| | | Market Snapshot
| Dow | 41113.97 | +284.97 | (0.70%) | | Nasdaq | 17738.16 | +48.50 | (0.27%) | | SP 500 | 5631.28 | +24.37 | (0.43%) | | 10-yr Note | -8/32 | 4.28 |
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| | NYSE | Adv 1631 | Dec 1014 | Vol 1.1 bln | | Nasdaq | Adv 2344 | Dec 1982 | Vol 8.0 bln |
Industry Watch
| Strong: Consumer Discretionary, Technology, Health Care, Financials, Utilities |
| | Weak: Communication Services, Materials |
Moving the Market
-- Volatile response to FOMC decision and Fed Chair Powell press conference; committee voted to hold rates steady and Fed Chair Powell said the Fed is in wait-and-see mode
-- Sentiment shift around trade situation with China after meeting was announced, yet comments from President Trump dampened some initial optimism
-- Losses in Alphabet (GOOG -7.5%) and Apple (AAPL -1.1%) following Bloomberg report that Apple may shift to AI search feature
-- Rebound after recent declines
| Closing Summary
07-May-25 16:30 ET
Dow +284.97 at 41113.97, Nasdaq +48.50 at 17738.16, S&P +24.37 at 5631.28
[BRIEFING.COM] The stock market had a mixed showing. Major indices were in a holding pattern in the early going as investors waited for the FOMC policy decision at 2:00 ET and Fed Chair Powell's press conference at 2:30 ET.
The committee voted unanimously to maintain the target range for the fed funds rate at 4.25-4.50%, which was largely expected. Market participants were hoping for more clarity about the Fed's path regarding rate cuts at Fed Chair Powell's press conference, but he maintained that policy is in a good place to allow the Fed to wait for more data.
The major equity indices had a volatile response, ultimately closing higher for the day. The Dow Jones Industrial Average rose 0.7%, the S&P 500 closed 0.4% higher than yesterday, and the Nasdaq Composite registered a 0.3% gain.
Equity indices held up well considering the disappointing price action in Alphabet (GOOG 152.80, -12.40, -7.5%) and Apple (AAPL 196.25, -2.26, -1.1%) after a Bloomberg report that Apple may shift toward using an AI search feature, which would reduce the reach of Alphabet's Google.
Many other stocks participated in upside moves. Advancers led decliners by a 3-to-2 margin at the NYSE and by an 11-to-10 margin at the Nasdaq.
The upside bias was driven in part by news of policy easing by the People's Bank of China, along with optimism about the trade war following news that representatives from the U.S. and China will meet to begin trade talks in Switzerland on May 8.
Some of the optimism around this development was tempered, however, after President Trump said that he is not open to pulling back the 145% tariff on imports from China as part of negotiations.
Late afternoon reports also indicated that the Trump administration is considering rescinding the AI chip export restrictions. This news sparked increased buying in the chipmaker space, leading the PHLX Semiconductor Index (SOX) to close 1.7% higher.
The price action in chipmakers helped boost the S&P 500 technology sector to a 0.9% gain despite the decline in Apple. The consumer discretionary (+1.0%) and health care (+0.8%) sectors were also top performers. The communication services sector was the worst performer by a wide margin due to the fallout in Alphabet.
- Dow Jones Industrial Average: -3.4% YTD
- S&P 500: -4.3% YTD
- S&P Midcap 400: -6.7% YTD
- Nasdaq Composite: -8.1% YTD
- Russell 2000: -10.8% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 11.0%; Prior -4.2%
Thursday's economic calendar features:
- 8:30 ET: Preliminary Q1 Productivity (Briefing.com consensus -0.4%; prior 1.5%), preliminary Q1 Unit Labor Costs (Briefing.com consensus 4.0%; prior 2.2%), weekly Initial Claims (Briefing.com consensus 238,000; prior 241,000), and Continuing Claims (prior 1.916 mln)
- 10:00 ET: March Wholesale Inventories (Briefing.com consensus 0.5%; prior 0.3%)
- 10:30 ET: Weekly natural gas inventories (prior +107 bcf)
Markets chop around before the close
07-May-25 15:35 ET
Dow +143.77 at 40971.91, Nasdaq -107.98 at 17581.68, S&P -7.96 at 5598.95
[BRIEFING.COM] The stock market continues to chop around ahead of the close. The S&P 500 dipped back below its prior close, down 0.2% from yesterday.
Earlier, the Consumer Credit report for March showed an increase of $10.17 billion (Briefing.com consensus $11.0 billion) following a $0.6 billion contraction in February. Markets didn't react much as investors focus on the Fed's latest move and commentary.
