| | | Market Snapshot
| Dow | 41368.45 | +254.48 | (0.62%) | | Nasdaq | 17928.14 | +189.98 | (1.07%) | | SP 500 | 5663.94 | +32.66 | (0.58%) | | 10-yr Note | -32/32 | 4.394 |
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| | NYSE | Adv 1749 | Dec 938 | Vol 1.2 bln | | Nasdaq | Adv 2953 | Dec 1403 | Vol 8.5 bln |
Industry Watch
| Strong: Energy, Consumer Discretionary, Communication Services, Financials, Industrials, Technology |
| | Weak: Health Care, Consumer Staples, Utilities |
Moving the Market
-- Carryover momentum after yesterday's positive finish
-- President Trump saying that people should buy stocks now
-- Positive sentiment around global trade situation after President Trump announces a trade deal with the UK today
-- Mixed earnings news since yesterday's close
| Closing Summary
08-May-25 16:25 ET
Dow +254.48 at 41368.45, Nasdaq +189.98 at 17928.14, S&P +32.66 at 5663.94
[BRIEFING.COM] The stock market closed higher across the board. The major equity indices settled off session highs with gains ranging from 0.6% to 1.1%. The market was fueled by some pleasing developments in the trade situation, along with President Trump saying to buy stocks now.
The Trump administration announced a trade deal with the UK, fueling optimism that deals will be reached with other countries and that the tariffs may be less impactful than feared on the global economy.
Commerce Secretary Howard Lutnick said the 10% baseline tariff will remain in place (as expected), adding that the UK will purchase $10 billion worth of Boeing (BA 191.70, +6.14, +3.3%) jets.
During the Q&A with reporters, President Trump said the US is very close to making additional deals with other countries, specifying that tariffs on China "could be" lowered if this weekend's meeting goes well. Mr. Trump added he may speak with President Xi after the meeting.
Late afternoon reports indicated that the U.S. is considering lowering tariffs on China to 50% next week before long trade deal talks begin, according to the NY Post.
Treasuries faced selling pressure today, leading the 10-yr yield to settle ten basis points higher at 4.37%, and the 2-yr yield to settle ten basis points higher at 3.89%. Factors that influenced this price action included a disappointing Productivity report for Q1, which showed a larger-than-expected decrease in productivity, coupled with a bigger-than-expected increase in Unit Labor Costs.
Also, the New York Fed released its April Survey of Consumer Expectations, showing no change in year-ahead inflation expectations (3.6%) while the three-year outlook increased to 3.2% from 3.0%. The five-year outlook decreased to 2.7% from 2.9%.
On a related note, the U.S. Treasury sold $25 billion in 30-yr bonds to weak demand.
- Dow Jones Industrial Average: -2.8% YTD
- S&P 500: -3.7% YTD
- S&P Midcap 400: -5.5% YTD
- Nasdaq Composite: -7.2% YTD
- Russell 2000: -9.1% YTD
Reviewing today's economic data:
- Weekly Initial Claims 228K (Briefing.com consensus 238K); Prior 241K, Weekly Continuing Claims 1.879 mln; Prior was revised to 1.908 mln from 1.916 mln
- The key takeaway from the report is the step down in initial jobless claims -- a leading indicator -- from the prior week, as it leaves initial claims at a level that is consistent with a fairly solid labor market and far from recession-like levels.
- Q1 Productivity-Prel -0.8% (Briefing.com consensus -0.4%); Prior was revised to 1.7% from 1.5%, Q1 Unit Labor Costs-Prel 5.7% (Briefing.com consensus 4.0%); Prior was revised to 2.0% from 2.2%
- The key takeaway from the report is the jump in unit labor costs stemming from the weak productivity, although the first-quarter earnings reports in aggregate have not conveyed any strong profit margin pressures as a result of higher labor costs.
- March Wholesale Inventories 0.4% (Briefing.com consensus 0.5%); Prior 0.3%
Looking ahead to Friday, there is no US economic data on the calendar.
Stocks sit at highs ahead of the close
08-May-25 15:35 ET
Dow +543.09 at 41657.06, Nasdaq +335.76 at 18073.92, S&P +74.56 at 5705.84
[BRIEFING.COM] Stocks remain near session highs after news that the US is considering lowering tariffs on China to 50% next week before long trade deal talks begin.
Treasuries settled sharply lower. The 10-yr yield settled ten basis points higher at 4.37% and the 2-yr yield settled ten basis points higher at 3.89%.
Looking ahead to Friday, there is no US economic data on the calendar.
Mega caps boost performance
08-May-25 15:00 ET
Dow +527.80 at 41641.77, Nasdaq +318.23 at 18056.39, S&P +70.58 at 5701.86
[BRIEFING.COM] The Dow Jones Industrial Average trades 1.3% higher, the S&P 500 sports a 1.3% gain, and the Nasdaq Composite trades 1.8% higher.
Some mega caps have an outsized impact on the major indices, but many stocks are participating in upside moves. Apple (AAPL 198.73, +2.44, +1.3%), Microsoft (MSFT 442.40, +9.05, +2.1%), and NVIDIA (NVDA 118.02, +0.98, +0.9%) are standouts in that respect.
