US Open: Wall Street battles CPI-driven sell-off 🗽CVS Health shares surge 15%

• BigTech stocks lead the downward pressure, with all except Tesla (TSLA.US), Meta Platforms (META.US), and Apple (AAPL.US) declining by more than 1%.
• Significant losses are seen in Shopify (SHOP.US), Oracle (ORCL.US), Fortinet (FTNT.US), and Home Depot (HD.US).
• Gilead Sciences (GILD.US) and CVS Health (CVS.US) lead the gains in the S&P 500.
• Kraft-Heinz (KHC.US) shares are down 3.5% ahead of today’s quarterly earnings release.
• The US dollar is strengthening, while the yield on 10-year Treasuries rises by over 11 basis points to 4.65%. Bitcoin holds above $95,000, but stocks of crypto-related companies are declining.

Today's stock market session is marked by a correction in sentiment among technology stocks and "hawkish" US economic data, which reduce the likelihood of a Fed rate cut—at least in the first half of the year. Nonetheless, buyers are attempting to limit the downward momentum, with the US100 defending the 21,500-point level, reducing the initial sell-off from -1% to approximately -0.6% about an hour after the US market opened.

Source: xStation5

Tesla shares rebound nearly 3% today after the recent sell-off driven by competition from BYD, which has partnered with DeepSeek, and uncertain sales prospects due to Elon Musk's actions.

Source: xStation5

US CPI Inflation Data

• Annual CPI (YoY): 3.0% (Forecast: 2.9%, Previous: 2.9%)
• Monthly CPI (MoM): 0.5% (Forecast: 0.3%, Previous: 0.4%)
• Annual Core CPI (YoY): 3.3% (Forecast: 3.1%, Previous: 3.2%)
• Monthly Core CPI (MoM): 0.4% (Forecast: 0.3%, Previous: 0.2%)

Both headline and core CPI readings indicate higher-than-expected price pressures in the US economy. The US dollar is strengthening despite earlier remarks from Donald Trump suggesting the need for rate cuts—just before today's CPI release. Markets are lowering expectations for Fed rate cuts this year following the CPI report.

CVS Shares Surge 15% After Earnings

The largest provider of pharmacy and healthcare services in the US, as well as one of the biggest health insurers, CVS Health (CVS.US), saw its total revenue increase by 4.2% in Q4 and for the entire year, driven by the expansion of healthcare services and the wellness segment.

• For Q4 2024, the company reported earnings of $1.19 per share, exceeding forecasts of $0.93, and revenue of $97.7 billion, surpassing Wall Street expectations of $97.2 billion.In his comments, CEO David Joyner highlighted that the company is observing positive trends in the still weaker Consumer Wellness and Pharmacy segments. The health insurance division was the main driver of profitability, but investors particularly welcomed a 10.2% year-over-year increase in comparable pharmacy sales.
• At the same time, the Health Services segment faced revenue declines due to the loss of a key client and pricing adjustments in the pharmacy sector.Operating income fell nearly 30% in Q4 and 38% year-over-year, primarily due to higher healthcare costs, lower Medicare Advantage ratings, and restructuring expenses. However, profits from strategic investments and cost optimizations helped mitigate some of these losses.

Although revenues in the Health Care Benefits segment grew by over 23%, it posted an operating loss of $439 million in Q4, a stark contrast to $676 million in operating income a year earlier. The decline was due to:

• Increased patient claims
• Lower Medicare Advantage ratings
• Higher Medicaid costs following the resumption of eligibility redeterminations

For the full year, the segment’s operating income plummeted from $5.58 billion to just $307 million, highlighting the scale of industry challenges. The Health Services segment saw revenues drop by 4.3% in Q4 and 7.1% year-over-year, mainly due to the loss of a large client and pricing pressures in the pharmacy sector. However, improved purchasing conditions and growth in specialty pharmacies helped offset some of these losses.

Meanwhile, the Pharmacy and Consumer Wellness segment outperformed expectations, with revenues rising 7.5% in Q4 and 6.6% for the year, driven by higher prescription volumes, demand for vaccinations, and increased drug sales. Operating income in this segment declined by 13.3% in Q4 and 3.2% for the full year, primarily due to pharmacy reimbursement pressures and lower front-store sales. CVS Health projects adjusted EPS for 2025 in the range of $5.75–$6.00, while Wall Street had expected $5.96. The company also expects operating cash flows of approximately $6.5 billion.

CVS Health Stock Performance

CVS Health (CVS.US) shares are up 15% today, breaking above the 200-day EMA, attempting to reverse the downtrend into a bullish move.

Source: xStation5