Market Snapshot
| Dow | 40669.36 | +141.74 | (0.35%) | | Nasdaq | 17446.34 | -14.98 | (-0.09%) | | SP 500 | 5569.06 | +8.23 | (0.15%) | | 10-yr Note |
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| | NYSE | Adv 1146 | Dec 1431 | Vol 1.5 bln | | Nasdaq | Adv 1891 | Dec 2410 | Vol 8.6 bln |
Industry Watch
| Strong: Consumer Staples, Health Care |
| | Weak: Communication Services, Information Technology, Energy, Consumer Discretionary, Utilities |
Moving the Market
-- Q1 GDP report fuels stagflation concerns
-- Pleasing inflation readings with March PCE Price Index and core-PCE Price Index
-- Digesting big batch of earnings news
-- Waiting on earnings from Microsoft (MSFT) and Meta Platforms (META) after the close
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Closing Summary
30-Apr-25 16:20 ET
Dow +141.74 at 40669.36, Nasdaq -14.98 at 17446.34, S&P +8.23 at 5569.06
[BRIEFING.COM] The stock market initially gave back some of its recent gains today. The rebound mentality was still present, however, leading major equity indices to close well off session lows.
The S&P 500, which dropped as much as 2.3% at its low, closed 0.2% above its prior close.
The initial drop was driven in part by stagflation concerns following a disappointing Q1 GDP report, which showed a 0.3% contraction in growth alongside a 3.7% rise in the GDP Price Deflator. A modest increase of 62,000 private payrolls in April, per the ADP Employment Change Report, added to the unease.
Another headwind for stocks today was consumer spending anxiety amplified by underwhelming earnings from Starbucks (SBUX 80.05, -4.80, -5.7%) and Norwegian Cruise Line Holdings (NCLH 16.03, -1.35, -7.8%), raising questions about discretionary demand.
The subsequent recovery off session lows in the major indices coincided with the 10:00 a.m. ET release of the March Personal Income and Spending Report, which showed flat month-over-month readings for both the headline and core PCE Price Index—offering a touch of relief on the inflation front.
Seven S&P 500 sectors ultimately closed in the green while four sectors registered declines. The health care (+0.9%) and industrial (+0.8%) sectors led the pack while the energy (-2.6%) and discretionary (-1.1%) sectors saw the largest declines.
Reviewing today's economic data:
- Mortgage Applications Index -4.2% wk/wk, with refinance applications down 4% and purchase applications down 4%.
- The April ADP Employment Change Report showed an estimated 62,000 jobs were added to private-sector payrolls (Briefing.com consensus 128,000), and the pay for job-stayers rose 4.5% year-over-year, which was a slight deceleration from March.
- The Q1 Employment Cost Index was up 0.9%, as expected, for the three-month period ending in March 2025, following a 0.9% increase for the three-month period ending in December 2024. Wages and salaries increased 0.8%, versus 1.0% for the prior quarter, and benefit costs jumped 1.2%, versus 0.8% for the prior quarter.
- The key takeaway from the report is that employment costs have softened year-over-year, with compensation costs increasing 3.6% for the 12 months ending in March 2025, versus 4.2% for the 12 months ending in March 2024.
- The Adv. Q1 GDP report showed a 0.3% decline in real GDP (Briefing.com consensus 0.4%), with net exports subtracting 4.83 percentage points from growth, following a 2.4% increase in Q4. The GDP Price Deflator jumped 3.7% (Briefing.com consensus 3.1%) following a 2.3% increase in Q4.
- The key takeaway from the report is that there was obvious frontrunning of the tariff measures, which showed up in a 41.3% increase in imports. Separately, consumer spending growth was decent at 1.8%, yet that was a marked slowdown from the 4.0% growth seen in Q4.
- April Chicago PMI 44.6 vs. 46.0 Briefing.com consensus; prior 47.6.
