| | | Market Snapshot
| Dow | 40524.79 | +312.08 | (0.78%) | | Nasdaq | 16831.48 | +107.03 | (0.64%) | | SP 500 | 5405.97 | +42.61 | (0.79%) | | 10-yr Note | +11/32 | 4.36 |
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| | NYSE | Adv 2134 | Dec 548 | Vol 1.1 bln | | Nasdaq | Adv 3168 | Dec 1226 | Vol 9.7 bln |
Industry Watch
| Strong: Technology, Financials, Real Estate, Communication Services, Utilities, Energy, Industrials, Materials |
| | Weak: Consumer Discretionary |
Moving the Market
-- Reacting to announcement by Trump administration that smartphones, laptops, semiconductors, solar cells, and other electronic items will be excluded from the 10% global reciprocal tariff rate
--Ebb and flow of mega caps
-- Positive response to earnings from Goldman Sachs
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Closing Summary
14-Apr-25 16:30 ET
Dow +312.08 at 40524.79, Nasdaq +107.03 at 16831.48, S&P +42.61 at 5405.97
[BRIEFING.COM] The stock market logged gains to start the week. An early surge saw the S&P 500 trade up as much as 1.8%, but the index settled 0.8% higher than Friday after briefly turning negative and bouncing off its session low around mid-day.
Buying interest was rooted in relief that smartphones, laptops, semiconductors, solar cells, and other electronic items will be exempt from the 10% global tariffs and the 125% tariff rate on imports from China. The subsequent deterioration was related in part to the understanding that imports from China are still subject to the 20% fentanyl-related tariff.
Also, Commerce Secretary Lutnick clarified that the exemptions will be temporary and President Trump said that he will soon announce a tariff rate for semiconductors.
The ebb and flow of equities was also driven by choppy action in mega caps. NVIDIA (NVDA 110.71, -0.22, -0.2%) was an influential name in that respect, trading up as much as 3.0% at its high and trading down as much as 1.7% at its low.
Ten of the 11 S&P 500 sectors ultimately closed in the green and seven of them finished more than 1.0% higher, including the financial sector, which was helped by a positive response to above-consensus quarterly results from Goldman Sachs (GS 503.98, +9.54, +1.9%).
The rate-sensitive real estate (+2.2%) and utilities (+1.8%) sectors led the pack as market rates dropped. The 10-yr yield dropped 13 basis points to 4.36% and the 2-yr yield dropped 12 basis points to 3.83%.
There was no notable US economic data today. This week's calendar features March Retail Sales on Wednesday, and March Housing Permits and Building Permits on Thursday. There is also an ECB meeting on Thursday and the central bank is expected to announce a 25-basis point rate cut.
- Dow Jones Industrial Average: -4.8% YTD
- S&P 500: -8.1% YTD
- S&P Midcap 400: -11.7% YTD
- Nasdaq Composite: -12.8% YTD
- Russell 2000: -15.7% YTD
Looking ahead to Tuesday, market participants receive the following data:
- 8:30 ET: April Empire State Manufacturing (Briefing.com consensus -14.8; prior -20.0), March Export Prices (prior 0.1%), Export Prices ex-agriculture (prior 0.1%), Import Prices (prior 0.4%), and Import Prices ex-oil (prior 0.3%)
Treasuries settle with gains
14-Apr-25 15:30 ET
Dow +454.24 at 40666.95, Nasdaq +189.38 at 16913.83, S&P +40.82 at 5404.18
[BRIEFING.COM] The three major indices trade off session highs ahead of the close.
Treasuries settled with solid gains. The 10-yr yield dropped 13 basis points to 4.36% and the 2-yr yield dropped 12 basis points to 3.83%.
Looking ahead to Tuesday, market participants receive the following data:
- 8:30 ET: April Empire State Manufacturing (Briefing.com consensus -14.8; prior -20.0), March Export Prices (prior 0.1%), Export Prices ex-agriculture (prior 0.1%), Import Prices (prior 0.4%), and Import Prices ex-oil (prior 0.3%)
Banks outperform ahead of earnings
14-Apr-25 15:00 ET
Dow +411.99 at 40624.70, Nasdaq +66.51 at 16790.96, S&P +188.65 at 5552.01
[BRIEFING.COM] The stock market continued its steady recovery off session lows in recent trading. The market-cap weighted S&P 500 sports a 1.1% gain and the equal-weighted S&P 500 trades 1.5% higher.
Bank of America (BAC 36.83, +0.88, +2.5%), Citigroup (C 63.87, +2.23, +3.6%), and PNC (PNC 156.17, +4.18, +2.8%) are notable standouts in the financial sector ahead of their earnings report tomorrow morning.
