Goldman Sachs: Trading Desk 01/29/2025
S&P -47bps closing at 6039 with a $500M market-on-closing (MOC) order to SELL. NDX -24bps at 21411, R2K -25bps at 2283 and Dow -31bps at 44713. 12.9B shares traded across all US exchanges vs. the YTD daily average of 16B shares. VIX +91bps at 16.56, Crude Oil +114bps at 72.94, US 10Y Treasury note unchanged at 4.53, Gold -26bps at 2756, DXY +11bps at 107.98 and Bitcoin +391bps at 104250.
Stocks fell today. The mood was quiet, with many market participants “taking a break” after two days of intense trading/interactions and awaiting the FOMC (as widely anticipated, no change in the Fed funds rate and more dovish language on inflation progress…the market is now pricing in the first full cut in June) and a big night of earnings reports, all of which were generally disappointing…
MSFT -4% (Azure growth came in below expectations, +31% vs. expectations of +32-33%; Ranking Score 6.5/10); TSLA came in a bit with lower revenue and gross margins and a rather vague 2025 delivery guidance (just mentions growth is expected but doesn’t quantify it; Ranking Score 5/10). META -1% (solid Q4 revenue report, but Q1 revenue guidance came in below expectations ($39.5-41.8B vs. consensus of $41.67B… strong FX headwind though) and 2025 expense guidance comes in above expectations at $114-119B vs. expectations of ~$115B; Ranking Score 7.5/10).
Reminder: The earnings bar is higher this quarter, with the market consensus calling for 8% year-over-year S&P 500 EPS growth (the previous quarter was 3% consensus, but the actual result was 8%). The positioning bar in tech has been adjusted lower, with Mag7 names collectively net-sold for the second week in a row ahead of this week’s AI frenzy. The aggregate long/short ratio in this group now stands at 3.09, putting it in the 5th percentile compared to the past year and the 8th percentile compared to the past five years.
Our trading room was a 5 on a scale of 1-10 in terms of overall activity levels. Executed flow ended +284bps vs. +58bps 30-day average. Institutional investors finished with net buying of $1 billion driven by demand in the discretionary sector following SBUX results (+8%), substantial defense is expected from any pullback in the stock from here, it is a storied stock and it looks like the story is changing after some initial stumbles last year. Hedge funds ended balanced, with scattered demand in tech and macro products vs. supply in industrials.
Other movements after the market closed:
LVS +8%: Expectations were very low and results were better (mainly due to Singapore). The stock had been one of the worst performers in the quarter. Some strength is expected, but the key question on the call will be whether they think market share will improve closer to previous levels as some property disruptions are resolved.
LEVI +8%: Q4 EPS of $0.50 vs. consensus of $0.48 on revenue up 6%. The quarter was never the focus as most expected positive surprises. The concern (for the bears) was guidance, and it came in a bit below expectations. Guidance is lower, but management's comments suggest they are confident in the organic revenue trajectory for Q4 and into 2025, so the question is whether it's really a fair comparison.
WDC -3.5%: Q3 EPS guidance between $0.90-1.20 vs. consensus of $1.47, with revenue below $3.85 billion at the midpoint vs. consensus of $3.98 billion.
IBM +9%: Q4 software revenue +11% YoY (Red Hat accelerated to +17% YoY in constant currency vs. +14% YoY last quarter) vs. consulting revenue -1% YoY in constant currency… 2025 revenue guidance of “at least +5% YoY” excluding FX effects… and free cash flow of ~$13.5 billion.
NOW -11%: 2025 subscription revenue guidance below expectations ($12.64-12.68 billion vs. consensus $12.87 billion).
CHRW (=) $1.21 Q4 EPS vs. $1.11 expectations, on lower revenue of $4.18B vs. $4.42B. 5 p.m. call. Implied move of 5%. Slightly outperformed, but expectations were high and the position was overbought.
LSTR (-) Q4 EPS of $1.31 vs. $1.35 on revenue of $1.21B. Q1 guidance of $1.05-1.25 EPS and $1.075-1.175B in revenue vs. consensus of $1.32 EPS and $1.19B in revenue. 4:30pm call. Implied move of 2%. Misses expectations, but those were already low.
WHR (-) Q4 EPS of $4.57 vs. $4.32 on lower sales of $4.14B vs. $4.24B. Projects 2025 revenue of $15.8B vs. $16.22B and EPS of $10.00 vs. $11.59 consensus. Implied move of 7%. 8am Call Has become more of an overbought position over the past few months, dislocation could be in store.
CP (=) $1.29 vs. $1.23 in Q4 EPS, on top-line revenue at $3.9 billion and worst-case operating ratio (OR) of 59.7% vs. 58.4%. Projects 2025 EPS growth of 12-18% with a midpoint of $4.25 vs. consensus of $4.21. Implied move of 3%. 4:30pm call Debate between tariff risk and estimates that are finally improving.
URI (-) Q4 EPS of $11.59 vs. $11.66 on revenue surplus of $4.095B vs. $3.936B. 2025 revenue guidance of $15.6-16.1B vs. consensus of $18.8B and EBITDA of $7.2-7.45B vs. consensus of $7.4B. Excludes H&E acquisition. Implied move of 5%. 8:30am Call Some investors were forced to exit positions in HEES, but the tilt is negative which could lead to further downside.