Market Snapshot
| Dow | 41603.07 | -256.02 | (-0.61%) | | Nasdaq | 18737.20 | -188.53 | (-1.00%) | | SP 500 | 5802.82 | -39.19 | (-0.67%) | | 10-yr Note |
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| | NYSE | Adv 1219 | Dec 1523 | Vol 1.01 bln | | Nasdaq | Adv 1776 | Dec 2594 | Vol 8.78 bln |
Industry Watch
| Strong: Utilities, Real Estate, Materials, Consumer Staples, Energy |
| | Weak: Technology, Consumer Discretionary, Communication Services |
Moving the Market
-- President Trump recommends straight 50% tariff on European imports starting June 1 due to slow negotiations; White House official says this is a way to gain negotiating leverage and that the stock market is overreacting to it
-- Treasuries rebound from recent weakness
-- Softness in the mega-cap stocks
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Closing Stock Market Summary
23-May-25 16:20 ET
Dow -256.02 at 41603.07, Nasdaq -188.53 at 18737.20, S&P -39.19 at 5802.82
[BRIEFING.COM] Capital markets had an excitable day following a few posts before the open from President Trump that fueled growth concerns and a heightened state of uncertainty about the tariff developments going into the holiday weekend.
The first post was a warning to Apple (AAPL 195.37, -5.99, -3.0%) that it will face tariffs of at least 25% on iPhones it intends to sell in the U.S. if they are not made in the U.S. The second post caused a bigger shock, as it conveyed the president's position that he will be recommending a straight 50% tariff on the EU, effective June 1, because "the trade talks are going nowhere."
The latter post, in particular, triggered a flight-to-safety to Treasuries that saw the yield on the 10-yr note drop from 4.54% to 4.45% in a hurry, and the yield on the 30-yr bond slide from 5.04% to 4.98%. Those moves, though, did not comfort the equity futures market, which took a risk-off turn at the same time the CBOE Volatility Index shot higher to 25.53 from yesterday's close of 20.28.
The Dow, Nasdaq, S&P 500, and Russell 2000 fell as much as 1.2%, 1.7%, 1.3%, and 1.7%, respectively, shortly after the open, pressured further by disappointing quarterly guidance and a lack of fiscal year guidance from retailers Deckers Outdoor (DECK 101.05, -25.04, -19.9%) and Ross Stores (ROST 136.99, -15.26, -10.0%).
Things took a calmer turn after CNBC reported that it was told by a White House official that the president's remarks should be viewed as negotiating leverage and that nothing has been implemented yet. The official also added that the stock market was overreacting to the news.
Separately, Treasury Secretary Bessent told Bloomberg TV that he is not worried about the rise in Treasury yields, observing that other countries' yields have increased further and that the move here could also be the bond market pricing in stronger growth because of the reconciliation bill.
The 10-yr note yield settled today's session at 4.51%, up seven basis points for the week, and the 30-yr bond yield settled at 5.04%, up 14 basis points for the week. The CBOE Volatility Index, meanwhile, backed down to 21.92 as of this writing.
The retreat in the stock market today was paced by Apple and the mega-cap stocks. Their relative underperformance manifested itself in the underperformance of the information technology (-1.3%), communication services (-1.0%), and consumer discretionary (-0.9%) sectors. The Vanguard Mega-Cap Growth ETF (MGK) declined 1.1%.
The rate-sensitive utilities sector (+1.2%) was the only sector to gain at least 1.0%.
Breadth figures showed decliners leading advancers by a 5-to-4 margin at the NYSE and by a roughly 13-to-9 margin at the Nasdaq.
U.S. markets will be closed Monday for Memorial Day.
- DJIA: -2.2% YTD
- S&P 500: -1.3% YTD
- Nasdaq: -3.0% YTD
- S&P 400: -4.6%
- Russell 2000: -8.5%
Reviewing today's economic data:
- New home sales surged 10.9% month-over-month in April to a seasonally adjusted annual rate of 743,000 units (Briefing.com consensus 679,000) from a downwardly revised 670,000 (from 724,000) in March. On a year-over-year basis, new home sales were up 3.3%.
