Market Snapshot
| Dow | 41953.32 | -11.31 | (-0.03%) | | Nasdaq | 17691.63 | -59.16 | (-0.33%) | | SP 500 | 5662.89 | -12.40 | (-0.22%) | | 10-yr Note |
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| | NYSE | Adv 1157 | Dec 1614 | Vol 1.2 bln | | Nasdaq | Adv 1607 | Dec 2711 | Vol 6.09 bln |
Industry Watch
| Strong: Financials, Energy, Utilities, Health Care |
| | Weak: Consumer Staples, Materials, Information Technology, Industrials |
Moving the Market
--Mega-cap stocks fail to hold earlier price gains
--Stronger-than-expected existing home sales in February
--Lack of conviction amid economic uncertainty
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Closing Stock Market Summary
20-Mar-25 16:15 ET
Dow -11.31 at 41953.32, Nasdaq -59.16 at 17691.63, S&P -12.40 at 5662.89
[BRIEFING.COM] The rally that followed yesterday's FOMC news did not persist today. There was an attempt at follow through, but that attempt ultimately petered out along with the mega-cap stocks as investors remained pre-occupied with questions -- and no clear answers -- about the economic outlook.
There was some good economic news today, however. Existing home sales showed some surprising strength in February as buyers responded to an increase in inventory. It was a good sign along with no real change in weekly initial jobless claims, which continue to run at levels consistent with a solid labor market.
Those reports corroborated Fed Chair Powell's view from yesterday that the "hard data," as opposed to soft survey data, is still pretty solid in terms of what it is conveying about economic activity. That point notwithstanding, the specter of reciprocal tariffs being announced on April 2, and a bewildering forecast from the Fed that calls for lower growth and higher inflation in 2025 than previously expected, seemingly curtailed the market's interest in following through on yesterday's advance.
Today, overall, didn't feature much conviction on either side of the tape. There were four S&P 500 sectors that finished higher, none more than 0.4%, and seven S&P 500 sectors that finished lower, none more than 0.6%. The biggest gainers were the energy and utilities sectors, and the biggest loser was the materials sector.
The information technology sector, which is the market's most heavily-weighted sector, ended the day down 0.5%. It was a relative laggard throughout the session due in large part to weakness in Accenture (ACN 300.76-23.71, -7.3%) following its earnings report, weakness in Apple (AAPL 214.10, -1.14, -0.5%) as reports suggested the company has shaken up its AI leadership ranks, and weakness in the semiconductor stocks. The Philadelphia Semiconductor Index was down 0.7%. It would have been worse if not for the outperformance of NVIDIA (NVDA 118.53, +1.01, +0.9%).
The Treasury market for its part also saw some vacillation. Earlier, the 10-yr note yield dropped to 4.17% from yesterday's settlement level of 4.26%, but it crept back up to 4.25% before settling at 4.23%. Treasuries, like the other capital markets, digested a slate of central bank news on the other side of the FOMC decision that included the following:
- The People's Bank of China left its 1-yr and 5-yr loan prime rates unchanged
- The Swiss National Bank cut its policy rate by 25 bps to 0.25%
- Sweden's Riksbank left it policy rate unchanged at 2.25%
- Brazil raised its policy rate by 100 bps to 14.25%
- The Bank of England left its policy rate unchanged at 4.50%
- ECB President Lagarde suggested the 25% tariff on imports imposed by the U.S. could subtract approximately 0.3 percentage points from euro area growth in the first year.
Reviewing today's economic data:
- Initial jobless claims for the week ending March 15 increased by 2,000 to 223,000 (Briefing.com consensus 220,000). Continuing jobless claims for the week ending March 8 increased by 33,000 to 1.892 million.
- The key takeaway from the report is that this period covers the week in which the survey for the employment report is conducted, so the low level of initial jobless claims will lead economists to project another relatively solid increase in nonfarm payrolls.
- The Q4 Current Account balance showed a narrowing in the deficit to $303.9 billion (Briefing.com consensus -$334.0 billion) from an upwardly revised $310.3 billion (from -$310.9 billion).
