility in markets. He acknowledged that tariff increases are larger than expected, which will provide a stronger headwind to growth, but he also said that the FOMC will patiently wait for greater clarity before making any adjustments to policy.
All 11 S&P 500 sectors declined more than 2.5% with energy at the bottom of the lineup, dropping 8.7% from yesterday. The heavily-weighted financial (-7.4%) and technology (-6.3%) sectors were the next worst performers.
- Dow Jones Industrial Average: -9.9% YTD
- S&P 500: -13.7% YTD
- S&P Midcap 400: -15.1% YTD
- Russell 2000: -18.1% YTD
- Nasdaq Composite: -19.3% YTD
Reviewing today's economic data:
- March Nonfarm Payrolls 228K (Briefing.com consensus 130K); Prior was revised to 117K from 151K, March Nonfarm Private Payrolls 209K (Briefing.com consensus 120K); Prior was revised to 116K from 140K, March Avg. Hourly Earnings 0.3% (Briefing.com consensus 0.3%); Prior was revised to 0.2% from 0.3%, March Unemployment Rate 4.2% (Briefing.com consensus 4.1%); Prior 4.1%, March Average Workweek 34.2 (Briefing.com consensus 34.2); Prior was revised to 34.2 from 34.1
- The key takeaway from the report is that positive results for March are being somewhat offset by downward revisions to figures from January and February, so on balance, the report is unlikely to alter the Fed's view of the current state of the labor market.
Looking ahead to next week, market participants receive the February Consumer Credit (Briefing.com consensus $15.1 bln; prior $18.1 bln) at 15:00 ET on Monday.
Treasuries settle with big gains this week
04-Apr-25 15:35 ET
Dow -1813.84 at 38732.09, Nasdaq -746.41 at 15804.20, S&P -261.23 at 5135.29
[BRIEFING.COM] There hasn't been much up or down movement in recent trading. Major equity indices remain near session lows with big losses.
The 10-yr yield dropped 27 basis points this week to 3.99% and the 2-yr yield dropped 24 basis points this week to 3.67% as global risk sentiment remained pressured by concerns related to the implementation of tariffs.
Looking ahead to next week, market participants receive the February Consumer Credit (Briefing.com consensus $15.1 bln; prior $18.1 bln) at 15:00 ET on Monday.
DJIA down more than 2,000 points
04-Apr-25 15:05 ET
Dow -2053.62 at 38492.31, Nasdaq -934.06 at 15616.55, S&P -309.06 at 5087.46
[BRIEFING.COM] The Dow Jones Industrial Average is more than 2,000 points lower after another leg lower. The market-cap weighted S&P 500 is 5.2% lower and the equal-weighted S&P 500 shows a 5.5% loss.
The increased selling had no specific catalyst. Downside momentum is acting as its own catalyst with less than an hour left of trading this week.
The CBOE Volatility Index (VIX) is near 45.00 and climbing.
S&P 500 drops 5% on tariff jitters; GEHC, APA, MU slide as NVR surges
04-Apr-25 14:30 ET
Dow -1864.18 at 38681.75, Nasdaq -839.09 at 15711.52, S&P -280.60 at 5115.92
[BRIEFING.COM] The S&P 500 (-5.20%) is the worst-performing major average on Friday afternoon, down more than 280 points.
Briefly, S&P 500 constituents APA Corp. (APA 15.39, -2.35, -13.25%), GE HealthCare (GEHC 62.27, -9.73, -13.51%), and Micron (MU 64.86, -9.48, -12.75%) dot the bottom of the average as stocks across the market continue to get hit on this week's tariff news. On GEHC specifically, the stock is seeing some added pressure from reports that China's MOFCOM had launched an anti-dumping probe into imported medical CT tubes from the U.S.
Meanwhile, home construction firm NVR (NVR 7548.53, +438.54, +6.17%) is atop the standings as lower yields and the anticipation of lower rates, which generally help borrowers, fuels NVR's rise alongside fellow homebuilding peers.
Gold drops as investors flock to bonds amid tariff jitters
04-Apr-25 14:00 ET
Dow -1601.73 at 38944.20, Nasdaq -730.01 at 15820.60, S&P -241.60 at 5154.92
[BRIEFING.COM] With about two hours to go in one of the worst-performing weeks in the stock market since 2020, the tech-heavy Nasdaq Composite (-4.41%) leads the major averages sharply lower in afternoon trading.
