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01/07/22 Briefing




The S&P 500 futures are down 26 points and are trading 0.7% below fair value. The Nasdaq 100 futures are down 75 points and are trading 6.5% below fair value. The Dow Jones Industrial Average futures are down 133 points and are trading 0.4% below fair value.

There is a lack of buyer interest in the futures for the major indices this morning after Mircon (MU) warned of weakening demand and the Eurozone reported a worse-than-expected inflation rate of 8.6%.

Micron said after the close yesterday, "the industry demand environment has weakened, and we are taking action to moderate our supply growth in fiscal 2023." This warning has implications for companies that use Micron's semiconductors, including smartphone and PC producers. 

The Eurozone inflation reached a new record high in June ahead of the ECB's first key rate hike in 11 years. Headline inflation was 8.6% year-over-year last month versus an estimated 8.4%.

The 2 yr-note yield is down nine basis points to 2.85% and the 10-yr note yield is down two basis points to 2.95%. WTI crude oil futures are up 2.8% to $108.71/bbl. 

Separately, the closely watched ISM Manufacturing PMI for June will be released at 10:00 a.m. ET.

Market participation might be light today ahead of the Independence Day weekend. As a reminder, markets are closed on Monday. 

In corporate news:

  • Micron (MU 52.80, -2.48, -4.5%): Micron beats by $0.14, reports revs in-line; guides Q4 EPS below consensus, revs below consensus; says industry demand environment has weakened recently

  • Kohl's (KSS 29.79, -5.90, -16.5%): Franchise Group negotiations to acquire Kohl's Corporation have terminated; Kohl's also lowers Q2 sales outlook

  • American Airlines (AAL 12.70, +0.02, +0.2%): American Airlines will offer pilots a 17% raise.

  • TSMC (TSM 78.70, -3.05, -3.7%): TSMC is seeing clients scale back their orders.

  • FedEx (FDX 222.75, -3.96, -1.8%): Downgraded to Hold from Buy at Berenberg; price target cut to $275 from $330.

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the week on a lower note while Hong Kong's Hang Seng was closed for a holiday. Japan's Nikkei: -1.7% (-2.1% for the week), Hong Kong's Hang Seng: CLOSED (+0.7% for the week), China's Shanghai Composite: -0.3% (+1.1% for the week), India's Sensex: -0.2% (+0.3% for the week),South Korea's Kospi: -1.2% (-2.6% for the week), Australia's ASX All Ordinaries: -0.4% (-0.6% for the week).

  • In economic data:

  • China's June Caixin Manufacturing PMI 51.7 (expected 50.1; last 48.1)

  • Japan's June Manufacturing PMI 52.7 (last 52.7). June Tokyo CPI 2.3% yr/yr (last 2.4%) and Tokyo Core CPI 2.1% yr/yr, as expected (last 1.9%). May Unemployment Rate 2.6% (expected 2.5%; last 2.5%). Q2 Tankan Large Non-Manufacturers Index 13 (expected 14; last 9) and Q2 Tankan Large Manufacturers Index 9 (expected 13; last 14). Q2 Tankan All Big Industry Capex -1.4% (expected -6.7%; last -11.4%)

  • South Korea's June trade deficit $2.47 bln (expected deficit of $4.83 bln; last deficit of $1.71 bln). June Imports 19.4% yr/yr (expected 22.6%; last 32.0%) and June Exports 5.4% yr/yr (expected 3.8%; last 21.3%). June Nikkei Manufacturing PMI 51.3 (last 51.8)

  • India's June Nikkei Manufacturing PMI 53.9 (expected 54.5; last 54.6)

  • Australia's June AIG Manufacturing Index 54.0 (last 52.4) and June Manufacturing PMI 56.2 (last 55.7)

  • New Zealand's May Building Consents -0.5% m/m (last -8.6%)

  • Singapore's Q2 URA Property Index 3.2% qtr/qtr (last 0.7%)

  • In news:

  • China's Caixin Manufacturing PMI returned into expansionary territory in the June reading while Japan's Manufacturing PMI expanded for the 17th month in a row.

  • Taiwan Semiconductor Manufacturing Company reportedly saw a reduction in chip orders from major clients for this year.