- The key takeaway from the report is that new home sales in April were bolstered by a decline in the median sales price; however, the excitement surrounding the headline beat was muted by the sharp downward revision to new home sales for March. Taking that revision into account, there wasn't a great deal of change in the March-April period compared to what economists knew and expected going into the April report.
Equal-weighted S&P 500 outperforming market-cap weighted S&P 500
23-May-25 15:30 ET
Dow -217.50 at 41641.59, Nasdaq -165.84 at 18759.89, S&P -33.65 at 5808.36
[BRIEFING.COM] Markets will be closed Monday for the Memorial Day holiday. The major indices are chugging to the finish line this week with a flat tire.
Today, the equal-weighted S&P 500 (-0.3%) is outperforming the market cap-weighted S&P 500 (-0.6%), which is feeling the pressure of losses in Apple (AAPL 195.23, -6.13, -3.1%) after the president warned the company it will face a tariff of at least 25% on iPhones it sells in the U.S. if they are not made in the U.S.
Most mega-cap stocks, though, are on the softer side of things today after having had an impressive run of the April 7 low.
The Vanguard Mega-Cap Growth ETF (MGK) is down 1.0%.
A calmer market than before
23-May-25 15:00 ET
Dow -139.82 at 41719.27, Nasdaq -133.04 at 18792.69, S&P -24.24 at 5817.77
[BRIEFING.COM] The major indices have managed to recoup a decent portion of their opening losses, as a clarifying statement from a White House official earlier in the session calmed the market's excitable mood.
Specifically, a White house official told CNBC that the president's recommendation for a stright 50% tariff on the EU should be viewed as negotiating leverage and that the stock markret overreacted to the initial comment, adding that nothing has been inplemented yet.
That clarification seemed to calm the Treasury market's excitable state, too.
Nonetheless, the indices continue on track for a losing week with losses in the range of 1.9% to 3.3% for the major indices.
S&P 500 slips as Workday and Copart tumble post-earnings; Seagate rallies on analyst praise
23-May-25 14:25 ET
Dow -81.49 at 41777.60, Nasdaq -89.34 at 18836.39, S&P -13.99 at 5828.02
[BRIEFING.COM] The S&P 500 (-0.24%) is in second place on Friday afternoon, down about 14 points.
Briefly, S&P 500 constituents Workday (WDAY 239.89, -32.18, -11.83%), Copart (CPRT 54.07, -6.59, -10.86%), and Leidos (LDOS 152.20, -6.10, -3.85%) dot the bottom of the standings, WDAY and CPRT dipping after earnings.
Meanwhile, Seagate Tech (STX 112.20, +3.34, +3.07%) is outperforming after the stock garnered a few price target increases following yesterday's Analyst Day.
Gold surges 5.6% weekly as U.S. debt fears and trade tensions fuel safe-haven demand
23-May-25 14:00 ET
Dow -96.49 at 41762.60, Nasdaq -105.80 at 18819.93, S&P -17.74 at 5824.27
[BRIEFING.COM] The Nasdaq Composite (-0.56%) is in last place on Friday afternoon, down about 105 points.
Gold futures settled $70.80 higher (+2.1%) at $3,365.80/oz, ultimately up +5.6% on the week; investor anxiety over U.S. fiscal health escalated following the passage of a substantial tax-and-spending bill in the House, which is projected to significantly increase the national debt. This development, coupled with this week's Moody's downgrade of the U.S. credit rating and a weak Treasury bond auction, led to a decline in the U.S. dollar, enhancing gold's appeal to non-dollar investors. Additionally, President Trump's threats to impose a 50% tariff on the European Union and potential levies on overseas-manufactured iPhones escalated trade tensions, prompting investors to seek safe-haven assets like gold.
Meanwhile, the U.S. Dollar Index is down -0.8% today to $99.14.
Intuit surges on Q3 report on strong tax season, Credit Karma was a standout as well (INTU)
Intuit (INTU +9%) is sharply higher today after reporting a huge EPS beat with its Q3 (Apr) earnings report last night. It also guided above expectations for Q4 (Jul). Q3 is always a critical quarter for Intuit. It's the largest revenue quarter of the year for them because tax season triggers a lot of sales of Turbo Tax. INTU focuses on small businesses and consumers (QuickBooks, TurboTax, Credit Karma, Mailchimp).
