Market Snapshot
| Dow | 42792.07 | +137.33 | (0.32%) | | Nasdaq | 19215.46 | +4.36 | (0.02%) | | SP 500 | 5963.60 | +5.22 | (0.09%) | | 10-yr Note |
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| | NYSE | Adv 1197 | Dec 1530 | Vol 950 mln | | Nasdaq | Adv 2182 | Dec 2210 | Vol 13.1 bln |
Industry Watch
| Strong: Health Care, Industrials, Consumer Staples, Utilities, Materials |
| | Weak: Consumer Discretionary, Energy |
Moving the Market
-- U.S. loses top credit rating from Moody's, but market shakes off headline shock
-- JPMorgan Chase (JPM) raises net interest income guidance for FY25
-- NVIDIA (NVDA) CEO Huang speaks at Computex 2025
-- UnitedHealth Group (UNH) CEO and CFO collectively buy ~$30 mln worth of stock
-- Ongoing buy-the-dip interest
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Closing Stock Market Summary
19-May-25 16:25 ET
Dow +137.33 at 42792.07, Nasdaq +4.36 at 19215.46, S&P +5.22 at 5963.60
[BRIEFING.COM] The groundwork for the start of today's session was laid after the close on Friday when Moody's announced a downgrade of its U.S. credit rating to Aa from Aaa due to the increase in government debt and interest payment ratios that are significantly higher than similarly rated sovereigns.
That headline shock precipitated a spike in longer-dated Treasury yields, a 1.0% decline in the U.S. Dollar Index, and selling interest in the equity futures market.
The 10-yr note yield, which settled Friday's session at 4.44%, went as high as 4.56%, while the 30-yr bond yield, which settled Friday's session at 4.90%, kissed 5.04%. And then the selling stopped.
Treasury yields reversed, with the 10-yr note yield settling at 4.47% and the 30-yr bond yield settling at 4.94%. Stocks, in turn, benefited once again from buy-the-dip interest and lingering optimism about the possibility of Congress passing the large reconciliation bill. The U.S. Dollar Index was down 0.7%.
The final numbers don't connote a picture of strength on their own, but the stock market's relative strength is rooted in the understanding that the Dow, Nasdaq, S&P 500, and Russell 2000 had been down as much as 0.7%, 1.4%, 1.1%, and 1.5%, respectively.
Once the headline shock of the Moody's downgrade wore off, participants settled into the notion that it wasn't really a "surprise," given that Standard & Poor's and Fitch Ratings had downgraded their U.S. credit ratings years earlier. That thinking presumably fostered some short-covering activity in the Treasury market that extended to stocks, which saw the S&P 500 record its sixth straight winning session.
There wasn't much corporate news governing today's trade, which had an M&M feel to it (macro and mechanical).
JPMorgan Chase (JPM 264.94, -2.58, -1.0%) slightly increased its FY25 net interest income guidance; Walmart (WMT 98.14, -0.10, -0.1%) garnered a rebuke from President Trump that it should "eat the tariffs;" the CEO and CFO of UnitedHealth Group (UNH 315.89, +23.98, +8.2%) collectively bought stock worth approximately $30 million; and JPMorgan downgraded Netflix (NFLX 1191.64, +0.11, +0.01%) to Neutral from Overweight.
Seven S&P 500 sectors finished higher. The health care sector (+1.0%) led the way. The next biggest gainer was the consumer staples sector, which gained a modest 0.4%. The energy sector (-1.6%) was in the losing category and was the only sector down more than 0.3%.
Market breadth improved as the session continued but still favored decliners by a narrow margin at the NYSE and Nasdaq when the closing bell rang.
Today's economic data was limited to the Leading Economic Index for April, which registered a 1.0% decline (Briefing.com consensus -0.7%) versus a downwardly revised 0.8% decline (from -0.7%) in March.
Small caps underperform
19-May-25 15:25 ET
Dow +53.38 at 42708.12, Nasdaq -52.19 at 19158.91, S&P -9.81 at 5948.57
[BRIEFING.COM] The stock market is heading into the closing stretch of today's trading in mixed form. Still, that is much improved from the start when the indices were sharply lower.
Most stocks have pared their opening losses, which has manifested itself in the improvement in the major indices, but the major indices themselves have not fully recovered. The small-cap Russell 2000 is the weakest link today, down 0.7%.
