Market Snapshot
| Dow | 42206.82 | +35.16 | (0.08%) | | Nasdaq | 19447.42 | -98.86 | (-0.51%) | | SP 500 | 5967.84 | -13.03 | (-0.22%) | | 10-yr Note |
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| | NYSE | Adv 1375 | Dec 1411 | Vol 3.07 bln | | Nasdaq | Adv 1898 | Dec 2629 | Vol 10.1 bln |
Industry Watch
| Strong: Energy, Utilities, Financials, Consumer Staples, Industrials |
| | Weak: Health Care, Materials, Communication Services |
Moving the Market
-- President Trump to determine approach to Iran over the next two weeks
-- Fed Governor Waller hints at potential rate cut in July
-- Quarterly options expiration
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Closing Stock Market Summary
20-Jun-25 16:30 ET
Dow +35.16 at 42206.82, Nasdaq -98.86 at 19447.42, S&P -13.03 at 5967.84
[BRIEFING.COM] The major indices started this quarterly options expiration day on a positive note, bolstered by President Trump's remark that he will decide on a final course of action with respect to Iran over the next two weeks and Fed Governor Waller's (FOMC voter) belief that he doesn't think there will be tariff inflation and that the Fed could cut rates as early as July.
Mr. Waller was careful to indicate that this is only his view and that he isn't speaking for the Fed. Fittingly, Richmond Fed President Barkin (non-FOMC voter) came out later in the day and said he sees no rush to cut rates amid the tariff uncertainty and resilient economy. The fed funds futures market continued to see it Mr. Barkin's way. A day ago there was a 12.5% probability of a 25 basis point cut at the July FOMC meeting, and notwithstanding Mr. Waller's more hopeful view, the probability of a 25 basis point cut rose to only 14.5% today, according to the CME FedWatch Tool.
The stock market was unable to sustain the positive demeanor seen at today's open, as many stocks succumbed to some profit-taking interest. Kroger (KR 71.97, +6.45, +9.84%), CarMax (KMX 68.57, +4.24, +6.59%), and Darden Restaurants (DRI 225.78, +3.03, +1.36%) were not among them, as they all responded positively in the wake of reporting earnings results.
Notably, the mega-cap cohort and the semiconductor stocks underperformed today, evidenced by a 0.4% decline in the Vanguard Mega Cap Growth Index Fund (MGK 348.17, -1.94, -0.55%) and a 0.8% decline in the Philadelphia Semiconductor Index.
Semiconductor stocks were undercut by a Wall Street Journal report that the Trump administration is planning to revoke waivers that allow chip companies to use American chipmaking technology in China.
The weakness in the semiconductor stocks weighed on the information technology sector (-0.3%), but it was the communication services sector (-1.9%) that took the biggest hit today as its biggest components traded lower.
Alphabet (GOOG 167.73, -6.25, -3.59%) got clipped in part by the news that the Advocate General in the Google Android case in the EU Court proposed that the Court of Justice dismiss Google's appeal and confirm the new fine of EUR4.124 billion set by the General Court. Meta Platforms (META 682.35, -13.42, -1.93%) was jostled by reports that it had previously considered buying Perplexity and that it had attempted to acquire Safe Superintelligence.
The energy sector (+1.1%) was the strongest performer today, as oil prices moved higher in some anxious trading going into the weekend. WTI crude futures rose $0.38, or 0.6%, to $73.88/barrel.
In related news, AP reported that today's meeting between European ministers for foreign affairs and their counterpart in Iran did not produce any breakthrough but that the European representatives expressed a willingness to meet again in the future.
The Treasury market, for its part, had a bit of a roller-coaster trade. The 10-yr note yield moved as high as 4.44% from an overnight low of 4.36% but settled the session at 4.38%, down two basis points from Wednesday's settlement. The 2-yr note yield went as high as 3.96% but settled the session down three basis points at 3.91%.
Breadth figures reflected an otherwise mixed disposition in today's trade, with neither buyers nor sellers showing a great deal of conviction. Decliners led advancers by a slim margin at the NYSE, while decliners outpaced advancers by a roughly 13-to-9 margin at the Nasdaq.