Gold futures settled $86.30 lower (-2.8%) at $3,034.60/oz, down about -2.5% on the week, fueled in part by the markets recalibrating risks related to President Trump's tariff announcements; the yellow metal waned as investors turned toward bonds, which saw increasing demand and in turn pressured yields.
Meanwhile, the U.S. Dollar Index is up +1% to $103.01.
Guess? firmly in the green following a volatile morning on mixed FY26 guidance (GES)
After a rollercoaster morning, Guess? (GES +9%) is trading nicely higher today following upbeat Q4 (Jan) earnings and sales figures. The stock hit lows of -5.1% after climbing out of the gate today before buyers swooped back in. The reason for today's volatility stems from GES's mixed FY26 guidance. While the company anticipates revenue growth above consensus, its adjusted EPS outlook was underwhelming, potentially signaling margin pressures ahead. Furthermore, management remarked that tariffs announced this week have yet to be incorporated into FY26 guidance.
However, GES noted that while its earnings could be impacted, there are factors underpinning why the impact could be minimal. For example, around 75% of GES's business stems from markets outside the U.S., making it not subject to increased tariffs. Regarding the remaining 25% of GES's business, the company estimates that a third is geared toward more affluent consumers, providing increased flexibility and pricing power.
- Headline results were a solid changeup from past quarters, returning to delivering top and bottom-line upside in Q4. Adjusted EPS contracted by 26% yr/yr to $1.48 while revenue rose by 5% to $932.25 mln, both near the high end of GES's forecasts. If backing out FX impacts and an extra week last year, sales grew 14% yr/yr.
- The economic environment has been challenging, to say the least, for GES, illuminated by its stock price tumbling by 65% over the past year. On the supply side, the Red Sea crisis, which began in October 2023, disrupted GES's flow of goods while spiking shipping costs and transit times. On the demand side, consumers have been dealing with inflationary pressures, tempering their spending for more discretionary products, leading to traffic declines in GES's retail stores.
- These headwinds continued to affect performance across most geographies. In the Americas, comps tumbled by 14% in constant currency, underperforming GES's expectations. Similarly, revenue landed near the lower end of GES's estimates in Asia as traffic remained challenging. The silver lining was Europe, which houses half of GES's retail locations, registering comp growth in constant currency of +5% as higher units per transaction offset weak store traffic.
- Looking ahead, GES expects FY26 adjusted EPS of $1.32-1.76 and revenue growth of +3.9-6.2% yr/yr. The company did not touch on the March proposal from brand management firm WHP Global, which offered $13.00 per share to acquire GES. There have been a few developments since the bid was made, including GES forming a Special Committee of the Board to evaluate the proposal and co-founder Paul Marciano noting that he continues to engage in discussions regarding the transaction.
The potential margin compression and tariff-related impacts are a medium-term concern. However, there were enough encouraging trends from GES's Q4 report, particularly its revenue outlook for the year, which came in nicely ahead of analyst expectations, to ultimately push its stock firmly in the green today. The upside likely remains limited, though, at WHP Global's $13.00 takeover offer price.
Stellantis laying off US workers; tariffs may not achieve stated goals (STLA)
Stellantis (STLA) announced yesterday, according to multiple news reports, that it will temporarily lay off 900 workers at five US plants in Michigan and Indiana. This supplier of Chrysler, Dodge, Jeep and many European vehicles said this was necessary because it was pausing production at plants, one in Mexico and one in Canada. Stellantis cited the new tariff policy as the reason.
- This is a good example of just how interconnected the automotive supply chain is between the US, Mexico and Canada. And it's also illustrative of the fact that nobody knows how these tariff decisions will play out. It is simple to think that, well just build cars in America, but it's a lot more complicated than that with so many parts made in other countries.
- Also, President Trump wants US-made vehicles to be cheaper relative to foreign vehicles. However, it is very unlikely that US producers will not raise prices. Not only do they have to account for tariff-fueled higher prices for parts from foreign countries, but it is just basic business sense to maximize profit. If foreign competitors are slapped with a 25% tariff, why not price their own vehicles just slightly under that to maximize profits.
- In terms of bringing manufacturing back to the US, which is a laudable goal, it is not clear if these tariffs will accomplish that goal. It is very expensive to build new plants in the US and, in a bit of irony, these tariffs will make buying the necessary equipment more expensive. Also, labor costs are a lot higher in the US than abroad.
