Market Snapshot
| Dow | 38170.41 | -971.82 | (-2.48%) | | Nasdaq | 15870.89 | -415.55 | (-2.55%) | | SP 500 | 5158.22 | -124.50 | (-2.36%) | | 10-yr Note | -29/32 | 4.41 |
|
| | NYSE | Adv 413 | Dec 2314 | Vol 1.0 bln | | Nasdaq | Adv 1222 | Dec 3166 | Vol 6.7 bln |
Industry Watch
| Strong: -- |
| | Weak: Consumer Discretionary, Technology, Energy, Communication Services, Industrials, Utilities |
Moving the Market
-- Negative sentiment influenced by threats to Fed's independence and China threatening to retaliate against some countries that strike trade deal with US
-- Weakness in mega caps and tech stocks
|
Closing Summary
21-Apr-25 16:30 ET
Dow -971.82 at 38170.41, Nasdaq -415.55 at 15870.89, S&P -124.50 at 5158.22
[BRIEFING.COM] The stock market tumbled right out of the gate to start the new week. Major equity indices remained in a steady decline through most of the session. The Dow Jones Industrial Average dropped 970 points, the Nasdaq Composite closed 2.6% lower than Thursday, and the S&P 500 logged a 2.4% decline.
The continuation of last week's selling was driven by deepening concerns about trade policy and fresh political pressure on the Federal Reserve. A warning from China urging nations to steer clear of U.S. trade deals that could disadvantage Beijing, along with talk that President Trump’s team is exploring whether he can lawfully remove Federal Reserve Chair Jerome Powell was at the heart of the market narrative today.
The warning from China piles onto existing worries about the trade war situation and the news about the Trump administration calls into question the stability of the central bank's longstanding independence.
The broad market retreat had a risk-off bias. Big tech and other mega caps led the declines, resulting from influential moves in NVIDIA (NVDA 96.91, -4.58, -4.5%), Microsoft (MSFT 359.12, -8.66, -2.4%), Apple (AAPL 193.16, -3.82, -1.9%), and Tesla (TSLA 227.50, -13.87, -5.8%).
Adding to the downbeat tone, the U.S. dollar weakened, and longer tenors logged gains in the bond market. The 10-year Treasury yield was up seven basis points to 4.41%, while the U.S. Dollar Index was 1.1% lower at 98.29.
- Dow Jones Industrial Average: -10.3% YTD
- S&P 500: -12.3% YTD
- S&P Midcap 400: -14.1% YTD
- Nasdaq Composite: -17.8% YTD
- Russell 2000: -17.5% YTD
Reviewing today's economic data:
- March Leading Indicators -0.7% (Briefing.com consensus -0.4%); Prior was revised to -0.2% from -0.3%
There's no U.S. economic data of note tomorrow.
Tuesday's calendar features results of the $69 billion 2-yr Treasury note auction at 1:00 p.m. ET.
Holding steady near session lows
21-Apr-25 15:30 ET
Dow -1147.56 at 37994.67, Nasdaq -519.56 at 15766.88, S&P -157.35 at 5125.37
[BRIEFING.COM] There hasn't been much up or down movement in recent trading.
There's no U.S. economic data of note tomorrow.
Tuesday's calendar features results of the $69 billion 2-yr Treasury note auction at 1:00 p.m. ET.
Earnings season ramps up
21-Apr-25 15:00 ET
Dow -1234.82 at 37907.41, Nasdaq -573.56 at 15712.88, S&P -170.89 at 5111.83
[BRIEFING.COM] The major equity indices are in a sideways flow near session lows.
Meanwhile, the 10-yr yield moved toward its intraday high at 4.41%.
Earnings reporting season ramps this week with results from Tesla (TSLA 223.64, -17.73, -7.3%), Alphabet (GOOG 148.47, -4.89, -3.2%), and Dow components Boeing (BA 157.16, -4.69, -2.9%), IBM (IBM 233.98, -4.82, -2.0%), Verizon (VZ 42.85, -1.18, -2.7%), 3M (MMM 124.75, -5.43, -4.2%), Procter & Gamble (PG 164.91, -4.66, -2.7%), and Merck (MRK 77.21, -0.79, -1.0%).
S&P 500 slips 3.3% as UHS, Vistra, and Blackstone weigh; Discover rallies on Capital One deal approv
21-Apr-25 14:30 ET
Dow -1233.03 at 37909.20, Nasdaq -571.14 at 15715.30, S&P -172.43 at 5110.29
[BRIEFING.COM] The S&P 500 (-3.26%) is in second place on Monday afternoon.