- The March Philadelphia Fed Index dipped to 12.5 (Briefing.com consensus 10.0) from 18.1 in February. The dividing line between expansion and contraction is 0.0, so this report indicates that business activity in the Philadelphia fed region expanded in March, but at a slower pace than the prior month.
- Existing home sales increased 4.2% month-over-month in February to a seasonally adjusted annual rate of 4.26 million (Briefing.com consensus 3.95 million) from an upwardly revised 4.09 million (from 4.08 million) in January. Sales were down 1.2% from the same period a year ago.
- The key takeaway from the report is that existing home sales actually increased, as the consensus estimate called for a 3.2% month-over-month decline. The surprising strength suggests some unleashing of pent-up demand with more inventory on the market and prospective buyers adjusting to the higher level of mortgage rates.
- February Leading Indicators declined 0.3% (Briefing.com consensus -0.2%) following an upwardly revised 0.2% decline (from -0.3%) in January.
There is no U.S. economic data of note on Friday.
Waiting for more data
20-Mar-25 15:30 ET
Dow -16.07 at 41948.56, Nasdaq -99.29 at 17651.50, S&P -15.03 at 5660.26
[BRIEFING.COM] The major indices continue to languish with conviction lacking in today's market. There hasn't been any real follow through to yesterday's post-FOMC rally, but at the same time there hasn't been an aggressive move to unwind it either.
The market has operated mostly at stall speed, waiting to get more data that lends more clarity to the tariff situation and the impact -- or lack thereof -- it is having on the economy. That assessment will factor directly into earnings estimates, which haven't been subject to much downward revision.
In fact, the forward 12-month EPS estimate has increased to $277.61 from $274.47 on February 19 (all-time high day for S&P 500), according to FactSet. Over the same time, the S&P 500 has declined 8.0%.
There won't be any data to assess on Friday -- not out of the U.S. anyway. Instead, the market will be taking stock of the earnings results and guidance from FedEx (FDX 245.94, -1.18, -0.5%), Nike (NKE 72.04, -0.95, -1.3%), Lennar Corp. (LEN 120.12, -0.18, -0.2%), and Micron (MU 102.88, +0.82, +0.8%), which will be reporting after the close.
Market weighed down by mega caps
20-Mar-25 15:00 ET
Dow -31.64 at 41932.99, Nasdaq -98.37 at 17652.42, S&P -21.71 at 5653.58
[BRIEFING.COM] The stock market is in a fight to find its footing again, having been tripped up by some faltering action in the mega-cap space and a general lack of buying conviction. The Vanguard Mega-Cap Growth ETF (MGK) is down 0.5%.
This fitful state is something market participants may have to get used to as the specter of the reciprocal tariff announcements is hanging out there on April 2. The level and scope of those tariffs is a nagging source of uncertainty.
The information technology sector (-1.0%) is today's worst-performing sector, which matters greatly to the market cap-weighted S&P 500 because it is the most heavily-weighted sector in the S&P 500.
S&P 500 modestly lower; Gartner, Microchip, and EPAM among the biggest decliners
20-Mar-25 14:30 ET
Dow -41.06 at 41923.57, Nasdaq -84.00 at 17666.79, S&P -19.60 at 5655.69
[BRIEFING.COM] The S&P 500 (-0.35%) is in second place among the major averages, down just shy of 20 points.
Briefly, S&P 500 constituents Gartner (IT 417.20, -32.23, -7.17%), Microchip (MCHP 51.68, -2.89, -5.30%), and EPAM Systems (EPAM 172.26, -8.61, -4.76%) pepper the bottom of the average. IT slips today after rumors the government has canceled some of the company's contracts, MCHP filed an automatic mixed securities shelf offering and news circulated that the company had engaged Macquarie Group to oversee the marketing and sale of its Fab 2 wafer facility in Arizona, while EPAM appears to be weaker in part due to IT services peer Accenture's (ACN 300.25, -24.22, -7.46%) reported bookings down 3% yr/yr, citing uncertainty related to DOGE implications.
