March 7, 2025
S&P 500 futures are up 0.3% in early trading, attempting a rebound after Thursday’s sharp selloff, which marked the S&P’s biggest pullback of the year for the second time this week. Big Tech continued to struggle, with Nvidia (NVDA) under heavy pressure, pushing the Mag 7 into correction territory. Asian markets were mostly lower, with Japan down over 2%, while European markets slipped ~0.7%. Treasuries firmed, with yields down ~2 bps, while the dollar index fell 0.4%. Gold was flat, Bitcoin futures fell 1%, rebounding slightly after an initial sell-the-news reaction to Trump’s crypto executive order. WTI crude rose 1.2%.
The market is looking for stabilization ahead of February’s nonfarm payrolls report and remarks from Fed Chair Powell, Williams, and Kugler. A beat-and-raise earnings report from Broadcom (AVGO) has helped improve sentiment in the AI space, while Gap (GPS) is another bright spot, outperforming after a series of weak retail updates. However, concerns persist over Trump’s aggressive trade policies, sticky inflation, negative earnings revisions, and systematic selling pressure from CTAs. Volatility is rising, with the VIX closing at its highest level of the year on Thursday, as growth concerns and capital rotations into European equities continue to weigh on U.S. markets.
Today’s employment report is expected to show 160K job gains in February (vs. 143K in January) with unemployment steady at 4.0%. Average hourly earnings are forecast to rise 0.3%, slowing from 0.5% in January. Markets are currently pricing in ~75 bps of Fed rate cuts for 2025. Looking ahead, next week brings NFIB small business sentiment and JOLTs job openings (Tuesday), CPI (Wednesday), PPI (Thursday), and Michigan consumer sentiment (Friday).
Corporate News
- Broadcom (AVGO) surged after beating earnings and raising guidance, citing AI revenue upside and two new AI partnerships.
- Costco (COST) comps were strong, led by non-food sales, though EPS slightly missed on lower operating margins.
- Hewlett Packard Enterprise (HPE) fell sharply after a gross margin miss, weak guidance, and warnings of tariff and pricing headwinds.
- Samsara (IOT) dropped on underwhelming Q4 NNARR, billings miss, and disappointing FY26 guidance.
- Cooper Companies (COO) reported weaker organic growth, dragged down by fertility revenue softness.
- Guidewire (GWRE) rallied on better-than-expected earnings and strong cloud momentum.
- Gap (GPS) jumped, with better comps at Gap and Old Navy, market share gains, and in-line Q1 guidance boosting sentiment.
U.S. equities ended sharply lower on Thursday, with the S&P 500 (-1.78%), Dow (-0.99%), Nasdaq (-2.61%), and Russell 2000 (-1.63%) all closing near session lows. The S&P 500 logged its sixth consecutive session with a move greater than 1%, marking its longest such streak since November 2020, and is on pace for its worst week since September. Big Tech was broadly weaker, while semiconductors, software, airlines, credit cards, asset managers, large-cap banks, and retail-investor favorites also lagged. Relative outperformers included integrated energy, managed care, machinery, agricultural chemicals, homebuilders, quick-service restaurants, auto suppliers, food & beverage, grocers (led by Kroger), household products, media, telecom, and China tech.
Tariff uncertainty continued to weigh on sentiment despite reports that Trump signed an executive order delaying tariffs on Mexico and Canada for one month for USMCA-eligible trade. However, Commerce Secretary Lutnick confirmed reciprocal tariffs would still go into effect on April 2, keeping investors cautious. Trump also ruled out modifications to steel and aluminum tariffs, limiting optimism about broader trade relief. The lack of clarity on the final scope of tariffs remains a key overhang for markets.
The AI trade remains under scrutiny after Marvell (MRVL) sold off on in-line guidance, raising concerns about an AI capex bubble and broader doubts about U.S. equity outperformance (“US exceptionalism”). Meanwhile, the velocity and magnitude of the recent bond yield rise are drawing investor attention, contributing to a rotation out of U.S. equities into global markets.
In economic data, initial jobless claims fell to 221K, below the 235K consensus, but continuing claims rose to 1.897M, exceeding estimates. Challenger layoffs surged to their highest level since July 2020, signaling labor market softening. The January trade balance widened to a record -$131.4B, worse than expected, while Q4 productivity was revised up to 1.5%, with unit labor costs revised down to 2.2%, easing some wage inflation concerns. Fed speakers Harker and Waller expressed concerns about rising consumer stress and signs of economic slowing, while the ECB cut rates by 25 bps, bringing total easing since last summer to 150 bps.