Briefly, S&P 500 constituents Universal Health (UHS 155.53, -19.27, -11.02%), Vistra Corp. (VST 104.50, -10.92, -9.46%), and Blackstone (BX 120.26, -10.13, -7.77%) dot the bottom of the standings. UHS is pressured alongside hospital peers after a WSJ story out over the weekend suggested certain cuts to Medicaid would impact the company's operations, while VST dips after a Wells Fargo note suggested AWS had paused some colocation leasing talks, signaling near-term hyperscale slowdown, while BX losses may be attributed to reports that China is planning on pulling back from US private equity investments.
Meanwhile, Discover Financial Services (DFS 164.43, +4.80, +3.01%) is atop the average, higher after Capital One (COF 164.36, +1.59, +0.98%) received final regulatory approvals for acquisition of Discover.
Gold jumps 3% to record high on Fed criticism, geopolitical jitters, and dollar slump
21-Apr-25 14:00 ET
Dow -1249.41 at 37892.82, Nasdaq -590.30 at 15696.14, S&P -176.22 at 5106.50
[BRIEFING.COM] The Nasdaq Composite (-3.62%) is down 590 points and sits now near session lows.
Gold futures settled $96.90 higher (+2.9%) at $3,425.30/oz, aided in part by escalating geopolitical tensions, a weakening U.S. dollar, and concerns over Federal Reserve independence. President Trump's intensified criticism of Fed Chair Jerome Powell and the imposition of new tariffs on Chinese imports have unsettled markets, prompting investors to seek safe-haven assets like gold. The dollar's decline to a three-year low further bolstered gold's appeal to international buyers.
Meanwhile, the U.S. Dollar Index is down nearly -1.0% to $98.41.
Tesla's growth outlook dims again as rollout of low-cost Model Y slips to late 2025 or beyond (TSLA)
Tesla (TSLA), which is no stranger to model launch delays, is pushing back its timeline for a U.S. launch of a more affordable version of its Model Y SUV, according to Reuters. The news comes one day ahead of the EV maker's 1Q25 earnings report and reinforces concerns about the company's ability to reignite its growth engine amid intensifying competitive pressures in its core U.S. and China markets. After deliveries declined by approximately 1% in 2024 -- TSLA's first annual drop in deliveries in over a decade -- analysts and investors have been banking on the launch of new lower-priced models to reverse the deliveries and revenue growth downtrends.
Now, however, it appears that this significant near-term growth catalyst has been removed, setting the stage for more downward revisions to revenue and EPS estimates for FY25. While a specific reason for the delay of the new affordable Model Y was not disclosed, TSLA's prioritization of its robotaxi platform is a likely culprit.
- When Elon Musk made the decision to cancel TSLA's plan for a new, next-generation $25,000 vehicle built on an "unboxed platform" back in 2023, to instead focus the company's resources on developing the robotaxi, a chain reaction was put into motion. As a result of this decision, TSLA opted to develop more affordable versions of existing vehicles -- including a stripped-down Model Y version -- on its production lines, rather than manufacturing all-new, low-cost models.
- This pivot and change in priorities have not only delayed the launch timeline of the affordable Model Y (codenamed E41), but it's also probable that the release of a more basic Model 3 sedan has been pushed back by at least a few months. When TSLA reported 4Q24 earnings on January 29, it stated that it remained on track to begin production on new affordable models in 1H25, but now 2H25 or 1H26 is more likely.
- An aging fleet that lacks lower-priced models has opened the door for competitors to take market share from TSLA, especially in China. In 2024, it's estimated that TSLA's market share in China in the battery-electric vehicle (BEV) market slipped to 10.4% from 11.7% in 2023. New vehicle launches, such as Nio's (NIO) new sub-brand, Firefly, and BYD Company's (BYDDY) budget-friendly e2 and Seagull hatchbacks, have caused TSLA to cede more ground.
- From a financial standpoint, TSLA's revenue is likely to remain stagnant, or worse, in the near-term due to the delay. Although the delay may help to preserve the current margin structure, which has been under pressure due to several rounds of price cuts, EPS will remain under pressure as flat/declining revenue, combined with rising costs amid a global trade war, apply pressure on TSLA's profits.
The delay of the affordable Model Y postpones a critical growth lever for TSLA, increasing near-term financial risks, while providing competitors more time to erode its market share. As the global EV market pivots towards affordability and scale, TSLA's aging product lineup positions the company for an extended period of stagnation in both sales and earnings.
Netflix streaming higher; was able to implement price increases despite macro pressures (NFLX)
Netflix (NFLX +3%) is streaming higher following its Q1 report late on Thursday. NFLX reported a huge EPS beat, its largest of any quarter in more than two years. The revenue upside was more modest, but NFLX offered Q2 upside guidance. NFLX only reaffirmed FY25 revenue and operating margin guidance. The strong results eased investors' fears that macro pressures might hurt subscriber retention/growth, especially following a recent price increase, but that was not the case.
