| | | Market Snapshot
| Dow | 39593.66 | -1014.79 | (-2.50%) | | Nasdaq | 16387.31 | -737.66 | (-4.31%) | | SP 500 | 5268.05 | -188.85 | (-3.46%) | | 10-yr Note |
|
|
|
| | NYSE | Adv 297 | Dec 2516 | Vol 1.54 bln | | Nasdaq | Adv 863 | Dec 3579 | Vol 11.9 bln |
Industry Watch
| Strong: Consumer Staples |
| | Weak: Energy, Information Technology, Consumer Discretionary, Communication Services, Materials, Financials, Industrials, Health Care, Real Estate |
Moving the Market
-- Selling into yesterday's huge move higher
-- White House clarifying the total tariff rate on China is 145%
-- Uncertainty around trade policy persists
-- Steep decline in U.S. Dollar Index
|
Closing Stock Market Summary
10-Apr-25 16:20 ET
Dow -1014.79 at 39593.66, Nasdaq -737.66 at 16387.31, S&P -188.85 at 5268.05
[BRIEFING.COM] The jaw-dropping rally seen Wednesday after President Trump announced a 90-day pause on reciprocal tariffs for most countries did not have legs today. The major indices started the session lower and remained in negative territory into the closing bell, yet they did pare their losses in the afternoon trade.
At their worst levels, the Dow, Nasdaq, S&P 500, S&P 400, and Russell 2000 were down 5.4%, 7.2%, 6.3%, 6.5%, and 6.5%, respectively, but they finished the day down 2.5%, 4.3%, 3.5%, 4.1%, and 4.3%, respectively.
The impetus for today's pullback was rooted in the following dynamics:
- The realization that the U.S. economy is not out of the woods. It is still only a "pause" on the reciprocal tariff action, and a baseline 10% tariff rate still applies. Meanwhile, there is still the draconian tariff rate for China, which was clarified by the White House today as 145% (125% reciprocal tariff + existing 20% tariff related to fentanyl).
- Renewed selling by skittish participants who saw yesterday's rally as a gift to sell at higher prices and minimize the pain of losses that followed the April 2 reciprocal tariff announcement.
- Comments from various Fed officials making it clear the Fed is worried about tariffs driving up inflation and isn't inclined to cut rates soon.
- Disappointing earnings results from CarMax (KMX 66.43, -15.62, -19.5%).
- Deficit angst as the House passed a reconciliation resolution that includes tax cuts, which some fear will not be offset with enough spending cuts to avoid adding to the budget deficit.
- Sharp losses for the dollar against other major currencies, which presumably stemmed from concerns about U.S. growth prospects, worries about the U.S. budget deficit, and waning confidence in U.S. investments on the part of foreign investors due to the policy volatility. The U.S. Dollar Index declined 1.9% to 100.98.
Notably, the March CPI report today brought good inflation news, but that didn't help sentiment because market participants are anticipating higher prices in coming months as tariff actions take root across supply chains.
Ten of the 11 S&P 500 sectors finished lower. The sole winner was the defensive-oriented consumer staples sector (+0.2%). The biggest loser was the energy sector (-6.4%), followed by information technology (-4.6%), consumer discretionary (-4.1%), communication services (-4.1%), and materials (-3.0%). The Philadelphia Semiconductor Index, up 18.7% yesterday, declined 8.0% today. The Vanguard Mega-Cap Growth ETF (MGK), up 12.2% yesterday, declined 4.1% today.
Decliners outpaced advancers by a better than 8-to-1 margin at the NYSE and by a better than 4-to-1 margin at the Nasdaq.
- Dow Jones Industrial Average: -7.1% YTD
- S&P 500: -10.4% YTD
- S&P Midcap 400: -14.0% YTD
- Nasdaq Composite: -15.1% YTD
- Russell 2000: -17.9% YTD
Reviewing today's economic data:
- Total CPI decreased 0.1% month-over-month in March (Briefing.com consensus 0.1%) and was up 2.4% year-over-year versus 2.8% in February. Core CPI increased 0.1% month-over-month (Briefing.com consensus 0.3%) and was up 2.8% year-over-year versus 3.1% in February.
- The key takeaway from the report is that, while better than expected, it will be discounted as a lasting improvement given the tariff actions that are now taking root across supply chains.
- Initial jobless claims for the week ending April 5 increased by 4,000 to 223,000 (Briefing.com consensus 225,000). Continuing jobless claims for the week ending March 29 decreased by 43,000 to 1.850 million.