- S&P 500: +1.5% YTD
- Nasdaq: +0.7% YTD
- DJIA: -0.8% YTD
- S&P 400: -3.1% YTD
- Russell 2000: -5.4% YTD
Reviewing today's economic data:
- The Philadelphia Fed Index hit -4.0 in June (Briefing.com consensus 0.3) unchanged from May.
- The Conference Board's Leading Economic Index was down 0.1% in May (Briefing.com consensus -0.1%) after falling a revised 1.4% (from -1.0%) in April.
Market sees Fed standing pat at July FOMC meeting
20-Jun-25 15:35 ET
Dow -35.80 at 42135.86, Nasdaq -121.96 at 19424.32, S&P -20.16 at 5960.71
[BRIEFING.COM] The market has tracked mostly sideways in the past 30 minutes, which leaves the major indices below their unchanged lines. The Nasdaq Composite (-0.6%) has been the weakest of the bunch, weighed down by some profit-taking among the mega-cap stocks and semiconductor shares.
Elsewhere, plenty of attention was paid earlier today to Fed Governor Waller's view that he isn't worried about tariffs driving up inflation and that he thinks (his view only) the Fed could cut rates as early as July based on his position.
Mr. Waller is an FOMC voter and is looked at by some as a possible candidate to replace Fed Chair Powell when his term ends; hence, the market got a nice boost from his remarks. Ultimately, the market did not sustain its positive bias, as it is clear to the market that Mr. Waller is still in a minority position as it relates to his rate-cut view and that Fed Chair Powell himself said earlier in the week that he expects to see a meaningful pickup in tariff inflation in the coming months.
The fed funds futures market looks to be adhering more to the Fed Chair's view. Notwithstanding Mr. Waller's belief, the probability of a rate cut at the July FOMC meeting rose only slightly to 14.5% from 12.5% a day ago, according to the CME FedWatch Tool.
Conviction lacking
20-Jun-25 15:05 ET
Dow -19.57 at 42152.09, Nasdaq -125.35 at 19420.93, S&P -20.22 at 5960.65
[BRIEFING.COM] The stock market is trading with a mixed to slightly negative disposition heading into the final hour of trading this week. Neither buyers nor sellers are showing much conviction, which is understandable given the potential for an escalation in the Israel-Iran conflict over the weekend when markets are closed.
Earlier, AP reported that today's meeting between European ministers for foreign affairs and their counterpart in Iran did not produce any breakthrough but that the European representatives expressed a willingness to meet again in the future.
WTI crude futures settled today up 0.4% to $73.83/bbl in an anxious trade going into the weekend.
Breadth figures show advancers and decliners roughly even at the NYSE and decliners leading advancers by a nearly 4-to-3 margin at the Nasdaq.
S&P 500 slips as steel, consulting stocks weigh; BLDR rallies on GMS buyout buzz
20-Jun-25 14:30 ET
Dow +46.62 at 42218.28, Nasdaq -67.27 at 19479.01, S&P -6.18 at 5974.69
[BRIEFING.COM] The S&P 500 (-0.10%) is in a familiar second place on Friday afternoon.
Briefly, S&P 500 constituents Steel Dynamics (STLD 124.00, -5.11, -3.93%), Cognizant Tech (CTSH 76.07, -3.07, -3.88%), and Albemarle (ALB 57.24, -2.16, -3.64%) dot the bottom of the standings. STLD slips as investors focus on near-term margin pressure and soft steel demand flagged by Morgan Stanley and KeyBanc analyst notes, while fresh Canadian tariff threats on U.S. steel imports add to trade uncertainty, weighing further on sentiment. For its part, consulting firm CTSH falls in sympathy to Accenture's (ACN 285.09, -21.29, -6.95%) declines post results,
Meanwhile, Builders FirstSource (BLDR 113.25, +6.40, +5.99%) is one of today's top gain getters, rallying in sympathy with GMS (GMS 100.81, +19.80, +24.44%) after reports of a potential bidding war involving Home Depot (HD 350.88, +3.85, +1.11%) and QXO (QXO 24.48, +1.98, +8.80%) for the building-products distributor. Investors are betting that industry consolidation could elevate BLDR's strategic value.