  • Major European indices trade on a modestly lower note. STOXX Europe 600: -0.4% (-1.8% week-to-date), Germany's DAX: -0.1% (-2.6% week-to-date), U.K.'s FTSE 100: -0.3% (-0.8% week-to-date), France's CAC 40: -0.1% (-2.5% week-to-date), Italy's FTSE MIB: -0.2% (-3.9% week-to-date), Spain's IBEX 35: +0.4% (-1.4% week-to-date).

  • In economic data:

  • Eurozone's June CPI 0.8% m/m (last 0.8%); 8.6% yr/yr (expected 8.4%; last 8.1%). June Core CPI 0.2% m/m (last 0.5%); 8.6% yr/yr (expected 8.4%; last 8.1%). June Manufacturing PMI 52.1 (expected 52.0; last 54.6)

  • Germany's June Manufacturing PMI 52.0, as expected (last 54.8)

  • U.K.'s May Mortgage Lending GBP7.43 bln (expected GBP4.15 bln; last GBP4.16 bln). June Manufacturing PMI 52.8 (expected 53.4; last 54.6)

  • France's June Manufacturing PMI 51.4 (expected 51.0; last 54.6)

  • Italy's June Manufacturing PMI 50.9 (expected 50.5; last 51.9)

  • Spain's June Manufacturing PMI 52.6 (expected 52.1; last 53.8)

  • Swiss June procure.chPMI 59.1 (expected 57.9; last 60.0)

  • In news:

  • June Manufacturing PMI readings from the region's major economies remained in expansionary territory with most beating expectations.

  • European Central Bank policymaker Holzmann said that he would have preferred an earlier start to the ECB's rate hike cycle, adding that returning inflation to target will take some time.

  • The U.K. may reduce its value added tax.

  • Italy's Prime Minister Draghi expressed confidence that his country's gas stockpile will be 90% full by November.

 

U.S. equity futures:

  • S&P 500 Futures: -20 @ 3,765

  • DJIA Futures: -141 @ 30,635

  • Nasdaq 100 Futures: -85 @ 11,419

Overseas:

  • Europe: DAX -0.1%, FTSE -0.3%, CAC -0.1%

  • Asia: Nikkei -1.7%, Hang Seng CLOSED, Shanghai Composite -0.3%

Commodities:

  • Crude Oil +3.04 @ 108.80

  • Nat Gas +0.350 @ 5.774

  • Gold -20.90 @ 1786.40

  • Silver -0.835  @ 19.517

  • Copper -0.1397 @ 3.5703

U.S. Summary:

  • Earnings:

  • Accolade (ACCD) reports Q1 (May) results, beats on revs; guides AugQ revs below consensus; guides FY23 revs in-line

  • BGC Partners (BGCP) expects Q2 revs to be slightly below the midpoint of its prior range due to FX impacts

  • Li Auto (LI) reports June deliveries increased 68.9% yr/yr

  • Micron (MU) beats by $0.14, reports revs in-line; guides Q4 EPS below consensus, revs below consensus; says industry demand environment has weakened recently

  • NIO (NIO) reports June deliveries increased 60.3% yr/yr

  • Shaw Comms (SJR) beats by CC$0.03, misses on revs

  • XPeng (XPEV) announces vehicle delivery results for June and Second Quarter 2022; 34,422 vehicles delivered in 2Q 2022, a 98% increase yr/yr

  • General News:

  • Mitch McConnell says he will kill bipartisan China bill if Dems revive their agenda, according to Business Insider

  • Chinese President Xi says Hong Kong will be prosperous because of loyalty to rest of China, according to the Wall Street Journal

  • Senator Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) reaffirm again that they will not support filibuster changes, which means Democrats do not have enough votes to change the filibuster, according to Reuters

  • Yesterday's Supreme Court decision leaves President Biden with very few tools to battle climate change, according to the New York Times

  • EU Commission approves EUR 5 billion French scheme to support energy intensive companies in context of Russia's invasion of Ukraine

  • Lawmaker wants to attach marijuana banking legislation to defense bill, according to Marijuana Moment

  • Macau Gaming Inspection and Coordination Bureau reported June 2022 gross revs -62.1 yr/yr to HKD 2.477 bln versus -68.0% in May of 2022

  • American Airlines (AAL) will offer pilots a 17% raise, according to CNBC

  • Amplitude (AMPL) announced the appointment of Thomas Hansen as its first President

  • Apple (AAPL) former corporate secretary and director of corporate law admits engaging in an insider trading scheme, according to DOJ

