02/10/23 Briefing

The S&P 500 futures are down 4 points and are trading 0.1% below fair value. The Nasdaq 100 futures are up 6 points and are trading 0.1% above fair value. The Dow Jones Industrial Average futures are down 50 points and are trading 0.1% below fair value.

Equity futures are mixed and somewhat flat this morning. Rising Treasury yields are still hanging over the market. The 2-yr note yield is up six basis points to 5.06% and the 10-yr note yield is up six basis points to 4.63%.

Congress passed a bill to extend government funding through November 17, avoiding a government shutdown, according to The New York Times. Also, federal student loan payments resumed on October 1. In related federal news, Rep. Matt Gaetz (R-FL) says he will bring a motion to remove House Speaker Kevin McCarthy from speakership this week as punishment for working with Democrats on government funding, according to CNN.

China's Manufacturing PMI returned into expansion in September while Caixin Manufacturing and Services readings pointed to a slowing expansion. Japan's Manufacturing PMI moved deeper into contraction territory.

Today's economic calendar features:

• 9:45 a.m. ET: Final September S&P Global U.S. Manufacturing PMI (prior 47.9)

• 10:00 a.m. ET: August Construction Spending (Briefing.comconsensus 0.5%; prior 0.7%) and September ISM Manufacturing Index (Briefing.comconsensus 47.8%; prior 47.6%)

In corporate news:

• Rivian Automotive (RIVN 25.14, +0.86, +3.5%): upgraded to Outperform from In Line at Evercore ISI

• NVIDIA (NVDA 440.00, +5.01, +1.2%): Goldman Sachs added the stock to its conviction list

• FedEx (FDX 267.03, +2.11, +0.8%): upgraded to Positive from Neutral at Susquehanna

• Discover Financial Services (DFS 89.97, +3.35, +3.9%): disclosed Friday nightthat FDIC issued the previously disclosed consent order which addresses shortcomings in Discover Bank's compliance management system for consumer protection laws and related matters

• Clorox (CLX 132.65, +1.59, +1.2%): upgraded to Buy from Neutral at DA Davidson

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region began the week on a mixed note, though markets in China, South Korea, and India were closed for holidays, resulting in lower volume. Japan's Nikkei: -0.3%, Hong Kong's Hang Seng: +2.5%, China's Shanghai Composite: CLOSED, India's Sensex: CLOSED, South Korea's Kospi: CLOSED, Australia's ASX All Ordinaries: -0.2%

• In economic data:

• China's September Manufacturing PMI 50.2, as expected (last 49.7) and non-Manufacturing PMI 51.7 (expected 51.5; last 51.0). September Caixin Manufacturing PMI 50.6 (expected 51.2; last 51.0) and Caixin Services PMI 50.2 (expected 52.0; last 51.8)

• Japan's Q3 Tankan Large Manufacturers Index 9 (expected 6; last 5) and Big Manufacturing Index 10 (expected 5; last 9). Q3 Tankan All Big Industry CAPEX 13.6%, as expected (last 13.4%). September Manufacturing PMI 48.5 (expected 48.6; last 49.6)

• South Korea's September trade surplus $3.70 bln (expected surplus of $1.75 bln; last surplus of $880 mln). September Imports -16.5% yr/yr (expected -17.6%; last -22.8%) and Exports -4.4% yr/yr (expected -9.1%; last -8.3%)

• New Zealand's August Building Consents -6.7% m/m (last -5.4%)

• In news:

• China released its official and Caixin Manufacturing and Services PMI readings for September. The official Manufacturing PMI returned into expansion while Caixin Manufacturing and Services readings pointed to a slowing expansion.

• Japan's 10-yr yield (0.758%) remained just below las week's high even though the Bank of Japan announced that it will buy JGBs with maturities between 5- and 10-yrs on October 4, in addition to buying that was previously planned.

• The Reserve Bank of Australia will hold a policy meeting tomorrow, but it is not expected to conclude with another rate hike.

• Major European indices trade on a mostly lower note while Spain's IBEX (+0.3%) outperforms. STOXX Europe 600: -0.4%, Germany's DAX: -0.1%, U.K.'s FTSE 100: -0.2%, France's CAC 40: -0.1%, Italy's FTSE MIB: UNCH, Spain's IBEX 35: +0.3%.

• In economic data:

• Eurozone's August Unemployment Rate 6.4%, as expected (last 6.5%). September Manufacturing PMI 43.4, as expected (last 43.5)

• Germany's September Manufacturing PMI 39.6 (expected 39.8; last 39.1)

• U.K.'s September Nationwide HPI 0.0% m/m (expected -0.4%; last -0.8%); -5.3% yr/yr (expected -5.7%; last -5.3%). September Manufacturing PMI 44.3 (expected 44.2; last 43.0)

• France's September Manufacturing PMI 44.2 (expected 43.6; last 46.0)

• Italy's September Manufacturing PMI 46.8 (expected 45.7; last 45.4). August Unemployment Rate 7.3% (expected 7.7%; last 7.5%)

• Spain's September Manufacturing PMI 47.7 (expected 46.5; last 46.5)

• Swiss August Retail Sales -1.8% yr/yr, as expected (last -2.5%) and August procure.chPMI 46.8 (expected 45.7; last 45.4)

• In news:

• Final September Manufacturing PMI readings from Spain, Italy, Germany, and the U.K. improved from their final August readings, but all remained in contraction.

• Sweden's central bank released its policy Minutes from the September meeting, showing an agreement that contractionary policy is needed for some time and that more rate hikes may be needed.

• Fitch raised Portugal's rating to A- from BBB+ with a Stable outlook.

U.S. equity futures:

• S&P 500 Futures -4 @ 4,284

• DJIA Futures: -46 @ 33,462

• Nasdaq 100 Futures: +11 @ 14,726

Overseas:

• Europe: DAX -0.1%, FTSE -0.2%, CAC -0.1%

• Asia: Nikkei -0.3%, Hang Seng +2.5%, Shanghai Composite CLOSED

Commodities:

• Crude Oil +0.44 @ 91.23

• Nat Gas -0.036 @ 2.893

• Gold -12.15 @ 1853.95

• Silver -0.555 @ 21.895

• Copper -0.0598 @ 3.6777

Earnings/Guidance:

• Arch Coal (ARCH) provides Q3 update; revises FY23 outlook

• Eldorado Gold (EGO) reports Q3 production; provides project update on Skouries

• Li Auto (LI) reports September deliveries increased 212.7% yr/yr

• NIO (NIO) reports September deliveries increased 43.8% yr/yr

• Scilex Holding (SCLX) reports preliminary unaudited financial results for the one month ended September 30, 2023

• XPeng (XPEV) reports September deliveries increased 12% yr/yr

• ZoomInfo (ZI) COO will transition into the role of EVP, International Expansion; co reaffirms Q3 and FY23 guidance

News:

• Congress passes bill to extend government funding through November 17, avoiding a government shutdown, according to the New York Times

• Rep. Matt Gaetz (R-FL) says he will bring a motion to remove House Speaker Kevin McCarthy from speakership this week as punishment for working with Democrats on government funding. It will take a majority of House members to remove him, CNN

• House Speaker Kevin McCarthy believes he has enough support to survive leadership challenge, according to CBS News

• California Governor Gavin Newsom appoints Laphonza Butler (D) to Senate to fill Dianne Feinstein's seat

• Migrant encounters at southern border reach all time record high in September, according to Fox News

• Ukraine funding was not included in short term government funding bill, according to Bloomberg

• Macau Gaming Inspection and Coordination Bureau reported September gross revs 404% yr/yr to HKD 14.9 bln versus -49.6% in September of 2022

• Students will now be required to resume loan payments, Washington Post

• Turkey: S&P outlook revised to Stable from Negative on policy shift; 'B' ratings affirmed

• Accuray (ARAY) has a 510(k) pending for an online adaptive therapy option, Cenos, for its Radixact System

• Airbnb (ABNB) CEO plans to build foundation for the company, according to Bloomberg

• ANI Pharma (ANIP) announces FDA approval and commercial availability of new 1-ml vial size of purified Cortrophin Gel, appropriate for adjunctive treatment of certain patients with acute gouty arthritis flares

• Apellis Pharmaceuticals (APLS) announces that the U.S. Food and Drug Administration has approved the EMPAVELI Injector

• Apple (AAPL) will issue software update to fix iPhone 15 overheating issue, according to the Wall Street Journal

• ARMOUR Residential REIT (ARR) announces effectiveness of one-for-five reverse stock split

• BAE Systems (BAESY): GBP 3.95bn awarded for next phase of AUKUS submarine program

• Banco Bilbao Vizcaya Argentaria (BBVA) announces EUR1.0 bln share buyback

• Biogen (BIIB) confirms that FDA Approves its TOFIDENCE (tocilizumab-bavi), a Biosimilar Referencing ACTEMRA

• Bowman Consulting Group (BWMN) fies scope of previously announced Canadian National Railway deal

• Braskem SA (BAK) confirms that the decision given in the Dutch court, in the preliminary phase of the process, did not judge the merits of the individual action

