Daily Market Recap – Tuesday Feb 18, 2025
Stocks Close Higher in a Quiet Session
U.S. equities finished higher on Tuesday, with the S&P 500 gaining 0.24%, the Dow up 0.02%, the Nasdaq adding 0.07%, and the Russell 2000 rising 0.45%. The equal-weight S&P 500 notably outperformed the official index, signaling broader market strength outside of mega-cap tech.
Outperformers included semiconductors (INTC-US), energy, banks, casual dining, athletic apparel (NKE-US), agricultural industrials, steel and aluminum, chemicals, drug stores (WBA-US), road and rail, machinery, and paper/packaging. Conversely, big tech underperformed, with Meta (META-US) snapping a 20-session winning streak. Other laggards included managed care, medical devices (MDT-US), engineering & construction (FLR-US), homebuilders, auto-parts retailers (GPC-US), entertainment, and food stocks (CAG-US, GIS-US).
Bond yields rose, with the 10-year Treasury yield climbing back above 4.50%, while the U.S. dollar strengthened (+0.4%). Gold (+1.7%) rallied, but Bitcoin (-3.7%) saw a notable pullback. Crude oil (+1.6%) extended its recent gains.
Macroeconomic & Political Developments
Markets were relatively quiet coming out of the long weekend, with Washington policy developments remaining a key focus. The GOP remains divided over legislative priorities, with Senate leaders considering a “skinny” resolution without a TCJA extension, while the House favors an omnibus approach. Tariff policy uncertainty remains, but no major updates emerged today. Meanwhile, U.S. and Russian officials met in Saudi Arabia for Ukraine peace talks, though skepticism remains given the absence of Ukrainian and European officials.
On the macro front, February’s Empire State Manufacturing Index showed a rebound to +5.7, above expectations, as new orders strengthened. However, input prices surged to their highest level in nearly two years, raising inflation concerns. The NAHB homebuilder sentiment index fell to 42.0, below consensus, as tariff-related concerns on timber and appliances weighed on builder confidence.
Fed commentary remained muted, with San Francisco Fed President Daly and Vice Chair Barr sticking to previous messaging. However, Fed Governor Waller’s recent dovish remarks raised expectations that disinflation traction could still allow for rate cuts later this year. Investors now look ahead to Wednesday’s January FOMC meeting minutes, which may provide further insight into the Fed’s stance on inflation, rate cuts, and balance sheet normalization.
Earnings & Corporate Developments
The M&A landscape saw increased activity today:
Intel (INTC-US) jumped +16.1% after reports that Broadcom (AVGO-US) and Taiwan Semiconductor (TSM-US) are considering acquiring its chip design and manufacturing units in a possible breakup of Intel’s business.
H&E Equipment Services (HEES-US) rose +15.2% after accepting a superior buyout offer from Herc Holdings (HRI-US) over United Rentals (URI-US).
Walgreens (WBA-US) surged +13.9% following a report that Sycamore’s buyout offer remains a possibilityafter prior speculation that the deal had stalled.
Elsewhere, Sherwin-Williams (SHW-US) announced a $1.15B acquisition of BASF's Brazilian Architectural Paints Business to expand its international footprint. Diamondback Energy (FANG-US) acquired Midland Basin assets in a $4B cash-and-stock deal.
On the earnings front, Valmont Industries (VMI-US, +17.5%) beat on revenue and EPS, raised guidance, and announced a $700M buyback. Nike (NKE-US, +6.2%) announced a new collaboration with SKIMS. On the downside, Tri Pointe Homes (TPH-US, -10.9%) fell after issuing weaker-than-expected guidance and softer new orders.
Investment Takeaways
Tech M&A and Corporate Restructuring on the Rise: Intel’s potential asset sales highlight how chip companies are positioning for the next phase of AI and cloud computing. Investors should watch for further consolidation in semiconductors and AI infrastructure.
Rate Expectations Continue to Evolve: The market remains sensitive to Fed policy signals, with inflation data still a key driver of expectations. Investors will closely watch FOMC minutes on Wednesday for any shifts in the Fed’s outlook.
Consumer Spending and Tariffs in Focus: The weaker retail sales print, combined with tariff uncertainties, suggests potential headwinds for consumer stocks. Companies with pricing power and strong brand loyalty may be better positioned in this environment.
Sector Rotation Beyond Big Tech: Broader market participation today, including strength in industrials, banks, and energy, signals growing investor interest outside of mega-cap tech.
While big tech took a breather, market breadth improved, and investors remain focused on the evolving policy landscape, earnings trends, and potential catalysts from Fed commentary.