Putting things in proper context, though, the Russell 2000 entering today had gained 21.9% from its April 7 low, so some consolidation activity can be expected.
The latter is true for the broader market, which has largely done nothing but go up since those April 7 lows.
Homebuilders relatively weak
19-May-25 15:00 ET
Dow +84.66 at 42739.40, Nasdaq -26.47 at 19184.63, S&P -2.96 at 5955.42
[BRIEFING.COM] The S&P 500 is down 0.1% for the day, yet that small loss feels like a big gain considering the market had been down 1.1% at the start of today's session.
True to form, there was some quick intervention to buy the dip that helped foster a speedy recovery. That intervention was mediated by the Treasury market and its recovery from overnight selling that saw the 10-yr note yield go as high as 4.56% and the 30-yr bond yield move as high as 5.04%. They both sit at 4.47% and 4.94% now, respectively.
The initial thrust in yields was tied to the Moody's downgrade of the U.S. credit rating, and it helped contribute to the 30-yr fixed mortgage rate climbing above 7.00%. That is not the direction homebuilders want to see the mortgage rate go. Accordingly, the homebuilding group is exhibiting relative weakness in today's trade, evidenced by a 1.0% decline in the iShares U.S. Home Construction ETF (ITB).
S&P 500 slips as solar stocks sink on GOP tax deal; Moderna jumps on COVID resurgence
19-May-25 14:30 ET
Dow +86.39 at 42741.13, Nasdaq -39.11 at 19171.99, S&P -4.53 at 5953.85
[BRIEFING.COM] The S&P 500 (-0.08%) is in second place on Monday afternoon.
Briefly, S&P 500 constituents First Solar (FSLR 162.25, -16.21, -9.08%), AES (AES 11.68, -0.53, -4.34%), and Best Buy (BBY 71.08, -2.72, -3.69%) dot the bottom of the standings. FSLR slides after Republican lawmakers said they secured a deal to end key clean-energy tax credits earlier than planned, threatening a major source of support for the solar industry, while BBY is weaker after catching a Wells Fargo target cut this morning to $75 from $85.
Meanwhile, Moderna (MRNA 26.30, +1.44, +5.79%) is one of today's best performers, rallying on renewed COVID-19 concerns, with rising cases in Asia sparking investor interest in vaccine makers like MRNA and BioNTech (BNTX 97.33, +4.44, +4.79%). Additional momentum came from positive headlines tied to Novavax (NVAX 7.76, +1.03, +15.30%) and broader strength in the healthcare sector.
Gold surges 1.5% as weaker dollar and geopolitical jitters boost safe-haven demand
19-May-25 14:00 ET
Dow +98.86 at 42753.60, Nasdaq -17.32 at 19193.78, S&P +0.01 at 5958.39
[BRIEFING.COM] The tech-heavy Nasdaq Composite (-0.09%) is in last place on Monday afternoon, having jostled around flat lines a few times over the last half hour.
Gold futures settled $46.30 higher (+1.5%) at $3,233.50/oz, driven by a confluence of macroeconomic and geopolitical factors. The U.S. dollar dipped to open the week, enhancing gold's appeal to foreign investors. This currency movement coincided with renewed safe-haven demand following President Trump's tariff threats and a Moody's downgrade of the U.S. credit rating, citing rising national debt.
Meanwhile, the U.S. Dollar Index is down about -0.6% to $100.48.
Sanmina slides as market questions value proposition of ZT Systems Manufacturing purchase (SANM)
Sanmina (SANM) is trading sharply lower following the announcement of its $3.0 bln acquisition of ZT Systems' data center infrastructure manufacturing business from Advanced Micro Devices (AMD), reflecting investor concerns surrounding integration risks, the significant amount of new debt obtained to finance the deal, and the issuance of equity to pay for part of the premium. ZT Systems, acquired by AMD for $4.9 bln less than two months ago, is a supplier of hyperscale server solutions, specializing in the design, integration, manufacturing, and deployment of cloud and AI infrastructure for major clients like Amazon (AMZN) Web Services and Microsoft (MSFT) Azure.
The deal’s structure includes SANM paying $2.25 bln in cash, a $300 mln premium (split evenly between cash and equity), and up to $450 mln in contingent consideration based on the business’s financial performance over the next three years. In connection with the transaction, SANM has obtained committed financing from Bank of America for $2.5 bln.