  • Apple (AAPL) will add feature that will allow drivers to purchase gas from car dashboard, according to Reuters

  • Apple (AAPL) increases price of iPhone in Japan by nearly 20%, according to Reuters

  • AstraZeneca (AZN) signs new three year agreement with Oxford Biomedica

  • BAE Systems (BAESY) awarded $299 mln Army modification to previous contract for the delivery of M109A7 and M992A3 vehicles

  • BioCryst Pharma (BCRX) presents new data demonstrating consistently low attack rates among HAE patients after switching to ORLADEYO

  • Bitfarms (BITF) provides June 2022 production and mining operations update

  • CBL & Assoc (CBL) re-establishes regular quarterly dividend at $0.25/sh

  • Celldex Therapeutics (CLDX) presents positive interim data from Barzolvolimab Phase 1b Study in Chronic Spontaneous Urticaria at EAACI 2022

  • Clearway Energy (CWEN) CFO Chad Plotkin to step down

  • Customers Bancorp (CUBI) discloses that one of the company's commercial mortgage warehouse customers filed for chapter 11 bankruptcy protection

  • Ford Motor (F) is recalling more than 63,000 Bronco SUVs and Ranger pickup trucks for windshield issue, according to Consumer Reports

  • Intel (INTC): Sen McConnell tweet saying there will be no bipartisan USICA as long as Dems pursue a partisan reconciliation bill

  • Lockheed Martin (LMT) awarded $307 mln Army contract for repair and recertification of Phased Array Tracking Radar to Intercept on Target Advanced Capability-3 missiles

  • Maxeon Solar (MAXN) to supply approximately 600MWdc of its performance series solar panels to Cypress Creek Renewables

  • Meta (FB) reduces hiring target for engineers, according to Reuters

  • MGM (MGM): New Jersey casino workers reach deal with MGM and Caesars (CZR), according to the Wall Street Journal

  • Nektar Therapeutics (NKTR) promotes Jillian B. Thomsen to CFO

  • Pacific Biosciences (PACB) enters into an amended and restated development and commercialization agreement with Invitae (NVTA)

  • Pfizer (PFE): FDA issues update; FDA recommends inclusion of Omicron BA.4/5 component for COVID-19 vaccine booster doses

  • Provention Bio (PRVB): FDA extended its review period by three months for the Biologics License Application (BLA) for teplizumab; the extended user fee goal date is November 17, 2022

  • PureCycle Technologies (PCT) CEO and Chairman Mike Otworth will resign to return to Innventure; current COO Dustin Olson promoted to CEO, effective August 5

  • Rocket Lab USA (RKLB) confirmed its Photon Lunar spacecraft successfully completed a sixth on-orbit burn of the HyperCurie engine

  • Skillz (SKLZ) hires Jason Roswig, former Blackstone (BX) executive, as CFO, effective August 8

  • Tailwind International Acquisition (TWNI) CEO Pierre Denis has voluntarily resigned; Philip Krim named as new CEO

  • Takeda's (TAK) TAKHZYRO (lanadelumab) demonstrated positive results in the prevention of HAE Attacks in First and Only Open-Label Phase 3 Trial in Children Ages 2 to <12 Years

  • Teleflex (TFX) reports New Data Reinforce Efficacy of the UroLift System for the Treatment of Enlarged Prostate

  • TSMC (TSM) is seeing clients scale back their orders, according to Digitimes

  • Uber (UBER) releases safety report; Uber received 3,824 reports across the five most severe categories of sexual assault and misconduct; Compared to the first Safety Report, which covered 2017 and 2018, the rate of sexual assault reported on the Uber app decreased by 38%

  • Wolverine (WWW) sells Champion trademarks for footwear in the US and Canada to HanesBrands, which also settles litigation between the two

  • Zebra Tech (ZBRA) and Honeywell (HON) enter into a license and settlement agreement to resolve all patent-related litigation between the two companies

  • M&A:

  • Chubb (CB) completes acquisition of Cigna's (CI) Personal Accident, Supplemental Health and Life Insurance Business in Asia-Pacific

  • Citigroup (C) in discussions with buyers over sale of Russia operations, according to Financial Times

  • Costco (COST) completes purchase of Costco-Taiwan for $1.05 bln

  • Emerson (EMR) acquires Fluxa to complement its software portfolio and help accelerate delivery of medicines; financial details not disclosed

