Silver banana goes to…

In this issue of the peel:

• 🎭 Trump hints at easing China tariffs—markets melt, hawks panic, drama pending on Truth Social. 

• 💎 Australia’s stockpiling critical minerals just in case trade wars get really spicy.

• 🏠 Fed’s playing wait-and-see while homebuyers tap out at 7% mortgage rates and rising prices.

Market Snapshot

Banana Bits

• President Trump indicated a willingness to reduce tariffs on Chinese imports by up to 60%, aiming to de-escalate the ongoing trade tensions.

• In response to escalating trade tensions and to reduce global reliance on China, Australia announced a $0.77 billion plan to create a strategic reserve of critical minerals, including rare earth elements.

• IMF Managing Director Kristalina Georgieva urges a swift resolution of escalating trade disputes, warning that President Trump's aggressive tariffs are causing businesses to delay investment and consumers to reduce spending.

• Russian President Vladimir Putin encourages officials to leverage global market turbulence and trade wars to bolster Russia's economy.

• A massive Russian strike on Kyiv results in at least nine deaths, marking the deadliest attack on Ukraine in nearly a year.

The Daily Poll

Previous Poll:

Will Bessent’s “rebalancing” calm the trade war?

Yep, market magic: 17.5% // Nah, just sweet talk: 48.8% // Maybe—too early to tell: 33.7%

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Macro Monkey Says

The Fed’s New Favorite Word: “Patience”

The Federal Reserve is taking a cautious approach to interest rate changes, emphasizing the need for more data before making any decisions. 

Fed Governor Christopher Waller and Cleveland Fed President Beth Hammack both indicated that it's too soon to adjust rates, especially with the potential inflationary effects of President Trump's proposed tariffs still uncertain. 

Waller noted that these tariffs might not significantly impact the economy before July, suggesting that inflation or growth concerns won’t be clear until the year's second half. This sentiment was echoed by Hammack, who stated that May is too soon for a rate change, though future action could be possible with strong supporting evidence.

Meanwhile, the housing market is feeling the strain. In March 2025, U.S. home sales experienced their sharpest decline since November 2022, falling 5.9% from the previous month to a seasonally adjusted annual rate of 4.02 million units. 

This drop, reported by the National Association of Realtors, occurred across all regions and represents a 2.4% decrease compared to March 2024. 

The downturn comes at the beginning of the crucial spring buying season and is attributed primarily to persistently high mortgage rates, near 7%, and rising home prices, which continue to deter potential buyers.

The Takeaway?

The Federal Reserve is in no rush to cut rates, emphasizing patience as they monitor the economy. Meanwhile, high mortgage rates and rising home prices are cooling the housing market, indicating that the Fed's cautious approach may be warranted.

Career Corner

Question

I was recently asked this question and would love to get some input on how I should answer it: "What are some line items that might be included in the COGS section of the income statement of a tech and/or biotech company?"

Answer

Look up the public financials of a tech company and a biotech company, and you'll see what they include in COGS (directly below revenue, above gross profit). You want to make sure these line items are directly tied to the production of revenue.

Head Mentor, WSO Academy

Check out WSO Academy!

What's Ripe

ServiceNow (NOW) 15.5%

• ServiceNow's stock surged by 15.49% on Thursday, following a robust earnings report that exceeded analyst expectations. 

• The company's strong performance was driven by increased demand for its AI-driven enterprise software solutions, particularly in the government sector. 

• Additionally, ServiceNow increased its full-year subscription revenue target from a range of $12.635 billion and $12.675 billion to a revised $12.64 billion and $12.68 billion. 

Microchip Technology (MCHP) 12.4% 

• Microchip Technology shares surged 12.38% after unveiling a new ultra-compact power chip, the MCPF1412 power module, designed for AI and data centers. 

• It helps computers run faster and cooler while using less energy, perfect for the booming AI market. Investors see this as a long-term win, with Microchip cementing itself as a key supplier for next-gen tech infrastructure.

What's Rotten

Alaska Air Group (ALK) 10.0%

• Alaska Air Group's shares declined by 9.98% on Thursday, after the company withdrew its full-year 2025 financial forecast due to ongoing macroeconomic uncertainties, including the impacts of trade tensions. 

• The airline also projected weaker profits for the second quarter, citing lower fare bookings and reduced pricing power, which are expected to cut revenues by about 6% in the current quarter.

Tyler Technologies (TYL) 6.8%

• Tyler Technologies saw its stock fall by 6.81% on Thursday, following a mixed earnings report that, while showing revenue growth, indicated potential challenges in maintaining its profit margins. 

• Investors expressed concerns over the company's high valuation metrics, with a trailing P/E ratio of 80x and a forward P/E of 46.7x, suggesting limited room for error in future performance.

Thought Banana

Merck’s $3.5B SpringWorks Bet

Germany’s Merck KGaA (ETR:MRK) is in advanced talks to acquire U.S.-based SpringWorks Therapeutics (NASDAQ:SWTX) for approximately $3.5 billion, at a proposed price of around $47 per share. The deal could be finalized as early as next week, according to insiders close to the matter.

SpringWorks, founded in 2017 and publicly listed since 2019, specializes in developing treatments for rare diseases and cancers. Its flagship product, Ogsiveo (nirogacestat), received FDA approval in November 2023 for treating desmoid tumors, marking the first approved therapy for this rare condition. The drug generated $172 million in U.S. net product revenue in 2024.

For Merck, the acquisition aligns with a long-term strategy to expand its life sciences and oncology portfolio, especially as the company navigates competitive pressures and looming patent cliffs on key drugs like Mavenclad. 

SpringWorks adds a differentiated pipeline and a strong foothold in the growing rare disease segment.

But the path to the deal hasn’t been without complications. 

According to the Wall Street Journal, recent market volatility and geopolitical uncertainties added complexity to the discussions. While volatility generally causes buyers to hesitate, Merck’s roughly $60 billion market cap makes SpringWorks an easily digestible target, even amid macroeconomic shakiness. 

In fact, it’s precisely during uncertain markets that strategic acquirers often find their best deals. The deal, if finalized, would be one of Merck's largest recent pharmaceutical acquisitions, following its $17 billion purchase of Sigma-Aldrich in 2015. 

It also reflects a broader industry trend of big pharma companies investing in biotech firms with promising pipelines to bolster their portfolios amid increasing competition and patent cliffs.

The Takeaway?

Merck's potential acquisition of SpringWorks underscores the growing value of biotech firms specializing in rare diseases. 

Merck’s SpringWorks bid isn’t just about rare diseases—it’s a bold move amid global trade and market uncertainty, signaling that big pharma is ready to strike when valuations dip and pipelines promise..

The Big Question: Will Merck's acquisition of SpringWorks set a precedent for future big pharma investments in rare disease biotech firms?

Banana Brain Teaser

Previous

A project scheduled to be carried out over a single fiscal year has a budget of $12,600, divided into 12 equal monthly allocations. At the end of the 4th month of that fiscal year, the total amount actually spent on the project was $4,580. By how much was the project over its budget?

Answer: $380

Today

A case contains c cartons. Each carton contains b boxes, and each box contains 100 paper clips. How many paper clips are contained in 2 cases?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
Chris, Vyom, Ankit & Patrick

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