May 13, 2025, was a pivotal day for the markets, with the S&P 500 turning positive for the year for the first time since February, closing at 5,886.55, up 0.72% on the day and +0.08% year-to-date (YTD). This milestone erased losses triggered by President Trump’s “Liberation Day” tariff announcement in April. However, the Dow Jones Industrial Average slipped 0.64% to 42,140.43, dragged down by a massive 17.8% drop in UnitedHealth (UNH), underscoring that not all corners of the market shared the day’s optimism. Here’s a breakdown of the day’s events, key drivers, and what’s ahead for traders and investors.

Market Recap: S&P 500 Shines, Dow Stumbles

• S&P 500: +0.72% to 5,886.55, now +0.08% YTD.
• Nasdaq Composite: +1.61% to 19,010.08, still -1.5% YTD.
• Dow Jones Industrial Average: -0.64% to 42,140.43, -1.0% YTD.

The S&P 500’s rally was broad but not universal, with technology (+2.3%), communication services (+1.6%), and energy (+1.4%) leading gains, while healthcare (-2.5%) and real estate (-0.9%) lagged. The index has surged 21.75% from its April 7 low of 4,835.04, one of its fastest recoveries from a 15%+ YTD decline since 1982, according to Bespoke Investment Group. The Nasdaq outperformed, buoyed by a 5.6% jump in Nvidia (NVDA), while the Dow’s decline was almost entirely due to UNH’s collapse after its CEO resigned and 2025 guidance was suspended amid rising medical costs.

Key Drivers of the Day

Three major factors fueled the market’s momentum:

1. Trade Deal Progress: A U.S.-China tariff rollback (U.S. from 145% to 30%, China from 125% to 10%) and Saudi Arabia’s $600 billion U.S. investment pledge lifted sentiment. Treasury Secretary Scott Bessent’s “targeted decoupling” softened fears of a prolonged trade war.
2. Benign Inflation Data: April’s CPI rose 0.2% month-over-month (below the 0.3% expected), with annual headline CPI at 2.3% (below 2.4% consensus) and core CPI at 2.8% (in-line). No tariff-driven price spikes emerged, keeping Fed rate-cut hopes alive.
3. Earnings Strength: A robust Q1 earnings season, especially in tech and cyclicals, drove a “fear of missing out” (FOMO) rally.

However, UNH’s 17.8% plunge highlighted sector-specific risks, pulling the Dow into the red and reminding investors of lingering vulnerabilities.

S&P 500: Best and Worst Performers YTD

The S&P 500’s journey back to positive territory revealed stark winners and losers:

Top 10 Performers

1. NRG Energy (NRG): +75.5%
2. Palantir Technologies (PLTR): +70.9%
3. Uber Technologies (UBER): +52.5%
4. Howmet Aerospace (HWM): +45.1%
5. Mosaic Company (MOS): +39.7%
6. Philip Morris International (PM): +36.5%
7. CVS Health Corp (CVS): +35.2%
8. Newmont Corp. (NEM): +34.5%
9. Verisign (VRSN): +33.5%
10. GE Aerospace (GE): +32.8%

Bottom 10 Performers

1. Moderna (MRNA): -38.7%
2. UnitedHealth Group (UNH): -38.7%
3. Deckers Outdoor Corp (DECK): -36.2%
4. West Pharmaceutical Services (WST): -34.1%
5. Enphase Energy (ENPH): -33.7%
6. Teradyne, Inc (TER): -32.6%
7. Edison International (EIX): -29.6%
8. Viatris (VTRS): -29.3%
9. Bio-Techne (TECH): -28.1% (tied)
10. Albemarle (ALB): -28.1% (tied)

Energy, tech, and discretionary stocks dominated the upside, while healthcare and select consumer names bore the brunt of the year’s challenges.

Broader Market Trends

• Nasdaq Strength: The Nasdaq’s 1.61% gain reflected tech’s leadership, with NVDA and other chipmakers riding AI and trade-thaw tailwinds.
• Fixed Income: The 10-year Treasury yield rose to 4.50% (+13 bps from Friday), signaling growth optimism but pressuring equity valuations.
• Recession Odds Dialed Back: JPMorgan, Goldman Sachs, and Apollo Asset Management cut U.S. recession probabilities (e.g., Goldman’s now at 35%), boosting confidence.

Analysis: What It Means

The trade truce and tame inflation data suggest the market’s priced in near-term relief, but risks remain. UNH’s woes could signal broader healthcare pressures, while the rally’s reliance on trade talks leaves it vulnerable to breakdowns. The Fed’s “wait-and-see” stance (40% odds of a December cut) and rising yields add complexity—growth stocks may thrive if inflation cools further, but value could falter if rates climb.