- We suspect that some manufacturing will return, but some companies may just wait it out. These tariffs are not US law, they are by executive order and easily changed by a new president. Also, President Trump has been fickle with respect to tariffs, turning some on, then off, then reducing percentages etc. sometimes in a week or even in the same day. President's Trump's advisers say they are permanent, but given his track record, it is hard for companies to know for sure.
- There are also legal arguments that the president does not have the authority to implement such massive tariffs without Congressional approval. The US Constitution squarely puts the power of the purse and taxation in the hands of Congress. Congress has given the President authority to make changes in emergencies, but this seems like the President is making wholesale changes to our economy without Congressional approval. Court rulings could limit the tariffs.
The market is down sharply again today as the trade war escalates, highlighted by China imposing 34% reciprocal tariffs. Time will tell if these Trump tariffs are just a negotiating tactic and perhaps short term in nature. However, foreign countries seem willing to dig in their heels, both in terms of tariffs of their own and in their angry rhetoric. It may also drive some to band together and focus more on selling goods to each other, which could hurt the US in the long run.
China retaliates with 34% tariffs on imports from U.S.; sends shockwave across China stocks (FXI)
After holding their ground relatively well yesterday despite a tariff-induced sell-the-news reaction, many China-based stocks have succumbed to tariff-related selling pressure today. Almost no sector is unscathed. Tech giants in the region, from Alibaba (BABA), JD.com (JD), and Baidu (BIDU) to conglomerates like Tencent (TCEHY), auto manufacturers like Nio (NIO) and XPeng (XPEV), and other verticals, such as Trip.com (TCOM) and Yum China (YUMC) are unable to avoid the outsized selling pressure. The driving force is China's retaliatory action against the United States, imposing an additional 34% tariff on all imported goods from the U.S. starting on April 10.
PDD (PDD), which owns Temu, an e-commerce site shipping low-cost goods to American consumers, did not see buyers step in yesterday like many of its e-commerce peers following President Trump's announcement of ending the de minimis trade loophole on May 2. The loophole, which allowed shipments under $800 to enter the U.S. duty-free, has been vital to the demand Temu and Shein (privately held) have enjoyed, which spurred Amazon (AMZN) to launch Amazon Haul featuring items under $20. However, with an escalating trade war in the mix, even Chinese companies with minor exposure to American consumers are feeling the sting.
- Why are import controls on the U.S. wreaking such havoc in China? The announcement is a clear retaliation to the Trump administration's 34% levy on Chinese goods, escalating a trade war that has spurred serious global economic concerns. Market participants are signaling outward fear over how the current measures set to take place over the coming days could spiral into a recession, hurting Chinese companies in the process.
- Discouragingly, the tariffs come at a time when the Chinese economy has steadily improved over the past few months. For instance, manufacturing PMI expanded for five straight months, reaching a four-month high in March. JD noted last month that China was amid a steady rebound in consumption trends, illuminated by a solid Q4 report headlined by a return to double-digit growth in electronics, home appliances, and general merchandise. Tariffs may halt this progress, prompting investors to steer clear over the immediate term as they employ a wait-and-see attitude.
- A trade war can often bring on or intensify macroeconomic headwinds, from higher inflation dampening consumer spending to supply chain disruptions leading to inventory woes. This worry is triggering a risk-off sentiment, affecting both U.S. and Chinese stocks alike. While some are better shielded, such as firms focused more on domestic demand, which helped eventually spark buying interest yesterday in stocks like BABA and BIDU, a noticeable shift in investor sentiment following fears of a prolonged trade war can leave no stone unturned.
Given the fluidity of the Trump administration surrounding trade policy -- declaring tariffs, cancelling them, altering rates, etc. -- there is no certainty that the current tariffs are in their final form. However, the market is not taking any chances, selling now and asking questions later. Given the constantly changing geopolitical landscape, volatility may remain elevated over the coming weeks and months as investors assess the current tariffs' impact on future demand and subsequent earnings.
MSC Industrial pulls back on top line miss; seeing hesitancy and caution among its customers (MSM)
MSC Industrial Supply (MSM -4%) is trading lower following its Q2 (Feb) earnings report this morning. This distributor of metalworking and MRO products reported a decent EPS beat. However, revenue fell 4.7% yr/yr to $891.7 mln, which was light of expectations. MSM is a company that Briefing.com keeps an eye on because it provides a glimpse into the industrial economy.
- ADS (average daily sales) is a key metric for MSM. It declined -4.7%, which was at the lower end of its -5% to -3% prior guidance range. However, MSM was encouraged by January and February exceeding historical month-over-month trends. MSM concedes that the demand environment remains soft, but MSM is improving execution and returning the company to growth. MSM guided to Q3 (May) ADS growth of -2% to flat.
