Market Snapshot
| Dow | 40545.93 | -1679.39 | (-3.98%) | | Nasdaq | 16550.61 | -1050.44 | (-5.97%) | | SP 500 | 5396.52 | -274.45 | (-4.84%) | | 10-yr Note | +28/32 | 4.06 |
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| | NYSE | Adv 368 | Dec 2303 | Vol 1.5 bln | | Nasdaq | Adv 716 | Dec 3706 | Vol 9.5 bln |
Industry Watch
| Strong: Consumer Staples |
| | Weak: Technology, Discretionary, Energy, Financials, Communication Services, Industrials, Materials |
Moving the Market
-- Fears about impact of new tariffs
-- Growth concerns related to tariff news
-- Safe-have bids shaping early action
-- Outsized losses in mega caps
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Closing Summary
03-Apr-25 16:30 ET
Dow -1679.39 at 40545.93, Nasdaq -1050.44 at 16550.61, S&P -274.45 at 5396.52
[BRIEFING.COM] The stock market experienced a sharp selloff today following President Donald Trump's announcement of sweeping tariffs on nearly all U.S. trading partners. The Dow Jones Industrial Average plunged more than 1,500 points, the Nasdaq Composite slumped 6.0%, and the S&P 500 fell 4.8%.
The administration imposed 10% tariffs on global imports, effective April 5. Higher rates were imposed on specific countries, effective April 9, including a 34% tariff on top of the 20% tariff on imports from China. Japan, Vietnam, and India face tariff rates of 24%, 46%, and 26%, respectively. The EU is subject to a 20% rate.
The move escalated fears about an economic slowdown and triggered a slight from risk assets. The small-cap Russell 2000 sank 6.6%, large-cap tech suffered outsized declines, and many discretionary-related industries fell under selling pressure.
Apple (AAPL 203.19, -20.70, -9.3%) was a significant drag on the broader equity market, along with NVIDIA (NVDA 101.80, -8.62, -7.8%) and other semiconductor shares.
Slowdown worries also translated into lower oil prices due to fears about softening demand. WTI crude plunged back to $67/bbl, contributing to the decline in the energy sector (-7.5%). It was the worst performer, along with technology (-6.9%) and discretionary (-6.5%).
Treasuries surged as stocks slid, resulting in sharply lower rates. The 10-yr yield dropped 14 basis points to 4.06%, and the 2-yr yield dropped 18 basis points to 3.72%.
Reviewing today's economic data:
- Weekly Initial Claims 219K (Briefing.com consensus 224K); Prior was revised to 225K from 224K, Weekly Continuing Claims 1.903 mln; Prior was revised to 1.847 mln from 1.856 mln
- The key takeaway from the report is that initial claims remained at a relatively low level while continuing claims increased to their highest level since November 2021, suggesting that people are having an increasingly difficult time returning to work.
- February Trade Balance -$122.7 bln (Briefing.com consensus -$121.0 bln); Prior was revised to -$130.7 bln from -$131.4 bln
- The key takeaway from the report is that while there was some sequential narrowing in the trade deficit, the deficit remained in record territory as front-running of purchases continued ahead of April's implementation of tariffs.
- March S&P Global US Services PMI - Final 54.4; Prior 54.3 from
- March ISM Services 50.8% (Briefing.com consensus 53.2%); Prior 53.5%
- The key takeaway from the report is that growth in the services sector slowed notably in March with employment contracting for the first time since September.
Market participants receive some potentially market-moving data tomorrow in the form of the March Employment Situation report at 8:30 ET.
Treasuries surge as stocks sink
03-Apr-25 15:30 ET
Dow -1616.75 at 40608.57, Nasdaq -1027.44 at 16573.61, S&P -266.34 at 5404.63
[BRIEFING.COM] The major indices hit fresh lows ahead of the close.
The 10-yr yield dropped 14 basis points to 4.06% and the 2-yr yield dropped 18 basis points to 3.72%.
Market participants receive some potentially market-moving data tomorrow in the form of the March Employment Situation report at 8:30 ET.
Consumer staples benefit from risk-off bias
03-Apr-25 15:05 ET
Dow -1386.50 at 40838.82, Nasdaq -909.45 at 16691.60, S&P -233.56 at 5437.41
[BRIEFING.COM] The major equity indices moved mostly sideways over the last half hour, sticking close to session lows.
The equal-weighted S&P 500 trades 4.1% lower versus a 4.1% decline in the market-cap weighted index.
The S&P 500 consumer staples sector continues to benefit from the risk-off, growth fear related trade. The sector shows a 0.9% gain.