Forward-Looking Insights

1. Trade Deal Plays:

• Bullish: If talks advance, S&P could hit 6,000—target tech (XLK) and China-exposed names (JD, BABA).
• Bearish: Stalls could drop S&P to 5,750—hedge with SPY puts or VIX calls.

1. Healthcare Risks: UNH’s fallout may hit peers—consider XLV puts or shorts on ELV (-8.97% today).
2. Inflation & Yields: Cooler CPI could lower yields, favoring QQQ over IWD.
3. Momentum Trades: NVDA and crypto (Bitcoin at $104K) could extend gains—watch Jun $130 calls on NVDA or COIN.

Takeaway

May 13th marked a triumph for the S&P 500, but the Dow’s UNH-driven dip shows the rally’s fragility. Trade progress and inflation calm are tailwinds, yet sector cracks and headline risks loom. Lock in gains where momentum’s strong (e.g., NVDA, PLTR), hedge defensives (XLP, GLD), and stay nimble—choppy waters may lie ahead. What’s your next move?

— Z3

1. Dashboard

Tuesday 2‑day YTD S&P 500 5 886 (+0.72 %) +4.1 % +0.1 % Nasdaq Comp. 19 010 (+1.61 %) +5.9 % –1.5 % Dow 30 42 140 (–0.64 %) +2.1 % –1.0 % Russell 2000 2 012 (+0.8 %) +3.2 % –5.7 % 10‑yr UST 4.50 % (+4 bp) +13 bp +41 bp since Jan 1 WTI Crude (Jun) $63.73 (+2.9 %) +7.2 % +8.4 % YTD Gold (Jun) $3 248 (+0.6 %) –4.8 % +16 % YTD

2. Macro movers

CPI: tariff fears fail to show

• Headline and core CPI both rose 0.2 % m/m, below the 0.3 % consensus (US consumer inflation eases ahead of tariffs – Reuters).
• Year‑on‑year headline eased to 2.3 %, a new 4‑year low, while core stayed at 2.8 %. Food prices edged down; shelter remained sticky.
• Market takeaway: an “all‑clear” to stay overweight risk until actual tariff inflation appears. Eurodollar futures trimmed the probability of a July Fed cut to <40 % (Trump Talks Oil, AI, Geopolitics at Saudi-US Investment Forum).

U.S.–China 90‑day tariff pause

• Average U.S. duties on Chinese goods fall from 145 % to 30 %, China cuts from 125 % to 10 % .
• Treasury Sec. Bessent says talks resume “within weeks;” permanent deal still elusive.
• Goldman and JPM each slashed their recession odds to the low‑30 % area .

Saudi capital wave

• Riyadh unveiled a $600 bn commitment to U.S. infrastructure, AI/datacenter and energy transition projects, coinciding with Trump’s Doha/Riyadh visit .
• Humain, a Saudi JV, will buy Nvidia/AMD chips for a Gulf super‑cluster .

3. Sector & thematic check

Sector % chg Driver Tech +2.3 % Nvidia +5.6 % on Gulf AI order ; mega‑caps lifted MGK ETF +1.8 %. Comm. Svcs +1.6 % Meta +2.2 %; resilient ad‑spend narrative. Consumer Discr. +1.2 % Amazon +2.7 %, Nike +2.4 % on China exposure relief . Energy +1.4 % Crude breakout, Saudi‑linked demand tailwind . Health Care –2.5 % UNH –17.8 %; CEO exit, FY25 outlook pulled ([StanChart cautious on tariff impact after strong first quarter Staples / Real Estate –0.8 % / –0.9 % Defensive fade as risk appetite returns.

4. Notable movers

• UnitedHealth (UNH) –17.8 % – Witty resigns; 2025 guidance suspended amid surging Medicare costs (StanChart cautious on tariff impact after strong first quarter | Reuters). Dragged Dow > 250 pts.
• Coinbase (COIN) +9.5 % – to join S&P 500 on 20 May, replacing Discover .
• First Solar (FSLR) +20.6 % – House tax bill preserves IRA credits; adds foreign‑influence guardrails .
• SMCI +16.5 % – Raymond James initiates “Outperform” on continued AI server demand .
• Boeing (BA) +1.9 % – China clears backlog deliveries after 6‑year halt (Andrew Witty).

