Futures tentative, Germany pulls out all the stops, CrowdStrike falls, Abercrombie warns, Baytex beats
I’m 38 in earth years but it feels like I am 138 in Trump Administration years.
I had a great chat with Paul Harris of Harris Douglas about how investors can keep their head down and focus on buying great companies regardless of tariff noise. He gave his perspective on what he thinks are best companies on the planet. Watch the full episode now! Never miss an episode, subscribe to our YouTube channel!
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Bark: Futures were in the green but are starting to lose ground again after a tariff-induced sell-off yesterday. Markets are taking comfort in a softer tone after Secretary of Commerce Howard Lutnick suggested an update would be coming this afternoon that could lessen the 25% tariffs on Canadian and Mexican goods. Lutnick made specific mention of the auto sector and shares of GM (+6%), Ford (+2%) and Stellantis (+8%) are all higher in the pre-market. In the middle of Lutnick’s interview on Bloomberg this morning we got a read of job growth (ADP private payrolls) that was well below expectations (77,000 jobs created against the 140,000 jobs expected). This isn’t as important as the official job data out of the government Friday, but still the market reacted with bonds rallying. Lutnick dodged responsibility for the data saying it was still “Biden” data. So, we wait for an update this afternoon.
How do you say, “whatever it takes” in German: The other major catalyst this morning is a historic spending announcement out of Germany that marks a huge shift in the typical fiscal restraint they are famous for. Germany’s Chancellor Friedrich Merz actually used the words “whatever it takes” when he announced plans to spend more than $500 billion (US) on infrastructure and defense and that defense spending would be carved out of the constitutional debt brake that enforces fiscal discipline. This morning Germany is urging the EU to relax fiscal spending rules so that all countries can increase defense spending. “Last night Germany announced plans for one of the largest fiscal regime shifts in post-war history, perhaps with reunification 35 years ago being the only rival,” wrote Jim Reid of Deutsche Bank, “Everything you thought you knew about Germany’s economic prospects 3 months ago, or even 3 weeks ago, should be ripped up and you should start your analysis from fresh. This is game changing if it goes through.” German markets are ripping higher, with the DAX up more than 3%. Meanwhile, European bonds are getting crushed on the prospect of fiscal spending with yields blowing out across the board by 20 basis points or more (see below)
Reboot: Shares of CrowdStrike are falling 7% in the pre-market after its earnings outlook disappointed investors. The cyber security company famously caused a global outage in Windows computers last year when a software update went awry. While the stock since recovered, the investment required to move past the outage that halted global air travel, brought down banking systems and affected hospitals is weighing on the bottom line outlook. Outlook for profit was $0.64-$0.66/share for the next quarter, well below the $0.96/share analysts were expecting. I mostly see bulls defending the name this morning. “CrowdStrike continues to recover from the faulty update, and in our view has been taking the right steps to deepen its relationships with customers, partners, and the ecosystem more broadly,” wrote Stifel’s Adam Borg who calls CrowdStrike the “comeback kid.” Indeed, Dan Ives at Wedbush points out that even with that terrible outtage the company still has a retentio rate of +97%. “Overall, this quarter reaffirms our positive long-term view of CrowdStrike, as CRWD remains the gold standard for cybersecurity with the outage mostly in the rearview,” wrote Ives.
Hot and cold: Shares of Abercrombie & Fitch are cratering 9% and are poised to open at a one-year low this morning. The apparel retailer that I was never cool enough to shop at actually showed very strong sales growth with Hollister +24% from last year and 14% growth across the board. But the company is warning that growth will slow to 3-5% for 2026 and that is weighing on the stock this morning. It is also caught in the middle of week of uncertainty regarding tariffs.
Baytex watch: Watch shares of Baytex at the open after the oil & natural gas producer reported higher than expected cash flow per share. However, Raymond James’ Luke Davis points out this was largely due to one-time items. Nevertheless, the name has come under pressure with oil prices trading below $70/barrel and the stock trading at a near 4-year low. “While Canadian (small and mid)-caps have been under pressure in light of macro uncertainty (tariffs, OPEC production cut reversals), we believe the company’s cross border asset mix should provide some insulation with recent relative underperformance likely overdone,” wrote Davis. “That said, we continue to believe a mid-US$70 oil price is required for Baytex to make meaningful improvements to the current capital structure and enhance flexibility.”