Gold falls nearly 2% on week as Fed caution, easing haven demand offset Mideast tensions
20-Jun-25 14:00 ET
Dow -55.04 at 42116.62, Nasdaq -119.58 at 19426.70, S&P -19.55 at 5961.32
[BRIEFING.COM] The Nasdaq Composite (-0.61%) is today's worst-performing major average, trimming this week's gains to about +0.1%.
Gold futures settled $22.40 lower (-0.7%) at $3,385.70/oz, down about -1.9% on the week, as a stronger U.S. dollar and sticky Treasury yields undercut the yellow metal's appeal. The Fed's caution around rate cuts compounded pressure, even as geopolitical tensions in the Middle East lingered. Yet, easing haven demand, fueled by diplomacy ahead of potential U.S. involvement, and technical profit-taking after recent highs outweighed supportive safe-haven flows.
Meanwhile, the U.S. Dollar Index is now down about -0.1% to $98.65.
CarMax heads higher on impressive Q1 EPS beat following rough Q4 results (KMX)
CarMax (KMX +6%) is driving in high gear today after getting FY26 off to a good start. The nation's largest retailer of used autos reported big EPS upside with its Q1 (May) report this morning. KMX earnings have been volatile lately. It had big EPS upside in Q3, then a Q4 miss and today a huge beat. Part of the issue is KMX does not guide, so analysts are a bit in the dark.
- Revenue rose 6.1% yr/yr to $7.55 bln, which was slight upside. Combined retail and wholesale used vehicle unit sales were 379,727, an increase of 5.8% yr/yr. Total retail used vehicle unit sales increased 9.0% to 230,210. Comparable store used unit sales increased +8.1%.
- Total retail used vehicle revenue increased 7.5% yr/yr, driven by the increase in retail used units sold. Wholesale unit sales were up 1.2% yr/yr, although average wholesale selling price declined approximately $150 per unit to $8,000.
- KMX said was it pleased it delivered its fourth consecutive quarter of positive retail comps and double-digit yr/yr EPS growth. Importantly, KMX was pleased that all three months were positive. April ended up being the strongest month in Q1 with tariff concerns likely playing a role. In terms of the outlook for the rest of the year, KMX feels like it's in a good position. KMX expects to continue to grow sales and continue to gain market share.
Investors are reacting positively to KMX's Q1 results and with good reason. This was its largest EPS upside of any quarter in the past two years. Its earnings are known to be pretty volatile, partly because management does not guide and partly because gauging consumer demand for used vehicles can be difficult from quarter-to-quarter. Tariffs on foreign-made vehicles added another wrinkle, making this a difficult quarter to predict.
On a final note, sentiment was running quite low heading into this report as evidenced by the sharp pullback in the share price since early March. We think a lot of that was related to tariffs and the potential impact on the used car market. However, the impact did not seem to be too great.
We thought that the tariffs on foreign vehicles might spur demand for used cars in the US. However, offsetting that is that we have a cautious consumer worried about the macro economy and job security. All of this made for a difficult quarter to predict, but it was better than expected.
Darden Restaurants modestly higher as robust comps offset muted FY26 EPS/revs guidance (DRI)
Darden Restaurants (DRI +2%) is trading modestly higher after wrapping up FY25 on a decent but not great note with its Q4 (May) report this morning. This operator of several restaurant chains (Olive Garden, LongHorn Steakhouse, Ruth's Chris, Chuy's) reported fairly modest EPS upside. However, given the misses and very small beats in recent quarters, this was a step up from that.
- Unfortunately, the FY26 guidance was not great with a downside outlook for both EPS and revs. We suspect that investors know that DRI tends to be conservative with guidance, especially this early in the fiscal year, so they are not overly concerned about it. Also, its FY26 consolidated same-restaurant sales guidance at +2.0-3.5% was pretty solid and a step up from +2.0% consolidated comps for all of FY25. We actually view the comp guidance as quite bullish.