- The key takeaway from the report is that the relatively low level of initial jobless claims remains consistent with an otherwise solid labor market and an economy still in expansion mode.
- The Treasury Budget for March showed a deficit of $160.5 billion compared to a deficit of $236.6 billion in the same period a year ago. The March deficit resulted from outlays ($528.2 billion) exceeding receipts ($367.6 billion). The Treasury Budget data are not seasonally adjusted, so the March deficit cannot be compared to the February deficit of $307.0 billion.
- The key takeaway from the report is that the deficit so far in fiscal 2025 is 23% greater than the deficit seen at the same time in fiscal 2024.
Friday's economic lineup features:
- 08:30 ET: March PPI (Briefing.com consensus 0.1%; prior 0.0%) and Core PPI (Briefing.com consensus 0.3%; prior -0.1%)
- 10:00 ET: Preliminary April Univ. of Michigan Consumer Sentiment (Briefing.com consensus 54.8; prior 57.0)
Dollar daze
10-Apr-25 15:25 ET
Dow -1047.35 at 39561.10, Nasdaq -731.67 at 16393.30, S&P -184.99 at 5271.91
[BRIEFING.COM] Stocks have had a rough go of it today, but the dollar has really taken a pounding. The U.S. Dollar Index is down 1.8% to 101.03. That might not seem like much relative to the declines registered by the major indices, yet it qualifies as a major move in the currency world.
The euro (EUR/USD +2.1% to 1.1172) is the most influential mover that is weighing on the U.S. Dollar Index, but the yen (JPY/USD -1.9% to 144.97), British pound (GBP/USD +1.0% to 1.2949), and Swiss franc (USD/CHF -3.4% to 0.8274) are also making outsized moves against the greenback.
Concerns about U.S. growth prospects, worries about the U.S. budget deficit, and waning confidence in U.S. investments on the part of foreign investors due to the policy volatility are all factoring into the dollar's difficulties.
Separately, gold futures made another big move today, settling up $97.30, or 3.2%, at $3175.60/troy oz.
A tough outing
10-Apr-25 15:00 ET
Dow -969.58 at 39638.87, Nasdaq -664.97 at 16460.00, S&P -172.42 at 5284.48
[BRIEFING.COM] It has been a tough day for the stock market, but things have gotten a little less tough over the past few hours. The S&P 500 is roughly 150 points above its lows for the day, but even so, it is still down 3.1% in today's session.
It has been worse for the Nasdaq Composite, which is down 3.9%. The upshot is that it was up 12.2% yesterday.
Clearly, there is more of a defensive tone in today's session. The consumer staples sector (+0.4%) is the lone sector in positive territory, while the utilities sector (-0.2%) is little changed. Losses for the other nine sectors range from 2.0% (real estate) to 6.3% (energy).
The CBOE Volatility Index is up 22.2% to 41.08.
Stocks wobble as Treasury reports $1.31 trillion mid-year deficit
10-Apr-25 14:30 ET
Dow -966.40 at 39642.05, Nasdaq -667.25 at 16457.72, S&P -169.86 at 5287.04
[BRIEFING.COM] Up-and down action in the major averages ultimately leaves us little changed over the prior half hour following the release of the March Treasury Budget which hit at the bottom of the hour. Currently, the S&P 500 (-3.11%) is in second place, down about 169 points.
The Treasury Budget for March showed a deficit of $160.5 billion compared to a deficit of $236.6 billion in the same period a year ago. The March deficit resulted from outlays ($528.2 billion) exceeding receipts ($367.6 billion). The Treasury Budget data are not seasonally adjusted so the March deficit cannot be compared to the February deficit of $307.0 billion.
The key takeaway from the report is that the deficit now stands at a record $1.31 trln through the first half of the fiscal year, marking the second-largest mid-fiscal-year deficit, trailing only the COVID-era $1.71 trillion deficit in the first half of fiscal 2021.
Gold hits record high amid escalating trade war and dollar weakness
10-Apr-25 14:00 ET
Dow -1177.55 at 39430.90, Nasdaq -764.48 at 16360.49, S&P -200.67 at 5256.23
[BRIEFING.COM] With about two hours to go on Thursday, the tech-heavy Nasdaq Composite (-4.46%) remains at the bottom of the major averages.
Gold futures settled $98.10 higher (+3.2%) at $3,177.50/oz, due in part to escalating trade tensions following President Trump's decision to increase tariffs on Chinese imports from 104% to 125%. This move intensified the ongoing trade war, prompting a rush to safe-haven assets like gold. Losses in the greenback also facilitated the rise in the yellow metal today.