Meanwhile, Jabil (JBL 146.79, +7.31, +5.24%) is atop the standings following earnings and guidance.
Gold prices steady near record highs amid rate cut bets and geopolitical risks
20-Mar-25 14:00 ET
Dow -65.15 at 41899.48, Nasdaq -83.77 at 17667.02, S&P -20.23 at 5655.06
[BRIEFING.COM] The Nasdaq Composite (-0.47%) is the worst-performing major average with about two hours to go on the sesssion.
Gold futures settled $2.60 higher (+0.1%) at $3,043.80/oz, supported by the yesterday's signal from the Federal Reserve for two rate cuts in 2025, strong central bank purchases, and geopolitical tensions. Also applying support for gold prices, Citigroup analysts raised their three-month gold target to $3,200, citing increased investment demand and inflation concerns.
Meanwhile, the U.S. Dollar Index is up about +0.4% to $103.87.
Accenture reports mixed Q2 earnings report as DOGE-related spending cuts weigh on growth (ACN)
Driven by broad-based growth across its markets and industries, consulting and IT services company Accenture (A) edged past Q2 EPS and revenue expectations. Despite the upside performance, the stock is trading sharply lower due to concerns that the company's growth is set to slow under the Trump Administration's deep spending cuts. In fact, these DOGE-led spending cuts are already having a negative impact on Accenture's business as illustrated by the 3% decline in new bookings to $20.9 bln, signaling a decrease in the company's future revenue streams.
- The slowdown in new bookings is especially discouraging since Accenture was experiencing solid momentum across its business, including in its largest Americas region where revenue grew by 11% to $8.55 bln. In terms of verticals, Financial Services and Products were notable areas of strength, up 11% and 9%, respectively, in Q4. Impressively, Accenture ended the quarter with 32 clients that had quarterly bookings of $100 mln or more.
- Assisting companies and organizations with their digital rollouts and implementations of AI are two key services that Accenture provides. More specifically, Accenture assists clients in embedding AI tools into their operations, and it also helps clients utilize AI in data analytics and process automation. Therefore, the rapid expansion of AI technologies is providing Accenture with a potent growth catalyst, as reflected by the company achieving GenAI new bookings of $1.4 bln during the quarter.
- Accenture has also identified a few strategic priorities that it anticipates will underpin growth in years ahead. Cloud Services, one of those strategic priorities, experienced double-digit growth in Q2, fueled by continued growth in cloud migration projects. Security, which generated "very strong double-digit growth" due to increasing client investments in data security, is another area that Accenture is focusing on.
- This good news, though, is being clouded over by Accenture's lackluster FY25 EPS outlook, which was below expectations based on the midpoint of the guidance range, and the decline in new bookings. The soft guidance is a function of DOGE and the reduction in federal spending, leading to the loss of several Accenture contracts. In FY24, U.S. federal contracts accounted for 17% of Accenture's North America revenue, so the erosion in the government sector is a significant development.
Although Accenture slightly exceeded Q2 expectations, the new bookings decline, and the associated DOGE cost-cutting measures that have led to the cancellation of several multi-million U.S. government contracts, is creating meaningful growth concerns.
Jabil jumps on a solid beat-and-raise in Q2; remains confident in navigating tariff headwinds (JBL)
Electronic manufacturing services giant Jabil (JBL +4%) charges to its best levels since selling off to start the month of March after delivering a solid beat-and-raise in Q2 (Feb), mirroring the results of last quarter. JBL has been steadily recovering since tumbling by roughly 24% from January highs to March lows, which was prompted by fears surrounding tariffs and worsening consumer sentiment.
While investors remain on their toes regarding the potential consequences of tariffs and subsequent trade wars, JBL provided some alleviating commentary. Management reiterated that most of its business in China is local or regional, with only a minor fraction of its revenue generation in China being U.S.-bound. At the same time, JBL has limited exposure to Canada, while in Mexico, around 80-90% of its business is USMCA compliant -- tariffs are currently paused for USMCA-compliant goods. As a result, JBL raised its FY25 guidance again, reflecting confidence in circumventing material damage from tariffs. The company expects EPS of $8.95, up from $8.75, and revs of $27.9 bln, up from $27.3 bln.
