Market Snapshot
| Dow | 39142.23 | -527.16 | (-1.33%) | | Nasdaq | 16286.44 | -20.71 | (-0.13%) | | SP 500 | 5282.72 | +7.00 | (0.13%) | | 10-yr Note | -4/32 | 4.33 |
|
| | NYSE | Adv 1998 | Dec 634 | Vol 1.2 bln | | Nasdaq | Adv 2895 | Dec 1428 | Vol 7.1 bln |
Industry Watch
| Strong: Energy, Real Estate, Utilities, Consumer Staples, Materials, Industrials |
| | Weak: Health Care, Technology, Communication Services |
Moving the Market
-- Big decline in UNH weighing down DJIA
-- Rebound in some mega caps
-- Sentiment shift after President Trump said trade talks are going well
-- Reacting to earnings news
|
Closing Summary
17-Apr-25 16:30 ET
Dow -527.16 at 39142.23, Nasdaq -20.71 at 16286.44, S&P +7.00 at 5282.72
[BRIEFING.COM] The stock market exhibited some turbulence at the index level amid mixed headlines and corporate news. The S&P 500 (+0.1%) and the Nasdaq Composite (-0.1%) traded above and below prior closing levels while the Dow Jones Industrial Average (-1.3%) lagged its peers.
The underperformance of the DJIA was due to a significant earnings-related loss in UnitedHealth (UNH 454.11, -130.93, -22.4%), which is among the heaviest components in the price-weighted average.
The overall bias in the market was positive, however. The equal-weighted S&P 500 closed 0.7% higher, the Russell 2000 registered a 0.9% gain, and the S&P Mid Cap 400 was up 0.8%. Also, market breadth was positive through the entire session. Advancing issues led declining issues by a 3-to-1 ratio at the NYSE and by a 2-to-1 margin at the Nasdaq.
Outsized moves were mostly reserved for individual stocks with specific catalysts. Eli Lilly (LLY 839.96, +105.06, +14.3%) was an influential winner after announcing positive trial results for its weight-loss drug pill.
Alphabet (GOOG 153.36, -2.14, -1.4%) was another influential mover, dropping after a Reuters report indicating a federal judge ruled that it holds an illegal monopoly in online advertising technology.
Treasuries settled with losses. The 10-yr yield was up five basis points today, and down 16 basis points this week, to 4.33%.
- Dow Jones Industrial Average: -8.0% YTD
- S&P 500: -10.2% YTD
- S&P Midcap 400: -12.1% YTD
- Nasdaq Composite: -15.7% YTD
- Russell 2000: -15.7% YTD
Reviewing today's economic data:
- March Housing Starts 1.324 mln (Briefing.com consensus 1.418 mln); Prior was revised to 1.494 mln from 1.501 mln, March Building Permits 1.482 mln (Briefing.com consensus 1.455 mln); Prior was revised to 1.459 mln from 1.456 mln
- The key takeaway from the report is that single-unit starts (-14.2%) and permits (-2.0%) were both down during the month, as affordability constraints driven by higher mortgage rates and building costs presumably curtailed homebuilder activity.
- April Philadelphia Fed Index -26.4 (Briefing.com consensus 10.0); Prior 12.5
- The key takeaway from the report is that the index for new orders dropped sharply to -34.2 from 8.7, signaling a notable dropoff in demand; meanwhile, the prices paid index rose to 51.0 from 48.3.
9:16 AM Pat O'Hare: Mia, I don't understand why that 10:00
- Weekly Initial Claims 215K (Briefing.com consensus 225K); Prior was revised to 224K from 223K, Weekly Continuing Claims 1.885 mln; Prior was revised to 1.844 mln from 1.850 mln
- The key takeaway from the report is that the low level of initial jobless claims will support the idea that the labor market is still in a solid position overall. Additionally, this should factor well in forecasts for April nonfarm payrolls since it covers the period in which the employment survey is conducted.
Looking ahead to Monday, market participants receive the following data:
- March Leading Indicators (prior -0.3%) at 10:00 ET
Small and mid caps lead ahead of the close
17-Apr-25 15:40 ET
Dow -454.22 at 39215.17, Nasdaq -8.88 at 16298.27, S&P +17.55 at 5293.27
[BRIEFING.COM] The S&P 500 (+0.4%) and Nasdaq Composite (+0.03%) remain above prior closing levels.
Small and mid cap stocks have maintained a positive posture this session, leading the Russell 2000 (+0.7%) and S&P Mid Cap 400 (+0.7%) to outperform large cap indices.
As a reminder, markets are closed tomorrow for Good Friday.
Treasuries settle lower
17-Apr-25 15:00 ET
Dow -390.12 at 39279.27, Nasdaq +10.82 at 16317.97, S&P +26.56 at 5302.28
[BRIEFING.COM] The Nasdaq Composite is about ten points higher while the S&P 500 trades up about 25 points.
Treasuries settled with losses. The 10-yr yield was up five basis points today, and down 16 basis points this week, to 4.33%.
Looking ahead to Monday, market participants receive the following data:
- March Leading Indicators (prior -0.3%) at 10:00 ET
S&P 500 leads Thursday gains as FIS, Dollar Tree, and Diamondback rally; GPN slides on Worldpay deal
17-Apr-25 14:30 ET
Dow -235.72 at 39433.67, Nasdaq +92.31 at 16399.46, S&P +49.99 at 5325.71
[BRIEFING.COM] The S&P 500 (+0.95%) is in first place on Thursday afternoon, up just shy of 50 points.
Briefly, S&P 500 constituents Fidelity Nat'l Info (FIS 75.27, +6.63, +9.66%), Dollar Tree (DLTR 78.96, +5.75, +7.85%), and Diamondback Energy (FANG 138.58, +8.36, +6.42%) pepper the top of the standings. DLTR moves higher after CFO Glendinning disclosed the purchase of 17K shares, while FANG jumps after its Q1 operational update out overnight.
Meanwhile, Global Payments (GPN 71.22, -12.90, -15.34%) holds solid losses after news it would acquire Worldpay from FIS for $24.25 bln in cash and stock while divesting its Issuer Solutions business.
Gold pulls back from highs on profit-taking, still up 2.5% this week on safe-haven demand
17-Apr-25 14:00 ET
Dow -302.35 at 39367.04, Nasdaq +46.99 at 16354.14, S&P +38.03 at 5313.75
[BRIEFING.COM] The Nasdaq Composite (+0.29%) is in second place on Thursday afternoon.
Gold futures settled $18.00 lower (-0.5%) at $3,034.60/oz, up about +2.5% on the week; the weekly rally was mostly driven by safe-haven demand amid escalating trade tensions stemming from President Trump's announcement of new tariff investigations into critical minerals, pharmaceuticals, and semiconductors.
Today's pullback, then, stems from profit-taking as prices approached record highs amid a modest rebound in the U.S. dollar, which makes gold more expensive for holders of other currencies.
Meanwhile, the U.S. Dollar Index is up +0.3% to $99.53.
American Express posts solid Q1 results, fueled by robust spending among affluent cardholders (AXP)
Despite stubbornly high interest rates and persistent inflation, American Express (AXP) has delivered consistently strong quarterly earnings reports and that trend continued as the credit card company surpassed 1Q25 EPS expectations on solid billed business growth of 7% (FX-adjusted). Ahead of AXP's Q1 earnings report, a slate of banks released better-than-expected quarterly results that featured healthy consuming spending trends, setting the stage for AXP's upside performance. For instance, JPMorgan Chase's (JPM) combined credit and debit card spending grew by 7% yr/yr in Q1, while Bank of America (BAC) saw credit/debit card spending growth of 4%.
What sets AXP apart, though, from most banks is its younger and more affluent customer base. Approximately 35% of AXP's U.S. spending is derived from Millennials and Gen Z, and the average household income for its premium products, such as Amex Platinum, is north of $400,000. This favorable customer mix makes AXP more immune to economic volatility and forms the basis of stronger credit quality.
- On that note, provision for credit losses decreased by $100 mln yr/yr to $1.2 bln and the net write-off rate was flat yr/yr at 2.1%. In comparison, BAC's provision for credit losses in its Consumer Banking segment increased by $200 mln yr/yr in Q1 to $1.5 bln, while consolidated net charge-offs rose by over 80% yr/yr to $1.5 bln.
- Meanwhile, spending remains brisk among AXP customers, especially in the Travel & Experiences (T&E) category. In Q1, T&E spending increased by 11% yr/yr, outpacing the overall spending on its cards, fueled by strong demand from Millennials and Gen Z cardholders who continue to prioritize experiential purchases.
- During the quarter, AXP added 3.4 mln new cards, while retention also remained strong. Although AXP didn't disclose a specific cardholder retention rate for 1Q25, CEO Stephen Squeri stated that customer retention was better compared to 2024, reflecting continued high engagement and customer loyalty. Additionally, demand for premium cards are services which command higher fee income remains robust.
- On the cost side, consolidated expenses increased by 10% yr/yr to $12.5 bln, driven by higher variable customer engagement costs on higher card member spending. These costs include card member rewards, business development and card member services expenses. Rising usage of travel-related benefits and reward redemptions have pushed these expenses higher.
AXP delivered strong 1Q25 results featuring healthy spending growth driven by younger customers with premium products, while maintaining solid credit quality amid a volatile and unpredictable macro environment. The company also reiterated its FY25 outlook, calling for revenue growth of 8-10% and EPS of $15.00-$15.50, despite rising expenses and the intensifying macro headwinds.
Taiwan Semiconductor Manufacturing tries to hold onto gains following upbeat Q1 results (TSM)
Taiwan Semi (TSM) has cooled down from initial highs of over +3% but still trades in the green today, following top and bottom-line upside in Q1 alongside upbeat Q2 revenue guidance. The chip-making behemoth, supplying tech titans like Apple (AAPL) and NVIDIA (NVDA), also reiterated its FY25 capital budget of $38-42 bln, signaling steady demand despite the overabundance of uncertainty injected into the global economy following a fluid trade policy from the Trump administration.
Recall that President Trump released a chart of reciprocal tariffs earlier this month, including a 32% rate on Taiwan. While the rate has been adjusted to 10% due to a 90-day pause, the rate will spike back to 32% without further negotiations. Furthermore, earlier this week, NVDA announced it would write down its inventory by $5.5 bln due to license restrictions on its chips geared for China, creating angst over future revenue tied to the region from TSM's customers.
However, despite all this, TSM is confident in hitting its prior capital budget for the year and reaching close to mid-20s percent revenue growth. Meanwhile, for Q2, TSM anticipates revs of $28.4-29.2 bln, well above analyst expectations.
- TSM's Q1 results were solid, registering EPS of $2.12 on revs of $25.53 bln, a 35.3% gain yr/yr. Gross margins did contract slightly, slipping by 20 bps, primarily due to the earthquake in January, which clipped 60 bps off margins. However, TSM's investments in fabrication plants outside of Taiwan are also creating some margin dilution.
- TSM announced a $100 bln investment in the U.S. last month, initially expecting it to weigh on margins by 2-3%, but is starting to widen slightly to 3-4%. However, TSM mentioned that this is mostly the result of inflationary costs and potential tariff-related impacts.
- Tariffs remain a variable. Management touched on the potential impact of tariff policies but added that it has yet to see any change in customers' behavior, which provided its confidence in reiterating its FY25 revenue outlook. TSM noted that a better picture might appear over the next few months and will remain focused on its business fundamentals while continuing to capitalize on several demand tailwinds.
- AI is one such tailwind. TSM continues to observe exceptional AI-related demand thus far in 2025. TSM reaffirmed its revenue from AI accelerators, defined as AI GPUs, AI ASICs, and high-bandwidth memory (HBM) controllers for AI training, to double yr/yr in 2025.
The unmovable AI tailwind can support TSM's ability to recoup its roughly 20% sell-off YTD. However, many headwinds could prevent a quick recovery. The increased margin dilution is deflating. Meanwhile, trade policies make near-term demand conditions murky. Although TSM issued energetic guidance for Q2 and the year, the fluidity of the current administration's tariff stance creates outsized anxiety, reducing investors' confidence in TSM achieving its forecasts for the upcoming quarter and FY25. As such, shares are struggling to maintain their gains out of the gate today, potentially foreshadowing how the stock may move over the next few months.
D.R. Horton's expanding stock buyback plan helps soften the blow from rough earnings report (DHI)
Disappointing earnings results from the homebuilding industry is continuing after D.R. Horton (DHI) missed 2Q25 EPS and revenue expectations, cut its FY25 outlook, and issued downside 3Q25 revenue guidance of $8.40-$8.90 bln. Similar to KB Home (KBH) and Lennar (LEN), each of which reported Q1 earnings last month, DHI faced a slower-than-typical spring selling season as affordability constraints and waning consumer confidence kept potential homebuyers at bay.
While the main narrative for DHI and its competitors remains unchanged from recent quarters -- namely, high mortgage rates and inflation are exacerbating affordability issues -- the intensity of these headwinds has strengthened.
- Following a 1% decrease last quarter, net sales orders sank by 15% in Q2 to 22,437 homes. In the past, DHI's focus on entry-level affordable homes has worked in its favor, supporting strong order volume. Looking back just two quarters ago, net sales orders grew by 10% to approximately 24,000 homes. Now, however, with affordability pressures increasing, DHI's entry-level customer base, with little or no existing home equity available to use as a down payment, is more detrimental.
- As these headwinds escalate, homebuilders have responded by ramping up incentives to drive traffic and sales. Last quarter, DHI warned that incentive costs were likely to increase further over the next few months, and the company echoed that message during this morning's earnings call. As such, DHI's margins continue to spiral lower with it forecasting Q3 home sales gross margin of 21.0-21.5% compared to 21.8% in Q2, 23.6% in Q1, 24.0% in 4Q24, and 24.6% in 3Q24. This is resulting in lower profitability as Q2 EPS decreased by 27% yr/yr to $2.58.
- Due to the soft results in 1H25 and the unfavorable market conditions, DHI cut its FY25 revenue guidance to $33.3-$34.8 bln from its prior outlook of $36.0-$37.5 bln, and its home closings forecast to 85,000-87,000 homes from 90,000-92,000 homes. Unless interest rates begin sliding lower, demand is unlikely to improve in the back half of DHI's FY25.
- There is a silver lining, though. As DHI's stock has slumped, the company has stepped up its share buyback activity. In 2Q25 alone, DHI repurchased 9.7 mln shares for $1.3 bln, reducing the outstanding share count by 7% compared to a year ago. DHI also announced a new, larger share repurchase program of up to $5.0 bln, stating that it expects to repurchase approximately $4.0 bln of common stock this fiscal year compared to its prior guidance of $2.6-$2.8 bln.
Driven by a slower-than-expected spring selling season amid ongoing affordability constraints that are weighing on consumer confidence, DHI posted downside Q2 results and lowered its outlook for FY25. Helping to offset the soft results and outlook, DHI is significantly bolstering its capital return efforts by expanding and accelerating its share repurchases, supporting EPS during this downturn.
UnitedHealth plunges on slashed FY25 EPS guidance due to unforeseen Medicare-related setbacks (UNH)
UnitedHealth (UNH -21%) is having a bad day, currently suffering its worst trading day of the century following top and bottom-line misses in Q1 and a significantly cut FY25 outlook. As a component of the Dow, UNH's sell-off is slicing roughly 700 points off the index. The selling pressure is also dragging down many other managed healthcare names, including Humana (HUM), Centene (CNC), and CVS Health (CVS). Shares of the healthcare giant were amid a powerful rally leading into Q1 results, roaring +33% higher from 52-week intraday lows set on February 21 after the DOJ opened an investigation into UNH's billing practices. This level of appreciation in just the past two months adds to today's ugly action.
- With revenue growing by just 9.8% yr/yr to $109.58 bln, UNH posted back-to-back revenue misses in Q1, a rarity for the company, which touted 17 consecutive quarters of top-line upside before last quarter. Making the situation worse was a rare earnings miss, delivering adjusted EPS of $7.20; UNH had missed bottom-line estimates just once over the past 20 quarters before Q1. The bad news did not stop there. UNH slashed its FY25 adjusted earnings guidance to $26.00-26.50 from $29.50-30.00, which it reiterated last quarter.
- What happened? CEO Andrew Witty attributed the downward revision to two primary factors. For starters, care activity indications within Medicare Advantage (MA) were two times higher than the planned 2025 increase, which was aligned with 2024 levels. The activity was most apparent within physician and outpatient services and exclusively within MA, not being a factor in UNH's commercial or Medicaid businesses.