- Turning to comps, DRI posted Q4 consolidated comps of +4.6% (OG +6.9%, LS +6.7%, Fine Dining -3.3%), a notable improvement from recent quarters: Q3 (Feb) comps were +0.7% (OG +0.6%, LS +2.6%, Fine Dining -0.8%) and Q2 (Nov) came in at +2.4% (OG +2.0%, LS +7.5%, Fine Dining -5.8%).
- Olive Garden was impressive in Q4. DRI cited the return of its Buy One, Take One offer for the first time in five years, combined with continued strength in off-premise. The take home selections leveraged OG's existing $6 take home platform, minimizing operational complexity. OG's recent Uber partnership has been a success with average weekly deliveries nearly doubling late in the quarter. Also, OG's marketing was more targeted.
- LongHorn did well also and continues to increase market share with sales growth exceeding the industry same-restaurant sales benchmark. However, Fine Dining comps were negative as the industry continues to be challenged.
We see a lot of cross-currents in Darden's Q4 report. There were a number of positives. The $0.02 EPS upside was a decent step up from recent quarters, which included some misses and even smaller upside quarters. Probably the biggest positive was the robust comps in Q4, led by its two largest banners, Olive Garden and Longhorn. The was a big improvement from recent quarters. We also think the FY26 comp guidance was a big positive as well.
In addition to all that, DRI announced a 7% dividend increase and a $1 bln share buyback authorization. The main negative was the downside EPS and revenue guidance for FY26. Overall, we think the positives outweigh the negatives. However, the stock has been steadily rising in recent months, which tells us sentiment was running pretty high heading into this report and that may account for the somewhat muted stock reaction.
GMS heads sharply higher as Q4 was better-than-feared and a bottom may be near (GMS)
GMS Inc. (GMS +12%) is heading sharply higher following a healthy EPS beat with its Q4 (Apr) report this morning. This building products distributor (wallboard, ceilings, steel framing etc.) reported a 5.6% yr/yr drop in revenue to $1.33 bln, however, that was in-line with the single analyst estimate.
- The company is pleased with its Q4 and FY25 results, despite deterioration in its end market conditions as it moved through the fiscal year. GMS said that commercial activity continues to be negatively impacted by high interest rates, the lack of available financing and general economic uncertainty contributing to soft starts and mixed results among commercial applications. GMS expects this dynamic to continue but moderate, with some recovery in its business towards the first half of calendar 2026.
- Despite pressures, there were areas of strength. Within commercial, current category strength continues to come from larger projects and those that are not as dependent on private financing, particularly those in public education, health care, and technology. Notably, a data center backlog extends well into 2026, and there is no indication of these projects slowing down in the near term.
- Also, GMS posted Q4 volume growth for Ceilings and Complementary Products. Ceilings performed particularly well given the continued benefits of the addition of its Kamco Supply acquisition. In addition, GMS has focused more on architectural specialties projects, which have higher average unit pricing. In Steel Framing, as suppliers navigate the latest tariff actions, GMS has received notices of upcoming manufacturer price increases.
A key statement that stood out to us was GMS saying it's cautiously optimistic that it is nearing the bottom of the cycle, although the intensity and duration of the downturn will vary by each end market. High interest rates and policy uncertainty are the primary impediments to growth. These factors are causing homebuyers to retreat to the sidelines, multifamily and commercial developers to pause or delay starts, and regional banks to increase commercial lending requirements for new projects and lend less overall.
Given all the macro headwinds, we think investors are pleased with GMS's Q4 report and its comments about FY26. GMS's market appears it will remain difficult in the near term, but management did provide some measure of optimism, saying it's nearing a bottom in the cycle.
Nucor and Steel Dynamics diverge in their guidance, but both say selling prices are rising (NUE)
Nucor (NUE +4%) and Steel Dynamics (STLD -1%) tend to both provide EPS guidance around the middle of the last month each quarter. And that was the case again this quarter. It was a little different this time because Nucor guided higher but Steel Dynamics guided lower. The two steelmakers tend to guide in the same direction, but not always.