- Starting last quarter, JBL changed how it broke out its lines of business, no longer splitting them into DMS and EMS. Now, JBL breaks down the performance of its three new segments: Regulated Industries (~40% of revs), Intelligent Infrastructure (~39%), and Connected Living & Digital Commerce (~19%). Only its Intelligent Infrastructure unit reported yr/yr growth, climbing by 18%, fueled by strong demand in AI-related cloud and data center infrastructure markets. Regulated Industries and Connected Living & Digital Commerce fell by 8% and 13%, respectively.
- The drop in Regulated Industries was led by ongoing weakness in renewable energy and EV markets. Others in the industry have noticed similar trends. For instance, Flex (FLEX) noted in late January that it continued to endure softer near-term trends in automotive. Sanmina (SANM) was not as explicit but registered relatively flat growth across its automotive business in DecQ. JBL mentioned that it remains cautious with its EV outlook for the year and is not witnessing much recovery in the renewable energy space outside of storage.
- In Connected Living, the drop was due to JBL's Mobility divestiture. When excluding this impact, revenue ticked 4% higher yr/yr, underpinned by healthy growth across its digital commerce and warehouse automation markets. On the flip side, consumer-driven connected living products experienced less demand.
- The end result was nearly flat yr/yr revenue growth, with JBL registering $6.73 bln, surpassing the high end of its $6.10-6.70 bln forecast. Core operating margins inched 60 bps lower yr/yr to 5.0%, primarily due to the Mobility divestiture. Adjusted EPS expanded by 15% yr/yr to $1.94, clocking in toward the high end of JBL's $1.60-2.00 prediction.
Uncertainty still abounds for JBL due to the inability to fully measure the degree of tariffs. Furthermore, the EV and renewable energy industries remain suppressed. However, the spending on AI remains elevated while warehouse automation is demonstrating sustained demand. Meanwhile, JBL reiterated its confidence in steering through tariff-related headwinds. As such, JBL looks attractive at current levels, especially stacked against its peers due to its relatively limited exposure to China, Canada, and Mexico.
Academy Sports + Outdoors trails Dick's Sporting Goods in Q4, Jordan Brand debut offers hope (ASO)
Fierce competitive pressures and a budget-conscious consumer have combined to create a very difficult business climate for Academy Sports + Outdoors (ASO) and that remained the case in 4Q24. Driven by its cost containment efforts -- SG&A expenses fell by about 2% in Q4 -- and an 80% increase in share repurchases, ASO comfortably surpassed EPS estimates. Although still underwater at -3.0%, ASO's comps are also trending in the right direction and with the upcoming launch of the Jordan Brand in 145 stores, the hope is that the trend will continue. However, like Dick's Sporting Goods (DKS), the company issued soft FY26 guidance, amplifying concerns that demand for sports equipment, footwear, and athleisurewear will soften under rising macroeconomic uncertainties.
ASO's results still pale in comparison to DKS's, which has been a steady share gainer, mainly thanks to its large format stores that offer a high-quality product assortment and unique in-store shopping experiences (batting cages, climbing walls, ice rinks), particularly at its House of Sport locations.
- In Q4, DKS achieved its largest sales quarter in its history at $3.89 bln with solid comp growth of +6.4%. The company also reported an improvement in gross margin. In contrast, ASO's revenue declined by 6.6% to $1.68 bln, marking the eleventh yr/y decline over the past twelve quarters. Gross margin also contracted by 50 bps yr/yr to 32.5% due to increased promotional activities aimed at stimulating sales.
- Relief isn't on the immediate horizon, either, with ASO anticipating that 1Q26 will be the most challenging quarter of the year from a sales and EPS perspective. In addition to the headwinds noted above, the company is also transitioning to a new Jordan floor set, which could temporarily disrupt sales while adding costs.