Meanwhile, the U.S. Dollar Index is down about -2.0% to $100.96.
Costco's strong March comps underscore its resilience and strong competitive positioning (COST)
Costco's (COST) value proposition through offering products in bulk and through its Kirkland Signature private label continues to resonate with budget-conscious consumers as reflected by its strong March adjusted comparable sales growth of 9.1%. A favorable calendar shift related to the timing of Easter added approximately 1.5% to the comp growth, but the underlying performance is still impressive.
Similar to competitor Walmart (WMT), which reaffirmed its 1Q26 sales growth guidance and annual sales growth outlook yesterday, COST's business tends to strengthen relative to other retailers during economic downturns. In fact, COST has even outperformed price-focused WMT and Target (TGT), thanks to its resilient membership model, higher exposure to food and essentials, and a more affluent customer base.
- On that note, COST's foot traffic increased by 7.5% in March, compared to declines of 3.8% at WMT and 6.5% at TGT. Once again, strong performance in food, fresh produce, and household essentials drove the healthy foot traffic and comp growth. However, non-food categories such as electronics and seasonal goods also positively contributed.
- COST's e-Commerce channel continued to shine as adjusted comps jumped by 16.2% yr/yr, indicating robust momentum heading through 3Q25, which ends on May 11. Unlike Amazon's (AMZN) pure-play e-Commerce model, COST's omnichannel strategy combines the strengths of its physical warehouse locations with digital convenience, providing it with a competitive edge. Also, the company's expansion into "big and bulky" items, like appliances and furniture, has been a significant contributor to e-Commerce sales. COST logistics has streamlined delivery for these items, adding another layer of convenience.
- Relative to many other retailers, COST is also more insulated from tariffs -- particularly on China. Only about one-third of COST's U.S. sales are imported with less than half of those imports coming from China. In comparison, WMT sources approximately 60% of its products from China, which now faces the stiffest tariffs with a 125% duty charged on Chinese imports. TGT has reduced its reliance on Chinese manufacturing in recent years, lowering its exposure to 30% from 60%, but that is still substantially higher than COST's exposure.
- Like WMT, COST is pressuring suppliers to absorb some tariff costs, leveraging its scale and strong supplier relationships. The company has also accelerated inventory purchases and plans to replace less competitive imported items with better-value alternatives.
COST demonstrated remarkable resilience in March, achieving strong comparable sales growth, driven by robust U.S. sales and significant e-commerce gains of 16.2%. This performance underscores COST's ability to thrive during economic uncertainty, leveraging its membership model and value-driven offerings to attract and retain customers seeking convenience and savings in a challenging retail environment.
Constellation Brands tops Q4 expectations, driven by premiumization gains in Wine & Spirits (STZ)
In a surprising role reversal, Constellation Brands' (STZ) Wine & Spirits segment, which continues to undergo a premiumization transformation, drove the company's upside 4Q25 results as organic net sales increased by 11% yr/yr. During this multi-year reshaping of the brand portfolio, Wine & Spirits has consistently lagged behind the Beer segment, weighing on STZ's overall results. It appears that this focus on premiumization is finally paying some dividends and STZ is moving full steam ahead with this strategy, also announcing that it's divesting more mainstream wine brands to The Wine Group.
- For the first time in at least eight quarters, Wine & Spirits delivered positive organic net sales growth, driven by favorable product mix toward higher-margin premium products, distributor payments, and volume growth in U.S. and international wholesale markets. In recent quarters, unfavorable sales trends for mainstream, and some premium brands, have combined with operational disruptions related to brand restructuring to pressure sales.
- Compared to premium labels, mainstream wine brands are facing increasing competition from private label brands and discount offerings. Furthermore, premium wines are aligned with an evolving consumer preference for quality over quantity. From a financial standpoint, premium wines also deliver higher margins. For these reasons, STZ is willing to deal with some disruptions and impairment charges in the short-term in Wine & Spirits, betting that a higher-margin premium portfolio will drive stronger profits over the long-term.
- In Q4, Wine & Spirits' operating margin did contract by 380 bps yr/yr to 21.7% as benefits from contractual distributor payments were offset by higher cost of products sold and higher marketing expenses. With the divestiture of more mainstream brands, including Woodbridge, Meiomi, Robert Mondavi Private Selection, Cook's, and SIMI, more margin pressure is likely in the coming quarters. In fact, STZ is expecting operating income to decline by 97-100% in FY26.