  • Fintech Acquisition (FTCV) and online brokerage EToro plan to let deadline for merger pass without closing the deal, according to The Information

  • FTX walked away from Celsius deal, according to Block

  • Hillenbrand (HI) to acquire Herbold Meckensheim GmbH for an enterprise value of approximately 79 mln; expected to close in Q4

  • Isleworth Healthcare Acquisition (ISLE) terminates previously announced merger with Cytovia Holdings

  • JBT Corp (JBT) acquires Alco-food-machines

  • JetBlue Airways (JBLU) extends tender offer to acquire all common shares of Spirit Airlines (SAVE) to July 29, 2022

  • KKR (KKR): NielsenIQ and GfK to combine; terms of the agreement were not disclosed

  • KNOT Offshore Partners (KNOP) announces acquisition of Synnve Knutsen

  • Kohl's (KSS): Franchise Group negotiations to acquire Kohl's Corporation have terminated; lowers Q2 sales outlook

  • Light & Wonder (LNW) amends purchase agreement for the sale of OpenBet to Endeavor (EDR); will now receive $750 mln in cash and $50 mln in common stock of Endeavor

  • North Atlantic Acquisition Corp. (NAAC) announces termination of business combination agreement with TeleSign effective immediately

  • SailPoint (SAIL) shareholders approve the company's pending acquisition by Thoma Bravo

  • Syndicate

  • Anterix (ATEX) files for 500,000 share common stock offering by selling shareholder

  • Ares Commercial Real Estate (ACRE) files for $1.25 bln mixed securities shelf offering

  • Evelo Biosciences (EVLO) entered into $75 mln sales agreement through an "at the market" equity offering program

  • lululemon athletica (LULU) files mixed securities shelf offering

  • IPOs:

  • Priced to Trade:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • CYTK +2.6%, NIO +2.1%, CWEN +1.9%, LI +1.9%, SKLZ +1.6%, SAIL +1%, JBLU +0.6%, CBL +0.5%, F+0.5%, NVTA +0.5%

  • Gapping down:

  • MU -4.8%, WDC -3.8%, CLDX -3.2%, ERJ -3.2%, ATEX -2%, ACRE -1.6%, PCT -1.5%, ACCD -1.2%, TAK -0.9%, PFE -0.7%, EDR -0.6%, INTC -0.6%, HON-0.5%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Coupang (CPNG) upgraded to Outperform from Neutral at Credit Suisse; tgt lowered to $19

  • Downgrades:

  • Duck Creek Technologies (DCT) downgraded to Mkt Perform from Mkt Outperform at JMP Securities

  • Duck Creek Technologies (DCT) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $16

  • Others:

  • Alvotech (ALVO) initiated with a Hold at Deutsche Bank; tgt $10

  • Comcast (CMCSA) initiated with an Outperform at Daiwa Securities; tgt $43

  • Cousins Prop (CUZ) initiated with a Peer Perform at Wolfe Research

Upcoming Events:

  • Econ Data:

  • 09:45 ET: IHS Markit Manufacturing PMI - Final for June (Briefing.comConsensus NA; Prior 52.4)

  • 10:00 ET: ISM Manufacturing Index for June (Briefing.comConsensus 55.0%; Prior 56.1%)

  • 10:00 ET: Construction Spending for May (Briefing.comConsensus 0.4%; Prior 0.2%)

  • Earnings:

  • Monday (Jun 27)

  • Afternoon: CNXC JEF NKE TCOM

  • Tuesday (Jun 28)

  • Morning: CGNT EPAC SNX

  • Afternoon:  AVAV PRGS

  • Wednesday (Jun 29)

  • Morning:  BBBY GIS MKC MSM PDCO PAYX SCHN UNF

  • Afternoon:  DCT MLKN SGH

  • Thursday (Jun 30)

  • Morning: AYI STZ LNN SMPL WBA

  • Afternoon:  ACCD MU

Asia & Europe detail:

Asia: Nikkei -1.7%, Hang Seng CLOSED, Shanghai Composite -0.3%

Equity indices in the Asia-Pacific region ended the week on a lower note while Hong Kong's Hang Seng was closed for a holiday. China's Caixin Manufacturing PMI returned into expansionary territory in the June reading while Japan's Manufacturing PMI expanded for the 17th month in a row. Taiwan Semiconductor Manufacturing Company reportedly saw a reduction in chip orders from major clients for this year.