- ZT Systems’ $5–6 bln revenue run-rate implies a price-to-sales ratio of approximately 0.5–0.6x, which is reasonable for a manufacturing business with lower gross margins (possibly below 10%) compared to AMD’s high-margin chip design operations. However, the contingent payment introduces risk, as achieving the full $3 bln valuation depends on sustained performance in a competitive market. While not overtly overpriced, the deal’s success hinges on SANM’s ability to leverage ZT Systems’ scale and customer relationships without eroding margins, particularly as hyperscale demand fluctuates.
- AMD’s decision to divest ZT Systems’ manufacturing business aligns with its strategic focus on high-margin, design-driven segments like AI accelerators and rack-scale AI systems, while shedding capital-intensive manufacturing operations. By retaining ZT Systems’ design and customer enablement teams, AMD ensures it can accelerate the quality and deployment of AI solutions for hyperscale clients without the burden of managing manufacturing.
- SANM’s designation as a preferred new product introduction manufacturing partner for AMD’s cloud rack and cluster-scale AI solutions strengthens this collaboration, enabling AMD to streamline supply chains and focus R&D on competitive areas like its Instinct AI accelerators and EPYC processors. Financially, the $3 bln sale, following the $4.9 bln acquisition, allows AMD to recoup a significant portion of its investment, bolstering its balance sheet for further AI investments, although the divestiture reduces AMD’s direct control over manufacturing quality and timelines.
- For SANM, acquiring ZT Systems’ manufacturing business is a strategic pivot to capitalize on the AI infrastructure boom, positioning it as a leader in cloud and AI ecosystems. The acquisition enhances the company's end-to-end component technology, systems integration, and supply chain solutions by integrating ZT Systems’ expertise in high-quality manufacturing for hyperscalers, particularly its advanced liquid cooling capabilities critical for dense AI compute environments.
- The deal is expected to be accretive to SANM’s non-GAAP EPS in the first year post-close, driven by synergies from combining SANM’s global manufacturing expertise with ZT Systems’ hyperscaler relationships and specialized facilities. However, SANM must navigate margin pressures in contract manufacturing and integration costs, which could temper EPS growth if hyperscale demand slows or competition intensifies.
For AMD, the divestiture sharpens its focus on high-margin AI design and recoups significant capital, though it risks reduced manufacturing oversight. Meanwhile, SANM gains a transformative foothold in AI infrastructure with strong revenue and EPS growth potential but faces challenges in integration and margin sustainability.
Bath & Body Works hires Nike exec as new CEO on hopes he can turn brand around (BBWI)
Bath & Body Works (BBWI) is taking a step today that investors hope will turn the company's fortunes around. It named Daniel Heaf as its new CEO, effective immediately. In addition, the company offered encouraging Q1 (Apr) guidance with upside EPS and in-line revenue. It also reaffirmed full-year EPS and revenue guidance.
- Heaf comes over from Nike (NKE), where he drove significant growth in retail and digital sales channels during a time of massive upheaval in the marketplace. Most recently, he was Nike's Chief Strategy and Transformation Officer, where he delivered productivity gains by refocusing resources and investment. Before that, he was Head of Nike Direct. Before Nike, Heaf worked at Burberry, where he helped reposition the brand as a digital innovator.
- Bath & Body Works is a bit of a different animal as one of the world's largest specialty retailers of fragrances for the body (fragrance mist, body lotion, body cream) and home (candles, fragrance diffusers, soap). But the hope is he can turn this struggling brand around. A big issue for BBWI is that consumers have become more value-conscious. Also, BBWI's merchandise in general is highly discretionary.
- BBWI concedes the market for candles, a core category for BBWI, has become a lot more competitive with a value-conscious consumer. In response, BBWI recently launched collaborations with big names and pop culture through partnerships with companies like Netflix. It also successfully rolled out Everyday Luxuries, its prestige-inspired line of fine fragrance mist, which is resonating with younger customers.
- In 2025, BBWI expects to build on platforms launched in 2024, including Everyday Luxuries and Collaborations. It also expects to extend its reach through adjacencies and international expansion. BBWI is expanding its Everyday Luxuries collection with additional fragrances and forms, including body cream and body wash. It's also expanding into adjacent categories like Men's, Hair, Lip and Laundry.