- Secondly, unanticipated changes in UNH's Optum Medicare membership are hurting FY25 revenue. The company added more new Medicare patients to Optum Health, many of whom were covered by plans exiting markets, which experienced a lack of engagement in 2024, leading to 2025 reimbursement levels well below what UNH expected. Additionally, UNH endured a more pronounced impact to current and new complex patients from Medicare funding reductions under the Biden administration.
UNH is already addressing the problems, with the respective teams responding to the performance challenges. However, UNH is not planning on a bounce this year. Instead, it has set its sights on 2026, working throughout this year to ensure the complex patients most impacted by the prior Medicare funding cuts engage in value-based programs. UNH is also starting to better assess the health status of new patients. Additionally, the company is transitioning more effectively to the new CMS (Centers for Medicare & Medicaid Services) risk model.
Today's sell-off may seem overblown. However, UNH is not in a position to band-aid its problems quickly, illuminated by a sizeable reduction in its FY25 earnings forecast. Medical costs are refusing to come down; UNH raised its FY25 medical care ratio by 50 bps at the high end to 87.5%. Furthermore, transitioning to a new CMS model is operationally complex. Therefore, it may be better to sit on the sidelines and await further details on UNH's progress in fixing these problems.
J.B. Hunt Transport at 52-week lows despite Q1 EPS beat; uncertainty keeps sellers in control (JBHT)
J.B. Hunt Transport (JBHT -7%) hits fresh 52-week lows today despite delivering narrow earnings and sales beats in Q1. The intermodal trucking company has been caught amid unfavorable trade policies and a sluggish economic recovery. The stock was already turning lower before "Liberation Day" earlier this month, weighed down by what management has called a "freight recession." Pricing has remained weak as too much capacity chases too few goods, eroding JBHT's margins and profits.
- JBHT conceded that its Q1 results were not up to par, displeased with its returns and efforts to eliminate costs. Last quarter, JBHT accentuated that its top priorities were repairing its margins and improving financial performance. However, operating income contracted by 8% yr/yr in Q1, leading to operating margins of 6.1%, a 50 bp drop yr/yr. Meanwhile, sales fell by 0.8% yr/yr to $2.92 bln; JBHT has not registered yr/yr sales growth since 4Q22. JBHT cited seasonally lower volume, rate pressures, and ongoing hikes in insurance premiums as culprits.
- CEO Shelley Simpson remarked that the executive team explored options it can implement to more aggressively eliminate costs in some scenario planning analyses, stressing the need to stay fluid amid a dynamic economic environment filled with inflationary pressures, depressed consumer spending, and changing tariff policies.
- On the bright side, Intermodal volume jumped by 8% yr/yr, 3 pts higher than last quarter, supported by a 4% and 13% increase in transcontinental and eastern network loads, respectively. Management mentioned that customer demand trended in line with normal seasonality. In Dedicated Contract Services (DCS), JBHT's second-largest segment behind Intermodal, revenue edged 4% lower yr/yr. The company noted that some customers are taking longer than usual to execute contracts, employing a wait-and-see approach due to market uncertainty.
- JBHT stated that within DCS, it anticipates a return to net fleet growth this year but cautioned that the timing of deals will largely influence its ability to return to positive revenue and operating income growth.
- Across JBHT's other segments, including Integrated Capacity Solutions (ICS), Final Mile Services (FMS), and Truckload (JBT), revenue fell across the board. In ICS, its customer count jumped by 20% yr/yr. In FMS, big and bulky product demand remained muted, a concerning trend for furniture retailers like Wayfair (W) and La-Z-Boy (LZB). Conversely, demand in JBHT's fulfillment network was positive, supported by off-price retail trends, a good sign for TJX (TJX), Ross Stores (ROST), and their peers. In JBT, service levels were strong, resulting in additional bid opportunities.
- Regarding tariffs, JBHT does not yet have a complete picture. Management stated that customers are planning for multiple scenarios, ultimately waiting for the dust to settle before changing their short and long-term business strategies.
Bottom line, JBHT's Q1 earnings beat was a pleasant surprise but insufficient to offset the overarching concerns related to tariffs, the economy, and the heightened uncertainty surrounding how everything will play out, keeping bears in the driver's seat today.
|