  • In economic data:

  • China's June Caixin Manufacturing PMI 51.7 (expected 50.1; last 48.1)

  • Japan's June Manufacturing PMI 52.7 (last 52.7). June Tokyo CPI 2.3% yr/yr (last 2.4%) and Tokyo Core CPI 2.1% yr/yr, as expected (last 1.9%). May Unemployment Rate 2.6% (expected 2.5%; last 2.5%). Q2 Tankan Large Non-Manufacturers Index 13 (expected 14; last 9) and Q2 Tankan Large Manufacturers Index 9 (expected 13; last 14). Q2 Tankan All Big Industry Capex -1.4% (expected -6.7%; last -11.4%)

  • South Korea's June trade deficit $2.47 bln (expected deficit of $4.83 bln; last deficit of $1.71 bln). June Imports 19.4% yr/yr (expected 22.6%; last 32.0%) and June Exports 5.4% yr/yr (expected 3.8%; last 21.3%). June Nikkei Manufacturing PMI 51.3 (last 51.8)

  • India's June Nikkei Manufacturing PMI 53.9 (expected 54.5; last 54.6)

  • Australia's June AIG Manufacturing Index 54.0 (last 52.4) and June Manufacturing PMI 56.2 (last 55.7)

  • New Zealand's May Building Consents -0.5% m/m (last -8.6%)

  • Singapore's Q2 URA Property Index 3.2% qtr/qtr (last 0.7%)

---Equity Markets---

  • Japan's Nikkei: -1.7% (-2.1% for the week)

  • Hong Kong's Hang Seng: CLOSED (+0.7% for the week)

  • China's Shanghai Composite: -0.3% (+1.1% for the week)

  • India's Sensex: -0.2% (+0.3% for the week)

  • South Korea's Kospi: -1.2% (-2.6% for the week)

  • Australia's ASX All Ordinaries: -0.4% (-0.6% for the week)

---FX---

  • USD/JPY: -0.3% to 135.31

  • USD/CNH: +0.2% to 6.7070

  • USD/INR: -0.1% to 78.91

Europe: DAX -0.1%, FTSE -0.3%, CAC -0.1%

Major European indices trade on a modestly lower note. June Manufacturing PMI readings from the region's major economies remained in expansionary territory with most beating expectations. European Central Bank policymaker Holzmann said that he would have preferred an earlier start to the ECB's rate hike cycle, adding that returning inflation to target will take some time. The U.K. may reduce its value added tax. Italy's Prime Minister Draghi expressed confidence that his country's gas stockpile will be 90% full by November.

  • In economic data:

  • Eurozone's June CPI 0.8% m/m (last 0.8%); 8.6% yr/yr (expected 8.4%; last 8.1%). June Core CPI 0.2% m/m (last 0.5%); 8.6% yr/yr (expected 8.4%; last 8.1%). June Manufacturing PMI 52.1 (expected 52.0; last 54.6)

  • Germany's June Manufacturing PMI 52.0, as expected (last 54.8)

  • U.K.'s May Mortgage Lending GBP7.43 bln (expected GBP4.15 bln; last GBP4.16 bln). June Manufacturing PMI 52.8 (expected 53.4; last 54.6)

  • France's June Manufacturing PMI 51.4 (expected 51.0; last 54.6)

  • Italy's June Manufacturing PMI 50.9 (expected 50.5; last 51.9)

  • Spain's June Manufacturing PMI 52.6 (expected 52.1; last 53.8)

  • Swiss June procure.chPMI 59.1 (expected 57.9; last 60.0)

---Equity Markets---

  • STOXX Europe 600: -0.4% (-1.8% week-to-date)

  • Germany's DAX: -0.1% (-2.6% week-to-date)

  • U.K.'s FTSE 100: -0.3% (-0.8% week-to-date)

  • France's CAC 40: -0.1% (-2.5% week-to-date)

  • Italy's FTSE MIB: -0.2% (-3.9% week-to-date)

  • Spain's IBEX 35: +0.4% (-1.4% week-to-date)

---FX---

  • EUR/USD: -0.3% to 1.0452

  • GBP/USD: -1.0% to 1.2047

  • USD/CHF: +0.5% to 0.9599


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The S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures