| | | Market Snapshot
| Dow | 40828.14 | -389.83 | (-0.95%) | | Nasdaq | 17689.66 | -154.58 | (-0.87%) | | SP 500 | 5606.91 | -43.47 | (-0.77%) | | 10-yr Note | -1/32 | 4.31 |
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| | NYSE | Adv 1119 | Dec 1516 | Vol 1.0 bln | | Nasdaq | Adv 1536 | Dec 2798 | Vol 7.0 bln |
Industry Watch
| Strong: Utilities, Energy |
| | Weak: Health Care, Technology, Industrials, Real Estate, Consumer Discretionary, Financials, Materials |
Moving the Market
-- Consolidation continues after big run off April lows
-- Outsized declines in mega caps
-- Monitoring price action in Treasuries
-- Tariff concerns back in the forefront
| Closing Summary
06-May-25 16:30 ET
Dow -389.83 at 40828.14, Nasdaq -154.58 at 17689.66, S&P -43.47 at 5606.91
[BRIEFING.COM] The stock market fell under selling pressure for a second consecutive session. The S&P 500 dropped 0.8% and the Nasdaq Composite logged a 0.9% decline. Consolidation efforts were among the driving factors in today's trade.
Renewed tariff concerns and cautious corporate guidance were also driving factors. Ford (F 10.44, +0.27, +2.7%) and Mattel (MAT 16.65, +0.45, +2.8%), which both reported above-consensus Q1 earnings, held off on providing full-year guidance. Ford warned that tariffs may cut $1.5 billion from its profits, while Mattel acknowledged the volatile macro-environment and said it plans to raise toy prices.
President Trump announced impending pharmaceutical tariffs, expected to be detailed within two weeks. This comes amid a U.S. trade deficit of $140.5 billion in March, driven by a preemptive surge in imports, including a $20.9 billion increase in imports of pharmaceutical preparations.
Treasury Secretary Bessent said in an oversight hearing on Capitol Hill that some trade deals could be announced as early as this week and that up to 90% of deals could be completed by the end of the year, but stocks didn't react much.
Investors will also closely monitor the Federal Reserve's upcoming policy announcement for guidance on inflation and economic growth risks related to the tariffs. The May FOMC decision is tomorrow at 2:00 ET.
Treasuries settled with gains. The 10-yr yield dropped four basis points to 4.31% and the 2-yr yield dropped five basis points to 3.79%.
- Dow Jones Industrial Average: -4.0% YTD
- S&P 500: -4.7% YTD
- S&P Midcap 400: -6.9% YTD
- Nasdaq Composite: -8.4% YTD
- Russell 2000: -11.1% YTD
Reviewing today's economic data:
- The trade deficit widened to a record $140.5 billion in March (Briefing.com consensus -$127.5 billion) from a downwardly revised $123.2 billion (from -$122.7 billion) in February. The widening was the result of March exports being $0.5 billion more than February exports and March imports being $17.8 billion more than February imports.
- The key takeaway from the report is the surge in imports, which detracted sharply from Q1 GDP, and was highlighted by a $22.5 billion increase in imports of consumer goods that was led by a $20.9 billion increase in pharmaceutical preparations.
Looking ahead to Wednesday, market participants receive the following data:
- 7:00 ET: Weekly MBA Mortgage Index (prior -4.2%)
- 10:30 ET: Weekly crude oil inventories (prior -2.696 mln)
- 15:00 ET: March Consumer Credit (Briefing.com consensus $11.0 bln; prior -$0.8 bln)
Treasuries settle with gains
06-May-25 15:40 ET
Dow -284.70 at 40933.27, Nasdaq -84.90 at 17759.34, S&P -24.50 at 5625.88
[BRIEFING.COM] The major indices are moving sideways ahead of the close.
Treasuries settled with gains. The 10-yr yield dropped four basis points to 4.31% and the 2-yr yield dropped five basis points to 3.79%.