- Nucor guided to Q2 EPS of $2.55-2.65, which was a good bit above analyst expectations. We did not get a ton of color from Nucor, but it did say earnings are expected to increase across all three of its operating segments, with the largest increase in the steel mills segment, which benefitted from higher average selling prices at its sheet and plate mills.
- On the other hand, Steel Dynamics guided to Q2 EPS of just $2.00-2.04, which is well below analyst expectations.
- Q2 profitability from its steel operations is expected to be significantly stronger than Q1, as metal spreads expanded with steel pricing increasing more than scrap raw material costs. Long product steel shipments improved sequentially, with flat rolled volumes contracting modestly due primarily to an inventory overhang from coated flat rolled steel imports.
- In terms of end markets, Steel Dynamics said that energy, non-residential construction, automotive, and industrial sectors continue to lead demand.
Despite the divergent guidance, the key similarity is that both steel companies are benefitting from higher selling prices. Also, selling prices appear to be increasing faster than scrap costs (a key input for mini-mills), which is resulting in expanding metal spreads. It just sounds like STLD is being impacted by a company-specific inventory overhang on the flat-rolled side. Taken all together, we think this guidance is generally positive for steelmakers.
La-Z-Boy roughly flat on mixed quarter, macro concerns and slow housing market hurts (LZB)
La-Z-Boy (LZB +1%) is trading roughly flat after wrapping up FY25 on a mixed note. This furniture retailer and manufacturer missed slightly on EPS for Q4 (Apr), but revenue grew 3.1% yr/yr to $570.9 mln, which was above the high end of prior guidance of $545-565 mln. However, the mid-point of Q1 (Jul) revenue guidance at $490-510 mln was light of analyst expectations. In fairness, Q1 is generally LZB's lowest sales and margin quarter of the year.
- The growth driver in Q4 was its Retail segment, with delivered revs up 8% yr/yr to $247 mln, led by new stores and acquisitions. During the quarter, LZB opened its 200th company-owned La-Z-Boy Furniture Galleries store, and it now owns 55% of the total network. Written same-store sales for Retail declined -5%, a notable drop from +7% in Q3 and -1% in Q2. LZB cited continued weakness in industry traffic, partially offset by higher average ticket and design sales.
- Wholesale segment sales (includes intersegment sales) increased 2% to $402 mln, driven by growth in its core North America La-Z-Boy wholesale business partially offset by the continued impact of a significant customer transition in its international wholesale business.
- In its digitally-native Joybird business, written sales trends decreased 21% yr/yr in Q4. LZB believes the Joybird consumer has been more significantly impacted by rising macro uncertainty and that this pressure is likely to persist in the near term. LZB says it's making appropriate adjustments to navigate during this time. Notably, LZB is seeing relatively stronger written trends in its Joybird physical stores where it can more fully serve the consumer.
- LZB said that stubbornly high mortgage rates and increased volatility in the economy negatively influenced consumer sentiment in Q4, which, hurt industry traffic. LZB expects economic uncertainty to continue challenging consumers in the near term. However, management noted that La-Z-Boy is an iconic brand in a highly fragmented market and it has navigated challenging times throughout its history. Also, a strong balance sheet helps.
- In terms of tariffs, approximately 90% of LZB's upholstered units sold in North America are produced in the US, with its Mexican operations supporting most of the balance. The vast majority of the products produced and exported out of Mexico are US MCA compliant and therefore not subject to tariffs. So that does not seem to be a big issue for them.
Overall, this was a pretty mixed quarter. Sales were much stronger than expected, especially later in the quarter. However, EPS was a bit weak and the guidance could have been better. Unfortunately, LZB is being impacted by a constrained consumer, who is looking at the macro picture and holding off on buying new furniture. Also, new home purchases are usually a big catalyst to buy new furniture, but the housing market is slow. So this is a rough time for LZB.
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