- Consumer Group segment (TurboTax, both DIY and assisted) revenue grew a healthy 11% yr/yr to $4.0 bln. Intuit says it made significant progress in terms of disrupting the assisted tax category and winning in the DIY category. Intuit saw strong monetization across simple and complex tax filers, driving an expected 13% increase in average revenue per return (ARPR), as more customers choose its assisted offerings and faster access to refunds.
- Intuit expects pay-nothing customers to decline to 8 mln from 10 mln, as Intuit shifts its focus towards disrupting assisted tax, which resulted in yielding share with lower quality ARPR customers. Intuit expects Consumer Group revenue to grow 10% this year, driven by 24% growth in TurboTax Live customers, resulting in 47% growth in TurboTax Live revenue, well above its long-term expectation of 15-20%. ProTax (used by tax pros, accountants) revenue grew 9% in Q3.
- Outside of tax season, its largest segment is usually its Global Business Solutions Group (mostly QuickBooks and Mailchimp). GBSG revenue jumped 19% yr/yr to $2.8 bln. Its robust growth was largely consistent with prior quarters and broad-based across online accounting and online services. QuickBooks Online Accounting revenue grew 21% in Q3, driven by higher prices, customer growth, and mix shift. Intuit continues to prioritize disrupting the mid-market. Mailchimp has been a bit of a drag on GBSG segment revs. Mailchimp's revenue was flat in Q3 and Intuit continues to expect it will take several quarters to deliver improved outcomes at scale.
- Its Credit Karma segment was a laggard in FY23, but recovered nicely in FY24 and that has continued in FY25. Credit Karma revenue in Q3 grew 31% to $579 mln, driven by strength in credit cards, personal loans, and auto insurance. What makes the growth more impressive is that Intuit is lapping strong growth in auto insurance that began in Q3 last year.
Overall, this was a great quarter. Tax season is always critical for Intuit. What stood out to us is that the company made surprisingly strong inroads in terms of scaling up its higher margin assisted tax service. Also, more generally, its overall business sounds stable despite the macro/inflation pressures, which was evident with its upside Q4 guidance. What helps Intuit is that most of its customers are on the service side and not the product side, so there is some insulation from tariffs. Credit Karma was a another bright spot and its integration with Turbo Tax added to growth for its Consumer segment.
Deckers Outdoor getting decked as slowing growth, lack of FY26 guidance spooks investors (DECK)
Staying true to form, Deckers Outdoor (DECK) cruised past 4Q25 EPS expectations, continuing a five-year trend of consistent EPS beats. However, the footwear maker's yr/yr revenue growth sharply decelerated to 6.5% from the high-teen/low-twenty percent level it had been recently achieving. Making matters worse, DECK issued downside guidance for 1Q26 and opted to withhold FY26 guidance due to macroeconomic uncertainties and anticipated tariff impacts of up to $150 mln in cost of goods sold (COGS). Tariffs are expected to pressure gross margins by approximately 250 bps yr/yr without immediate mitigation from price increases or cost-sharing, contributing to investor concerns about future profitability.
- The slowdown in revenue growth, particularly for HOKA, marks a shift from DECK’s recent trajectory. HOKA’s 10% net sales increase to $586 mln in Q4 compares unfavorably to its 24% growth in Q3, 35% in Q2, and 30% in Q1. This deceleration stems from several factors, including model changeovers for key products like the Bondi 9 and Clifton 10, which led to increased price promotions and impacted average selling prices, though unit volumes remained strong. Additionally, a strategic shift toward wholesale expansion diluted direct-to-consumer (DTC) performance. DECK's DTC net sales decreased by 1.2% in Q4, while wholesale net sales for the company (which HOKA heavily contributes to) increased by 12.3% in the same quarter.