- Personal income increased 0.5% month-over-month in March (Briefing.com consensus 0.4%) after increasing a revised 0.7% (from 0.8%) in February. Personal spending rose 0.7% month-over-month (Briefing.com consensus 0.4%) after increasing a revised 0.5% (from 0.4%) in February. The PCE Price Index was unchanged month-over-month (Briefing.com consensus 0.0%), which left it up 2.3% year-over-year versus a revised 2.7% (from 2.5%) in February. The core-PCE Price Index was also unchanged month-over-month (Briefing.com consensus 0.1%), which left it up 2.6% year-over-year versus a revised 3.0% (from 2.8%) in February.
- The key takeaway from the report is that it showed an acceleration in spending as consumers prepared for the implementation of tariffs. The PCE Price Index decelerated to 2.3% year-over-year from 2.7% while the core PCE Price Index decelerated to 2.6% year-over-year from 3.0%, making for a welcome sight.
- March Pending Home Sales up 6.1% (Briefing.com consensus -0.2%); prior revised to 2.1% from 2.0%
Looking ahead, market participants receive the following data on Thursday:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 225,000; prior 222,000) and Continuing Claims (prior 1.841 mln)
- 9:45 ET: Final April S&P Global U.S. Manufacturing PMI (prior 50.2)
- 10:00 ET: March Construction Spending (Briefing.com consensus 0.3%; prior 0.7%) and April ISM Manufacturing Index (Briefing.com consensus 47.9%; prior 49.0%)
- 10:30 ET: Weekly natural gas inventories (prior +88 bcf)
Treasuries settle with gains in April
30-Apr-25 15:35 ET
Dow -225.90 at 40301.72, Nasdaq -182.90 at 17278.42, S&P -42.21 at 5518.62
[BRIEFING.COM] The major equity indices are moving mostly sideways heading into the close.
The 10-yr yield settled unchanged at 4.18% and the 2-yr yield was four basis points lower at 3.62%. The 10-yr yield and 2-yr yield declined seven basis points and 29 basis points, respectively, since March.
Looking ahead, market participants receive the following data on Thursday:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 225,000; prior 222,000) and Continuing Claims (prior 1.841 mln)
- 9:45 ET: Final April S&P Global U.S. Manufacturing PMI (prior 50.2)
- 10:00 ET: March Construction Spending (Briefing.com consensus 0.3%; prior 0.7%) and April ISM Manufacturing Index (Briefing.com consensus 47.9%; prior 49.0%)
- 10:30 ET: Weekly natural gas inventories (prior +88 bcf)
Mega caps trade lower ahead of earnings
30-Apr-25 15:00 ET
Dow -401.23 at 40126.39, Nasdaq -175.90 at 17285.42, S&P -41.98 at 5518.85
[BRIEFING.COM] The Dow Jones Industrial Average is about 400 points lower.
Microsoft (MSFT 390.27, -3.67, -0.9%) and Meta Platforms (META 540.36, -14.08, -2.5%) are the headliners in today's earnings calendar.
Qualcomm (QCOM 147.66, +0.78, +0.6%) and KLA Corporation (KLAC 694.25, +6.30, +0.9%) are going against the downside grain, trading higher ahead of their earnings reports.
Other notable names reporting results tonight trade lower, including Allstate (ALL 195.95, -2.78, -1.4%), MGM Resorts (MGM 31.26, -0.54, -1.7%), and CH Robinson (CHRW 88.15, -0.17, -0.2%).
S&P 500 slips as First Solar, Garmin, Edison drag; Seagate Tech rallies on earnings
30-Apr-25 14:30 ET
Dow -95.64 at 40431.98, Nasdaq -149.63 at 17311.69, S&P -30.11 at 5530.72
[BRIEFING.COM] The S&P 500 (-0.54%) is in second place on Wednesday afternoon, down now about 30 points.
Briefly, S&P 500 constituents First Solar (FSLR 124.54, -12.70, -9.25%), Garmin (GRMN 185.22, -18.88, -9.25%), and Edison (EIX 53.55, -5.18, -8.82%) pepper the bottom of the average following earnings.
Meanwhile, Seagate Tech (STX 89.04, +7.44, +9.12%) is atop the standings following earnings.
Gold ends April up +5.4% despite final-session dip on stronger dollar and easing trade tensions
30-Apr-25 14:00 ET
Dow -147.69 at 40379.93, Nasdaq -187.96 at 17273.36, S&P -35.84 at 5524.99
[BRIEFING.COM] With about two hours to go on Wednesday, and in the trading month of April, the Nasdaq Composite (-1.08%) is poised to end on a down note whilst flipping gains to losses on the final session (-0.15% MTD).
