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03/01/23 Briefing


The S&P 500 futures are up 14 points and are trading 0.3% above fair value. The Nasdaq 100 futures are up 60 points and are trading 0.5% above fair value. The Dow Jones Industrial Average futures are up 120 points and are trading 0.3% above fair value.

The stock market is poised to start this first trading day of the month and new year on an upbeat note. Gains are likely driven by some bargain hunting activity following a lousy year in 2022. The thinking that the pressure from tax loss selling has dissipated is likely helping the bargain hunting bid.  

Manufacturing PMI's released over the weekend out of Asia and Europe all came in below 50, indicating global manufacturing remains in a state of contraction. 

Treasury yields are noticeably lower as participants continue to deal with concerns over economic weakness and the fear of a policy mistake. The 2-yr note yield is down six basis points to 4.36% and the 10-yr note yield is down 12 basis points to 3.76%.

The U.S. Dollar Index has made a big move this morning, up 1.1% to 104.69. 

Separately, the new Congress convenes today with Republicans taking control of the House. A closely watched vote for House Speaker will also take place later today.

Market participants will receive the following economic data today:

  • 9:45 a.m. ET: IHS Markit Manufacturing PMI final for December reading (prior 46.2)

  • 10:00 a.m. ET: Construction Spending for November (prior -0.3%)

In corporate news:

  • Tesla (TSLA 118.00, -5.18, -4.2%): reports Q4 deliveries of 405K vehicles; Piedmont Lithium amends agreement with Tesla (TSLA); Piedmont has agreed to deliver approximately 125,000 metric tons of SC6 to Tesla beginning in H2 2023 through the end of 2025

  • Wynn Resorts (WYNN 85.91, +3.44, +4.2%): upgraded to Overweight from Equal Weight at Well Fargo; Optimism connected to reports of Macau reopening 

  • PayPal (PYPL 73.04, +1.82, +2.6%): upgraded to Buy from Hold at Truist

  • Ally Financial (ALLY 24.31, -0.14, -0.6%) downgraded to Equal Weight from Overweight at Barclays

  • Li Auto (LI 21.70, +1.30, +6.4%): reports December deliveries increased 50.7% yr/yr

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region had some mixed showings on Tuesday. Japan's Nikkei: closed for holiday, Hong Kong's Hang Seng: +1.8%, China's Shanghai Composite: +0.9%, India's Sensex: +0.2%, South Korea's Kospi: -0.3%, Australia's ASX All Ordinaries: -1.3%.

  • In economic data:

  • China's December Manufacturing PMI 47.0 (expected 48.0; last 48.0) and Non-Manufacturing PMI 41.6 (last 46.7); December Caixin Manufacturing PMI 49.0 (expected 48.8; last 49.4)

  • South Korea's December Exports -9.5% (expected -10.1%; last -14.0%) and Imports -2.4% (expected -0.6%; last +2.7%)

  • India's December Nikkei S&P Global Manufacturing PMI 57.8 (expected 54.3; last 55.7)

  • In news:

  • Japan's Nikkei wasn't part of the mix as it was closed for holiday.

  • Following the U.S. close on Friday, China released its official manufacturing PMI (47.0) and non-manufacturing PMI (41.6) reports for December.

  • They were both weaker than expected and lower than the November readings, which is to say they showed a further deceleration in business activity that coincided with rising COVID cases.

  • The Caixin Manufacturing PMI (49.0) was a bit stronger than expected but down from November.

  • Bloomberg reported that China's Beige Book notes the economy likely contracted in Q4. Not surprisingly, speculation is swirling that the PBOC is likely to cut interest rates and/or the required reserve ratio in the first half of 2023.

  • A Nikkei report highlighted the possibility of the BOJ considering boosting its inflation forecast for FY24 in a move that would be construed as a shift away from its ultra-loose policy.

  • Major European indices are all higher today. STOXX Europe 600: +1.0%, Germany's DAX: +0.6%, U.K.'s FTSE 100: +1.3%, France's CAC 40: +0.5%, Italy's FTSE MIB: +0.9%, Spain's IBEX 35: +0.3%.