- A key strategy for BBWI has been to move away from malls. Today, 57% of its North American stores are in off-mall locations with a plan to increase this to 75% over time. Also, international markets represent only 5% of sales, but BBWI sees potential in growing international sales.
The stock is trading lower today despite the CEO news. We think the overall weakness in the stock market is the main reason. However, the lack of upside tells us that investors may be taking a wait-and-see approach to see how a Nike executive could turn around a candle/fragrance brand. The businesses are quite different, but we should get some initial insight when BBWI reports earnings next week (May 29 before the open). On a final note, we wanted to mention that BBWI was added to our YIELD rankings on Friday. BBWI repurchased $400 mln in shares in 2024, a good amount for a company with a $7.1 bln market cap, plus it pays a 2.4% dividend yield.
JPMorgan Chase boosts FY25 NII forecast, signaling confidence amid economic crosscurrents (JPM)
Within its Investor Day presentation slides, JPMorgan Chase (JPM) slightly increased its FY25 NII guidance to $94.5 bln from a prior outlook of $94.0 bln, while reaffirming its guidance of approximately $90 bln NII excluding markets and adjusted expenses of $95.0 bln. The modest upward revision to JPM's NII forecast suggests cautious optimism amid a highly uncertain geopolitical and macroeconomic backdrop, signaling its expectation for stronger-than-expected growth in loan portfolios and deposits, offsetting the impact of lower rates.
- NII, the difference between interest earned on loans and securities and interest paid on deposits, is a critical revenue driver for JPM. With the Federal Reserve potentially cutting rates, the interest earned on loans may decline, compressing the net interest margin. Additionally, increased competition for deposits, especially in this lower-rate environment, is raising funding costs. Customers have shifted to higher-yielding products, squeezing the bank's ability to maintain profitable spreads, as reflected by NII decreasing by 2% yr/yr (excluding markets) in 1Q25 to $22.6 bln.
- However, the growth in credit card balances carried over month-to-month, generating interest income, is a significant tailwind. If consumer spending remains resilient, this will offset some of the pressure from lower rates and margin compression, supporting NII growth.
- JPM also laid out its key 2025 growth drivers in its presentation slides. Expansion in auto lease financing is one such growth driver, driving loan portfolio growth, contributing to NII. This aligns with trends in consumer demand for vehicle financing, potentially at attractive spreads. Also, healthy activity in investment banking, such as mergers and acquisitions and equity underwriting, is anticipated to boost non-interest income, though it indirectly supports NII through broader business momentum.
- From an industry-wide perspective, JPM expects to benefit from a possibly improved regulatory cycle, which could reduce compliance costs and allow for more flexible business operations. However, the bank must also contend with unprecedented uncertainty on the geopolitical and economic fronts, including trade tensions, global conflicts, and persistent inflation risks, which could impact loan demand and asset quality. To address these challenges, JPM is focusing on running a leaner organization.
- Over the last five years, the bank has meaningfully increased its headcount, reflecting growth in operations and customer base. However, it now aims to optimize its workforce by leveraging its existing footprint more efficiently. This includes reorganizing departments to eliminate redundancies, automating routine tasks, and ensuring that its physical and digital infrastructure supports growth without proportional increases in staffing.
- This approach not only improves efficiency but also positions the bank to scale operations as customer demand grows, particularly in digital channels. For instance, AI could help analyze customer data to offer personalized financial products, driving revenue without significant additional costs.
JPM's updated FY25 NII outlook is a modest but meaningful revision, suggesting the bank is more confident in its ability to generate interest income despite headwinds like lower rates and deposit margin compression. The guidance also signals resilience, especially as the bank positions itself to deliver strong returns across a range of macroeconomic conditions, from a soft landing to more turbulent scenarios.
Take-Two's Q4 EPS clouded by huge impairment charges, while Q1 guidance disappoints (TTWO)
Take-Two's (TTWO) 4Q25 earnings were clouded by significant non-cash impairment charges, rendering the GAAP EPS of ($21.08) incomparable to analysts' expectations. These charges, including $3.55 bln in goodwill impairments and $176.3 mln for acquisition-related intangible assets, significantly deepened TTWO's net loss, further souring sentiment around the company's lack of profitability. However, the focal point for most investors was Net Bookings, the key demand metric that reflects in-game purchases, subscriptions, and game sales.