- Turning to the Beer segment, depletions declined by 1% after increasing by 3.2% in Q3 and by 2.4% in Q2, while net sales were essentially flat yr/yr at $1.70 bln. Although the Beer business continued to outperform the total U.S. beer category -- STZ's branded added 0.5 points of share in Q4 -- momentum is fading amid mounting macro-related headwinds. In particular, the key Hispanic consumer group is facing strong economic pressures, leading to reduced discretionary spending and value-seeking behavior. Additionally, the beer industry as a whole is contending with changing consumer preferences, with some shifting to spirits, ready-to-drink beverages, and non-alcoholic beverages.
- Looking ahead, STZ is anticipating a challenging year, as illustrated by its downside FY26 EPS guidance of $12.60-$12.90 and enterprise organic net sales growth of (2)% to 1%. Increased tariffs on Mexican imports, which could cut into STZ's earnings by 25-40%, only add to the list of challenges. Beyond FY26, though, STZ is eyeing stronger growth, guiding for net sales growth of 2-4% for FY27-FY28 with EPS growing by mid-single-digits to low-double-digits in FY27.
STZ's pivot toward premium brands in its Wine & Spirits segment contributed to an 11% organic net sales growth in Q4, driven by favorable product mix and distributor payments. Meanwhile, macroeconomic pressures, including inflation and recession fears, coupled with newly imposed tariffs on Mexican beer imports, weighed on the Beer segment's depletions growth. The company's outlook reflects a cautious approach as it expects to navigate restructuring costs while continuing to focus on premiumization in Wine & Spirits.
CarMax stuck in reverse today on EPS miss and decision to remove timeframes for long term goals(KMX)
CarMax (KMX -20%) is driving in reverse after wrapping up FY25 on a down note. The nation's largest retailer of used autos missed on Q4 (Feb) EPS, following big EPS upside in Q3. To be fair, Q4 was impacted by a $0.06 Edmunds non-cash lease impairment, but it was still a miss when backing that out. KMX does not guide, but has provided general long term objectives. Today, KMX removed the timeframes related to prior stated goals due to macro factors.
- Revenue rose 6.7% yr/yr to $6.00 bln, which was generally in-line. Growth was mostly fueled on the retail side with revs up 7.5% yr/yr, primarily driven unit sales being up 6.2% yr/yr to 182,655 with a same store comp of +5.1%, up from +4.3% in Q3. Wholesale revenue increased 3.5% yr/yr, also primarily driven by an increase in wholesale units sold.
- KMX further explained that comp trends in December and January were very strong, but February was a little softer, as expected, because there was Leap Day last year. Also February may have been slightly impacted by a delay in tax refunds. On the positive side, KMX saw a step-up in comps in March, which continued and then accelerated into the first few days of April. This bodes well for Q1 (May) comps, which KMX estimates are running high single digits thus far.
- CarMax concedes that its market share came under pressure during 1H24, but it recovered in 2H24 with particular strength in aged 0 to 4 vehicles. Industry data indicates that its market share continued to grow yr/yr in January 2025 and KMX remains confident it will achieve further market share gains across 2025 and beyond.
- CarMax also addressed tariffs on the call. Basically, car tariffs will drive prices higher for new cars. That should create a bigger spread between late model used and new cars. KMX says this dynamic may help explain the recent rise in CarMax comps in Mar/Apr. The company thinks tariffs will push some folks into looking at late model used cars and CarMax is seeing a lot of interest right now. Over time, what could happen is that used car prices will also go up.
The stock appears to be reacting to the EPS miss, but likely more so to CarMax's decision to remove the timeframes related to prior stated goals. This seems to be spooking investors. We also suspect the weakness and profit taking in the overall market is impacting the stock today. However, we thought the commentary on the Mar/Apr comps was quite positive and shows that CarMax should benefit from tariffs. President Trump paused many tariffs, but he did not pause the 25% tariffs on automotive imports.
Walmart shares jump as reaffirm of Q1 and FY26 growth outlook eases tariff concerns (WMT)
Ahead of its Investment Community Meeting, Walmart (WMT) eased investors' intensifying tariff-related concerns, reaffirming its 1Q26 sales growth guidance of 3-4% and reiterating its annual sales and operating income growth outlook, which had called for growth of 3-4% and 3.5-5.5%, respectively. WMT did pull its Q1 operating income forecast, however, stating that the range of outcomes has widened due to less favorable category mix and a desire to maintain flexibility to invest in price as tariffs are implemented.
Still, WMT believes it is well-positioned to weather this storm, with CEO John Rainey commenting that the company typically gains market share during economic downturns, thanks to its low-price competitive edge.