Looking ahead to Wednesday, market participants receive the following data:
- 7:00 ET: Weekly MBA Mortgage Index (prior -4.2%)
- 10:30 ET: Weekly crude oil inventories (prior -2.696 mln)
- 14:00 ET: May FOMC Rate Decision (Briefing.com consensus 4.25-4.50%; prior 4.25-4.50%)
- 15:00 ET: March Consumer Credit (Briefing.com consensus $11.0 bln; prior -$0.8 bln)
Earnings after the close and ahead of tomorrow's open
06-May-25 15:05 ET
Dow -270.74 at 40947.23, Nasdaq -88.35 at 17755.89, S&P -23.90 at 5626.48
[BRIEFING.COM] The S&P 500 trades about 25 points lower and the Nasdaq Composite trades about 90 points lower.
Earnings season continues to roll on with results from Coupang (CPNG), AMD (AMD), Super Micro Computer (SMCI), Devon Energy (DVN), Intl Flavors (IFF), Andersons (ANDE), Arista Networks (ANET), Wynn Resorts (WYNN), Coty (COTY), and others after the close.
Wednesday's earnings calendar features results from Walt Disney (DIS), Bunge (BG), Uber (UBER), Johnson Controls (JCI), CDW (CDW), Teva Pharma (TEVA), BorgWarner (BWA), and others ahead of the open.
S&P 500 slips as CEG, CE, LDOS jump on earnings; MRNA drops on FDA news
06-May-25 14:30 ET
Dow -309.33 at 40908.64, Nasdaq -109.18 at 17735.06, S&P -29.85 at 5620.53
[BRIEFING.COM] The S&P 500 (-0.53%) is today's shallowest laggard among the major averages, shaving a bit off losses from the previous half hour.
Briefly, S&P 500 constituents Constellation Energy (CEG 278.22, +29.95, +12.06%), Celanese (CE 49.44, +4.67, +10.43%), and Leidos (LDOS 153.90, +5.96, +4.03%) dot the top of the standings following earnings.
Meanwhile, Moderna (MRNA 24.36, -3.48, -12.50%) is falling hard as reports circulate that the FDA appointed of Vinay Prasad - who is known for his outspoken criticism of the medical and regulatory establishment - as head of the Center for Biologics Evaluation and Research (CBER).
Gold surges to two-week high as safe-haven demand rises ahead of Fed decision
06-May-25 14:00 ET
Dow -412.70 at 40805.27, Nasdaq -169.59 at 17674.65, S&P -46.87 at 5603.51
[BRIEFING.COM] With about two hours to go on Tuesday the tech-heavy Nasdaq Composite (-0.95%) is in second place, down just shy of 170 points.
Gold futures settled $100.50 higher (+3.0%) at $3,422.80/oz, a two week high as investors sought safety amid rising geopolitical and economic uncertainty. Investors are also eyeing the Fed's upcoming policy decision, with expectations that rates will be held steady between 4.25% and 4.50% and speculation growing over potential cuts later this year -- another tailwind for gold.
Meanwhile, the U.S. Dollar Index is now -0.5% lower to $99.30.
Clorox stumbles in Q3 with EPS and revenue miss as shoppers favor lower-cost alternatives (CLX)
Clorox's (CLX) 3Q25 downside results reveal a concerning trend within the consumer staple sector, echoing the recent disappointments from peers Proctor & Gamble (PG) and Kimberly-Clark (KMB). The company missed both EPS and revenue expectations as elevated inflation impacting consumer discretionary income and cautious spending patterns are clearly impacting demand across the board. CLX did reaffirm its FY25 EPS guidance, but it lowered its organic sales growth outlook, reflecting increased price sensitivity and a shift towards value-oriented alternatives, alongside slower-than-anticipated volume recovery in key product categories.