Other names reporting earnings ahead of Tuesday's open include Johnson & Johnson (JNJ 154.32, +2.59, +1.7%) and Albertsons (ACI 21.61, +0.42, +2.0%).
S&P 500 leads Monday gains as tariff exemptions boost solar and tech; Humana slips
14-Apr-25 14:30 ET
Dow +396.76 at 40609.47, Nasdaq +154.34 at 16878.79, S&P +58.01 at 5421.37
[BRIEFING.COM] The S&P 500 (+1.08%) is in first place on Monday afternoon, up about 58 points.
Briefly, S&P 500 constituents Charles River (CRL 106.31, +6.56, +6.58%), First Solar (FSLR 132.74, +6.81, +5.41%), and Western Digital (WDC 36.14, +1.74, +5.06%) pepper the top of the standings. After being beaten down last week FSLR and WDC are seeing some reprieve from the Trump administration's announcement late Friday that smartphones, laptops, semiconductors, solar cells, and other electronic items will be excluded from the 10% global reciprocal tariff rate.
Meanwhile, Humana (HUM 283.65, -11.39, -3.86%) is today's top laggard, giving back some of last week's rebound.
Gold pulls back from record highs as tariff exemptions ease safe-haven demand
14-Apr-25 14:00 ET
Dow +287.83 at 40500.54, Nasdaq +95.61 at 16820.06, S&P +40.66 at 5404.02
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.57%) is in last place on Monday afternoon, trying to continue a modest move higher from the previous half hour.
Gold futures settled $18.30 lower (-0.6%) at $3,226.30/oz, today's pullback coming behind a recent surge to record highs, driven by rising safe-haven demand amid escalating trade tensions.
The drop in the yellow metal stems from news that President Trump would issue temporary exemptions for smartphones and computers from the latest round of reciprocal tariffs on China. This move alleviated some investor concerns, reducing the urgency to seek refuge in gold.
Meanwhile, the U.S. Dollar Index is now down -0.3% to $99.78.
Certara surges on strong outlook as regulatory and AI tailwinds position it for strong growth (CERT)
After soaring by 33% last Thursday and Friday, Certara (CERT) is launching higher again today following the company's upside 1Q25 revenue guidance, reaffirm of FY25 guidance, and announcement of a new $100.0 mln share repurchase plan. The initial spark for this remarkable rally is tied to the FDA's announced plans on April 10 to phase out animal testing in the development of monoclonal antibody therapies, which aligns with CERT's expertise in bio-simulation models and should drive even stronger demand from pharmaceutical companies for CERT's bio-simulation software.
- In Q1, software revenue jumped higher by 18% yr/yr, representing an uptick from last quarter's growth of 17% and Q3's increase of 16%. Rising adoption of CERT's bio-simulation software -- especially its Simcyp Simulator for pharmacokinetics modeling -- is a primary driver behind the healthy gains. The FDA announcement paves the way for AI-enabled bio-simulation tools, such as Simcyp Simulator, to significantly build upon the expanding adoption within the biopharmaceutical industry.
- CERT has increasingly leveraged AI across its platform to enhance predictive modeling accuracy and to streamline drug development workflows. For example, the latest version of Simcyp Simulator includes features like the "Ask Simcyp" AI-enabled help chat and chemical structure-based parameter predictors, improving usability and precision in drug modeling. These tools are helping to drive customer net retention rate, which was strong at 110% in 2024.
- Separately, the company also announced the launch of its Non-Animal Navigator platform in support of the FDA's plans to phase out animal testing. Positioned as a key solution for transitioning drug manufacturers away from animal testing, Non-Animal Navigator offers strategic regulatory advice, integrated preclinical development plans, and optimized AI-enabled modeling toolkits. The platform should bolster CERT's existing bio-simulation offerings, leading to increased adoption among biopharmaceutical companies that are focused on monoclonal antibodies and anti-body drug conjugates.
The main takeaway is that CERT's strong and improving software revenue growth reflects its ability to capitalize on a growing industry adoption trend to use new approaches like AI-enabled bio-simulation in the drug development process. Regulatory tailwinds, such as the FDA's decision to reduce animal testing, and CERT's integration of AI into its software offerings, position the company for healthy growth in the quarters ahead.