- Meanwhile, UGG Brand grew net sales by just 3.6% to $374.3 mln in Q4, a significant step down from 16% growth in Q3 and 13% in Q2. UGG’s slower growth reflects inventory constraints heading into Q4, limiting sales potential despite strong demand, particularly in international markets. Both brands face challenges from tougher yr/yr comparisons and macroeconomic pressures, including cautious U.S. consumer spending.
- DECK's downside 1Q26 guidance further disappointed investors. This outlook reflects post-tariff impacts without mitigation from planned price adjustments or cost-sharing with partners, which are not expected until after Q1. The company anticipates HOKA growth of at least low-double digits and UGG growth of at least mid-single digits, signaling continued moderation in growth rates.
- The decision to withhold FY26 guidance, citing trade uncertainty and potential tariff-related COGS increases, has heightened market unease. This lack of forward visibility, combined with concerns about U.S. consumer spending and potential margin compression, has spooked investors, as it deviates from DECK’s historical practice of providing clear annual guidance.
- DECK’s Q4 report showcased some notable positives, particularly in profitability. The company achieved a gross margin of 56.7% for Q4, up 50 bps from the year-earlier period, driven by DECK's disciplined inventory management and favorable product mix as it shifted toward higher-margin products, especially within HOKA’s premium offerings, despite some promotional activity tied to model changeovers.
DECK’s stock plunge reflects investor concerns over decelerating revenue growth, particularly HOKA’s slowdown to 10% in Q4, and disappointing Q1 guidance, which incorporates unmitigated tariff impacts. The decision to withhold FY26 guidance due to trade and macroeconomic uncertainties has amplified market fears, overshadowing a strong EPS beat and improved margins.
Workday plummets as soft outlook triggers growth concerns, overshadowing a strong 1Q26 (WDAY)
Workday (WDAY) delivered strong 1Q26 results with EPS of $2.23 comfortably exceeding expectations, continuing a consistent trend of significant EPS beats in recent quarters. The upside was primarily driven by healthy subscription revenue growth of 13.4%, disciplined cost management, and a notable expansion in non-GAAP operating margins. However, despite the strong EPS performance, WDAY is trading sharply lower, reflecting investor disappointment with the company’s cautious Q2 subscription revenue guidance, which was in-line with expectations at $2.16 bln, and its decision to reaffirm, rather than raise, its FY26 subscription revenue guidance of $8.8 bln.
- Subscription revenue, the cornerstone of WDAY’s business model and a critical demand metric for investors, grew 13.4% yr/yr to $2.059 bln, slightly exceeding the company’s guidance of $2.05 bln. This growth was propelled by strong adoption of WDAY’s AI-enhanced enterprise software solutions, particularly in financial services and healthcare, with notable customer wins and expansions among clients like Dover Corporation, Mutual of Omaha, and United Airlines.
- The introduction of new AI-driven products, such as Illuminate Agents and Evisort’s AI-powered contract management solutions, further supported revenue growth by addressing evolving customer needs. WDAY commented that "new annual contract value across AI products more than doubled yr/yr", indicating strong customer adoption of their AI offerings.
- However, the 13.4% yr/yr growth marks a deceleration from the 15.9% growth reported in 4Q25 and 18.8% in 1Q25, reflecting challenges such as moderating headcount growth across WDAY’s customer base and heightened deal scrutiny amid macroeconomic uncertainties. These factors have constrained demand in certain verticals, contributing to a more tempered growth trajectory despite the company’s strong product portfolio and focus on AI and international markets.
- WDAY’s non-GAAP operating margin expanded significantly to 30.2% in 1Q26, up from 25.9% in the same period last year, a 430-basis-point improvement that underscores the company’s focus on operational efficiency and cost discipline. This margin expansion was driven by several factors: scalable revenue growth from high-margin subscription services, reduced reliance on lower-margin professional services, and strategic cost management despite ongoing investments in AI, partner ecosystems, and international expansion.
- Reflecting confidence in sustained margin improvement, WDAY raised its FY26 non-GAAP operating margin guidance to 28.5% from 28.0%.