- Starting with this Q1 report, Netflix no longer reports paid memberships and ARM on a regular quarterly basis. However, starting in Q2, Netflix will publish a bi-annual engagement report in tandem with its Q2 and Q4 earnings results. Losing the membership metric is a letdown, but it is not a surprise as Netflix let investors know this was coming several quarters ago.
- Revenue in Q1 was modestly above guidance due to slightly higher-than-forecasted subscription and ad revenue (which is still very small). UCAN (US & Canada) revenue was a disappointment with +9% yr/yr growth, down from +15% in Q4. This was due to only a partial quarter impact from its price change, plan mix, and the absence of ad revenue from its Christmas Day NFL games. NFLX expects UCAN revenue growth to reaccelerate in Q2.
- The big EPS upside was driven by huge operating margin of 31.7% in Q1, well above prior guidance of 28.2%, and a step change improvement from the 22.2-29.6% quarters we saw in 2024. NFLX also guided to an even more robust margin in Q2 at 33.3% as Q2 will be the first full quarter to benefit from the price increase. Despite the big upside in Q1 and Q2, NFLX only reaffirmed FY25 guidance at 29% as Q3-Q4 as content expense is expected to ramp.
- Speaking of the recent price increases, they were implemented in large markets (US, UK and Argentina). Importantly, NFLX said they have performed in line with internal expectations. Netflix says its service has been generally quite resilient even in tougher economies, and that was evident again here. Of note, NFLX is boosting its price in France in Q2.
Overall, this was a solid, but not spectacular, Q1 report. We do miss getting the subscriber metrics, but we will need to adjust. NFLX understandably wants analysts to focus on overall revs, margins, EPS etc. The big EPS upside in Q1 and strong Q2 EPS guidance were driven more by lower expenses rather than by upside revs, which we think explains why we are not seeing a bigger move today. On the positive side, Briefing.com had concerns about possible cancellations following the price increases given the macro headwinds. However, that was not an issue in Q1. It's a reminder of how successful Netflix has become even as other streamers struggle to make a profit.
NVIDIA breaks below $100 as China-based rival Huawei preps updated AI chip for mass shipment (NVDA)
NVIDIA (NVDA -5%) takes another step lower today, breaking back below the $100 mark following a Reuters report that one of its largest Chinese competitors, Huawei, is prepping an updated AI chip for mass shipment, putting NVDA directly in its crosshairs. The news comes as China looks to quickly find a suitable replacement for NVDA's chips following extended U.S. export curbs on advanced AI chips to the region.
Last week, NVDA gapped lower after writing down its inventory by around $5.5 bln, indicating challenges in obtaining licenses to export its re-tooled AI chips, the H20, to China. These underpowered chips were already placing NVDA on a path toward competitive hurdles as the H20 was primarily useful for simple AI models, opening up the floodgates for competitors to take a commanding lead in China to fulfill the need to train complex AI models.
- It did not take long for a competitor to uncover a way to realize similar performance as NVDA's more advanced chips. Back in February, Huawei extracted significantly higher yields for its Ascend 910C AI chip, which boasts a similar performance as NVDA's H100, using a manufacturing process from SMIC, a China-based chip maker, which allowed Huawei to circumvent restricted EUV lithography. Leveraging this manufacturing process, Reuters reported that Huawei can begin mass shipments to Chinese customers as early as next month.
- While not on the same level as NVDA's flagship B200, or Blackwell, platform, the 910C fills a void in the Chinese market. For perspective, NVDA's H20, which was a scaled-down version of the H100, was still maintaining sequential growth over the past few quarters, illuminating healthy demand for the watered-down chip. With Huawei's 910C touting better performance than the H20, it may quickly become the top choice among Chinese businesses.
- The development from Huawei could not come at a better time for the China-based tech giant. However, for its U.S.-based competitors and their suppliers, like Taiwan Semi (TSM), it is coinciding with elevated uncertainty over the near-term future of the economy and how dynamic trade policy may shake out, pushing shares of NVDA and many other semiconductors lower today.
- On a side note, TSM reiterated its FY25 revenue growth outlook last week but noted that the picture over tariffs was not entirely clear yet. The news surrounding Huawei may materially dent NVDA's China revenue, consequently clouding TSM's ability to reach its annual targets.
Today's Reuters article further highlighted NVDA's outsized headwinds in China. The export curbs put in place under the previous administration were already acting as a roadblock, with shipments to China roughly halved in Q4 (Jan) compared to where they were before the restrictions. We warned last week after the $5.5 bln write-down, which signaled near-term gloom for NVDA's China business (approximately 13% of total revenue) that volatility could spike over the next few months as the fallout from tariffs begins to unfold. This trend may persist as investors assess the potential earnings hit from continued setbacks in China alongside the material effects of tariffs.
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.
|