Gains in the aforementioned names have propelled the S&P 500 technology sector to trade 1.6% higher.
S&P 500 gains 1.2% as Axon, EPAM, Paycom jump post-earnings; Fortinet slumps on soft Q2 outlook
08-May-25 14:30 ET
Dow +497.81 at 41611.78, Nasdaq +306.86 at 18045.02, S&P +68.51 at 5699.79
[BRIEFING.COM] The S&P 500 (+1.22%) is narrowly in second place on Thursday afternoon, up about 68 points.
Briefly, S&P 500 constituents Axon (AXON 690.10, +88.28, +14.67%), EPAM Systems (EPAM 179.63, +20.42, +12.83%), and Paycom Software (PAYC 251.76, +23.09, +10.10%) pepper the top of the standings following earnings.
Meanwhile, Fortinet (FTNT 98.56, -8.16, -7.65%) is today's top laggard after the company issued a slightly lower-than-expected revenue forecast for Q2, raising concerns about future growth despite the solid Q1 performance.
Gold tumbles 2.5% as Fed’s hawkish stance dampens rate-cut hopes, lifts dollar
08-May-25 14:00 ET
Dow +516.78 at 41630.75, Nasdaq +319.91 at 18058.07, S&P +73.33 at 5704.61
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+1.80%) is atop the averages on gains just under 320 points.
Gold futures settled $85.90 lower (-2.5%) at $3,306.00/oz, driven by the Fed's decision out yesterday to maintain interest rates, coupled with a more hawkish tone in its latest meeting minutes. The minutes revealed that while some Fed officials remained optimistic about inflation cooling, others expressed concerns about the pace of disinflation. The sentiment shift led to a reassessment of the Fed's rate-cut trajectory, diminishing the appeal of non-yielding assets like gold.
Meanwhile, the U.S. Dollar Index is up +0.8% to $100.67.
Crocs crushes muted Q1 expectations, driven by HEYDUDE rebound, but FY25 outlook scrapped (CROX)
In typical Crocs (CROX) fashion, the company easily surpassed muted EPS and revenue estimates in 1Q25. Heading into the earnings report, expectations were tempered due to CROX's soft Q1 guidance, which called for a 3.5% revenue decline, consistent with the company's pattern of conservative forecasts followed by outperformance. The sandal maker also withdrew its FY25 guidance -- previously set at EPS of $12.70-$13.15 and 2.0-2.5% revenue growth -- due to trade policy and tariff uncertainties, but this action has not pressured the stock. Investors appear to view the withdrawal as a prudent move and are instead focusing on a better-than-expected showing for the struggling HEYDUDE brand.
- Crocs brand revenue grew 4.2% in constant currency (cc) to $762 mln, fueled by double-digit international growth and solid North American demand for core products like clogs and sandals. The HEYDUDE brand, which has been bogged down by oversupply of inventory at major wholesale accounts, experienced a 9.8% drop in revenue to $176 mln, but that was better than the 14-16% decline that was anticipated. In the DTC channel, HEYDUDE revenue was up 7.2%, bolstered by CROX's e-Commerce efforts to leverage digital marketing and improve e-Commerce conversion rates.
- Both brands gained market share, with Crocs' internation markets (particularly China), and HEYDUDE's DTC inflection signaling stabilization. After CROX acquired HEYDUDE in 2022 for $2.5 bln, it launched a marketing campaign that was misaligned, failing to resonate with the right consumer segments. More recently, though, CROX has shifted to brand-building marketing investments, such as collaborations with Sydney Sweeney and Jelly Roll, which is showing signs of promise.
- Adjusted gross margin was a standout metric once again, expanding by 220 bps to 57.8%, despite challenging conditions marked by high inflation. Primary drivers include favorable product mix, with higher-margin Crocs clogs and Jibbitz charms outperforming, and reduced promotional activity due to leaner inventories. Furthermore, supply chain efficiencies, including through the new HEYDUDE distribution center in Las Vegas, have lowered freight costs.
- Crocs did not issue formal guidance for Q2, and it withdrew its FY25 outlook. However, the company has stated that tariffs are expected to reduce operating margins by 60-80 bps, while FX fluctuations could add further pressure to earnings. On the positive side, the Crocs brand has some momentum behind it, especially within international markets, and HEYDUDE's DTC recovery should also provide a tailwind in Q2 and 2H25.
CROX's upside Q1 results, driven by Crocs brand strength, HEYDUDE's stabilization, and gross margin expansion, highlights the company's resilience in a tough consumer environment. While tariff and currency headwinds cloud the 2025 outlook, the company's operational efficiency and investments support cautious optimism for additional market share gains and sustained profitability.
Dutch Bros brews up strong 1Q25 results, driven by booming loyalty program, menu innovation (BROS)
Continuing its recent trend of exceeding analysts' forecasts, Dutch Bros (BROS) delivered solid 1Q25 results, surpassing EPS and revenue expectations on strong system same-shop sales growth of 4.7%. The company's impressive performance is in stark contrast to Starbucks' (SBUX) weak 2Q25 results on April 29 that included a miss on the bottom-line and another global comp decline of 1.0%. SBUX's struggles stem from operational missteps in U.S. stores, a cautious consumer environment, and intense competition, while BROS' focus on iced beverages, personalization, and drive-thru efficiency is resonating with younger demographics, enabling it to capture market share.