- Looking ahead, WDAY’s Q2 subscription revenue guidance of $2.16 bln, representing 13% yr/yr growth, met but did not exceed analyst expectations, contributing to investor skepticism about the company’s near-term growth prospects. This guidance reflects a further slowdown in growth. More notably, WDAY’s decision to reaffirm its FY26 subscription revenue guidance of $8.8 billion, rather than raising it, has fueled market disappointment, as investors had anticipated a more optimistic outlook given the Q1 beat.
WDAY’s Q1 results showcased its ability to consistently deliver sizable EPS beats, driven by healthy subscription revenue growth and significant margin expansion. However, the cautious Q2 and FY26 subscription revenue guidance, which only met expectations and was not raised, has overshadowed these achievements, contributing to a sharp post-earnings stock decline.
Advance Auto soars as turnaround shifts to higher gear, driving surprise Q1 EPS blowout (AAP)
Advance Auto (AAP) reported surprisingly strong 1Q25 results, crushing EPS expectations and edging past revenue estimates, igniting a skyrocket move higher for the stock. The huge gains also reflect low expectations amid a multi-year turnaround plan involving a massive store optimization program that includes closing over 500 corporate stores and exiting more than 200 independently owned locations. Furthermore, a relatively high short interest, estimated at 10–12% of the float, has amplified today’s rally through a short squeeze as bearish investors cover positions amid the unexpected beat.
Historically, AAP has underperformed competitors O'Reilly Automotive (ORLY) and AutoZone (AZO), which have consistently delivered operating margins of 18–20% compared to AAP’s low-to-mid single digit range, hampered by self-inflicted wounds such as supply chain inefficiencies, chronic out-of-stock issues, a higher cost structure, and the poor integration of past acquisitions (Carquest in 2013, General Parts Intl in 2014).
- The turnaround plan, initiated under CEO Shane O’Kelly in 2023, focuses on three pillars: store operations, merchandise, and supply chain, with key actions including the $1.5 bln sale of Worldpac to streamline the business and a multiyear supply chain consolidation to address inefficiencies. Until 1Q25, the plan showed limited progress, with prior quarters reflecting weak comps of -1.0% in 4Q24 and -2.3% in 3Q24, alongside disappointing earnings due to bloated expenses and soft demand.
- AAP's Q1 EPS beat stems from early benefits of supply chain improvements, cost reduction initiatives, and the completed store optimization program, which was executed ahead of schedule, reducing 727 locations to standardize operations and boost labor productivity. Still, AAP continues to face industry headwinds, including soft demand for DIY projects and discretionary items like performance parts and accessories, which have weighed on sales as consumers prioritize essential repairs.
- Q1 comps of -0.6% outperformed guidance of -2.0%, while also marking an improvement from recent quarters. The positive trend is primarily driven by strength in the Pro business, which saw eight consecutive weeks of U.S. Pro comp sales growth. The Pro segment, serving professional installers, benefited from improved inventory management and expanded hub store distribution, enhancing product availability. Strength was evident in core categories like brakes, filters, and batteries, which align with essential repair needs.
- AAP reaffirmed its FY25 guidance, projecting adjusted EPS of $1.50–$2.50, net sales of $8.40–$8.60 bln, with comparable store sales expected to range from +0.5% to +1.5%, signaling a return to positive growth. This reaffirmation bolsters investor confidence, as it suggests management’s belief in sustained progress despite prior skepticism about the turnaround’s viability. Before Q1, analysts and investors doubted AAP’s ability to close the performance gap with competitors, given its lower margins, but the reaffirmation, coupled with the Q1 beat, signals that supply chain and cost-cutting measures are gaining traction.
In conclusion, AAP's Q1 outperformance reflects notable success in its turnaround plan, driven by supply chain improvements, store optimization, and Pro segment strength, amplified by a short squeeze. However, risks persist, including ongoing DIY weakness, competitive pressures from ORLY and AZO.
The Big Picture
Last Updated: 23-May-25 17:13 ET | Archive
The Treasury market will tell the stock market where to go
Column Summary:
*Rising U.S. debt and deficits are pushing Treasury yields higher, raising investor concerns.
*Higher yields challenge stock valuations and make borrowing costlier for companies and consumers.
*Stronger earnings growth is needed to justify current stock valuations amid rising rates.