Fed Chair Powell largely reiterated prior remarks about waiting for more clarity on the tariff front and in economic data before moving policy rates again.
Reacting to Powell's commentary
07-May-25 15:00 ET
Dow +354.56 at 41182.70, Nasdaq -16.56 at 17673.10, S&P +19.67 at 5626.58
[BRIEFING.COM] The market trades in whipsaw fashion, moving above and below yesterday's closing levels.
Market participants are reacting to Fed Chair Powell's press conference, where he acknowledged that the "risks of higher unemployment and higher inflation have risen. But they haven't materialized yet."
He also indicated that he believes the cost of waiting for more clarity is fairly low.
FOMC holds rates steady, signals growing stagflation risks and high bar for June cut
07-May-25 14:30 ET
Dow +96.61 at 40924.75, Nasdaq -126.19 at 17563.47, S&P -11.98 at 5594.93
[BRIEFING.COM] The Federal Open Market Committee (FOMC) voted unanimously to maintain the target range for the fed funds rate at 4.25-4.50%, as was widely expected.
In a commensurate action, it was decided that the Fed will roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $5 billion per month and reinvest the amount of principal payments from its holdings of agency debt and agency MBS received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities. That is unchanged from its March directive.
The changes in the May directive that are jumping off the page are the acknowledgments that uncertainty about the economic outlook has increased further (emphasis our own) and that the Committee "...judges that the risks of higher unemployment and high inflation have risen."
That assessment will be construed by some as a burgeoning concern about stagflation taking hold (i.e., low growth, high inflation, and high unemployment), which is not a good environment for stocks, as low growth would translate into weaker earnings growth; meanwhile, high inflation would likely prevent the Fed from cutting rates to help jumpstart growth out of fear that the lower rates would exacerbate inflation pressures.
The main takeaway from this view is that it seems to be a setup for Fed Chair Powell to suggest during his press conference, which begins at 2:30 p.m. ET, that the Fed is going to remain in a wait-and-see mode. Specifically, the Fed will need more time to assess the impact of tariff actions on prices and the economy. In other words, the bar for a rate cut at the June meeting is still quite high.
Gold drops nearly 1% ahead of Fed decision as U.S./China trade optimism curbs safe-haven demand
07-May-25 13:55 ET
Dow +246.04 at 41074.18, Nasdaq -47.59 at 17642.07, S&P +2.16 at 5609.07
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (-0.27%) is the only major average in the red, this ahead of the latest FOMC policy decision, due at the top of the hour; market participants largely expect the committee to hold the target range for the fed funds rate steady at 4.25-4.5%. The bigger unknown is what tone Fed Chair Powell will take in his press conference at 2:30 ET.
Gold futures settled $30.90 lower (-0.9%) at $3,391.90/oz, the pullback severs the recent rise to record highs and was influenced by a shift in investor sentiment amid renewed optimism over U.S./China trade negotiations. The announcement of upcoming talks between U.S. Treasury Secretary Scott Bessent and Chinese economic official He Lifeng in Switzerland signaled potential easing of trade tensions, reducing the demand for gold as a safe-haven asset.
Meanwhile, the U.S. Dollar Index is now +0.3% higher to $99.53.
Uber's modest Q1 Gross Bookings miss and tepid Q2 guidance triggers pullback in shares (UBER)
Uber (UBER) delivered mixed 1Q25 results, surpassing EPS and adjusted EBITDA expectations, but falling just short on Gross Bookings, contributing to the stock's weakness today. Disciplined cost management and enhanced operating leverage drove the upside profitability, while the shortfall in Gross Bookings was mainly attributable to Mobility's growth slightly underperforming expectations at +20% in constant currency. Furthermore, although UBER's 2Q25 Gross Bookings guidance of $45.75-$47.25 bln and adjusted EBITDA forecast of $2.02-$2.12 bln both indicate significant yr/yr growth, the outlook was largely just in-line with expectations. Following the stock's 30% move higher over the past month, the market may have been looking for a more bullish projection.
- Mobility Gross Bookings growth continues to be stable, ranging from 16-20% (cc) over the past four quarters, reflecting resilient demand in urban markets, particularly in the U.S. and Europe. Likewise, Delivery Gross Bookings have shown consistent, albeit slower growth, coming in at 19% (cc) in Q1, preceded by growth of 18% and 17% in Q4 and Q3, respectively. A healthy 14% rise in Monthly Active Platform Users (MAPCs) in Q1, combined with the expansion of Uber Eats advertising, supported Delivery's growth. However, fierce competitive pressures, especially from DoorDash (DASH), is tempering growth.