Intel divests majority stake in Altera, providing some needed financial relief (INTC)
After several months of speculation about whether Intel (INTC) would green light its potential plans to divest Altera -- the developer of Field Programmable Gate Array (FPGA) technology it acquired in 2015 for $16.7 bln -- the chip maker ended the suspense today, cutting a deal to sell 51% of its Altera business to Silver Lake Management for $8.75 bln. The substantial haircut INTC is taking to consummate the deal is a tough pill to swallow, but the transaction will provide some immediate financial relief as new CEO Lip-Bu Tan tries to stop the bleeding in the Foundry business.
Mr. Tan, who took the reins from Pat Gelsinger about one month ago, has discussed the need for INTC to simplify the company's portfolio while prioritizing the company's core chip manufacturing and AI initiatives. Today's news, and INTC's announcement in January to spin-off Intel Capital, are meaningful steps towards streamlining the business and stabilizing cash flows, but there are drawbacks, and the moves don't address the core issue of INTC's weakened competitive position.
- When INTC acquired Altera, the goal was to integrate Altera's FPGA technology with INTC's Xeon processors to target data centers, IoT, and other high-growth markets. However, the initial effort to combine CPUs and FPGAs into a single package, such as Xeon Gold, failed to gain traction. Furthermore, INTC largely neglected Altera's traditional strength in embedded systems and industrial markets as it focused on data center, opening the door for competitors like Advanced Micro Devices (AMD) and Lattice Semiconductor (LSCC) to take market share.
- Although INTC struggled to properly integrate and capitalize on Altera's technology, FPGAs remain critical for AI and data center applications. Therefore, selling Altera could further weaken the company's position in these markets, adding another layer of difficulty to its turnaround efforts.
- From a financial perspective, Altera contributed $1.54 bln in revenue in FY24, accounting for only about 3% of INTC's total revenue. On a non-GAAP basis, the segment was modestly profitable, generating operating income of $35.0 mln. After being untethered from INTC, Altera's ability to compete as a pure-play FPGA provider in AI-driven markets like edge computing and robotics should be enhanced.
- Meanwhile, INTC could use the capital to shore up its financials after seeing its GAAP EPS plunge to $(4.38) in FY24 from $0.40 in FY23, driven by restructuring charges, inventory write-downs, and steep losses in the floundering Foundry business. In 4Q24 alone, Foundry racked up an operating loss of $13.0 bln as INTC poured billions into new chip factories while it struggled to attract sufficient external customers to help offset the skyrocketing capital expenditures.
INTC’s decision to sell a majority stake in Altera reflects a strategic pivot aimed at financial stabilization and a focus on its core business. While the sale offers immediate financial benefits, it comes at the cost of potentially weakening INTC’s long-term position in key growth areas like AI and data centers.
Goldman Sachs reports strong Q1 upside, but was notably cautious on the macro picture (GS)
Goldman Sachs (GS +2%) is trading modestly higher after reporting a huge EPS beat. GS reported its third consecutive EPS beat above $1.50+. Revenue grew 6% yr/yr to $15.06 bln, which also was better than expected, and driven by strong growth in its GBM segment. This nice upside follows a similar pattern from what we saw with JPM last week. And just like with JPM, we think commentary about the economy, tariffs, inflation and the impacts on the consumer is what's taking center stage.
- The company said that ongoing policy uncertainty and market volatility drove many clients to reposition their portfolios, driving higher activity in its FICC and Equities businesses. Goldman conceded that it's entering Q2 with a markedly different operating environment than earlier this year.
- Global Banking & Markets (GBM) is by far Goldman's largest segment. Segment revs in Q1 grew 10% yr/yr and 26% sequentially to $10.71 bln. Notably, Investment Banking (IB) fees dropped 8% yr/yr to $1.91 bln, primarily due to significantly lower revenue in Advisory. In fairness, IB was lapping a strong IB quarter a year ago. However, GS said the volatile backdrop led to more muted activity relative to the levels expected coming into the year.
- Its other big segment is Asset & Wealth Management (AWM), but it was a drag on overall growth with segment revs down 3% yr/yr to $3.68 bln. This reflected significantly lower revs in Equity investments and Debt investments. Equity investments were impacted by significantly lower net gains from investments in private equities and higher net losses from investments in public equities.
- From a macro view, Goldman said that its clients, including CEOs and institutional investors, are concerned by the significant uncertainty that has constrained their ability to make important decisions. This uncertainty and fears over a potentially escalating trade war have created material risks to the US and global economy. GS is encouraged by the administration's recent actions to pursue a more gradual policy, but how this plays out is still unknown.