- Adjusted EPS declined by 15% to $1.35 even as gross margin expanded by 240-bps to 44.6%, primarily driven by cost savings and benefits from the divestitures of the VMS and Argentina businesses. Impressively, CLX has now achieved ten consecutive quarters of gross margin expansion. However, the Q3 gross margin gains were offset by lower sales volume and increased marketing investments aimed at stimulating demand. CLX disclosed that in the Health and Wellness segment, adjusted EBIT increased by 10%, which was partially offset by higher advertising investments.
- CLX's organic sales registered a decline of 2% in Q3 as a result of lower volume, partly offset by positive contributions from price/mix. The company is contending with persistent volume pressures, as illustrated by the 9% decline in organic sales in Q2 (impacted by lapping inventory restoration following the August 2023 cyberattack), preceded by a drop of 1% in Q1. Underlying factors include a shift toward private-label products, reduced consumer basket sizes, and retailer inventory reductions.
- In terms of segment performance, Health and Wellness continues to demonstrate relative strength, supported by consistent demand for its cleaning and disinfecting products, such as Clorox bleach, Pine-Sol, and CloroxPro. Net sales increased by 3% in Q3, driven by seven points of higher volume, and segment adjusted EBIT grew by 10% due to higher net sales and lower manufacturing and logistics costs.
- On the other end of the spectrum, the Household segment is facing significant headwinds, likely due to increased competition and consumer trade-down behavior within categories like trash bags and wipes. This segment experienced a low double-digit sales decline.
CLX is facing challenging conditions, marked by macroeconomic headwinds, shifting consumer behaviors, and competitive pressures driving a Q3 EPS miss and a lowered FY25 sales outlook. On a brighter note, its tenth consecutive quarter of gross margin expansion and the strength of its brands, such as Clorox and Burt's Bees, do provide a foundation for resilience amid an economic downturn.
Datadog tops Q1 expectations with strong large customer growth, but mixed guidance weighs (DDOG)
Datadog (DDOG) delivered strong 1Q25 results, surpassing EPS and revenue expectations, staying true to the company's historical trend of beating analysts' forecasts. In fact, DDOG has exceeded top and bottom-line estimates in every quarter going back at least five years. The Q1 outperformance was driven by strong usage growth among existing customers -- particularly large accounts with $100K+ in annual recurring revenue (ARR) -- and continued adoption of its multi-product platform.
However, DDOG's guidance for 2Q25 and FY25 was mixed, with the midpoint of both EPS ranges coming in slightly below expectations, while revenue came in above estimates. As the company prioritizes growth and innovation, R&D spending is likely to remain elevated (+27% in Q1), as is its Sales and Marketing expense (+21% in Q1) due to customer acquisition efforts. Additionally, some enterprises are optimizing cloud workloads amid rising macroeconomic uncertainty, further pressuring operating leverage and EPS.
- DDOG's growth was propelled by a 13% increase in large customers ($100K+ in ARR), reaching 3,770 and accounting for 87% of total ARR despite comprising only 12% of the 28,700 total customer base. Growth in large customers stems from increased cloud adoption and demand for the company's observability and security products, especially among enterprises undergoing digital transformations. Furthermore, DDOG's land-and-expand strategy is proving to be effective, reflected by a strong dollar-based net retention rate of 115%, indicating robust expansion within existing accounts.
- Like competitors Snowflake (SNOW) and MongoDB (MDB), DDOG is benefitting from secular tailwinds such as cloud migration, digital transformation, and rising AI adoption, fueling demand for monitoring and data analytics platforms. Also, like SNOW, the company's usage-based business model, which charges customers based on the volume of hosts, containers, or data processed, was an asset in Q1. The flexibility of the usage-based model allowed DDOG to capture additional revenue from customers, while the model's low friction for adoption enabled rapid onboarding of new customers, which grew by 10%.
- On the downside, DDOG's conservative EPS reflects the challenges in forecasting usage patterns during volatile macro conditions and cloud optimization trends. DDOG's model makes revenue projections less predictable than traditional subscription-based SaaS, but DDOG does have a tendency of guiding conservatively.
