02/06/23 Briefing

The S&P 500 futures are up 19 points and are trading 0.4% above fair value. The Nasdaq 100 futures are up 81 points and are trading 0.3% above fair value. The Dow Jones Industrial Average futures are up 157 points and are trading 0.4% above fair value.

Stock futures have a positive disposition, driven in part by upside momentum after the S&P 500 closed above 4,200 yesterday. Market participants are also reacting to news that the Senate passed the debt ceiling deal by a vote of 63-36. The bill now heads to President Biden for signing. 

There has also been a fair amount of corporate news since yesterday's close. Positive reactions to earnings from lululemon (LULU), MongoDB (MDB), and Five Below (FIVE) have helped boost sentiment. 

Market participants are awaiting the potentially market-moving Employment Report for May at 8:30 a.m. ET. 

The 2-yr note yield is unchanged at 4.34% and the 10-yr note yield is unchanged at 3.60%.

In corporate news:

• lululemon athletica (LULU 377.87, +49.52, +15.1%): beats by $0.32, beats on revs, comparable sales increased 14%; guides Q2 EPS in-line, revs in-line; guides FY24 EPS above consensus, revs above consensus

• MongoDB (MDB 376.43, +82.47, +28.0%): beats by $0.38, beats on revs; guides JulQ EPS above consensus, revs above consensus; guides FY24 EPS above consensus, revs above consensus

• Dell (DELL 44.21, -1.25, -2.8%): beats by $0.45, beats on revs; expects Q2 EPS and revs in-line with consensus; raises FY24 earnings outlook, reaffirms revenue guidance; reiterates long-term financial goals

• Broadcom (AVGO 789.90, -0.05, -0.01%): beats by $0.20, reports revs in-line; guides JulQ revs above consensus

• Five Below (FIVE 176.70, +7.35, +4.3%): beats by $0.04, reports revs in-line comps +2.7%; guides Q2 EPS below consensus, revs below consensus; guides FY24 EPS in-line, revs in-line

• SentinelOne (S 13.33, -7.39, -35.7%): beats by $0.02, misses on revs; guides Q2 revs below consensus; guides FY24 revs below consensus

• Costco (COST 509.89, -2.71, -0.5%): reports May net sales +1.2% yr/yr to $18.23 bln; total monthly comparable sales -0.3%, adj comps (ex gas fx) +3.3%

• Zscaler (ZS 137.75, +2.66, +2.0%): beats by $0.06, beats on revs; guides Q4 EPS above consensus, revs above consensus; guides FY23 EPS above consensus, revs above consensus

• PagerDuty (PD 23.30, -4.45, -16.0%): beats by $0.11, reports revs in-line; guides Q2 EPS above consensus, revs below consensus; guides FY24 EPS above consensus, revs below consensus

• Guidewire Software (GWRE 77.95, -4.89, -5.9%): misses by $0.12, misses on revs; guides Q4 revs in-line; guides FY23 revs below consensus

• Elastic (ESTC 68.90, -2.76, -3.9%): beats by $0.13, reports revs in-line; guides JulQ EPS below consensus, revs below consensus; guides FY24 EPS above consensus, revs below consensus

• The Trade Desk (TTD 75.89, +2.63, +3.6%): upgraded to Overweight from Equal Weight at Morgan Stanley 

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended the week on a higher note while markets in Singapore were closed for Vesak Day. Japan's Nikkei: +1.2% (+2.0% for the week), Hong Kong's Hang Seng: +4.0% (+1.1% for the week), China's Shanghai Composite: +0.4% (+0.6% for the week), India's Sensex: +0.2% (+0.1% for the week), South Korea's Kospi: +1.3% (+1.7% for the week), Australia's ASX All Ordinaries: +0.6% (UNCH for the week).

  • In economic data:

    • Japan's May Monetary Base -1.1% yr/yr (expected -1.4%; last -1.7%)

    • South Korea's Q1 GDP 0.3% qtr/qtr, as expected (last -0.4%); 0.9% yr/yr (expected 0.8%; last 1.3%). May CPI 0.3% m/m (expected 0.5%; last 0.2%); 3.3% yr/yr, as expected (last 3.7%)

    • Australia's April Home Loans -3.8% m/m (expected 3.0%; last 5.5%) and investment lending for homes -0.9% m/m (last 3.4%)

    • New Zealand's Q1 Terms of Trade Index -1.5% qtr/qtr (expected -1.3%; last 1.5%)

  • In news:

    • Hong Kong's Hang Seng (+4.0%) outperformed amid speculation that China is preparing a new stimulus package that could be announced around the Politburo's meeting in July.