- Goldman noted that its economists expectation for growth in the US have fallen meaningfully from over 2% to 0.5%. The prospect of a recession has increased with growing indications that economic activity is slowing down around the world. Goldman expects markets will likely continue to be volatile until there is further clarity. Goldman noted that few countries have benefited more from a post-World War II economic and financial order than the US.
Overall, Goldman's report was pretty similar to what we saw with JPM last week, namely impressive financials with strong beats but cautious macro commentary. JPM has much more exposure to the consumer with its Chase Bank arm while Goldman is more of a true investment bank, but the commentary was similar. Basically, the uncertainty over tariffs is slowing economic activity and growth. Goldman sounded pretty cautious about heading into Q2. We suspect we will get similar comments from Citigroup (C) tomorrow morning.
Follow-Up on FDA decision to reduce animal testing, winners and losers
Late yesterday, the FDA announced plans to replace animal testing in the development of monoclonal antibody therapies and other drugs with human-relevant methods. The FDA's animal testing requirement will be reduced, refined, or potentially replaced using a range of approaches, including AI-based computational models of toxicity and cell lines and organoid toxicity testing in a laboratory setting (so-called New Approach Methodologies or NAMs data).
The FDA said implementation of the regimen will begin immediately for investigational new drug (IND) applications, where inclusion of NAMs data is encouraged.
We posted an InPlay comment last night on names being impacted, but now that we have had time to digest the news a bit, we wanted to provide more color.
News is seen as Positive for:
- Certara (CERT +19%) is seen as a key player in the shift toward reducing animal testing in drug development, particularly through its biosimulation and AI-driven modeling platforms.
- Recursion Pharma (RXRX +25%) provides an AI-driven drug discovery platform which should reduce reliance on animal studies. It uses machine learning to identify drug targets and optimize molecules.
- Simulations Plus (SLP +27%) is a leader in the biosimulation market by providing software and consulting services supporting drug discovery, development, research, and regulatory submissions. It is advancing alternatives to traditional animal testing through its computational modeling and simulation technologies.
- Schrodinger (SDGR +23%) is a leader in computational drug discovery and is actively working to reduce reliance on animal testing through AI and physics-based simulations.
- Absci corp. (ABSI +14%) focuses on AI-driven drug discovery with a focus on reducing reliance on animal testing through computational and high-throughput wet lab methods.
News is seen as negative for:
Charles River Labs (CRL +2.2%): CRL is a major supplier of animals used in testing. CRL dropped 28% as the news hit the wires late yesterday but it is recovering a bit today.
TreeHouse Foods issues solid outlook and takes another step forward in streamlining operations (THS)
TreeHouse Foods (THS), a manufacturer of private label snacks and beverages, is building upon its recent efforts to improve margins and profitability, announcing organizational changes that include the departure of its EVP, Business President and Chief Commercial Officer, and the elimination of approximately 150 roles. The company also issued upside Q1 guidance for revenue of at least $792 mln and reaffirmed its FY25 adjusted revenue and adjusted EBITDA outlook, reflecting the resiliency in the private label category and the positive effects from improving its supply chain and prioritizing gross profit dollars through margin management.
- Rewinding to THS's Q4 earnings report in mid-February, in which the company handily beat EPS estimates on nearly flat sales, the impact of its strategy to focus on margins and gross profit dollars was already evident. Gross profit margin expanded by 2.8 percentage points to 19.5%, mainly due to supply chain initiatives, reduced commodity costs, and operational efficiencies. Additionally, THS reduced its capital expenditures by 22% yr/yr to $28.7 mln in 4Q24.
- With today's announcement, THS is taking another step forward in this strategy, specifically targeting corporate overhead reductions, leadership restructuring, and additional cost efficiencies. Once completed, the restructuring is expected to enhance decision-making speed while simplifying the organizational structure.
- In today's press release, THS also sought to ease investors' concerns surrounding tariffs, noting that only 5% of its sales come from customers outside of the U.S., with almost all of those sales occurring in Canada. The limited exposure to tariffs and modest international footprint minimizes risks associated with trade-related disruptions and additional costs from tariffs on imported goods. The downside is that the limited international exposure constrains its sales growth opportunities.
- In terms of the bigger picture, THS's organizational changes should position it to better capitalize on rising consumer demand for private label products. The affordability and improved quality of private label food brands make them ideally suited to perform well during economic downturns. In fact, reports show that 53% of consumers now prefer private label products, citing affordability and comparable quality to branded options.
THS's strategy to prioritize margins and gross profit reached a higher gear with today's announced organizational changes. These efforts, which are already paying dividends, as illustrated by THS's blowout Q4 EPS result, will help the company navigate through an increasingly challenging macro backdrop.
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