  • In economic data:

  • Eurozone's December Manufacturing PMI 47.8 (expected 47.8; last 47.1)

  • Germany's December Manufacturing PMI 47.1 (expected 47.4; last 46.2); December Unemployment Rate 5.5% (expected 5.6%; last 5.6%)

  • Spain's December Manufacturing PMI 46.4 (expected 46.2; last 45.7)

  • Italy's December Manufacturing PMI 48.5 (expected 48.5; last 48.4)

  • France's December Manufacturing PMI 49.2 (expected 48.9; last 48.3)

  • UK's December Manufacturing PMI 45.3 (expected 44.7; last 46.5)

  • In news:

  • The strength has been attributed to some optimism that the latest batch of manufacturing PMI readings suggest the worst of the manufacturing downturn is behind Europe. Also, there is some bargain hunting activity to begin the year after a tough 2022.

  • Sovereign bond yields have declined as each of the PMI readings point to an ongoing contraction in manufacturing activity that underscores weak economic conditions in the face of an ECB that is slated to keep raising rates to fight inflation.

  • An FT report discusses an expectation among economists that the UK will likely be dealing with a bad recession this year and have the weakest recovery among G7 members in 2023. EUR/USD -1.2% to 1.0533.

 

U.S. equity futures:

  • S&P 500 Futures: +17 @ 3,829

  • DJIA Futures: +126 @ 33,100

  • Nasdaq 100 Futures: +72 @ 11,012

Overseas:

  • Europe: DAX +0.6%, FTSE +1.3%, CAC +0.5%

  • Asia: Nikkei CLOSED, Hang Seng +1.8%, Shanghai Composite +0.9%

Commodities:

  • Crude Oil -1.12 @ 79.14

  • Nat Gas -0.440 @ 4.035

  • Gold +45.10 @ 1841.35

  • Silver +0.448 @ 24.488

  • Copper +0.0080 @ 3.8185

 

Earnings/Guidance:

  • Li Auto (LI) reports December deliveries increased 50.7% yr/yr

  • NIO (NIO) reports December deliveries increased 50.8% yr/yr

  • Tesla (TSLA) reports Q4 deliveries of 405K vehicles

  • XPeng (XPEV) reports December deliveries increased 94% month/month

News:

  • IMF Director Kristalina Georgieva warns that 33% of global economies will be in recession this year, according to BBC

  • Republicans will take over control of House today and offer several bills including legislation that would cut IRS funding, establish a China select committee, and block "non-emergency" drawdowns from the Strategic Petroleum Reserve. Most of these measures will be dead on arrival in Senate, according to ABC News

  • Rep. Kevin McCarthy (R-CA) is still short of votes to become House Speaker due to conservative opposition. Rep. Steve Scalise (R-LA) and Rep. Jim Jordan (R-OH) are other possibilities for House Speaker, according to the New York Times

  • Chinese President Xi acknowledged issues with pandemic controls, but says things will get better soon, according to the Wall Street Journal

  • China aiming to retaliate against countries that imposed travel restrictions, according to Bloomberg

  • EU will offer free coronavirus vaccines to China, according to Financial Times

  • Macau Gaming Inspection and Coordination Bureau reported December 2022 gross revs -56% yr/yr to HKD 3.482 bln versus -56% in November of 2022

  • Brazil extends tax cut measures to keep fuel prices low, according to Bloomberg

  • Brazil issued more restrictions on firearms, according to the Wall Street Journal

  • Dubai ends 30% tax on alcohol and will no longer charge tourists or expats for permits to buy alcoholic drinks, according to CNN

  • Albertsons Companies (ACI) Provides Update on Legal Proceedings in State of Washington Surrounding Special Dividend

  • AMC Entertainment (AMC): Cineworld Group says that neither it nor its advisers have participated in discussions with AMC

  • Apple (AAPL) notified suppliers to build fewer components for several devices in Q1, according to Nikkei

  • Deutsche Bank (DB) exec says company on track for restructuring targets, according to Reuters

  • Digital Realty Trust (DLR) names Matt Mercier as Chief Financial Officer

  • Exxon Mobil (XOM) and Chevron (CVX) will focus on oil projects in Americas, according to the Wall Street Journal

  • Foxconn (HNHPF) China plant returns to 90% capacity, according to Bloomberg

  • GMS (GMS) provides an update on the continued execution of its platform expansion strategy with its first entries in the New York City market

  • GOL Linhas Aereas Inteligentes S.A. (GOL) discloses preliminary traffic figures for December 2022

  • HUTCHMED (HCM) completes patient enrollment of ESLIM-01

  • InterDigital (IDCC) announced that the company has signed an HEVC and VVC patent license with LG Electronics; increases share buyback authorization to $400 mln

  • Legend Biotech (LEGN) receives acceptance of its New Drug Application for Ciltacabtagene Autoleucel (Cilta-Cel) in China