    • Australia's minimum wage will be increased by 5.75% on July 1, prompting upward revisions to Reserve Bank of Australia's terminal cash rate forecasts at ANZ and RBC.

• Major European indices are looking for a higher finish to the week. STOXX Europe 600: +1.0% (-0.3% week-to-date), Germany's DAX: +1.2% (+0.3% week-to-date), U.K.'s FTSE 100: +1.0% (-0.9% week-to-date), France's CAC 40: +1.3% (-1.2% week-to-date), Italy's FTSE MIB: +1.1% (+0.5% week-to-date), Spain's IBEX 35: +1.0% (+0.7% week-to-date).

  • In economic data: 

    • France's April Industrial Production 0.8% m/m (expected 0.3%; last -1.1%)

    • Spain's May Unemployment Change -49,300 (expected -40,100; last -73,900)

  • In  news:

    • European Central Bank policymaker Panetta repeated that inflation is too high, but also acknowledged that the ECB is not far from reaching the terminal rate.

    • Germany's finance ministry is encouraging other ministries to limit next year's spending plans to close a EUR20 bln deficit.

U.S. equity futures:

• S&P 500 Futures: +20 @ 4,241

• DJIA Futures: +147 @ 33,208

• Nasdaq 100 Futures: +79 @ 14,520

Overseas:

• Europe: DAX +1.2%, FTSE +1.0%, CAC +1.3%

• Asia: Nikkei +1.2%, Hang Seng +4.0%, Shanghai Composite +0.4%

Commodities:

• Crude Oil +1.12 @ 71.22

• Nat Gas -0.009 @ 2.149

• Gold +0.25 @ 1995.75

• Silver -0.010 @ 23.977

• Copper +0.0532 @ 3.7642

Earnings/Guidance:

• Asana (ASAN) beats by $0.09, beats on revs; guides JulQ EPS above consensus, revs in-line; guides FY24 EPS in-line, revs in-line

• Broadcom (AVGO) beats by $0.20, reports revs in-line; guides JulQ revs above consensus

• ChargePoint (CHPT) beats by $0.04, beats on revs; guides Q2 revs below consensus

• Cooper (COO) beats by $0.04, beats on revs; guides FY23 EPS in-line, revs in-line

• Costco (COST) reports May net sales +1.2% yr/yr to $18.23 bln; total monthly comparable sales -0.3%, adj comps (ex gas fx) +3.3%

• Dell (DELL) guides on the call: expects Q2 EPS and revs in-line with consensus; raises FY24 earnings outlook, reaffirms revenue guidance; reiterates long-term financial goals

• Elastic (ESTC) beats by $0.13, reports revs in-line; guides JulQ EPS below consensus, revs below consensus; guides FY24 EPS above consensus, revs below consensus

• Five Below (FIVE) beats by $0.04, reports revs in-line comps +2.7%; guides Q2 EPS below consensus, revs below consensus; guides FY24 EPS in-line, revs in-line

• Guidewire Software (GWRE) misses by $0.12, misses on revs; guides Q4 revs in-line; guides FY23 revs below consensus

• lululemon athletica (LULU) beats by $0.32, beats on revs, comparable sales increased 14%; guides Q2 EPS in-line, revs in-line; guides FY24 EPS above consensus, revs above consensus

• MongoDB (MDB) beats by $0.38, beats on revs; guides JulQ EPS above consensus, revs above consensus; guides FY24 EPS above consensus, revs above consensus

• PagerDuty (PD) beats by $0.11, reports revs in-line; guides Q2 EPS above consensus, revs below consensus; guides FY24 EPS above consensus, revs below consensus

• Quanex (NX) beats by $0.25, beats on revs; reaffirms FY23 revs

• Samsara (IOT) beats by $0.03, beats on revs, guides Q2 EPS inline, revs above consensus, guides FY24 EPS and revenue above consensus

• SentinelOne (S) beats by $0.02, misses on revs; guides Q2 revs below consensus; guides FY24 revs below consensus

• VMware (VMW) misses by $0.06, misses on revs; as previously announced, to be acquired by AVGO

• Zscaler (ZS) beats by $0.06, beats on revs; guides Q4 EPS above consensus, revs above consensus; guides FY23 EPS above consensus, revs above consensus

• Zumiez (ZUMZ) misses by $0.10, reports revs in-line; guides JulQ EPS below consensus, revs below consensus

News:

• Senate passes 2 year debt ceiling/spending cap bill by a vote of 63-36; sending to President Biden who says he will sign it as soon as possible

• OPEC+ unlikely to announce larger output cuts this weekend, according to Reuters

• CMS announces plan to ensure availability of new Alzheimer's drugs

• President Biden is expected to select Dr. Mandy Cohen as next CDC Director, according to the New York Times

• Acadia Healthcare (ACHC) appoints Heather Dixon as CFO, effective July 10, 2023

• Adaptive Biotechnologies (ADPT) highlights new data at ASCO 2023 and EHA 2023 underscoring the clonoSEQ Assay's impact as a standard for minimal residual disease assessment in patients with hematologic cancer

• Airbnb (ABNB) is suing NYC over a new law adding restrictions for short-term rentals, according to the Wall Street Journal

• AlTi Global (ALTI) CFO Christine Zhao to step down effective June 15; Reid Parmelee, currently the Global Controller, appointed as interim CFO

• AngioDynamics (ANGO) provides patent updates

• AppLovin (APP) announces GQG purchase of 15 million shares of Class A common stock from KKR

• Autolus Therapeutics (AUTL) presents positive results from pivotal phase 2 FELIX study in adult r/r B-ALL at ASCO

• BioNTech (BNTX) and OncoC4 present positive phase 1/2 data for antibody candidate BNT316/ONC-392 in hard-to-treat nsclc at ASCO

• Boeing (BA) awarded a $200 mln modification to a previously awarded US Navy contract

• Boeing (BA) aiming to delay Starliner flight, according to the Wall Street Journal

• Chemours (CC), DuPont (DD), and Corteva (CTVA) reach comprehensive PFAS settlement with U.S. Water Systems

• CME Group (CME) reports May 2023 monthly market statistics

• Darling Ingredients (DAR) enters into a letter of intent with Butterball, LLC to explore construction of a new poultry rendering plant in NC

• Enstar Group (ESGR) completes loss portfolio transfer With RACQ

• Exxon (XOM) and Chevron (CVX) near deals to drill in Algeria, according to the Wall Street Journal

• Healthcare Realty (HR) authorizes stock repurchase authorization $500 million of the company's Class A common stock

• Illumina's (ILMN) Board of Directors elects two experienced Independent Directors to Board

• KBR (KBR) to repurchase $100 mln principal amount of its $350 mln 2.50% convertible senior notes due November 1, 2023

• Kopin (KOPN) appoints James Brewington as Chairman

• Lockheed Martin (LMT) awarded a $240 mln US Air Force contract for the Joint Air-to-Surface Standoff Missile AGM-158D

• Marathon Digital Holdings (MARA) announces bitcoin production and mining operation updates for May 2023

• Meta (META) will require workers in offices three days a week, according to the Wall Street Journal

• New Fortress Energy (NFE) announced that it has received an export permit for its Altamira Fast LNG facility from Mexico's Ministry of Energy

• Nintendo (NTDOY) provides update on Russian operations

• Raytheon Technologies (RTX) awarded a $621.4 mln US Missile Defense Agency contract

• Ready Capital (RC) approves a stock repurchase program for up to $100 mln of company's common stock

• Saia (SAIA) reports LTL shipment and tonnage data for the first two months of the second quarter

• Senseonics (SENS) announces that UnitedHealthcare (UNH) will begin providing coverage for the Eversense E3 CGM System effective July 1, 2023for people with type 1 and insulin-requiring type 2 diabetes

• TEGNA (TGNA) has entered into an accelerated share repurchase agreement with JPMorgan Chase Bank, National Association

• TSMC (TSM) will make Nvidia (NVDA) AI chip, according to Digitimes

• Vanda Pharma (VNDA) receives Orphan Drug Designation for VCA-894A

M&A:

• 3D Systems (DDD) confirms submission of a superior proposal to combine with Stratasys (SSYS)

• CareTrust REIT (CTRE) has acquired multiple skilled nursing facilities

• Chemours (CC) enters into a definitive agreement to sell its Glycolic Acid business for $137 million in cash to PureTech Scientific

• EQT Corp. (EQT) private equity and ADIA agree recommended cash acquisition with Dechra Pharmaceuticals

• JetBlue Airways (JBLU) and Frontier Group Holdings (ULCC) enter agreement under which JBLU will divest all holdings of Spirit Airlines (SAVE) at NY's LaGuardia Airport to ULCC in connection with JBLU's planned merger with SAVE

• Stratasys (SSYS) receives unsolicited non-binding indicative proposal from 3D Systems (DDD) to acquire SSYS for $7.50 in cash and 1.2507 newly issued shares of DDD stock per share of SSYS

• Treace Medical Concepts (TMCI) to acquire certain assets of MIOS Marketing for a purchase price of $20 mln in an upfront cash payment with up to $10 mln in potential milestone payments

• W.R. Berkley (WRB) announces completed sale of the property and casualty insurance services division of Breckenridge IS, Inc.; company will recognize estimated pre-tax net realized gain on investment of $86 mln

Syndicate:

• AppLovin (APP) files mixed shelf securities offering

• Global Business Travel Group (GBTG) files $300 mln mixed shelf securities offering; also files for 3,775,304 shares of Class A common stock by selling stockholders

• MKS Instruments (MKSI) commences public offering of 2,000,000 shares of common stock

• NuScale Power (SMR) files $500 mln mixed shelf securities offering

• TriCo Bancshares (TCBK) files mixed shelf securities offering

IPOs:

• Expected to Price: No IPOs expected.

Gapping Up/Down

• Gapping up:

  • MDB +26.9%, IOT +15.7%, LULU +14.7%, NX +9.6%, SSYS +7.9%, FIVE +5.7%, HR +4%, TMCI +3%, KOPN+2.6%, ALTI +2.4%, MARA +2.4%, ASAN +1.8%, RC+1.7%, AMLI +1.5%, DDD +1.4%, ULCC +1.3%, SMR+1.2%, EQT +1.1%

• Gapping down:

  • S -36.8%, PD -13.5%, GWRE -7%, ESTC -6.5%, ZUMZ-4.8%, CHPT -3.6%, DELL -3.1%, MKSI -2.2%, COO -1.9%, APP -1.3%, ACHC -1.3%, AAP -1.3%, AVGO-1%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

  • Banco de Chile (BCH) upgraded to Outperform from Market Perform at Itau BBA; tgt $24

  • EPR Properties (EPR) upgraded to Overweight from Sector Weight at KeyBanc Capital Markets; tgt $47

  • FibroGen (FGEN) upgraded to Buy from Hold at Stifel; tgt raised to $32

  • Kinsale Capital (KNSL) upgraded to Outperform from Underperform at BMO Capital Markets; tgt raised to $389

  • Surgery Partners (SGRY) upgraded to Buy from Neutral at BofA Securities; tgt raised to $45

  • The Trade Desk (TTD) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt raised to $90

  • Universal Health (UHS) upgraded to Buy from Neutral at BofA Securities; tgt $163

• Downgrades:

  • Asana (ASAN) downgraded to Neutral from Buy at DA Davidson; tgt $21

  • BRP Inc. (DOOO) downgraded to Hold from Buy at TD Securities

  • Dollar General (DG) downgraded to Neutral from Overweight at Atlantic Equities; tgt $170

  • Dollar General (DG) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $178

  • Ginkgo Bioworks (DNA) downgraded to Sell from Neutral at Goldman; tgt lowered to $1.25

  • SentinelOne (S) downgraded to Hold from Buy at Canaccord Genuity; tgt lowered to $14

  • SentinelOne (S) downgraded to Hold from Buy at WestPark Capital

  • SentinelOne (S) downgraded to Neutral from Buy at BTIG Research

  • SentinelOne (S) downgraded to Neutral from Buy at DA Davidson; tgt lowered to $13.50

  • Valvoline (VVV) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $39

  • Warner Music Group (WMG) downgraded to Neutral from Overweight at Atlantic Equities; tgt lowered to $26

  • Xcel Energy (XEL) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $68

  • Xcel Energy (XEL) downgraded to Peer Perform from Outperform at Wolfe Research

• Others:

  • Acrivon Therapeutics (ACRV) initiated with an Outperform at Oppenheimer; tgt $25

  • Ambrx Biopharma (AMAM) initiated with an Outperform at Oppenheimer; tgt $30

  • Arbor Realty Trust (ABR) initiated with an Outperform at Wedbush; tgt $15

  • Ascent Industries (ACNT) initiated with a Buy at Stifel; tgt $20

  • Automatic Data (ADP) initiated with a Neutral at UBS; tgt $230

  • Chart Industries (GTLS) assumed with a Neutral at JP Morgan; tgt $138

  • CTO Realty Growth (CTO) assumed with a Buy at EF Hutton; tgt $23

  • Gladstone Land (LAND) assumed with a Buy at EF Hutton; tgt $20

  • Kopin (KOPN) initiated with a Buy at Stifel; tgt $3

  • Kura Sushi (KRUS) initiated with a Neutral at Citigroup; tgt $88

  • Modiv (MDV) assumed with a Buy at EF Hutton; tgt $17

  • Orla Mining (ORLA) resumed with a Buy at Stifel; tgt $7.25

  • Paychex (PAYX) initiated with a Neutral at UBS; tgt $115

  • Peakstone Realty Trust (PKST) initiated with a Hold at Truist; tgt $24

  • Quaker Chemical (KWR) initiated with a Buy at Stifel; tgt $250

  • REGENXBIO (RGNX) initiated with an Outperform at Robert W. Baird; tgt $42

Econ Data:

• 08:30 ET: Nonfarm Payrolls for May (Briefing.comConsensus 190K; Prior 253K)

• 08:30 ET: Nonfarm Private Payrolls for May (Briefing.comConsensus 177K; Prior 230K)

• 08:30 ET: Avg. Hourly Earnings for May (Briefing.comConsensus 0.3%; Prior 0.5%)

• 08:30 ET: Unemployment Rate for May (Briefing.comConsensus 3.5%; Prior 3.4%)

• 08:30 ET: Average Workweek for May (Briefing.comConsensus 34.4; Prior 34.4)

Earnings:

• Tuesday (May 30)

  • Morning: SKY

  • Afternoon:  AMBA BOX HPE HPQ SPWH

• Wednesday (May 31)

  • Morning:  AAP CAE CPRI DCI FRO

  • Afternoon:  AI CHWY CRDO CRWD DSGX NCNO NTAP JWN OKTA PHR PSTG PVH CRM VEEV VSCO

• Thursday (Jun 1)

  • Morning: BILI CAL CONN DG HRL M SPTN

  • Afternoon:  ASAN AVGO CHPT COO DELL ESTC FIVE GWRE LULU MDB PD S VMW ZS ZUMZ

Asia & Europe detail:

Asia: Nikkei +1.2%, Hang Seng +4.0%, Shanghai Composite +0.4%

Equity indices in the Asia-Pacific region ended the week on a higher note while markets in Singapore were closed for Vesak Day. Hong Kong's Hang Seng (+4.0%) outperformed amid speculation that China is preparing a new stimulus package that could be announced around the Politburo's meeting in July. Australia's minimum wage will be increased by 5.75% on July 1, prompting upward revisions to Reserve Bank of Australia's terminal cash rate forecasts at ANZ and RBC.

• In economic data:

  • Japan's May Monetary Base -1.1% yr/yr (expected -1.4%; last -1.7%)

  • South Korea's Q1 GDP 0.3% qtr/qtr, as expected (last -0.4%); 0.9% yr/yr (expected 0.8%; last 1.3%). May CPI 0.3% m/m (expected 0.5%; last 0.2%); 3.3% yr/yr, as expected (last 3.7%)

  • Australia's April Home Loans -3.8% m/m (expected 3.0%; last 5.5%) and investment lending for homes -0.9% m/m (last 3.4%)

  • New Zealand's Q1 Terms of Trade Index -1.5% qtr/qtr (expected -1.3%; last 1.5%)

---Equity Markets---

• Japan's Nikkei: +1.2% (+2.0% for the week)

• Hong Kong's Hang Seng: +4.0% (+1.1% for the week)

• China's Shanghai Composite: +0.4% (+0.6% for the week)

• India's Sensex: +0.2% (+0.1% for the week)

• South Korea's Kospi: +1.3% (+1.7% for the week)

• Australia's ASX All Ordinaries: +0.6% (UNCH for the week)

---FX---

• USD/JPY: UNCH at 138.87

• USD/CNH: -0.4% to 7.0741

• USD/INR: UNCH at 82.27

Europe: DAX +1.2%, FTSE +1.0%, CAC +1.3%

Major European indices are looking for a higher finish to the week. European Central Bank policymaker Panetta repeated that inflation is too high, but also acknowledged that the ECB is not far from reaching the terminal rate. Germany's finance ministry is encouraging other ministries to limit next year's spending plans to close a EUR20 bln deficit.

• In economic data:

  • France's April Industrial Production 0.8% m/m (expected 0.3%; last -1.1%)

  • Spain's May Unemployment Change -49,300 (expected -40,100; last -73,900)

---Equity Markets---

• STOXX Europe 600: +1.0% (-0.3% week-to-date) 

• Germany's DAX: +1.2% (+0.3% week-to-date)

• U.K.'s FTSE 100: +1.0% (-0.9% week-to-date)

• France's CAC 40: +1.3% (-1.2% week-to-date)

• Italy's FTSE MIB: +1.1% (+0.5% week-to-date)

• Spain's IBEX 35: +1.0% (+0.7% week-to-date)

---FX---

• EUR/USD: UNCH at 1.0765

• GBP/USD: UNCH at 1.2526

• USD/CHF: +0.1% to 0.9061