• Cabaletta Bio (CABA) receives FDA Clearance of IND Application for Treatment of Systemic Sclerosis with CABA-201

• Cigna Group (CI) resolves allegations related to industry risk adjustment practices

• Deutsche Bank (DB): German regulators will send monitor to Deutsche Bank, according to Handelsblatt

• Discover Financial Services (DFS) disclosed Friday nightthat FDIC issued the previously disclosed consent order which addresses shortcomings in Discover Bank's compliance management system for consumer protection laws and related matters

• DISH Network (DISH): FCC has confirmed that DISH Network Corporation met all of its June 14, 2023 band-specific 5G deployment commitments, and two of its three nationwide 5G commitments

• Ebix (EBIX) signs agreement with lenders regarding credit facility

• Eli Lilly (LLY) receives Complete Response Letter for Lebrikizumab based on inspection findings at third-party manufacturer

• Enerflex (EFXT) CFO resigns

• Evergy (EVRG) reaches unanimous settlement with parties to Kansas rate case

• Goldman Sachs (GS): CFTC orders three financial institutions to pay over $50 million for swap reporting failures and other violations

• Guess? (GES) co-founder Maurice Marciano is retiring from Board of Directors effective immediately; also settles previously-disclosed stockholder derivative lawsuit

• JetBlue Airways (JBLU) will raise flight attendant pay 5% next year, according to CNBC

• Kellanova (K), formerly known as Kellogg Company announced the completion of the previously announced separation of its North American cereal business, WK Kellogg Co (KLG)

• Lockheed Martin (LMT) awarded a $1.2 bln modification to previously awarded US Navy contract for Trident II missile production; also awarded a $746 mln US Navy contract relating to Switzerland's F-35 Joint Strike Fighter program

• Lockheed Martin's (LMT) Sikorsky Aircraft unit awarded a $650 mln US Air Force contract for the HH-60W Combat Rescue Helicopter

• MGM Resorts (MGM): Detroit Casino Council announced that members from MGM Grand Detroit, Hollywood at Greektown and MotorCity casinos - voted 99% 'yes' to authorize a strike

• Microosft (MSFT) CEO Satya Nadella will testify at Google (GOOG) antirust trial today, according to Bloomberg

• Minerals Tech (MTX): Barretts Minerals Inc. and Barretts Ventures Texas LLC file for Chapter 11 Protection

• Noble Corporation (NE) announces changes to its share capital

• Norfolk Southern Corporation (NSC) provided an update Saturday on a technology outage that impacted rail operations

• Northrop Grumman (NOC) awarded a $150 mln modification to US Navy contract

• Novartis (NVS) investigational iptacopan Phase III study demonstrates clinically meaningful and highly statistically significant proteinuria reduction in patients with IgA nephropathy

• Origin Materials (ORGN) appoints Matt Plavan as CFO

• PG&E (PCG) $6 bln plan to prevent wildfires is in jeopardy, according to the Wall Street Journal

• Repligen (RGEN) has appointed 20+ year industry veteran Olivier Loeillot to the newly created position of President and Chief Commercial Officer, effective immediately

• Rivian Automotive (RIVN) discloses it has agreed to build an EV manufacturing plant in Georgia

• Rivian Automotive (RIVN) losing $33,000 on every vehicle sold, according to the Wall Street Journal

• Robinhood Markets (HOOD) expects to accrue $100 mln expense related to previously disclosed legal and regulatory matters

• Roche Hldg (RHHBY) to present new key clinical and real-world data at ECTRIMS-ACTRIMS 2023 showcasing strength of long-term outcomes in MS and NMOSD

• Syndax (SNDX) Announces Pivotal AUGMENT-101 Trial of Revumenib in Relapsed/Refractory KMT2Ar Acute Leukemia Meets Primary Endpoint and Stopped Early for Efficacy Following Protocol-Defined Interim Analysis

• Takeda Pharma (TAK) announces amendment of compensation recoupment policy

• Tesla (TSLA) keeps Model Y price unchanged in China, according to Bloomberg

• Tesla (TSLA) Cybertruck coming out later than expected, according to the Wall Street Journal

• Tompkins Finl (TMP) completes balance sheet repositioning; expects loss in Q3, but transaction expected to have a favorable impact starting in Q4

• TotalEnergies SE (TTE) signs a new long-term solar power supply agreement with Saint-Gobain

• UBS (UBS) spokesperson says company is not aware of DOJ probe following reports last week, according to Reuters

• UBS (UBS) settled with Mozambique, according to Financial Times

• V2X (VVX) announced Shawn Mural has been appointed as its Senior Vice President and Chief Financial Officer