Gold futures settled $14.50 lower (-0.4%) at $3,319.10/oz, ending the month up +5.4%, today's dip primarily owing to a strengthening U.S. dollar and a de-escalation in trade tensions following President Trump's decision to ease auto tariffs and secure a trade agreement, which reduced gold's appeal as a safe-haven asset.
Monthly gains were facilitated by persistent global economic uncertainties, including U.S.-China trade tensions and geopolitical risks while the anticipation of potential Federal Reserve rate cuts, with traders pricing in approximately 95 basis points of easing by year-end, enhanced gold's attractiveness, as lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.
Meanwhile, the U.S. Dollar Index is up about +0.3% to $99.50.
Booking Holdings trades flat despite Q1 upside, seeing some changes in certain travel patterns
Booking Holdings (BKNG +0.8%) is trading roughly flat despite the online travel reservation giant reporting big upside with its Q1 report last night. Both revenue and adjusted EBITDA exceeded the high end of prior guidance. BKNG also guided to in-line revs for Q2. Despite the impressive results, we think some metrics and cautious commentary on the call are offsetting the strong results to some degree.
- In terms of Q1 metrics, room nights grew 7.2% yr/yr to 319 mln. This was BKNG's first quarter to exceed the 300 mln market, so that was an important milestone. This also slightly exceeded the high end of prior guidance. However, the 7.2% growth was below yr/yr growth in Q3 (+8.1%) and Q4 (+13.2%). It was a similar story with rental car days. Airline tickets saw growth of 44.8% to 16 mln units, which was down from Q4 on a yr/yr basis.
- While BKNG was encouraged by its Q1 results and the relative stability of trends seen thus far in Q2, the company recognizes the current geopolitical/macro uncertainty. There are concerns about the strength of consumer demand. However, BKNG believes its global diversification positions it well to navigate potential changes. BKNG remains confident in the long-term outlook for the travel industry.
- BKNG has observed notable changes in certain travel patterns. For example, it saw a moderation in trends for inbound travel into the US, particularly from bookers in Canada and to a lesser extent from Europe. However, it did see an improvement in trends in other travel corridors resulting in stable growth overall.
- Also, while it saw a yr/yr increase in length of stay on a global basis, it saw a decrease in length of stay in the US which could indicate that US consumers are becoming more careful with their spending. Looking ahead to Q2, BKNG continues to see stable travel demand trends but that could change.
Overall, BKNG's business seems to be holding up in the near term, but BKNG sounded cautious that view could change. This caution is weighing on other travel stocks: ABNB -4.5%, EXPE -3.6%.
Caterpillar posts downside Q1 results as construction and mining weakness fuels margin squeeze (CAT)
Caterpillar (CAT) is crawling lower after the heavy construction equipment manufacturer fell short of 1Q25 EPS and revenue expectations as the company continues to grapple with declining sales volume and margin compression. Each of CAT's three primary operating segments experienced yr/yr sales declines in Q1, but the Construction Industries (CI) unit was especially weak as sales plunged by 19% with weak demand seen in both residential and non-residential construction markets. More so than CAT's other businesses, high borrowing costs and inflation are weighing on CI.
One notable positive is that backlog grew by a record $500 mln in Q1, signaling strong underlying customer demand and ensuring revenue visibility for FY25 and beyond. In the near-term, though, ongoing dealer inventory reductions are likely to pressure sales, offering little relief for sales. In Q1, machine dealer inventory declined significantly, contributing a $600 mln sales headwind in CI alone.
- Driven by a 10% drop in total sales and a 390-bps decrease in adjusted operating profit margin to 18.3%, Q1 EPS declined by 24% yr/yr to $4.25. Although CAT didn't offer specific EPS guidance, the company stated that Q2 adjusted operating margin is expected to be lower on a yr/yr basis, primarily due to lower price realization and tariff-related cost headwinds of $250-$350 mln.
- From a demand standpoint, the story continues to revolve around declining sales volume. In Q1, sales volume in Machinery, Energy & Transportation fell by $1.10 bln, pressured by lower sales to users and dealer inventory drawdowns in CI and Resource Industries (RI). Unfavorable price realization was less of a factor overall, although CI did experience a $250 mln pricing headwind, reflecting aggressive post-sales merchandising programs and competitive pressures.
- CI was the clear laggard in Q1, but it was hardly alone. Sales in RI fell by 10% to $2.88 bln due to reduced mining equipment demand and changes in dealer inventories. Softer commodity prices and lower mining activity (outside of precious metals) are constraining demand for equipment.
- An area of relative strength continues to be Energy & Transportation (E&T). Sales in this segment were down by only 2% to $6.57 bln with price providing a $255 mln benefit. Similar to recent past quarters, robust demand for power generation equipment, particularly for data centers, is providing some resilience. However, weakness in oil and gas, driven by lower rig activity, is offsetting those gains.
CAT's Q1 results reflect a challenging environment marked by lower sales volume, unfavorable pricing, and margin compression, driven primarily by weak construction and mining demand. Headwinds, including tariffs, high borrowing costs, and competitive pricing, will continue to pressure results in Q2. In a scenario featuring negative economic growth in 2H25, CAT expects FY25 revenue to decline modestly on a yr/yr basis, supported by a record backlog. Still, the outlook remains murky as negative dealer inventory trends and rising macro-related uncertainty present obstacles for growth.
Starbucks' profits plunge as "Back to Starbucks" investments take a toll in Q2 (SBUX)
Looking for a jolt from the "Back to Starbucks" turnaround plan, Starbucks' (SBUX) investors were instead served another lackluster earnings report that highlighted the coffee chain's struggles, especially relating to driving traffic to its stores. Following an encouraging 1Q25 earnings report in which SBUX modestly topped EPS and revenue expectations, the company fell short on both the top and bottom-lines in 2Q25. Once again, SBUX refrained from providing formal guidance, but it did reiterate that it expects EPS to improve in 2H25 as the "Back to Starbucks" initiative gains traction.
- EPS declined by nearly 40% yr/yr to $0.41, badly missing estimates, as a combination of weaker-than-expected comparable sales and significant increases in costs associated with the "Back to Starbucks" plan caused non-GAAP operating margin to plunge by 460-bps to 8.2%. The increased costs are mostly associated with staffing expenses and increased investments in store experience and technology.
- Shortly after Brian Niccol took over as CEO last September, he implemented the "Back to Starbucks" initiative, which aims to reestablish SBUX as the premier coffeehouse by enhancing the customer experience, investing in labor, training, and technology, and simplifying the menu. So far, the substantial investments required for the turnaround effort are outweighing the benefits in terms of revenue growth and comps, and many are now wondering when the plan will translate into traffic growth and margin expansion.
- SBUX's Q2 comp declines reveal a continuation from previous quarters with negative transaction growth signaling persistent traffic challenges. However, the trend is improving as global comparable sales decreased by just 1% on a 2% drop in transactions (traffic), compared to last quarter's 4% decrease on a 6% drop in transactions. Likewise, North America comps were down 1% in Q2 with transactions down 4%, versus a 4% decrease in comps last quarter with transactions down 6%.
- In North America, SBUX has leaned on price increases to push comps higher, as illustrated by a 3% increase in average ticket in Q2. The concern, though, is that further price increases could face consumer resistance, potentially exacerbating traffic declines. In China, the opposite trend is unfolding as traffic increased by 4%, offset by a 4% decrease in average ticket. Rising competition in China from local competitors vying for market share is putting downward pressure on prices.
While SBUX maintains that the "Back to Starbucks" initiative is progressing as planned, its Q2 results offer limited tangible evidence of a significant positive impact on traffic or profits. The company is still navigating through strong headwinds, primarily reflected in the ongoing decline in customer traffic. Average ticket growth is providing some relief, but that is not a sustainable long-term growth driver on its own. SBUX reiteration of the back-half EPS improvement offers some reassurance, but investor confidence likely won't be restored until the underlying performance shows meaningful improvement.
Seagate Tech is finding its sea legs, robust guidance/commentary eases concerns about tariffs (STX)
Seagate Tech (STX +9%) is making a strong move following upside Q3 (Mar) results last night. The data storage giant reported its fourth consecutive double-digit EPS beat. Revenue jumped 30.5% yr/yr but was down 7% sequentially to $2.16 bln, a bit better than expected. What really stood out was robust guidance for Q4 (Jun). There had been worries that macro concerns might be pressuring clients' decision making, but this guidance eases those concerns.
- STX currently forecasts minimal direct impact from tariff policies. However, it will be monitoring for secondary impacts, including changes in customer demand. As of now, current demand indicators remain intact, particularly among global cloud customers. In MarQ, cloud nearline revenue and exabytes were up nearly 10% sequentially and almost double from a year ago amid a very tight supply environment.
- The growing demand for mass capacity storage aligns with the cloud CapEx investment cycle and ongoing build-out of data center infrastructure to support AI.
- The company explained that hard drives store close to 90% of the bits in large-scale data center deployments. For example, STX noted that Google recently unveiled details about their foundational Colossus storage system, highlighting the use of SSDs for fast data access while depending on hard drives for mass storage and data retention due to their scalability and cost benefits. This hybrid storage strategy is particularly vital for AI workloads that require access to massive data sets.
- Looking ahead, STX sees nearline exabyte demand looking strong through calendar 2025. Importantly, STX also has visibility of demand with several customers into the first half of calendar 2026. Seagate feels it's in a strong position to address the favorable demand outlook as it ramps shipments of its high capacity drives.
We think the main reason the stock is higher today is the robust upside guidance. Given the macro fears about tariffs, we think investors would have been happy with in-line guidance. However, the sharp upside was a pleasant surprise. We also think good guidance from its peer Western Digital (WDC +4.5%) was encouraging as well. The concern on tariffs was not so much higher costs for Seagate, but rather that its clients might slow orders. However, it sounds like demand looks good, fueled by the AI infrastructure buildout.
Spotify out of tune as premium subscriber growth is overshadowed by soft Q2 guidance (SPOT)
Spotify (SPOT) is out of tune today after badly missing 1Q25 EPS expectations and issuing downside Q2 revenue guidance of €4.3 bln, halting the stock's long-standing bullish momentum. Staying true to recent form, the premium subscription business performed quite well as strong subscriber gains and price hikes drove a 16% yr/yr increase in premium revenue to €3.77 bln. Those price hikes pushed ARPU higher, which, alongside favorable music content costs, drove gross margin higher by 400-bps yr/yr to 31.6%.
However, social charges of €76.0 mln came in significantly higher than anticipated and offset a decline in personnel and marketing costs, leading to the EPS miss. Social charges, which refer to payroll taxes associated with employee salaries and benefits, were above forecast due to share appreciation during the quarter. More worrisome, though, is SPOT's soft Q2 revenue guidance that suggests a slowdown in advertising spending is underway, and the downside MAU forecast of 689 mln, representing a yr/yr increase of 10%.
- Although SPOT has made major strides in profitability over the past few years, the company has now missed EPS expectations in each of the past three quarters. This underperformance relative to expectations puts SPOT's execution under the spotlight. Unfavorable FX impacts are also complicating matters as a strengthening Euro against other currencies is creating a top-line headwind that's funneling down the income statement.
- The good news is that premium subscriber growth remains robust at +12% yr/yr to 268 mln, marking SPOT's second highest Q1 net addition in its history. Even as the company hikes prices in various markets, churn has been minimal, indicating strong pricing power. Whether SPOT begins to experience a slowdown in premium subscriber growth, and/or an increase in churn in the coming quarters, will be closely monitored as consumers continue to tighten their budgets.
- Total MAU's grew by 10% yr/yr to 678 mln, matching SPOT's expectations, highlighting the stickiness of the platform and the company's ability to attract new users. The freemium model also continues to be an effective funnel for acquiring premium subscribers.
SPOT's Q1 report revealed strong execution in key areas like premium subscriber growth and gross margin expansion, suggesting the company's focus on profitability continues to yield positive results. However, the downside Q2 revenue guidance shows that SPOT is not immune to macroeconomic headwinds and currency fluctuations.
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