S&P 500 slides 4.3% as tariff woes hammer stocks; Dell, Best Buy, Ralph Lauren lead declines
03-Apr-25 14:30 ET
Dow -1425.11 at 40800.21, Nasdaq -963.36 at 16637.69, S&P -241.79 at 5429.18
[BRIEFING.COM] The S&P 500 (-4.26%) is in second place on Thursday afternoon, down about 240 points.
Briefly, S&P 500 constituents Dell (DELL 78.53, -16.80, -17.62%), Best Buy (BBY 62.85, -12.88, -17.01%), and Ralph Lauren (RL 197.28, -39.07, -16.53%) dot the bottom of the average. DELL and RL are among the wide swathe of stocks getting hit on President Trump's tariff news, while BBY caught a downgrade to Neutral at Citigroup this morning citing tariff risks and consumer slowdown.
Meanwhile, Lamb Weston (LW 59.84, +5.69, +10.51%) is firmly atop the standings following earnings/guidance.
Gold drops 1.4% to $3,121 as tariff shock ripples through markets
03-Apr-25 14:00 ET
Dow -1332.77 at 40892.55, Nasdaq -917.72 at 16683.33, S&P -226.84 at 5444.13
[BRIEFING.COM] With about two hours to go on Thursday the tech-heavy Nasdaq Composite (-5.21%) is the worst-performing major average.
Gold futures settled $44.50 lower (-1.4%) at $3,121.70/oz, driven by investor reactions to President Trump's announcement of sweeping new import tariffs, including a 10% baseline on all U.S. imports and a 25% tariff on global car and truck imports.
Meanwhile, the U.S. Dollar Index is down about -1.5% to $102.10.
MSC Industrial pulls back on top line miss; seeing hesitancy and caution among its customers (MSM)
MSC Industrial Supply (MSM -4%) is trading lower following its Q2 (Feb) earnings report this morning. This distributor of metalworking and MRO products reported a decent EPS beat. However, revenue fell 4.7% yr/yr to $891.7 mln, which was light of expectations. MSM is a company that Briefing.com keeps an eye on because it provides a glimpse into the industrial economy.
- ADS (average daily sales) is a key metric for MSM. It declined -4.7%, which was at the lower end of its -5% to -3% prior guidance range. However, MSM was encouraged by January and February exceeding historical month-over-month trends. MSM concedes that the demand environment remains soft, but MSM is improving execution and returning the company to growth. MSM guided to Q3 (May) ADS growth of -2% to flat.
- Switching to the macro environment, MSM said that IP (Industrial Production) readings across most end markets continue to contract and weigh on MSM's performance. However, customer sentiment and future outlook have been improving as is evidenced by recent MBI readings, which have hovered around 50 for the past couple of months.
- The near-term remains choppy. MSM says it is seeing hesitancy and caution among its customer base around future production levels due to tariff uncertainty, potentially looming inflation and sustained high interest rates. MSM feels well-positioned to navigate this uncertain environment for a number of reasons.
- MSM also addressed tariffs on the call. The company noted that its direct COGS exposure to China is approximately 10%, and it has low-single digit exposure in Mexico and Canada. While the tariff situation remains fluid, MSM is confident that it has a playbook in place which covers all aspects including purchasing, pricing, assortment management and productivity tools for customers.
- Importantly, MSM took advantage of its strong balance sheet by accelerating purchases ahead of tariffs on high return products during the quarter. On pricing, MSM implemented select tariff-related price increases in late March and will continually evaluate additional moves as warranted. MSM also has a good amount of made in the USA product offerings, which are being more prominently marketed on its website.
Overall, this was a mixed quarter for MSM. Demand remains soft as customers remain cautious. However, a bright spot is that ADS is expected to improve sequentially in Q3. Also, while MSM has exposure to tariffs, it sounds pretty manageable. Despite the mixed results, MSM should benefit from long term macro drivers, like reshoring. Finally, the stock action today looks to be fueled by both the top line miss and concerns about the tariff policy.
Conagra ticks higher after consumption trends remained robust during Q3 (CAG)
Conagra (CAG +1%) gives investors something to snack on as its slim Q3 (Feb) earnings and revenue misses prove better than feared today. In February, the consumer packaged goods giant, known for many brands from Slim Jim to Hebrew National, lowered its FY25 (May) guidance due to unforeseen supply chain challenges that cropped up during Q3. The company's facility that cooks chicken for frozen meals ran into quality inconsistencies, prompting a temporary halt in production. Meanwhile, demand was stronger than expected in CAG's frozen vegetables business, leading to inventory constraints. Both setbacks resulted in lost volume, lower net sales, and missed profit opportunities.
However, although shares slumped to 52-week lows on the reduced guidance, there was still a silver lining. Demand was not the issue as much as supply. Given how some of CAG's peers touched on snacking weakness lately, including PepsiCo (PEP), which owns Frito-Lay, and General Mills (GIS), citing a drop in consumer confidence, this was an encouraging point.
- Relatively resilient snacking demand underpins today's positive response despite CAG's weak headline performance. Consumption trends remained robust during the quarter, but shipments lagged due to the aforementioned supply chain headwinds, causing adjusted EPS of $0.51 and revenue of $2.84 bln, a 6.3% decline yr/yr (5.2% drop on an organic basis), to miss analyst forecasts. The supply chain issues showed up clearly in CAG's Refrigerated & Frozen segment, as net sales contracted by 7.2% yr/yr on a 3.0% dip in volumes.
- CAG's other segments performed slightly better but still reflected nagging economic headwinds suppressing consumers' spending appetites. In Grocery & Snacks, net sales slipped by 3.2% yr/yr, driven by a 1.3% volume decrease. However, management mentioned that the segment gained volume share across several categories, such as popcorn and canned tomatoes. In Foodservice, net sales declined by 6.1%, reflecting ongoing softness in commercial traffic. International net sales plunged 17.6% due to FX headwinds, which clipped off 8.5 pts.
- CAG kept its FY25 guidance unchanged, targeting adjusted EPS of $2.35 and organic net sales growth of around negative 2.0%. Management added that it is staying on its toes due to the dynamic external environment, including tariffs, regulatory changes (RFK Jr. has mentioned limiting SNAP benefits and food additive programs), inflation, and shifts in consumer sentiment.
- Regarding tariffs, CAG stated today that it anticipates being impacted by tariffs on tin mill, steel, and aluminum, as well as Chinese imports, albeit to a lesser extent. The impact should be limited in Q4 as CAG works through inventory on hand. The company expects additional clarity following its Q4 results in July.
There were not many surprises from Q3, given that CAG grounded expectations two months earlier following supply chain problems. Still, investors are keeping CAG at arm's length, expressing cautious optimism as the market awaits further tariff news. As such, CAG may remain range-bound until closer to Q4 results in July.
RH put in an uncomfortable position as tariffs inject additional challenges (RH)
Luxury home furnishings firm RH (RH -44%) sinks to a nearly five-year low today after posting misses on its top and bottom lines in Q4 (Jan) and issuing alarming guidance for Q1 (Apr) and FY26. RH is facing many obstacles at the moment. If sticky inflationary pressures, elevated interest rates, and a depressed housing market were not enough, yesterday's sweeping tariffs are creating new challenges for the company.
Nearly three-quarters of RH's products last year were sourced from Asia, including 35% from Vietnam, 23% from China, and the remainder from Indonesia and India. Only 10% of products were made in the U.S. Some of the highest reciprocal tariffs last night were on Vietnam, China, Indonesia, and India, charging 46%, 34%, 32%, and 26%, respectively, putting RH in an uncomfortable position on how to mitigate the fallout. The company has been stockpiling inventory, which ballooned by 35% yr/yr in Q4. CEO Gary Friedman said he feels good about acquiring inventory at a reasonable price ahead of tariffs. Mr. Friedman also believes the tariffs will not completely stick, thinking they are primarily a negotiation tactic.
Nevertheless, tariffs added a new wrinkle to RH's story, which the company is trying to keep from becoming a minor tragedy.
- Turning to Q4 results, there was a noticeable change in trend from last quarter. RH was coming off a bullish Q3 (Oct) report, projecting Q4 revenue well above consensus as demand accelerated during November and December. However, mortgage rates shot up to six-month highs after the Federal Reserve signaled higher-for-longer rates. As a result, demand softened in mid-December, coinciding with a 22% plunge in mortgage applications, causing revenue to grow by just 10.0% yr/yr to $812.41 mln, far below RH's initial $868.5 mln forecast.
- RH remains optimistic. Mr. Friedman noted that even as the company operates in the worst housing market in nearly five decades, citing how there were similar existing homes sold in 1978 compared to 2024 despite a 53% surge in population, it is still performing at a level one would expect during a robust housing market.
- Still, for the year, the picture is bleak. RH projected FY26 revenue growth of +10-13%, a decent uptick from the +5% growth posted in FY25 but still falling short of analyst expectations. The company also enters the year with meaningful debt, primarily from spending $2.2 bln to buy back its stock. However, RH mentioned that it plans to monetize around $500 mln of assets and turn its $200-300 mln of excess inventory into cash, which will help pay down debt and lower interest rate expenses.
There were many headwinds on the horizon before tariffs entered the picture, likely making it challenging for RH to mount an aggressive comeback over the near term. The company's peers similarly feel the sting of import taxes, with decent-sized losses across the board, including W -28%, WSM -17%, HVT -11%, LZB -10%, and ETD -9%.
Tariffs came in higher than expected, causing a market sell-off today
Investors are shaken today after the Trump administration imposed a 10% baseline tariff on global imports, and higher rates for 60 other countries including China at 34% (bringing the total tariff rate to 54%), the EU at 20%, and India at 26%. The 10% baseline tariffs go into effect April 5 and the higher rates on individual countries go into effect April 9. Also, the 25% tariffs on all foreign-made automobiles takes effect today. See earlier InPlay posts for details.
- The stock market actually traded higher yesterday ahead of the announcement as investors hoped the stock market sell-off in recent weeks would persuade President Trump to go easy on his tariff decision. However, the tariffs were higher than people had been expecting and that's why the market is selling off today.
- The purpose of the tariffs is to bring manufacturing back to the US and that is a laudable goal. However, that typically takes years and companies may be hesitant to repurpose billions of dollars when the tariff policy could change. The administration has changed its mind often in the opening weeks of this term. Declaring tariffs, then cancelling them or changing the percentage, sometimes in the same day. It makes it difficult for businesses to plan.
- We suspect some businesses will move some manufacturing back to the US, but even if they do, their input costs are still going to rise and the US consumer is not really in a buying mood so it may not be worth it. Others may just wait it out. Their thinking is that maybe a possible recession and a weak stock market could persuade the administration to claim some sort of a victory and change course. Or they may just wait for a new presidential term. Tariffs are unpopular and rolling them back will likely be a key rallying cry in the 2026 mid-terms and the 2028 presidential cycle.
- Looking ahead, the big concern is that these moves will fuel a trade war with China, Europe, Canada etc. Also, in the US, consumers have already been feeling the pinch on inflation, but these tariffs are likely to fuel inflation even further. The pain is likely to be felt most deeply by lower income consumers. Also, with 401Ks lower, US consumers are likely already feeling less secure and more uneasy about spending.
- Treasury Secretary Scott Bessent said in a Bloomberg interview that these tariffs are the "high water mark" unless countries retaliate. He is taking a "wait and see" approach to trade talks with other countries. As such, there is hope that some negotiations could be fruitful and perhaps tariffs could be reduced at some point.
Many investors are understandably disheartened today with the market under pressure, but we suspect this will be an evolving situation over the coming weeks and months. We really look forward to getting some commentary from companies about the tariffs when earnings season kicks off in a few weeks. We suspect guidance could be pretty weak for many companies.
Tesla turns positive as weak Q1 deliveries priced in; CEO stepping away from governing roles (TSLA)
There has been no shortage of noise surrounding Tesla (TSLA +5%) and its CEO Elon Musk. The alarms grew even louder following today's Q1 delivery figures, with the stock dropping by 6% immediately out of the gate. However, buyers quickly rushed in, igniting a decent rebound to bring shares above breakeven on the day.
News outlets have touched on how grim Tesla's Q1 deliveries would likely be over the past few months. For instance, two months ago, Bloomberg mentioned that sales cratered in Germany during February. The outlet followed up this report a week later, noting that shipments plunged in China during that same month. It did not help that Chinese competitors, including BYD (BYDDF), NIO (NIO), XPeng (XPEV), and Li Auto (LI) were posting uplifting delivery figures during Q1 throughout the past several days. Then, just yesterday, Reuters remarked that sales in key European markets fell again in March.
Combining these trends with the overabundance of speedbumps in Tesla's way, from lingering inflation and elevated interest rates to 25% auto tariffs and a deteriorating brand image, it may not be too shocking that the stock was already down over 40% from December highs ahead of Q1 deliveries. This context helps explain why investors were quick to jump into Tesla shares today, as much of the bad news from the Q1 delivery report was digested beforehand.
At the same time, there have been reports today that Mr. Musk will step back from his role in the Trump administration in the coming weeks. Given the political backlash surrounding the Tesla CEO, investors view this as a positive development. It may lead to Mr. Musk focusing more on his primary EV company, which faces serious headwinds.
- During Q1, Tesla's deliveries hit a nearly three-year low, posting 336,681, a 13% drop yr/yr. Deliveries did come in considerably below street estimates but were not disastrously far from the whisper number.
- Meanwhile, production reached 362,615 units, a 16% decline yr/yr. The drop was primarily fueled by the changeover of Model Y lines across four of the company's factories, leading to the loss of several weeks of production.
- Tesla added that the ramp of the new Model Y continues to progress well. With the vehicle being the best-selling SUV of the past two years, the refresh is critical to sustaining this upbeat demand.
Bottom line, Q1 deliveries were lackluster. However, this was not overly shocking given the string of reports ahead of the announcement today touching on how sales are struggling across the globe. With Elon Musk stepping away from his role within the Trump administration, perhaps the recent pronounced selling pressure will finally begin to ease. |