• Zevra Therapeutics (ZVRA) Announces Interim Data from the Phase 2 Clinical Trial of KP1077 for Idiopathic Hypersomnia

• Volkswagen AG (VWAGY) ends plans for electric car factory in Germany, according to Bloomberg

• Volvo (VLVLY): UAW posts on X "Nearly 4,000 UAW members at Mack Truck in Pennsylvania, Maryland, and Florida (UAW Region 8 & Region 9) have a tentative agreement"

M&A:

• Aramark (ARMK) completed the spin-off of Vestis Corporation (VSTS)

• Cohu (COHU) acquires Equiptest Engineering for $20 mln

• Cummins (CMI) acquires portions of Faurecia's Commercial Vehicle Exhaust Aftertreatment Business in Europe and the United States

• Digital World Acquisition Corp (DWAC) amended merger

• KKR (KKR) in discussions to purchase Eugin fertility clinics in Spain and Portugal, according to Reuters

• Rithm Capital (RITM) acquires Specialized Loan Servicing LLC for $720 mln

• Tilray (TLRY) closes its all-cash previously-announced acquisition of eight beer and beverage brands from Anheuser-Busch (BUD)

• Timken (TKR) acquired Rosa Sistemi S.p.A., a European designer and manufacturer of roller guideways, linear bearings, commercialized ball guideways and precision ball screws

• Trane (TT) signed a definitive agreement to acquire Nuvolo; Additional details of the transaction were not disclosed

• Viatris (VTRS) announces agreements on remaining planned divestitures; Upon closing would achieve its original total target of a multiple above 12x on 2022 estimated adjusted EBITDA

• Wells Fargo (WFC) sells to a group of leading investors ~$2 bln of private equity investments in certain Norwest Equity Partners and Norwest Mezzanine Partners funds

Syndicate:

• Fisker (FSR) announces successful closing of $170 mln additional convertible notes offering; now able to offer up to $623.3 mln additional 0% convertible notes for up to $550 mln in gross proceeds as a result of purchase agreement amendment

• Helix Energy (HLX) announces its 6.75% Convertible Senior Notes Due 2026 will become convertible

• HollySys (HOLI) announces formal sale process as part of review of strategic options

• Roivant Sciences (ROIV) files for $1.5 bln mixed securities shelf offering

• TeraWulf (WULF) files for 44,688,114 share common stock offering by selling shareholders

• Transocean (RIG) files for 9,891,980 share common stock offering by selling shareholder

IPOs:

• Priced to Trade:

• No IPOs expected.

Gapping Up/Down

• Gapping up:

• GNL +4.1%, TT +2.9%, VTRS +1.7%, BBVA+1.7%, LI +1.6%, HUM +1.5%, DHR +1.2%, EGO +1%, XPEV +1%, HOLI +0.9%, DWAC+0.9%, DXCM +0.8%, MGM +0.6%, LVS +0.5%

• Gapping down:

• IMAX -2%, NSC -1.2%, ARR -1.2%, TAK -1%, NVS -0.5%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

• Clorox (CLX) upgraded to Buy from Neutral at DA Davidson; tgt $152

• FedEx (FDX) upgraded to Positive from Neutral at Susquehanna; tgt raised to $315

• Insulet (PODD) upgraded to Buy from Hold at Jefferies; tgt lowered to $240

• LGI Homes (LGIH) upgraded to Neutral from Sell at BTIG Research

• Macerich (MAC) upgraded to Neutral from Underweight at Piper Sandler; tgt raised to $12

• Zscaler (ZS) upgraded to Overweight from Neutral at Piper Sandler; tgt raised to $190

• Downgrades:

• Bread Financial (BFH) downgraded to Sell from Neutral at Goldman; tgt lowered to $32

• Chubb (CB) downgraded to Neutral from Overweight at JP Morgan; tgt $250

• Norfolk Southern (NSC) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $215

• SolarEdge Technologies (SEDG) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $152

• Others:

• Credo Technology Group (CRDO) initiated with an Overweight at Barclays; tgt $18

Econ Data:

• 09:45 ET: S&P Global US Manufacturing PMI - Final for Sep (Briefing.comConsensus NA; Prior 47.9)

• 10:00 ET: ISM Manufacturing Index for Sep (Briefing.comConsensus 47.8%; Prior 47.6%)

• 10:00 ET: Construction Spending for Aug (Briefing.comConsensus 0.5%; Prior 0.7%)

Earnings:

• Tuesday (Oct 3)

• Morning: MKC

• Afternoon:  CALM

• Wednesday (Oct 4)