Despite the Q1 outperformance, BROS opted to only reaffirm its FY25 guidance for revenue of $1.555-$1.575 bln, same-shop sales growth of 2-4%, and adjusted EBITDA of $265-$275 mln. That conservative outlook may have weighed on shares, especially given the stock's frothy valuation with a trailing P/S of approximately 7.5x, had BROS not added that those projections are all trending toward the top half of their ranges, signaling confidence in sustaining its momentum.
- BROS' same-shop sales of 4.7% came in a tick higher than the 4.6% increase experienced through March 25, which the company disclosed on March 27 during its Investor Day. The healthy growth underscores BROS ability to drive traffic, as reflected in system-wide transaction growth of 1.3%, and higher ticket size. Seasonal limited-time offerings, such as the high-performing Candy Cane Mocha, and innovative platforms like Poppin' Boba and Protein Coffee, have fueled customer engagement.
- Meanwhile, the Dutch Rewards loyalty program continues to be a significant driver of BROS business. Transactions made through Dutch Rewards reached 71.8% of total transactions in Q1, up from 66.5% in the year-earlier period, indicating growing customer loyalty and engagement. Relatedly, mobile ordering continues to grow rapidly, especially in some of BROS' newer markets, bolstered by the rollout of its pre-ordering channel. Customers who utilize mobile ordering tend to visit BROS 5% more often.
- Strong sales growth, coupled with steady gross margins, is fueling profitability improvements. In Q1, adjusted EBITDA increased by nearly 20% yr/yr to $62.9 mln, while company-operated shop contribution margin reached 29.4%, approaching the long-term goal of 30%. Coffee cost inflation and rising labor costs, particularly in high-wage markets like California, where nearly 20% of BROS shops are located, pose risks to the company's margins.
- New store openings, with average CapEx per shop at $1.7 mln, pose another challenge, though BROS disciplined real estate strategy and strong new unit AUVs north of $2 mln mitigate risks. The company’s plan to open at least 160 shops in 2025, part of a long-term goal of 7,000+ locations, provides a significant growth catalyst, with new markets like Texas and Florida showing strong early performance.
BROS 1Q25 results and sustained momentum highlight its ability to outperform in a challenging consumer environment, driven by innovative menu offerings, a booming loyalty program, and aggressive expansion. However, a rich valuation leaves little margin for error, demanding flawless execution to justify the stock price.
Zillow inches lower on Q1 upside but muted guidance, expects housing market to remain subdued (ZG)
Zillow (ZG -1%) is trading roughly flat after reporting Q1 results last night. Zillow reported a decent EPS beat with revenue up 13% yr/yr to $598 mln, nicely above prior guidance of $575-590 mln. Adjusted EBITDA grew 22% yr/yr to $153 mln, well above the $125-140 mln prior guidance. Unfortunately, the mid-point of Q2 revenue guidance was below consensus, which is weighing on shares today.
- As a reminder, Zillow recently changed it reporting segments. It is now presenting revenue in two major categories: For Sale and Rentals. For Sale segment revenue was up 8% yr/yr to $458 mln. Residential revenue grew 6% yr/yr to $417 mln, outperforming its outlook. This was fueled by growth in Premier Agent, expansion of Zillow Showcase, as well as contributions from its new construction marketplace and Follow Up Boss. Also, within the For Sale category, mortgages revenue in Q1 grew a healthy 32% yr/yr to $41 mln, which was better than expected, as more buyers are choosing financing through Zillow Home Loans.
- In terms of its view on the housing market, Zillow says it has been challenged for a while and it expects it to continue to bounce along the bottom. This has been the environment since 2022 and Zillow expects more of the same in 2025. The company is pleased to report consistent double-digit revenue growth in the face of a really challenging housing market.
- On the Rentals side, revenue growth accelerated in Q1, increasing 33% yr/yr to $129 mln, this compares to +25% growth in Q4. Growth was driven primarily by multifamily revenue (25+ unit buildings), which grew 47% in Q1, up from 41% in Q4. Zillow increased the number of multifamily properties on its apps and sites by 38%, reaching an all-time high of 55,000 multifamily properties at of the end of Q1, up from 50,000 at the end of Q4.
- Recall that recently, Zillow announced a partnership with Redfin (RDFN), making Zillow the exclusive provider of multifamily rental listings on Redfin and its sites. Zillow is seeing stronger-than-expected benefits from this partnership, which went live at the end of April. In Q2, Zillow will begin paying Redfin for rentals leads and expects the partnership to be accretive to EBITDA in 2H25.
After some impressive recent quarters from Zillow, the last couple of quarters have been more modest. We suspect uncertainty around the election in Q4 and the macro/tariff issues in Q1 have cooled home buying interest. However, this does showcase why Zillow's aggressive move into Rentals was really smart and that is showing up in the numbers. That helps to offset some of the boom-bust nature of the housing market.
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.
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