For Q4, the company delivered Net Bookings of $1.58 bln, edging past the consensus estimate, driven by solid performances from key titles. Despite the modest beat, TTWO's in-line EPS and Net Bookings guidance disappointed investors, who had anticipated more robust forward-looking momentum given the gaming industry's tailwinds, such as the proliferation of high-performance smartphones, AI-driven content creation and personalization, and strong growth in eSports.
- Net Bookings growth was propelled by strong performances from flagship titles, notably NBA 2K25, Grand Theft Auto Online, and Sid Meier's Civilization VII. NBA 2K25 saw robust engagement, benefiting from new features and seasonal updates, while Grand Theft Auto Online continued to drive recurrent spending through fresh content drops, maintaining its status as a cash cow.
- Net Bookings from recurrent consumer spending, which includes in-game purchases, microtransactions, and subscriptions, rose 14% yr/yr and accounted for 77% of total Net Bookings, underscoring its critical role in TTWO’s revenue stability. This metric reflects the company’s ability to monetize engaged player bases over time, particularly through live-service models, and is vital for sustaining cash flow in a hit-driven industry.
- TTWO's in-line 1Q26 guidance was a source of disappointment as the outlook lacked the upside expected from a company with strong franchises. Looking ahead, the upcoming release of Borderlands 4 in 2026 could bolster Net Bookings. Longer-term, though, TTWO's growth catalysts look even more compelling with the highly anticipated Grand Theft Auto VI now confirmed for a fall 2027 release, expected to drive unprecedented Net Bookings and reshape the company’s financial trajectory.
- Additionally, TTWO’s mobile gaming segment, bolstered by Zynga’s portfolio, and its expanding pipeline of over 40 titles through 2027, position it for multi-year growth, though near-term profitability challenges and guidance conservatism is currently tempering enthusiasm for the stock.
TTWO's Q4 earnings showcased a modest Net Bookings beat, driven by NBA 2K25 and Grand Theft Auto Online, but massive impairment charges and an in-line Q1 guidance disappointed investors expecting more aggressive growth signals. The stock’s muted action reflects a market unconvinced by the performance, balancing near-term headwinds against the transformative potential of Grand Theft Auto VI in 2027.
Doximity heads lower on weak guidance following shift to multi-module offerings
Doximity (DOCS -11%) wrapped up FY25 on a solid note for Q4 (Mar). However, this operator of a digital platform for medical professionals disappointed investors with downside revenue guidance for both Q1 (Jun) and FY26.
- Let's start with the good news. Its unique active users on a quarterly, monthly, weekly, and daily basis all hit fresh highs in Q4. This growth was again led by its newsfeed product, which is both its most used and most monetized product. Its unique newsfeed users hit record highs in Q4 while articles read or tapped were up more than 30% yr/yr. Its workflow tools (telehealth, fax, scheduling, AI tools) also hit fresh highs in Q4, with over 620,000 unique active prescribers.
- DOCS noted that FY25 revenue benefited from its strategic shift to more multi-module integrated offerings. This not only drove larger deal sizes, but also enabled a greater share of annual programs to launch in January. Also, it ended the quarter with 116 customers contributing at least $500,000 each in subscription-based revenue on a trailing 12-month basis. This is a roughly 17% yr/yr increase.
- Turning to the guidance, it seems to have been partly impacted by DOCS' shift to more multi-module integrated offerings, which have allowed many customers to get their annual programs live in January. While DOCS expects these earlier launches to be the norm going forward, FY25 received the benefit of being the transition year, leading to a few points of revenue growth upside.
- However, this dynamic creates a tougher comparison for FY26. The company noted that these earlier launches allow its customers to maintain an uninterrupted presence on the Doximity platform, which helps drive ROI and should translate into even greater investment on Doximity over time. Another concern is visibility. As of today, Doximity has just under 70% of its initial subscription-based revenue guidance under contract.
- Another factor appears to be the macro view. DOCS says it has not seen any impact from macro uncertainty, however, it thought it would be prudent to assume the market growth rate could be on the lower-end of this range.
Overall, it's clear that investors are disappointed in the guidance. Whenever a company makes an important change to its model, as it recently has done here with its multi-module integrated offerings, there can be a period of adjustment in terms of expected financial performance. Doximity is likely learning as well as to what to expect. Doximity's revenue-generating customers are primarily drug manufacturers and health systems. We suspect the recent EO from President Trump is impacting guidance as well.
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