• Morning:  ANGO HELE RPM TLRY

• Afternoon:  ACCD RGP

• Thursday (Oct 5)

• Morning: CAG STZ LW

• Afternoon:  LEVI

Asia & Europe detail:

Asia: Nikkei -0.3%, Hang Seng +2.5%, Shanghai Composite CLOSED

Equity indices in the Asia-Pacific region began the week on a mixed note, though markets in China, South Korea, and India were closed for holidays, resulting in lower volume. Still, China released its official and Caixin Manufacturing and Services PMI readings for September. The official Manufacturing PMI returned into expansion while Caixin Manufacturing and Services readings pointed to a slowing expansion. Japan's 10-yr yield (0.758%) remained just below las week's high even though the Bank of Japan announced that it will buy JGBs with maturities between 5- and 10-yrs on October 4, in addition to buying that was previously planned. The Reserve Bank of Australia will hold a policy meeting tomorrow, but it is not expected to conclude with another rate hike.

• In economic data:

• China's September Manufacturing PMI 50.2, as expected (last 49.7) and non-Manufacturing PMI 51.7 (expected 51.5; last 51.0). September Caixin Manufacturing PMI 50.6 (expected 51.2; last 51.0) and Caixin Services PMI 50.2 (expected 52.0; last 51.8)

• Japan's Q3 Tankan Large Manufacturers Index 9 (expected 6; last 5) and Big Manufacturing Index 10 (expected 5; last 9). Q3 Tankan All Big Industry CAPEX 13.6%, as expected (last 13.4%). September Manufacturing PMI 48.5 (expected 48.6; last 49.6)

• South Korea's September trade surplus $3.70 bln (expected surplus of $1.75 bln; last surplus of $880 mln). September Imports -16.5% yr/yr (expected -17.6%; last -22.8%) and Exports -4.4% yr/yr (expected -9.1%; last -8.3%)

• Singapore's Q3 URA Property Index 0.5% qtr/qtr (last -0.2%) o Australia's September Manufacturing PMI 48.7 (expected 48.2; last 49.6). September MI Inflation Gauge 0.0% m/m (last 0.2%)

• New Zealand's August Building Consents -6.7% m/m (last -5.4%)

---Equity Markets---

• Japan's Nikkei: -0.3%

• Hong Kong's Hang Seng: +2.5%

• China's Shanghai Composite: CLOSED

• India's Sensex: CLOSED

• South Korea's Kospi: CLOSED

• Australia's ASX All Ordinaries: -0.2%

---FX---

• USD/JPY: +0.3% to 149.72

• USD/CNH: +0.1% to 7.3014

• USD/INR: +0.1% to 83.14

Europe: DAX -0.1%, FTSE -0.2%, CAC -0.1%

Major European indices trade on a mostly lower note while Spain's IBEX (+0.3%) outperforms. Final September Manufacturing PMI readings from Spain, Italy, Germany, and the U.K. improved from their final August readings, but all remained in contraction. Sweden's central bank released its policy Minutes from the September meeting, showing an agreement that contractionary policy is needed for some time and that more rate hikes may be needed. Fitch raised Portugal's rating to A- from BBB+ with a Stable outlook.

• In economic data:

• Eurozone's August Unemployment Rate 6.4%, as expected (last 6.5%). September Manufacturing PMI 43.4, as expected (last 43.5)

• Germany's September Manufacturing PMI 39.6 (expected 39.8; last 39.1)

• U.K.'s September Nationwide HPI 0.0% m/m (expected -0.4%; last -0.8%); -5.3% yr/yr (expected -5.7%; last -5.3%). September Manufacturing PMI 44.3 (expected 44.2; last 43.0)

• France's September Manufacturing PMI 44.2 (expected 43.6; last 46.0)

• Italy's September Manufacturing PMI 46.8 (expected 45.7; last 45.4). August Unemployment Rate 7.3% (expected 7.7%; last 7.5%)

• Spain's September Manufacturing PMI 47.7 (expected 46.5; last 46.5)

• Swiss August Retail Sales -1.8% yr/yr, as expected (last -2.5%) and August procure.chPMI 46.8 (expected 45.7; last 45.4)

---Equity Markets---

• STOXX Europe 600: -0.4%

• Germany's DAX: -0.1%

• U.K.'s FTSE 100: -0.2%

• France's CAC 40: -0.1%

• Italy's FTSE MIB: UNCH

• Spain's IBEX 35: +0.3%

---FX---

• EUR/USD: -0.4% to 1.0533

• GBP/USD: -0.4% to 1.2152

• USD/CHF: -0.1% to 0.9140