DDOG's Q1 results highlight its robust growth and healthy free cash flow generation of $244 mln, reinforcing its strong market positioning in cloud observability. However, its mixed guidance, driven by macroeconomic caution, increasing expenses, and usage-based model variability, is overshadowing the upside Q1 results.
DoorDash is dashing lower following rare top line miss and two announced deals (DASH)
DoorDash (DASH -7%) is dashing lower following its Q1 report last night. The food delivery service giant reported solid top line growth at +20.7% yr/yr to $3.03 bln, but that was a rare miss for DASH, its first in the past five years. Total orders rose 18% yr/yr to 732 mln while Q1 Marketplace GOV rose 20% yr/yr to $23.1 bln, which was above the $22.6-23.0 bln prior guidance.
- Since DASH does not provide adjusted EPS, we think it is important for investors to focus more on adjusted EBITDA as the better metric for profitability because it's a clean adjusted number and DASH provides guidance for it. And on the score, DASH did well with adjusted EBITDA growing 59% yr/yr to $590 mln, toward the higher end of its $550-600 mln prior guidance. Also, Adjusted EBITDA as a % of Marketplace GOV rose to 2.6% from 1.9% a year ago but ticked lower from 2.7% in Q4.
- DASH says Q1 was a good quarter from an overall restaurant growth perspective. Also, growth has been pretty stable over the past 5-6 quarters. Users continue to grow, order frequency continues to grow, retention has been very stable. When looking at the newer cohorts vs existing, all continue to perform extremely well. DASH says it looks pretty healthy, whether it's low income or high income or the new vs existing cohorts. DASH says a lot of that is being driven by improvements in its service.
- Earnings were not the only news on the menu. DASH also announced it will acquire Deliveroo, a London-based food delivery platform (restaurants, grocers, retail partners). Deliveroo has built one of the leading local commerce platforms across its geographies, primarily in Europe and the Middle East. These geographies are all complementary to DoorDash's current footprint. It's a large deal with an equity value of £2.9 bln and an EV of £2.4 bln.
- DASH also announced it will acquire SevenRooms, a hospitality-focused software company, for $1.2 bln in cash. DASH says the deal marks a significant expansion of DoorDash's Commerce Platform capabilities, equipping merchants with new tools to grow in-store sales. The deal is expected to close in 2H25. Of note, DASH was scheduled to report Q1 results tomorrow after the close, but apparently the M&A news caused them to move up earnings to this morning.
We think two main things are driving shares lower today: the rare top line miss is likely spooking investors a bit and the two acquisitions are likely making investors a bit nervous. On the former, it is causing concern that consumers are tightening the belt on QSR meals. We have heard that from several QSRs, including MCD, WING. DoorDash's yr/yr order growth ticked lower vs Q4 but DASH does not seem concerned.
On the latter, while the Deliveroo deal expands DoorDash's international reach, we think investors are a bit nervous about making such a large purchase when consumers are feeling the pinch and DASH missed on revs. Also, the SevenRooms was quite large as well. Investors may be questioning if this is the best timing for big cash outlays.
onsemi's upside Q1 EPS overshadowed by steep revenue drop and weak demand signals (ON)
Bolstered by disciplined cost management, favorable product mix, and manufacturing footprint optimization, onsemi (ON) edged past 1Q25 EPS and revenue expectations amid challenging market conditions. However, the semiconductor manufacturer focused on power and signal management technology experienced a steep 22% yr/yr decline in revenue to $1.45 bln with each segment -- Power Solutions Group (PSG), Analog and Mixed-Signal Group (AMG), Intelligent Sensing Group (ISG) -- seeing significant revenue drops. The substantial revenue decrease, combined with a cautious Q2 outlook that was in-line with analysts' expectations, is clouding over the modest Q1 outperformance, dragging shares sharply lower.