- UBER's profitability is on an upward trajectory with adjusted EBITDA increasing by 35% yr/yr to $1.9 bln, bolstered by Mobility's high incremental margins (approximately 40%) and Delivery's improving unit economics. Adjusted EBITDA per trip, which includes both rides and deliveries, improved by 15% yr/yr, highlighting UBER's improving unit economics. Cost efficiencies, including optimized driver incentives and reduced corporate overhead costs, are further supporting margin and profit expansion.
- Looking down the road, investments in robotaxis -- projected at $200-$300 mln annually through 2027 -- may modestly temper EBITDA growth, but UBER's partnership-driven robotaxi strategy will avoid the hefty multi-billion R&D investments borne by competitors like Tesla (TSLA). Additionally, UBER's partnerships, including its multi-year deal with Alphabet's (GOOG) Waymo to expand autonomous rides in Austin and Phoenix, and its collaboration with Cruise for driverless vehicle integration by 2026, positions the company for long-term strong growth.
UBER's mixed Q1 results, coupled with underwhelming Q2 guidance that was merely in-line with expectations, disappointed investors who were looking for a more robust outlook in the wake of the stock's recent surge higher. UBER’s robotaxi strategy, bolstered by partnerships with Waymo, Cruise, and BYD, offers a compelling growth catalyst, potentially unlocking significant value by 2027–2028, provided execution and regulatory challenges are navigated successfully.
Cirrus Logic heads lower despite upside results; may be a bit of a sell-the-news reaction (CRUS)
Cirrus Logic (CRUS -2%) is trading lower despite upside Q4 (Mar) results last night. CRUS reported a huge EPS beat, its eighth consecutive beat of at least $0.23. Revenue grew 14.2% yr/yr to $424.5 mln, which was above the high end of guidance.
- The guidance was probably even more important to investors as CRUS expects Q1 (Jun) revs of $330-390 mln. A couple of things on the guidance. First, the mid-point of the guidance was above analyst expectations, which is good to see. Second, CRUS is known for being conservative with guidance, so to guide above the mid-point is a good sign.
- In terms of the MarQ results, yr/yr results benefitted from stronger-than-expected smartphone volumes as well as an increase in revenue associated with its latest-generation products. On a sequential basis, revenue was down 24% due primarily to a reduction in smartphone volumes. During Q&A, CRUS was asked if it saw pull-forward sales in MarQ, but they said that was limited.
- Looking back at FY25, most notably, CRUS began shipping two new-generation products in its flagship smartphone audio business, a boosted amplifier and a smart codec. CRUS said the boosted amplifier significantly improves system performance and efficiency. The smart codec is Cirrus Logic's first 22-nanometer product and delivers meaningful advances in audio and mixed-signal processing capabilities. CRUS expects these products will ship from multiple smartphone generations, providing a sustained revenue contribution in the coming years.
- A key goal for CRUS has been to target new applications and new markets outside of smartphones. CRUS remains excited about its burgeoning laptop business. CRUS reported low tens of millions of dollars of revenue in laptops in FY25. In FY26, CRUS expects to double FY25 revenue in the laptop space as it sees more designs coming to market. Also, over the past year, CRUS has seen significant expansion of its funnel of design activity which is a very good leading indicator.
In terms of why CRUS is lower on the results, we are not seeing an obvious reason. It may be a bit of a sell-the-news reaction given the +30% move in the stock in recent weeks.
Disney finds its magical touch in Q2 as DTC profits and theme park resilience fuel results (DIS)
Walt Disney (DIS) delivered strong 2Q25 results, surpassing EPS and revenue expectations, driven by another impressive performance in the Entertainment segment as the DTC business benefitted from price hikes and a surprise increase in Disney+ subscribers. Additionally, the Experiences segment saw resilient demand with the domestic theme parks displaying notable strength, despite earlier hurricane-related disruptions. Bolstered by the better-than-expected Q2 results, DIS raised its FY25 EPS guidance to $5.75, equating to estimated yr/yr growth of 16% compared to its prior forecast of high-single-digit growth.
Separately, DIS also announced plans for a new theme park in Abu Dhabi, slated to open in 2028, which is expected to enhance long-term revenue diversification and drive incremental growth in the Experiences segment. Assuming regional demand aligns with current projections, analysts estimate that the new theme park could boost DIS's operating income by 3-5% annually.
- The Entertainment segment showcased solid growth with revenue jumping 9% yr/yr to $10.7 bln and operating income surging 61% to $1.3 bln, primarily driven by the DTC business. Disney+ added 1.4 mln subscribers, reaching 126.0 mln, easily surpassing the 123.5 mln FactSet consensus estimate. Price increases lifted Disney+ Core average revenue per paid subscriber (ARPU) by 3% yr/yr to $7.77, significantly boosting DTC operating income to $336 mln, up from $47 mln in the prior year period, with minimal churn impact due to strong content offerings like Mufasa: The Lion King.