  • Masimo (MASI): New Prospective Study Evaluates the Accuracy of Masimo SpHb Noninvasive and Continuous Hemoglobin Monitoring During Elective Cesarean Section

  • Matthews (MATW) wins over $200 mln in orders for the Energy Solutions Business in Q1

  • Melco (MLCO) Announces Commencement of New Gaming Concession

  • Meta Platforms (META): Facebook considering allowing former President Trump to return, according to CNN

  • Moderna (MRNA) issues letter to shareholders recapping events of 2022

  • Molina Healthcare (MOH) projects its California Medicaid revenue will double under revised medi-cal contract awards

  • MSP Recovery (MSPR), Now Doing Business as LifeWallet, Entered into a Term Sheet for the Monetization of a Portion of Its Company-owned Assignor Interests as a New Source of Monetization for $275 Million, and Payment of $48 Million in Servicing Fees for 2023

  • NaaS Technology (NAAS) names Alex Wu as President and CFO

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

  • PDS Biotechnology (PDSB) announces exclusive global license agreement with Merck KGaA (MKKGY) for the tumor-targeting IL-12 fusion protein M9241, which will join the pipeline as PDS0301

  • Piedmont Lithium (PLL) amends agreement with Tesla (); Piedmont has agreed to deliver approximately 125,000 metric tons of SC6 to Tesla beginning in H2 2023 through the end of 2025

  • Vertiv (VRT) announces that Giordano Albertazzi assumed role as CEO on January 1, 2023

  • Shopify (SHOP) to offer better ad targeting, according to Financial Times

  • Southwest (LUV) aiming to keep business model and CEO following holiday travel problems, according toBloomberg

  • So-Young International (SY) raises share repurchase program to $25 mln from $15 mln

  • T Mobile (TMUS) accused of misleading advertising by Poland, according to Reuters

  • Tradeweb Markets (TM) elevates Billy Hult to Chief Executive Officer

  • Walt Disney (DIS) recommends shareholders reject mini-tender offer by TRC Capital Investment

  • Watsco (WSO) raises annual dividend by 11% to $9.80 per share

  • Zhihu (ZH) appoints Henry Dachuan Sha as CFO

M&A:

  • Cactus (WHD) to acquire FlexSteel for $621 mln

  • Univar Solutions (UNVR) confirms end to preliminary discussions with Brenntag SE; Evaluating other indications of interest

Syndicate:

  • No syndicate news of note.

IPOs:

  • Expect to Price:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • LI +7.1%, XPEV +6.7%, SY +4.7%, MLCO +4.3%, NIO+4%, HCM +3.9%, ZH +3.8%, WYNN +3.7%, DRIO+3.5%, BGCP +2.7%, RGNX +2.5%, WBD +1.6%, MU+1.5%, LVS +1.4%, MGM +1.4%, DIS +1.4%, UBER+1.2%, IWM +1.1%, NEE +1%, QQQ +1%, IRDM+0.9%, O +0.8%, LMT +0.8%, TTWO +0.8%, SPY+0.8%, DIA +0.8%

  • Gapping down:

  • UNVR -6.4%, NE -2.9%, TSLA -2.7%, LOCL -1.4%, NAAS -1%, SJR -0.6%

 


Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Adaptimmune Therapeutics (ADAP) upgraded to Buy from Neutral at Guggenheim; tgt $5

  • Edison (EIX) upgraded to Buy from Neutral at UBS; tgt raised to $75

  • Enfusion (ENFN) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt lowered to $12

  • Downgrades:

  • Ally Financial (ALLY) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $33

  • American Homes 4 Rent (AMH) downgraded to Hold from Buy at Jefferies; tgt lowered to $32

  • Apple (AAPL) downgraded to Neutral from Outperform at Exane BNP Paribas; tgt $140

  • Azenta (AZTA) downgraded to In-line from Outperform at Evercore ISI; tgt raised to $62

  • Capital One (COF) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $119

  • CubeSmart (CUBE) downgraded to Hold from Buy at Jefferies; tgt lowered to $41

  • Entergy (ETR) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $119

  • Fate Therapeutics (FATE) downgraded to Neutral from Buy at Guggenheim

  • Fresenius Medical (FMS) downgraded to Underperform from Buy at Jefferies; tgt lowered to $11.70

  • Traeger (COOK) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $3

  • Others:

  • General Mills (GIS) initiated with an Equal Weight at Wells Fargo

  • Hershey Foods (HSY) initiated with an Underweight at Wells Fargo

Upcoming Events:

  • Econ Data:

  • 09:45 ET: IHS Markit Manufacturing PMI - Final for Dec (Briefing.comConsensus NA; Prior 46.2)

  • 10:00 ET: Construction Spending for Nov (Briefing.comConsensus -0.4%; Prior -0.3%)

  • Earnings:

  • Tuesday (Jan 3)

  • Afternoon:  SGH

  • Wednesday (Jan 4)

  • Morning:  UNF

  • Afternoon:  RGP SLP

  • Thursday (Jan 5)

  • Morning: ANGO CAG STZ HELE LW LNN MSM NEOG RPM SCHN SMPL WBA

  • Afternoon:  DCT

  • Friday (Jan 6) 

  • Morning:  GBX

Asia & Europe detail:

Asia: Nikkei CLOSED, Hang Seng +1.8%, Shanghai Composite +0.9%

Equity indices in the Asia-Pacific region had some mixed showings on Tuesday. Japan's Nikkei wasn't part of the mix as it was closed for holiday. Following the U.S. close on Friday, China released its official manufacturing PMI (47.0) and non-manufacturing PMI (41.6) reports for December. They were both weaker than expected and lower than the November readings, which is to say they showed a further deceleration in business activity that coincided with rising COVID cases. The Caixin Manufacturing PMI (49.0) was a bit stronger than expected but down from November. Bloomberg reported that China's Beige Book notes the economy likely contracted in Q4. Not surprisingly, speculation is swirling that the PBOC is likely to cut interest rates and/or the required reserve ratio in the first half of 2023. A Nikkei report highlighted the possibility of the BOJ considering boosting its inflation forecast for FY24 in a move that would be construed as a shift away from its ultra-loose policy.

  • In economic data:

  • China's December Manufacturing PMI 47.0 (expected 48.0; last 48.0) and Non-Manufacturing PMI 41.6 (last 46.7); December Caixin Manufacturing PMI 49.0 (expected 48.8; last 49.4)

  • South Korea's December Exports -9.5% (expected -10.1%; last -14.0%) and Imports -2.4% (expected -0.6%; last +2.7%)

  • India's December Nikkei S&P Global Manufacturing PMI 57.8 (expected 54.3; last 55.7)

---Equity Markets---

  • Japan's Nikkei: closed for holiday

  • Hong Kong's Hang Seng: +1.8%

  • China's Shanghai Composite: +0.9%

  • India's Sensex: +0.2%

  • South Korea's Kospi: -0.3%

  • Australia's ASX All Ordinaries: -1.3%

---FX---

  • USD/JPY: +0.1% to 130.85

  • USD/CNH: -0.1% to 6.9222

  • USD/INR: +0.3% to 82.937

 

Europe: DAX +0.6%, FTSE +1.3%, CAC +0.5%

Major European indices are all higher today. The strength has been attributed to some optimism that the latest batch of manufacturing PMI readings suggest the worst of the manufacturing downturn is behind Europe. Also, there is some bargain hunting activity to begin the year after a tough 2022. Sovereign bond yields have declined as each of the PMI readings point to an ongoing contraction in manufacturing activity that underscores weak economic conditions in the face of an ECB that is slated to keep raising rates to fight inflation. Separately, an FT report discusses an expectation among economists that the UK will likely be dealing with a bad recession this year and have the weakest recovery among G7 members in 2023. EUR/USD -1.2% to 1.0533.

  • In economic data:

  • Eurozone's December Manufacturing PMI 47.8 (expected 47.8; last 47.1)

  • Germany's December Manufacturing PMI 47.1 (expected 47.4; last 46.2); December Unemployment Rate 5.5% (expected 5.6%; last 5.6%)

  • Spain's December Manufacturing PMI 46.4 (expected 46.2; last 45.7)

  • Italy's December Manufacturing PMI 48.5 (expected 48.5; last 48.4)

  • France's December Manufacturing PMI 49.2 (expected 48.9; last 48.3)

  • UK's December Manufacturing PMI 45.3 (expected 44.7; last 46.5)

---Equity Markets---

  • STOXX Europe 600: +1.0%

  • Germany's DAX: +0.6%

  • U.K.'s FTSE 100: +1.3%

  • France's CAC 40: +0.5%

  • Italy's FTSE MIB: +0.9%

  • Spain's IBEX 35: +0.3%

---FX---

  • EUR/USD: -1.2% to 1.0533

  • GBP/USD: -0.8% to 1.1945

  • USD/CHF: +1.4% to 0.9381

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