- First, the good news. Structural cost reductions, including workforce adjustments and fab rationalization, preserved ON's margins, with non-GAAP gross margin remaining relatively stable at 45.2% compared to 46.8% in the year-earlier period. Also, ON generated strong free cash flow, up 72% yr/yr to $231.6 mln, and supported shareholder returns with 66% of free cash flow returned via share repurchases.
- From a demand standpoint, though, ON's results were discouraging. In PSG, revenue fell 26% yr/yr to $645.1 mln, reflecting significant demand weakness in automotive and industrial applications. More specifically, the segment is experiencing lower demand for power switching and circuit protection products as auto OEMs scale back production amid inventory corrections and macroeconomic uncertainty.
- PSG's focus on SiC-based power solutions for electric vehicles and renewable energy grids remain a key growth driver, but potential tariff impacts on automotive supply chains pose a significant risk to the segment's recovery.
- Turning to AMG, revenue dove by 19% to $566.4 mln, fueled by softer demand for analog and mixed-signal ICs in automotive and consumer electronics, coupled with destocking by distributors. Weakness in mobile and computing end-markets, where AMG’s sensor interfaces and power management ICs are prevalent, further dragged performance lower. Making matters worse, competitive pricing pressures in commoditized analog products also eroded revenue.
- Lastly, in ISG, revenue sank by 20% to $234.2 mln, stemming from lower demand for CMOS image sensors and single-photon detectors in ADAS and consumer applications. Furthermore, delays in new product ramps and inventory adjustments by customers impacted revenue.
ON's upside EPS was driven by rigorous cost discipline, strong free cash flow, and a strategic focus on high-margin SiC and automotive platforms. However, the steep revenue declines, cautious Q2 guidance, and broader semiconductor market concerns -- including trade and cyclical headwinds -- are overshadowing the EPS beat, triggering the stock's selloff.
Skechers USA to go private, 3G Capital smartly buys the company when tariffs are an overhang (SKX)
Skechers USA (SKX +24%) announced this morning that it has agreed to go private. With $9 bln in annual sales, Skechers is the third largest footwear company in the world. It has agreed to be acquired by 3G Capital, a global investment firm, for $63 per share in cash, a 28% premium to Friday's closing price.
- The stock has been struggling of late, mostly on concerns about tariffs. Just last week, SKX announced it was withdrawing guidance. SKX said the world is significantly more uncertain today than it was three months ago. SKX described tariffs as a similar level of uncertainty to what was observed during the initial phase of the COVID pandemic.
- International growth is a huge catalyst for SKX and China is a key growth area. As such, the trade war with China is causing great concern among investors. Europe is another key growth market, and the tariffs there are a concern as well. As such, the stock has fallen 37% from its January highs. And 3G Capital sees an opportunity to buy a great brand name when there is a tariff cloud overhang.
Briefing.com has been writing about SKX for many years. Today's news is a bit of a wistful end of an era. Some positive things stand out to us. For example, an enviable feature about Skechers is that it seems to be appeal to all age groups, from older consumers, who really appreciate the comfort features, to parents to school-age children. It can be difficult for brands to do this, but Skechers seems to have that magic.
A big part of this is that Skechers really focuses on comfort and innovation, from slip-ins to Go Walk Max Cushioning Arch Fit etc. And it is able to achieve this while still keeping its price points pretty reasonable.
One area where we think they can improve is to cut back on all the celebrity endorsements. We think it is just too much. Maybe one is ok, but it's too many and we question how much value they bring. They can save money, they do not need it and it confuses the brand's message. People buy Skechers for the comfort and reasonable price points, not the celebrity endorsements. Maybe this will get curtailed when it goes private.
On a final note, we suspect we may see Skechers re-emerge as an IPO in a few years. Perhaps 3G Capital can make some changes on costs, cut the celebrities, and wait out the tariff overhang. We would like to see more consistent earnings performances from Skechers in the future, it has been too volatile for years and we think this has hurt the stock price.
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