We have stressed often that earnings trends drive the stock market. When earnings are trending higher, the stock market tends to follow. When earnings are trending lower, the stock market may not follow that trend in direct lockstep, but it often gets locked on valuation concerns that interrupt its upward momentum and invite lower prices.
There may just be a new sheriff in town, though, dictating where the stock market goes. That would be the Treasury market.
Feeling Uncomfortable
U.S. Treasuries are deemed to be risk-free securities since they are backed by the full faith and credit of the United States of America, which is the steward of the world's reserve currency. There have been some rumbles recently, however, about how risk-free U.S. Treasuries really are.
Moody's downgraded the U.S. credit rating to Aa from Aaa, citing concerns about the increase in government debt and interest payment ratios hitting levels that are significantly higher than similarly rated sovereigns. It should be noted that the Moody's downgrade came years after Standard & Poor's and Fitch Ratings also cut their triple-A ratings for the U.S. In other words, the Moody's downgrade wasn't so much a shock in terms of its review of the U.S. fiscal situation as it was in terms of its timing.
It came in the midst of the House negotiating a reconciliation bill that some forecasting firms suggested could add as much as $5 trillion to the government's budget deficit over the next 10 years. The House ultimately passed the reconciliation bill in a 215-214 party-line vote, sending it over to the Senate for consideration. The Congressional Budget Office said that, before accounting for interactions, the House's version would add $2.3 trillion to deficits over the next decade and estimates it would add $3.1 trillion to the debt as it is written.
Buyers of Treasuries haven't felt entirely comfortable with such forecasts and have started to demand a higher term premium -- nothing exorbitant, mind you, but higher as they recognize more of the government's budget will need to be allocated to paying the interest on the U.S. debt, which currently stands at $36.9 trillion, or 123% of nominal GDP.
Time Will Tell
The 10-yr note yield, which stood at 4.00% in early April, recently went as high as 4.63%. It currently stands at 4.50%, which is actually seven basis points less than when the year began.
That is an important distinction when it comes to tempering just how fearful the market has been about the budget negotiations, but the trend matters, and there is a nervous tension in the market that it is going to continue higher since it isn't at all clear that the U.S. government's fiscal trajectory will improve soon.
The counterargument is that the tax-friendly provisions of the reconciliation bill will ignite increased growth that makes up the deficit gap with increased tax revenues resulting from the stronger growth.
Only time will tell if that is the case, but rest assured the Treasury market will be keeping time, and the stock market is going to know if it is time for the U.S. government to make a more concerted effort to get its spending under control.
How will it know? Treasury yields will head higher in an unhinged fashion with so-called "bond vigilantes" selling their positions and/or balking at buying new supply that lacks, in their judgment, an adequate term premium.
Briefing.com Analyst Insight
This is a situation that could play out slowly over time or happen suddenly. With moves in Treasury yields, it isn't always the level that stirs the stock market, as it is the pace of change. To that end, 4.50% is not a "high" yield, but considering it is up 50 basis points since early April, it has caused a stir that has slowed the stock market's recovery momentum. In the same vein, the 30-yr bond yield of 5.03% is not "high" either, but it is also up 60 basis points since early April.
Source: FactSet
The stir is that these yields for risk-free securities are creating increased competition for stocks, which are not risk-free, and which have pushed the market cap-weighted S&P 500's valuation back to a lofty 21.2x forward twelve-month earnings. That is a 16% premium to the 10-year average, according to FactSet -- a premium that will demand stronger earnings growth to sustain.
Source: FactSet
That will be an increasingly challenging proposition if rates continue to rise, making it more expensive for companies to finance their debt and more onerous for consumers to take on new debt and/or to service existing debt with a variable rate structure. In the end, this all gets back to earnings driving the stock market.
Interest rates matter, and they are at risk of rising further if inflation rates start to accelerate due to the tariff actions and/or changes to the reconciliation bill by the Senate increase deficit forecasts.
That could be a problem for the stock market and the U.S. government, particularly if the Treasury market thinks it is a problem.
-- Patrick J. O'Hare, Briefing.com
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