- DIS's Q3 guidance projects a modest increase in Disney+ subscribers -- implying 1-2 mln net additions -- which is better-than-feared given concerns over seasonal softness and recent pricing adjustments. The subscriber growth signals confidence in retention and content appeal.
- Staying with Entertainment, Content Sales/Licensing was a standout again in Q2 as revenue soared by 54% yr/yr to $2.15 bln, swinging operating income into positive territory to $153 mln compared to $(18) mln in the year earlier period. The much-improved results were buoyed by the theatrical success of Mufasa: The Lion King, and sustained home entertainment demand for 2024 blockbusters such as Inside Out 2 and Deadpool and Wolverine. However, growth in the theatrical business is expected to moderate in FY25 due to a less robust content slate that lacks comparable high-impact releases.
- Turing to the Experiences segment, revenue climbed 6% to $8.9 bln and operating income gained 9% to $2.5 bln, fueled by the domestic theme park business. Walt Disney World saw higher per capital guest spending (+4% yr/yr) and stable attendance, supported by new attractions like Tiana’s Bayou Adventure. However, the international theme park business experienced a slowdown, with operating income growth falling by 23% yr/yr to $225 mln, reflecting normalization in post-COVID demand at parks like Hong Kong Disneyland and Shanghai Disney Resort. DIS reaffirmed Experiences operating income growth of 6-8%, with growth weighted towards the second half.
DIS's Q2 results and improved FY25 outlook underscore the company's operational strength, driven by DTC profitability, theme park resilience, and strategic content investments. However, risks such as a moderating content slate, international park slowdown, and ESPN streaming launch costs could temper near-term upside for shares if execution falters.
AMD roughly flat on upside Q1 results; Q2 guidance was encouraging but China clouds remain (AMD)
Advanced Micro (AMD) is trading roughly flat following upside Q1 results last night. The EPS upside was slightly larger than recent quarters. Revenue for this chipmaker, which competes against NVIDIA (NVDA) and Intel (INTC) in the AI race, rose 35.9% yr/yr to $7.44 bln, which was better than expected, as Instinct AI accelerator, EPYC and Ryzen CPU sales grew significantly yr/yr. Also, the mid-point of Q2 revenue guidance was above analyst expectations.
- Last quarter, the stock dropped following earnings despite upside results due to a concerning miss on Data Center segment revenue. In Q1, Data Center segment revenue grew 57% yr/yr to $3.7 bln, primarily driven by continued CPU server share gains across both cloud and enterprise customers and strong growth of AMD Instinct GPUs. Hyperscaler demand remained strong as cloud providers expanded EPYC deployments.
- Turning to its Data Center AI business, revenue increased by a significant double-digit percentage yr/yr as MI325X shipments ramped to support new enterprise and cloud deployments. Several hyperscalers expanded their use of Instinct accelerators to cover an increasing range of generative AI search. AMD also added multiple Tier 1 cloud and enterprise customers in Q1.
- AMD has begun sampling its next-gen MI350 series with multiple customers and remains on track to begin accelerated production by mid-year 2025. Looking further ahead, AMD is pretty excited about Instinct MI400, an upcoming series of AI accelerators slated for release in 2026. They are designed to improve performance and efficiency for AI training and inference tasks. AMD says its teams are fully engaged and already co-designing with key customers on rack-level designs. Early customer feedback has been very positive. AMD expects MI400 will significantly expand its AI accelerator TAM as customers plan broader Instinct deployments.
- As a reminder, in April, a new export license requirement was put in place for MI308 shipments to China. AMD estimated a $700 mln revenue reduction in Q2 and $1.5 bln for FY25.
- Client and Gaming segment revenue grew 28% yr/yr to $2.9 bln. The clear driver was Client with revs surging 68% yr/yr to $2.3 bln, driven by strong demand for the latest "Zen 5" AMD Ryzen processors and a richer mix. Gaming revenue fell 30% yr/yr to $647 mln due to a decrease in semi-custom revenue. And finally, Embedded segment revenue declined 3% yr/yr to $823 mln as demand in end markets remained mixed.
Overall, we think this was a decent report for AMD with the Q2 guidance being the highlight. The guidance has calmed some nerves. Its Data Center segment performed pretty well. It was good to hear AMD reaffirm its timelines for both its MI350 and MI400 series. We had some concerns about how the new export license requirement might impact Q2 and FY25 guidance. While significant, at least we have some clarity. However, we think a cloud remains over AMD until the China issues get resolved.
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.
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