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Weak Corporate Earnings Results Weigh on Stocks

Weak Corporate Earnings Results Weigh on Stocks

  • 21.03.2025 20:17
  • theglobeandmail.com
  • Keywords: Geopolitical Risks, Market Volatility

Stocks dropped as weak corporate earnings, led by FedEx, Nike, and Micron, weighed on markets amid cost pressures and tariffs. Geopolitical tensions in the Middle East and US-China trade concerns also contributed to broader economic worries.

SMCI ProductsFDXsentiment_dissatisfiedNKEsentiment_dissatisfiedMUsentiment_dissatisfiedMARsentiment_dissatisfiedCUKsentiment_dissatisfiedHLTsentiment_dissatisfiedHSTsentiment_dissatisfiedDALsentiment_dissatisfiedNCLHsentiment_dissatisfiedBKNGsentiment_dissatisfiedLENsentiment_dissatisfiedALNYsentiment_satisfiedTSLAsentiment_satisfiedHSYsentiment_satisfiedTAPsentiment_satisfiedCPBsentiment_satisfiedGISsentiment_satisfiedKHCsentiment_satisfiedLMTsentiment_satisfiedSMCIsentiment_satisfied

Estimated market influence

FedEx

FedEx

Negativesentiment_dissatisfied
Analyst rating: Buy

Cut profit outlook due to cost pressures and weaker demand.

Nike

Nike

Negativesentiment_dissatisfied
Analyst rating: Buy

Tariffs and geopolitical issues affecting earnings.

Micron Technology

Micron Technology

Negativesentiment_dissatisfied
Analyst rating: Buy

Forecasted Q3 gross margin below consensus.

Marriott International

Marriott International

Negativesentiment_dissatisfied
Analyst rating: Neutral

Economic concerns weighing on travel stocks.

Carnival

Carnival

Negativesentiment_dissatisfied
Analyst rating: Buy

Same as above.

Hilton Worldwide Holdings

Hilton Worldwide Holdings

Negativesentiment_dissatisfied
Analyst rating: Neutral

Same as above.

Host Hotels & Resorts

Host Hotels & Resorts

Negativesentiment_dissatisfied
Analyst rating: Buy

Same as above.

Delta Air Lines

Delta Air Lines

Negativesentiment_dissatisfied
Analyst rating: Strong buy

Same as above.

Norwegian Cruise Line Holdings

Norwegian Cruise Line Holdings

Negativesentiment_dissatisfied
Analyst rating: N/A

Same as above.

United Airline Holdings

Negativesentiment_dissatisfied
Analyst rating: N/A

Same as above.

Booking Holdings

Booking Holdings

Negativesentiment_dissatisfied
Analyst rating: Buy

Same as above.

Lennar Corp

Lennar Corp

Negativesentiment_dissatisfied
Analyst rating: Buy

Q1 home sales gross margins down y/y and weaker Q2 forecast.

Valmont Industries

Negativesentiment_dissatisfied
Analyst rating: N/A

Downgraded by William Blair & Co.

Alnylam Pharmaceuticals

Alnylam Pharmaceuticals

Positivesentiment_satisfied
Analyst rating: Buy

Expanded approval for heart drug.

Tesla

Tesla

Positivesentiment_satisfied
Analyst rating: Neutral

CEO Musk's assurance boosted confidence.

Hershey Co

Hershey Co

Positivesentiment_satisfied
Analyst rating: Neutral

Defensive sector strength in broader market weakness.

Molson Coors Beverage

Molson Coors Beverage

Positivesentiment_satisfied
Analyst rating: Neutral

Same as Hershey Co.

Campbell's Company

Campbell's Company

Positivesentiment_satisfied
Analyst rating: Neutral

Same as Hershey Co.

General Mills

General Mills

Positivesentiment_satisfied
Analyst rating: Neutral

Same as Hershey Co.

Kraft Heinz

Kraft Heinz

Positivesentiment_satisfied
Analyst rating: Neutral

Same as Hershey Co.

J M Smucker

Positivesentiment_satisfied
Analyst rating: N/A

Same as Hershey Co.

Lockheed Martin

Lockheed Martin

Positivesentiment_satisfied
Analyst rating: Buy

Potential fighter jet contract win.

Super Micro Computer

Super Micro Computer

Positivesentiment_satisfied
Analyst rating: Buy

JPMorgan upgrade.

Context

Business Insights and Market Implications Analysis

Market Performance

  • S&P 500 Index: -0.81%
  • Dow Jones Industrials Index: -0.95%
  • Nasdaq 100 Index: -0.97%

Key Drivers of Market Decline

  • Corporate Earnings Concerns:

    • FedEx down >-11% due to inflation and demand concerns, cutting full-year EPS guidance to $18.00-$18.60 from $19.00-$20.00.
    • Nike down >-7% citing tariffs and geopolitical tensions.
    • Micron Technology down >-7% after forecasting Q3 gross margin below consensus.

  • Geopolitical Risks:

    • Escalation in Middle East conflicts, including Israeli airstrikes on Gaza and US strikes in Yemen, increasing global instability.

  • Trade Tensions:

    • Impact of US tariffs on Canada, Mexico, and China, with more reciprocal tariffs expected by April 2.

Market Volatility

  • Triple-witching event causing $4.5 trillion options and futures expiration, leading to potential price fluctuations.
  • Heightened market volatility due to economic and geopolitical uncertainties.

Interest Rates and Bond Markets

  • 10-year T-note yield: -1.9 bp to 4.218%
  • 10-year German bund yield: -2.7 bp to 2.753%
  • European bond yields mixed, with swaps discounting a 59% chance of ECB rate cut.

Sector Performance

Declining Sectors:

  • Technology: Chip stocks (Micron, KLA Corp, Applied Materials) down >-2%.
  • Travel: Marriott (-5%), Carnival (-4%), Delta Air Lines (-2%).
  • Housing: Lennar Corp (-4%) due to weak home sales and new orders.

Outperforming Sectors:

  • Healthcare: Alnylam Pharmaceuticals (+10%) after drug approval expansion.
  • Consumer Staples: Hershey (+1%), Molson Coors Beverage (+0.86%).
  • Defense: Lockheed Martin (+1%) amid potential fighter jet contract news.

Strategic Considerations

  • Fed policy signals: Steady approach favored by Williams and Goolsbee, with markets discounting a 25 bp rate cut at 21%.
  • Tariffs impact: Expected to weigh on corporate earnings and global economic growth.
  • Geopolitical risks: Escalation in conflicts may further strain investor confidence.

Long-Term Implications

  • Potential for sustained market volatility as trade tensions and geopolitical risks persist.
  • Defensive sectors (food, beverages) showing resilience amid broader market weakness.
  • Tech and travel sectors vulnerable to economic slowdowns and demand contraction.