All eyes now turn to Friday’s February nonfarm payrolls report, as well as Fed Chair Powell and Governor Kugler’s remarks, which could shape expectations for future rate policy.
Sector Performance & Notable Company News
Technology (-2.65%)
- Marvell Technology (MRVL, -19.8%): Q4 earnings and revenue beat expectations, but guidance disappointed, leading to multiple analyst downgrades. AI commentary was more positive, highlighting a ramp in AWS T3 chips, but it wasn’t enough to offset concerns about AI demand and market saturation.
- MongoDB (MDB, -26.9%): Despite a Q4 beat, the company’s FY26 guidance came in weak, with concerns about execution risks and non-Atlas subscription softness outweighing positive trends in Atlas growth.
- Descartes Systems (DSGX, -8.3%): Q4 earnings met estimates, but revenue missed, as CEO flagged risks from global trade uncertainty and tariffs.
- ON Semiconductor (ON, -5.6%): Allegro MicroSystems (ALGM) rejected its $6.9B takeover offer, calling the price inadequate.
Communication Services (-2.17%)
- OpenAI & Oracle announced plans to deploy 64K Nvidia GB200 AI chips by 2026, underscoring the massive AI infrastructure buildout.
- Victoria’s Secret (VSCO, -8.1%): Q4 earnings beat, but results benefited from a gift card accounting adjustment, boosting EPS by $0.24. The company cut FY25 guidance, citing softening sales trends since late January.
Consumer Discretionary (-2.93%)
- Burlington Stores (BURL, +8.7%): Q4 comps beat expectations by 350 bps, with sales, gross margins, and EPS ahead of estimates. The 2025 outlook remained uncertain, but management emphasized that off-price retail historically outperforms in this type of environment.
- Cracker Barrel (CBRL, +7.6%): Q2 earnings, revenue, and margins all topped expectations, with the restaurant and retail segments outperforming. The company raised FY guidance and lowered wage inflation expectations.
- Tesla (TSLA, -5.6%): Named a bearish “Fresh Pick” at Baird, with analysts citing weak Q1 sales data from the U.S., China, and Europe. Concerns also growing about Elon Musk’s involvement with Trump, which could impact demand.
Consumer Staples (-0.11%)
- Kroger (KR, +2.0%): Q4 EPS beat, though revenue came in light. Ex-fuel comps were better than expected, and gross margins improved, benefiting from the sale of Specialty Pharmacy and lower shrink. However, FY26 EPS guidance came in below consensus.
- BJ’s Wholesale Club (BJ, +12.2%): Q4 earnings, revenue, and comps (ex-fuel) beat expectations, while e-commerce grew 25% YoY.
Industrials (-0.92%)
- D.R. Horton (DHI, +3.6%): Upgraded to Buy at Seaport Research Partners, citing a 30% sector decline since September and strong valuation support.
- Fastenal (FAST, +4.5%): February daily sales rose 5% YoY, accelerating from 1.9% in January, driven by strength in manufacturing.
- GMS Inc (GMS, -7.5%): Q3 EBITDA and revenue missed, with soft demand in Wallboard and Steel Framing, and margin pressure from economic uncertainty and weather disruptions.
Materials (+0.53%)
- Allegro MicroSystems (ALGM, +5.7%): Rejected ON Semiconductor’s $6.9B buyout offer, stating that $35.10/share significantly undervalues the company.
Energy (+0.50%)
- WTI crude (+0.1%) rebounded after Wednesday’s near 3% drop, though oil remains near its lowest level since September. Investors are increasingly concerned about 2026 oil price levels, which could impact future output growth.
Financials (-1.67%)
- Investors are souring on several “Trump trades”, shifting capital away from cyclical and small-cap stocks, signaling growing recession fears.
Real Estate (-2.78%)
- Mortgage rates fell for a seventh straight week, marking the biggest drop since September, but concerns about tariffs, job cuts, and slowing home demand remain.
Eco Data Releases | Friday March 7th, 2025
S&P 500 Constituent Earnings Announcements | Friday March 7th, 2025
No constituents report today
Data sourced from FactSet Research Systems Inc.