5. Technical picture

• The S&P 500 closed at 5 886, now 4 % below the February record (6 144) and >130 pts above its 200‑DMA (5 752) .
• Nasdaq has regained bull‑market status, up > 20 % from the April lows .
• VIX slid to 17.8 – lowest since mid‑March – signalling calmer tape .

6. Fixed income & commodities

Move Context 2‑yr UST 4.02 % (–2 bp) Traders price two cuts in ’25 but later start. 10‑yr UST 4.50 % (+4 bp) Supply concerns, Saudi flow headlines. WTI Crude $63.73 (+2.9 %) Iranian rhetoric + Saudi investment push . Gold $3 249 (+0.6 %) Bargain‑hunting after Monday’s $86 slide . DXY 101.07 (–0.7 %) Risk bid; euro, EMFX firmer .

7. Looking ahead

• Wednesday – MBA mortgage apps; EIA crude.
• Thursday – Retail sales, PPI, Industrial Prod., Walmart, Alibaba, Deere, Applied Materials earnings.
• Friday – Housing starts, UMich sentiment.
• Watch follow‑up tariff instructions from USTR and budget‑reconciliation tax outlines on Capitol Hill; both could shift sector leadership again.

Bottom line: a near‑textbook “bad‑news good‑news” CPI, plus a temporary tariff cease‑fire, have reignited animal spirits. As the index approaches 5 900/6 000 resistance, a steady bond market and continued earnings resilience will be crucial to sustain the break‑out. Stay nimble: volatility can snap back once the 90‑day truce clock starts ticking.

Oil $63.67! Brent $66.56 so still a $3 spread (still bullish) and /RB well on it’s holiday climb at $2.16. /NG $3.62.

Gold $3,253, Silver $33.10, Copper $4.71 so all seems well enough.

Almost done with the Butterfly Portfolio but taking a break!

Sure, I like those guys but they haven’t been cheap for a long time so not in our portfolios:

https://publish.finviz.com/051325/SHWw134787637i.png

🚢 Sherwin-Williams (SHW) Investor Report:

I’m excited to analyze Sherwin-Williams for you! Let’s explore where this paint and coatings giant might be headed by January 2027.

Current Financial Position (May 2025)

Sherwin-Williams recently reported Q1 2025 results showing mixed performance in a challenging environment:

• Net sales decreased 1.1% to $5.31 billion compared to Q1 202423
• Diluted EPS increased 1.5% to $2.00 per share2
• Adjusted EPS rose 3.7% to $2.25, exceeding analyst expectations23
• Adjusted EBITDA grew 4.6% to $937 million (17.7% of net sales)25

The company has maintained its full-year 2025 guidance:

• Diluted EPS: $10.70 to $11.10 per share
• Adjusted EPS: $11.65 to $12.05 per share25

Segment Performance

Paint Stores Group: The strongest performer with:

• 2.3% sales growth to $2.94 billion56
• Same-store sales up 1.2%, a positive shift from Q1 2024’s 0.1% decline6
• 9.7% increase in segment profit5
• Growth in protective/marine coatings, residential repaint, and new residential business5

Consumer Brands Group: Facing headwinds with:

• 6% sales decline to $762.2 million56
• Continued softness in North American DIY demand56
• Approximately 3% negative impact from unfavorable currency translation6

Performance Coatings Group: Experiencing challenges with:

• 4.8% sales decline to $1.6 billion56
• Gains in packaging offset by declines in other industrial markets5
• Currency headwinds affecting international performance3

Sherwin-Williams: Fundamental Analysis and 18-Month Outlook

First, let’s establish the current baseline:

• Current share price: $356.34 (as of May 13, 2025)
• Q1 2025 results: Revenue $5.31B (down 1.1% YoY), Adjusted EPS $2.25 (up 3.7% YoY)23
• Full-year 2025 guidance: Adjusted EPS $11.65-$12.05 (midpoint $11.85, up 4.6% from 2024)313

Revenue Growth Trajectory

Sherwin-Williams is projecting “low single-digit” revenue growth for 20253. Let’s quantify this:

• The global paint and coatings industry is growing at approximately 4.5% CAGR14
• The U.S. market specifically is projected to grow at 2.3% for paints/preservatives through 202814
• SHW’s Q1 2025 revenue declined 1.1%, but Paint Stores Group (55% of revenue) grew 2.3%38
• New tariffs on imports from Canada, Mexico, and China are disrupting supply chains and increasing costs for key materials like titanium dioxide5

Synthesizing these factors, I project:

• 2025: 2.0% revenue growth (below industry average due to continued DIY weakness)
• 2026: 3.5% revenue growth (improving as housing market strengthens)
• First half 2027: 4.0% revenue growth (approaching industry average)

Margin Analysis and EPS Projection

Despite revenue challenges, SHW has demonstrated impressive margin management:

• Q1 2025: Adjusted EBITDA increased 4.6% to $937M (17.7% of sales)213
• Operating margin held steady at 14.3% despite inflationary pressures2
• The company opened 18 new stores in Q1 while maintaining profitability3

For my EPS projections:

• 2025: $11.85 (midpoint of guidance)
• 2026: $13.20 (11.4% growth, slightly below analysts’ 13.39% projection)9
• 2027 (annualized): $14.65 (11.0% growth)

Housing Market and Construction Outlook

The housing market significantly impacts SHW’s performance:

• Multifamily supply is expected to surge in 2025 with over 500,000 new apartment units6
• New York and Los Angeles will lead with 35,000 and 19,400 new units respectively6
• Sun Belt cities (Dallas, Austin, Houston, Charlotte, Raleigh, Atlanta, Orlando) will see significant inventory growth6
• New residential sales increased in Q1 2025 despite a soft housing market3

These factors suggest improving conditions for SHW’s architectural coatings business through 2026-2027.

Consumer Behavior Analysis

Historical patterns suggest recession-resilient aspects to SHW’s business:

• During economic downturns, consumers shift to cooking more at home and DIY projects7
• However, they also trade down from mid-tier brands to cheaper alternatives7
• SHW’s premium positioning (evidenced by its $8.5B brand value, highest in the industry)11 may provide some insulation from trading down

Valuation Analysis

Current metrics:

• P/E ratio: 33.68 (based on current price)
• Forward P/E (2025 guidance midpoint): 30.1
• Historical 5-year average P/E: ~28-30

For January 2027 valuation:

• Projected 2027 EPS: $14.65
• Conservative P/E multiple: 28 (below current level, accounting for potential economic slowdown)
• Base case P/E multiple: 30 (in line with historical average)
• Optimistic P/E multiple: 32 (assuming continued premium valuation)

This yields January 2027 price targets of:

• Conservative: $410.20
• Base case: $439.50
• Optimistic: $468.80

Competitive Position and Brand Strength

SHW maintains strong competitive advantages:

• World’s most valuable paints and coatings brand at $8.5B (up 12% in 2025)11
• Implemented a 5% price increase in January 2025 without significant volume loss11
• Expanded distribution network with 5,115 locations (up from 5,024 year-over-year)2
• Strong growth in protective and marine coatings (high-single digit percentage)13

Risk Factors

Key risks to my outlook include:

1. Prolonged housing market weakness – While multifamily construction is strong, a broader housing slowdown would impact results
2. Tariff and supply chain disruptions – New tariffs are affecting key raw materials5
3. DIY demand deterioration – Consumer Brands Group continues to face headwinds3
4. Commercial construction weakness – Commercial and property maintenance segments remain under pressure13

The Sherwin-Williams Story: 18-Month Narrative

Sherwin-Williams is navigating a challenging near-term environment with remarkable resilience. The company’s premium brand positioning, pricing power, and operational excellence are enabling it to expand margins even as revenue growth remains modest. While DIY demand and commercial construction face headwinds, the residential repaint and new residential segments are showing encouraging growth.

Looking ahead to January 2027, I see a company that will have successfully weathered the current choppiness and positioned itself for accelerating growth. The anticipated housing market recovery, particularly in multifamily and Sun Belt regions, will drive increased demand for architectural coatings. Meanwhile, SHW’s strategic expansion of its store network (adding 70-80 stores annually) will continue to strengthen its competitive moat.

The company’s disciplined capital allocation strategy, including consistent dividend increases (10.5% in Q1 2025) and share repurchases ($351.7M in Q1 alone), will continue to reward long-term shareholders. By January 2027, I expect SHW to be trading in the $410-$470 range, representing 15-32% appreciation from current levels, plus dividend income.

This forecast assumes that SHW successfully navigates the current tariff and supply chain challenges, maintains its pricing power, and benefits from the anticipated recovery in housing and construction activity. The company’s strong brand value and expanding global footprint provide additional avenues for growth beyond the core U.S. market.

For investors with a 18+ month horizon, SHW represents a quality business trading at a reasonable valuation relative to its long-term growth potential. The current challenges are creating an attractive entry point for those willing to look beyond near-term volatility.

See yesterday’s post – I answered you there.

Feel free to ask follow-up, of course.