- Switching to the macro environment, MSM said that IP (Industrial Production) readings across most end markets continue to contract and weigh on MSM's performance. However, customer sentiment and future outlook have been improving as is evidenced by recent MBI readings, which have hovered around 50 for the past couple of months.
- The near-term remains choppy. MSM says it is seeing hesitancy and caution among its customer base around future production levels due to tariff uncertainty, potentially looming inflation and sustained high interest rates. MSM feels well-positioned to navigate this uncertain environment for a number of reasons.
- MSM also addressed tariffs on the call. The company noted that its direct COGS exposure to China is approximately 10%, and it has low-single digit exposure in Mexico and Canada. While the tariff situation remains fluid, MSM is confident that it has a playbook in place which covers all aspects including purchasing, pricing, assortment management and productivity tools for customers.
- Importantly, MSM took advantage of its strong balance sheet by accelerating purchases ahead of tariffs on high return products during the quarter. On pricing, MSM implemented select tariff-related price increases in late March and will continually evaluate additional moves as warranted. MSM also has a good amount of made in the USA product offerings, which are being more prominently marketed on its website.
Overall, this was a mixed quarter for MSM. Demand remains soft as customers remain cautious. However, a bright spot is that ADS is expected to improve sequentially in Q3. Also, while MSM has exposure to tariffs, it sounds pretty manageable. Despite the mixed results, MSM should benefit from long term macro drivers, like reshoring. Finally, the stock action today looks to be fueled by both the top line miss and concerns about the tariff policy.
Conagra ticks higher after consumption trends remained robust during Q3 (CAG)
Conagra (CAG +1%) gives investors something to snack on as its slim Q3 (Feb) earnings and revenue misses prove better than feared today. In February, the consumer packaged goods giant, known for many brands from Slim Jim to Hebrew National, lowered its FY25 (May) guidance due to unforeseen supply chain challenges that cropped up during Q3. The company's facility that cooks chicken for frozen meals ran into quality inconsistencies, prompting a temporary halt in production. Meanwhile, demand was stronger than expected in CAG's frozen vegetables business, leading to inventory constraints. Both setbacks resulted in lost volume, lower net sales, and missed profit opportunities.
However, although shares slumped to 52-week lows on the reduced guidance, there was still a silver lining. Demand was not the issue as much as supply. Given how some of CAG's peers touched on snacking weakness lately, including PepsiCo (PEP), which owns Frito-Lay, and General Mills (GIS), citing a drop in consumer confidence, this was an encouraging point.
- Relatively resilient snacking demand underpins today's positive response despite CAG's weak headline performance. Consumption trends remained robust during the quarter, but shipments lagged due to the aforementioned supply chain headwinds, causing adjusted EPS of $0.51 and revenue of $2.84 bln, a 6.3% decline yr/yr (5.2% drop on an organic basis), to miss analyst forecasts. The supply chain issues showed up clearly in CAG's Refrigerated & Frozen segment, as net sales contracted by 7.2% yr/yr on a 3.0% dip in volumes.
- CAG's other segments performed slightly better but still reflected nagging economic headwinds suppressing consumers' spending appetites. In Grocery & Snacks, net sales slipped by 3.2% yr/yr, driven by a 1.3% volume decrease. However, management mentioned that the segment gained volume share across several categories, such as popcorn and canned tomatoes. In Foodservice, net sales declined by 6.1%, reflecting ongoing softness in commercial traffic. International net sales plunged 17.6% due to FX headwinds, which clipped off 8.5 pts.
- CAG kept its FY25 guidance unchanged, targeting adjusted EPS of $2.35 and organic net sales growth of around negative 2.0%. Management added that it is staying on its toes due to the dynamic external environment, including tariffs, regulatory changes (RFK Jr. has mentioned limiting SNAP benefits and food additive programs), inflation, and shifts in consumer sentiment.
- Regarding tariffs, CAG stated today that it anticipates being impacted by tariffs on tin mill, steel, and aluminum, as well as Chinese imports, albeit to a lesser extent. The impact should be limited in Q4 as CAG works through inventory on hand. The company expects additional clarity following its Q4 results in July.
There were not many surprises from Q3, given that CAG grounded expectations two months earlier following supply chain problems. Still, investors are keeping CAG at arm's length, expressing cautious optimism as the market awaits further tariff news. As such, CAG may remain range-bound until closer to Q4 results in July.
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