- Even at the expense of short-term profits, investing in price to maintain affordability remains a key tenet of WMT's strategy. WMT's efforts to shift and diversify its supply chain will help to mitigate the damage from tariffs. Currently, WMT sources approximately 60% of its products from China, which now faces the stiffest tariffs with a 104% duty charged on Chinese imports. In prior years, China accounted for about 80% of WMT's products. WMT has turned to countries such as India, Vietnam, and Mexico to source more of its products.
- In addition to a more diverse and efficient supply chain, WMT is focused on expanding its e-Commerce channel to drive higher margins and profits. The company's investments are paying off here, as illustrated by its healthy U.S. e-Commerce growth rates over the past four quarters: +20% in 4Q25, +22% in 3Q25, +22% in 2Q25, and +17% in 1Q25.
- Mr. Rainey's statement about WMT becoming stronger during economic downturns rings true when looking at the company's financial performance during the pandemic. For instance, in FY21, U.S. comparable sales grew by a robust 8.6% while EPS increased by 9%. During this period, WMT gained market share across multiple categories, including groceries and household essentials, as higher-income shoppers turned to value retailers for affordability.
- The same scenario is now unfolding for WMT. In fact, in 4Q25, households earning over $100,000 annually accounted for 75% of the company's market share gains. WMT also credited high-income shoppers for contributing to the 20% increase in U.S. e-Commerce sales last quarter as this group utilized services like curbside pickup and fast home deliveries.
WMT's reaffirmation of Q1 sales growth guidance and its FY26 sales and operating income growth outlook has put the retailer's resilience and stability under the spotlight. Similar to past economic downturns, the company is well-positioned to emerge as a winner in the retail space, driven by its steadfast goal of maintaining affordability, a more diverse supply chain, and e-Commerce expansion.
Delta Air Lines' revenue diversification drives better-than-expected Q1 results and Q2 outlook (DAL)
Against an increasingly turbulent macroeconomic climate and as associated downturn in domestic leisure travel demand, Delta Air Lines (DAL) flew past analysts' muted 1Q25 EPS and revenue estimates. On March 10, the airliner slashed its Q1 guidance, resetting the bar lower and signaling that it may be in for a bumpy landing this year following a post-pandemic boom period. On that note, DAL refrained from reaffirming its FY25 guidance due to tariff-related uncertainties. The company had previously guided for FY25 EPS of greater than $7.35 and free cash flow of over $4.0 bln.
- Weaker consumer confidence and softness within price sensitive customers led to a 5% decrease in domestic leisure travel demand and DAL isn't anticipating an upswing in this category any time soon. The company's most price-sensitive customers -- those flying in the main cabin on non-peak flights -- have pulled back on spending, significantly impacting domestic bookings. Consequently, in an effort to protect margins, DAL revised its capacity growth plans for 2H25 to remain flat compared to 2024 levels.
- In 1Q25, capacity, or Available Seat Miles (ASMs), grew by 4.2% to 68.3 bln, reflecting moderate capacity expansion despite DAL's cautious view on demand. The combination of capacity growth and slowing domestic leisure travel demand pressured DAL's unit revenue (TRASM), which slipped by 1% yr/yr, down from flat last quarter.
- Some pockets of strength remain, though, and DAL's revenue diversification strategy is providing it with some resiliency. For instance, premium revenue grew by 7% yr/yr compared to a 3% decline for main cabin, driven by strong demand for Delta One and Premium Select premium cabins. Relatedly, DAL continues to see strength in its loyalty program, generating record revenue of $2.0 bln from its American Express (AXP) partnership.
- DAL's substantial international business (about 40% of total revenue) is also providing it with an edge. International routes are showing resilience despite global trade uncertainties, as illustrated by the mid-single-digit revenue increase for DAL's international business. The Pacific region was particularly strong with revenue jumping by 16%.
- Although DAL is taking a cautious approach to its outlook, its in-line Q2 EPS and revenue guidance is likely viewed as better-than-feared and is providing the stock with a spark following a 44% nosedive since its Q4 report in January. Along with strength in premium and international, lower fuel costs are helping to support DAL's profits. On a yr/yr basis, DAL's fuel costs slid by 7% as the average fuel price per gallon decreased to $2.47 from $2.79.
DAL delivered better-than-expected Q1 results, buoyed by growth in premium travel and international routes, which helped to offset the downturn in domestic leisure travel. Corporate travel remains soft and is now flat yr/yr with the outlook growing cloudier as tariff-related uncertainties weigh. It's shaping up to be a difficult year for the airline industry, but DAL's more diverse revenue streams should enable it to outperform many of its competitors.
|
|
