CWS Market Review – April 22, 2025

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Before this week, the battle on Wall Street was over tariffs. Now it’s over tariffs and interest-rate policy. President Trump took to social media to call Federal Reserve Chairman Jerome Powell, “a major loser.”

In the history of White House/Central Bank relations, that’s probably one of the more polite salvos (Google “Andrew Jackson” and the “Bank War” if you want to see what I mean.)

Wall Street was not particularly pleased with the president’s remarks. The U.S. stock market is now off to its worst start for a presidential term since at least 1928. The Dow is on pace for its worst April since the Great Depression.

Somebody call T.S. Eliot!

At one point in yesterday’s trading session, the S&P 500 was off by 3.4%. To put that in context, that day was worse than every single trading day in 2023 and 2024. Yet for this April, it would only be the fourth worst. Fortunately, we were spared somewhat as the market did rally off yesterday’s low.

One interesting side note to yesterday’s sell-off was how broad it was. It’s as if every stock lost around 2.5% plus or minus 1%. Of course, that’s not literally true, but in no sense did we see the massive rotation action that we saw earlier this month. By this, I’m referring to days when growth stocks were through the floor but value stocks shot up. Or the opposite. Yesterday, most everything was down.

Today’s recovery was perhaps even broader than yesterday’s. For example, the S&P 500 Growth ETF was up 2.71% today while the Value ETF was up 2.34%. That’s very narrow, especially for a big day.

The narrowness of this market suggests that the market is most concerned with valuations on a broad level, not with any specific sector or industry. In plain English, yesterday Wall Street thought stock prices were too high. It walked some of that back today.

Another optimistic item came today when Bloomberg reported that Treasury Secretary Scott Bessent believes that the “tariff standoff with China is unsustainable and that he expects the situation to de-escalate.”

“Bessent also said the world’s top two countries essentially have a trade embargo in place, with both slapping tariffs of more than 125% on each other’s goods.”

As for the Trump-Fed squabbles, the president may soon get his way. The FOMC meets again in two weeks, and I doubt anything will happen. After that, however, the Fed meets in June and I think there’s a very good chance that the central bank will cut rates by 0.25%.

That may not be enough for the president’s liking, but traders expect three more rate cuts this year after the cut in June. It’s broadly understood that the president can’t fire the Fed chief unless it’s for cause, meaning something like misconduct. The Fed chairman can’t be dismissed because of a policy disagreement. Powell’s term isn’t up until May of next year, and things may be quite different then.

Earnings from Moody’s and Mueller

We had two Buy List earnings reports. I’ll cover these in greater depth in our premium newsletter (which you can sign up for here). I also want to stress how well our Buy List is doing against the broader market. In fact, in relative terms, the last several weeks have been some of our best in the 20-year history of our Buy List.

Let’s start with Mueller Industries (MLI). This is one of those well-run small-to-mid caps that’s not well known on Wall Street. The company has a market value of roughly $8 billion. Since early 1992, the stock is up by 40,000%. You’d think that would attract more interest, but that’s not the case.

I can’t say it’s completely ignored by Wall Street, but Mueller is currently followed by just one Wall Street analyst. Personally, I love finding little-covered stocks.

Here’s a chart of Mueller. The S&P 500 (in red) looks like a flat line in comparison. It’s actually a gain of 1,150%.

Mueller makes and sells copper, brass, and aluminum products. The company operates through three segments: Piping Systems, Industrial Metals, and Climate.

For Q1, Mueller had operating income of $206.3 million. That’s up 12.4% over last year. Net income increased 13.7% to $156.4 million. Quarterly sales increased 17.6% to $1 billion. Mueller’s EPS rose 14.9% to $1.39. The lone analyst had been expecting $1.31 per share.

During the quarter, the price for copper averaged $4.57 per pound. That’s up 18.4% over last year’s Q1.

Mueller said that the increase in sales was attributable to the inclusion of sales from two recently acquired businesses, and also to higher selling prices related to the rise in raw material costs and tariffs. At the end of the quarter, MLI had a cash balance of $830.1 million.

Regarding the quarter performance, Greg Christopher, Mueller’s CEO said, “We delivered very good results in the first quarter despite certain manufacturing disruptions, which have since been resolved, and the general economic landscape. We were particularly pleased with the positive contributions that our Nehring Electrical Works and Elkhart Products acquisitions made to our business, and we look forward to their continued improvement.”

Regarding the outlook, Mr. Christopher continued, “While markets and demand are in line with our year end comments and outlook, the tariff and trade policies have presented new challenges. Although we largely manufacture our products in the countries where they are consumed, we are not immune to the effects of tariffs. Where required, our teams are proactively and diligently taking appropriate price actions and will continue to do so as necessary. As we have consistently demonstrated resilience during past periods of disruption, we are confident in our ability to effectively navigate the current environment.”

Mueller is now going for just under 11 times next year’s earnings. The company pays a quarterly dividend of 25 cents per share, which yields about 1.4%. The stock got a nice 2.7% bounce in today’s trading.

Moody’s (MCO) has been a great stock for us. We added it in 2017, and it’s been a big winner for us. I’m glad to see MCO is outpacing the market this year as well, although that means it’s down by less.

For the quarter, Moody’s revenues increased by 8% to $1.9 billion. Moody’s business is really two businesses. There’s Moody’s Investor Service (MIS) and Moody’s Analytics (MA), which is the jewel in the crown.

Last quarter, revenues at MIS increased by 8% to $1.1 billion. Revenue at MA increased by 8% to $859 million. Earnings increased 14% to $3.83 per share. That’s a healthy beat. Wall Street had been expecting $3.54 per share.

Companywide, Moody’s had an operating margin of 51.7%. For MIS, it was 66% and for MA, it was 30%. Cash flow from operations was $757 million and free cash flow was $672 million.

During Q1, Moody’s bought back 800,000 shares at an average cost of $481.77 per share and issued net 400,000 shares as part of its employee stock-based compensation programs.

This was another very good quarter for Moody’s. The only downbeat is that it lowered its guidance for the coming year. Previously, Moody’s had been expecting full-year earnings to range between $14 and $14.50 per share. Now it sees 2025 earnings ranging between $13.25 and $14 per share. I think that’s a sign of the current environment instead of the health of Moody’s business.

Shares of Moody’s rallied 4% today.

Outside of earnings, we’ll have some important news items towards the end of next week. The ADP payrolls report will be out on Wednesday, April 30. The ISM Manufacturing report will be out the following day. After that, the April jobs report will be due out on Friday, May 2.

Also on Wednesday, we’ll get our first report on Q1 GDP growth. Wall Street is not looking forward to this report. The consensus seems to expect Q1 GDP growth between 0% and 1%. That’s not very good. We’re not in a recession yet, but one may not be too far away. As it turns out, the major loser could be the economy.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on April 22nd, 2025 at 5:24 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.