- On a brighter note, ASO expects the launch of the Jordan Brand and the introduction of new technology and targeted marketing initiatives to start having a positive impact in Q2. We believe the addition of the Jordan Brand is a good step in the right direction, strengthening the company's competitive positioning while attracting a broader and younger customer base. Ultimately, the inclusion of the Jordan Brand should drive incremental sales and enhance store traffic.
- Expanding its store footprint remains a key component of ASO's growth strategy. In Q4, the company opened five new stores for a total of 16 new stores in 2024. For 2025, ASO is aiming to open 20-25 new stores, providing it with increased revenue potential, improved brand visibility, and economies of scale. The downside, of course, is that opening new costs requires significant capital, making the ambitious store expansion plans a risky proposition, especially given the macro-related uncertainties.
The main takeaway is that ASO's Q4 results reflect ongoing underperformance relative to DKS. To help narrow this gap, ASO plans to launch the Jordan Brand in 145 stores and online starting in late April. While we view this is a positive step, ASO has fallen far behind DKS, and it will likely remain a "show me" story as it attempts to execute a major turnaround.
Five Below leaps on upbeat Q1 guidance; FY26 outlook more muted due to tariff uncertainty (FIVE)
With just three months as CEO, Winnie Park is receiving plenty of high-fives today after leading Five Below (FIVE +7%) to a solid Q4 (Jan) report, posting comps near the high end of its previous forecast and projecting Q1 (Apr) numbers firmly above consensus. However, there were a few sticking points, as FIVE projected FY26 EPS to be markedly below consensus and revenue merely in line with estimates. The ambiguity surrounding tariffs also remains, which the company noted did its best to embed in its current FY26 outlook. Nevertheless, with shares hovering near seven-month lows over the past few trading sessions, results were ultimately better than the market feared.
- Headline Q4 numbers were not too surprising given that FIVE issued guidance in mid-January, which already encompassed the all-important holiday shopping season. However, delivering a 3% drop in same-store sales, landing at the high end of FIVE's negative 3-5% forecast issued at the time, was a welcomed development. The comp decline was fueled by transactions ticking 1.9% lower and average ticket sliding by 1.0%.
- While there were no startling developments from Q4, it is worth noting that the company finished FY25 significantly stronger than it started. During the front half of the year, FIVE hit the reset button, shifting focus to improving product value and in-store experience. By the time FIVE entered the holiday period, it could lean into newness, emphasizing value, a strategy that clearly demonstrated success.
- Under its new leader, FIVE is looking to capitalize on its upward momentum from Q4, illustrated by its upbeat guidance for Q1, projecting adjusted EPS of $0.50-0.61 and revs of $905-925 mln. FIVE also anticipates comparable store sales of flat to +2.0%, its best quarter since 4Q24 and far better than the -2.3% comps registered in 1Q25.
- However, looking out at the year, the situation becomes less clear, illuminated by FIVE's downbeat FY26 earnings outlook of $4.10-4.72. Revenue is expected to land around $4.21-4.33 bln based on flat to +3% comp growth.
- The issue revolves around tariffs and their yet-to-be-seen impacts. In 2018 and 2019, FIVE was able to mitigate tariffs, passing along costs while still registering healthy low to mid-single-digit comp growth. This time around, consumers are more price-sensitive, given the past few years of elevated inflation. As such, FIVE is taking a strategic approach to price adjustments.
With experience as the former CEO of Forever 21 and a Board member of Dollar Tree (DLTR), Winnie Park is thus far successfully steering through an onslaught of uncertainty and sticky macroeconomic issues. While FIVE's FY26 outlook is not as rosy as its Q1 guidance indicates, it is good enough given the stock's nearly 30% tumble to start the year. There are too many variables to account for, making it possible that FIVE guided too conservatively. However, by that same token, if consumer sentiment continues to weaken, FIVE may need to trim its initial forecast. This give-and-take highlights the degree of uncertainty encompassing FIVE, which may keep a lid on further appreciation over the next few months.
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