Daily Market Recap – Wednesday Feb 19, 2025

Stocks Edge Higher in a Quiet Session

U.S. equities finished mostly higher on Wednesday, with stocks ending just off their best levels of the day. Gains were relatively limited as the market remained in a holding pattern, waiting for more clarity on major macroeconomic and policy developments. Outperformers included aerospace & defense, airlines, oil exploration & production, semiconductors, electric vehicles, healthcare services, and utilities. Big tech was mixed—Tesla led gains, while Meta declined for a second straight session after its 20-day winning streak. Laggards included meme stocks and retail favorites, homebuilders, chemicals, banks, and consumer discretionary names. The equal-weighted S&P 500 outperformed the official index, indicating broader participation in today’s gains.

In macro movements, Treasuries firmed across the curve as bond yields declined, reversing some of Tuesday’s rise. The dollar index edged up 0.1%, while gold slipped 0.4%. Bitcoin rebounded, gaining 2.5%, and WTI crude added 0.4%.

Markets Await Clarity on Policy, Fed, and Economic Data

Investor sentiment remains cautious amid ongoing uncertainty over Trump 2.0 policy measures, particularly regarding tariffs, tax policy, and budget negotiations. Trump signaled a 25% tariff on autos, chips, and pharmaceuticals, but markets took a measured response due to the lack of specific details and potential for negotiations. Meanwhile, House and Senate GOP leadership continue to struggle to find consensus on tax policy, with the TCJA extension remaining a sticking point.

The market also focused on the release of January FOMC meeting minutes, which were largely in line with expectations. The Fed reiterated its patient stance on rate cuts, acknowledging inflation risks remain somewhat elevated. Some officials signaled concerns that inflation remains the greater risk relative to the labor market. Rate expectations remained largely unchanged, with markets continuing to price in the next cut in July and approximately 40 basis points of easing by year-end. Separately, Atlanta Fed President Bostic echoed the need for patience, highlighting reduced confidence in the 2025 economic outlook.

Housing data showed mixed results, with January housing starts missing expectations but December revisions coming in stronger. Building permits exceeded forecasts, signaling continued resilience in the housing sector despite elevated mortgage rates. Elsewhere, a $16 billion 20-year bond auction saw minimal demand weakness, tailing by just 0.1 basis points.

Earnings & Corporate Developments

On the earnings front, Apple unveiled a new lower-priced iPhone 16e, which will rely on its proprietary chip, signaling continued vertical integration. Palantir came under pressure following reports of expected 8% annual budget cuts to the Department of Defense over the next five years, alongside CEO Karp selling shares. Meanwhile, Arista Networks declined despite an earnings beat, as concerns lingered over a slight guidance raise and Meta's potential reduced capex spend in 2025.

Analog Devices posted strong results, citing improving cyclical dynamics and stronger industrial and auto demand. Garmin also rallied on earnings and revenue beats, along with a proposed 20% dividend hike. Devon Energy gained after raising its 2025 production guidance and announcing an increased dividend. On the M&A front, Global Blue jumped on news of its acquisition by Shift4 Payments in a $1.5 billion all-cash deal, while Capri Holdings was lifted by reports that Prada is evaluating a potential acquisition of its Versace unit.

Top Gainers

Compass soared +28.3% after reporting a strong quarter, with management citing traction in its three-phase marketing strategy. Hims & Hers Health gained +17.5% following its acquisition of an at-home lab testing facility. Global Blue surged +17.5% on its acquisition news, while SolarEdge rallied +16% after posting better-than-expected revenue and cash flow. Garmin rose +12.6% on an earnings beat, strong demand in fitness and outdoor segments, and a dividend increase. Penumbra climbed +12% after highlighting strong procedural volume growth in vascular treatments. Analog Devices gained +9.7% on improving bookings and favorable trends in industrial and auto markets.

Top Decliners

Bumble plunged -30.3% despite a top-line beat, as its guidance suggested further declines in paying users. Celanese dropped -21.5% after issuing weak Q1 guidance due to inventory destocking and industrial demand softness. Shift4 Payments fell -17.5% following mixed results and concerns over its $1.5 billion acquisition of Global Blue. Wolverine World Wide sank -16.6% after flagging FX headwinds and guidance uncertainty. Etsy tumbled -10.1% after missing revenue and gross merchandise sales estimates, with ongoing Marketplace segment weakness. Howard Hughes Holdings lost -8.9% as investors scrutinized Pershing Square's proposal to increase its stake.

Investment Takeaways

Markets remain in a wait-and-see mode, with key catalysts on the horizon, including upcoming earnings reports from Walmart and Nvidia, further clarity on Trump’s tariff and tax plans, and additional economic data releases. While the Fed minutes reinforced a patient stance, the overall inflation trajectory and macro environment will play a pivotal role in determining the pace of rate cuts in 2025.

From an investment perspective, continued rotation into energy, industrials, and select value stocks could present opportunities, while the AI and semiconductor narratives remain central to growth-focused investors. However, caution is warranted in high-expectation names, as evidenced by today's sharp declines in select software and consumer discretionary stocks. The coming weeks will provide more clarity on economic trends, corporate earnings, and the direction of policy, shaping investor sentiment in the months ahead.