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04/01/23 Briefing


The S&P 500 futures are up 6 points and are trading 0.2% above fair value. The Nasdaq 100 futures are up 38 points and are trading 0.4% above fair value. The Dow Jones Industrial Average futures are up 48 points and are trading 0.1% above fair value.

There's a positive bias in the equity futures market on this final day of the Santa Claus rally period. Some bargain hunting activity and nice gains in the mega cap space, except Microsoft (MSFT) sporting losses on a downgrade at UBS, are fueling the upside moves. The S&P 500 stood at 3,822 when this year's Santa Claus rally period began and yesterday's close brought the index just a whisker above that level (3,824).  

Encouraging inflation data out of Europe, including Germany's November Import Price Index and France's December Consumer Price Index, also helps to boost investor sentiment this morning. 

These reports play into the peak inflation narrative, which may be driving Treasury yields lower. The 2-yr note yield is down two basis points to 4.35% and the 10-yr note yield is down nine basis points to 3.69%.

The U.S. Dollar Index is down 0.4% to 104.13. 

Energy complex futures continue to suffer losses. WTI crude oil futures are down 3.4% to $74.33/bbl and natural gas futures are down 0.1% to $3.64/mmbtu. 

The MBA Mortgage Applications Index for the week ending December 31 fell 13.2% from two weeks earlier with purchase applications declining 12.2% and refinancing applications falling 16.3%. Other data out today includes:

  • 10:00 a.m. ET: December ISM Manufacturing Index (Briefing.comconsensus 48.5%; prior 49.0%)

  • 10:00 a.m. ET: November JOLTS Job Openings (prior 10.334 million)

  • 2:00 p.m. ET: FOMC Minutes for the December 13-14

In corporate news:

  • Tesla (TSLA 109.15, +1.05, +1.0%): Cathie Wood (ARKK) purchased more shares of Tesla (TSLA), according to Bloomberg

  • Goldman Sachs (GS 346.60, +0.38, +0.1%): downgraded to Peer Perform from Outperform at Wolfe Research

  • Microsoft (MSFT 234.24, -5.34, -2.2%): downgraded to Neutral from Buy at UBS

  • Salesforce (CRM 139.11, +4.33, +3.2%): announced a restructuring plan that includes a reduction of current workforce by ~10%

  • Alibaba (BABA 97.86, +5.88, +6.4%): Ant Financial secures approval for $1.5 bln capital plan, according to Bloomberg

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region were mixed with some decent moves on either side of the unchanged line. Japan's Nikkei: -1.5%, Hong Kong's Hang Seng: +3.2%, China's Shanghai Composite: +0.2%, India's Sensex: -1.0%, South Korea's Kospi: +1.7%, Australia's All Ordinaries: +1.7%.

    • In economic data:

      • Japan's December Manufacturing PMI 48.9 (expected 48.8; last 49.0)

      • India's Nikkei Services PMI 58.5 (expected 55.5; last 56.4)

    • In news:

  • Major European indices are sporting some nice-sized gains in Wednesday's trade, driven by hopes of a soft-landing scenario that have been forged on the back of some relatively pleasing December Services PMI reports for the eurozone, encouraging inflation data out of France and Germany, and the relief of plummeting natural gas prices. STOXX Europe 600: +1.3%, Germany's DAX: +1.6%, U.K.'s FTSE 100: +0.6%, France's CAC 40: +1.7%, Italy's FTSE MIB: +1.3%, Spain's IBEX 35: +1.5%.

    • In economic data:

      • Eurozone's December Services PMI 49.8 (expected 49.1; last 48.5)

      • Germany's November Import Price Index -4.5% m/m (expected -1.6%; last -1.2%) and +14.5% yr/yr (expected +18.0%; last +23.5%); December Services PMI 49.2 (expected 49.0; last 46.1)

      • France's December CPI -0.1% m/m (expected +0.4%; last +0.3%) and +5.9% yr/yr (expected +6.4%; last +6.2%)

      • Spain's December Services PMI 51.6 (expected 50.8; last 51.2)

      • Italy's December Services PMI 49.9 (expected 49.5; last 49.5)

      • UK's November Mortgage Approvals 46.08K (expected 55.00K; last 57.88K)

      • Switzerland's December CPI -0.2% m/m (expected -0.2%; last +0.1%) and +2.8% yr/yr (expected +2.9%; last +3.0%)

    • In news: 

      • Sovereign bond yields have come down nicely in response to the inflation data. The 10-yr German bund yield is down 12 basis points to 2.27%. EUR/USD +0.6% to 1.0609.

 

U.S. equity futures:

  • S&P 500 Futures: +6 @ 3,830

  • DJIA Futures: +43 @ 33,180

  • Nasdaq 100 Futures: +32 @ 10,894

Overseas:

  • Europe: DAX +1.6%, FTSE +0.6%, CAC +1.7%

  • Asia: Nikkei -1.5%, Hang Seng +3.2%, Shanghai +0.2%

Commodities:

  • Crude Oil -2.61 @ 74.32

  • Nat Gas -0.005 @ 3.983

  • Gold +13.35 @ 1859.45

  • Silver +0.069 @ 24.305

  • Copper -0.0562 @ 3.7103

 

Earnings/Guidance:

  • Fulcrum Therapeutics (FULC) provides business update and 2023 outlook

  • GOL Linhas Aereas Inteligentes S.A. (GOL) provides Q4 update; EBITDA margin to be ~20%

  • NGL Energy Partners (NGL) increases its FY23 adjusted EBITDA guidance to over $630 mln from over $600 mln; CFO Linda Bridges resigning, effective January 13, to be succeeded by Senior VP Brad Cooper

  • Patterson-UTI (PTEN) expects its net income for Q4 to exceed $100 mln and its adjusted EBITDA for Q4 to surpass $230 mln, based on current projections

  • Perion Network (PERI) sees Q4 revs above consensus

  • Rivian Automotive (RIVN) produced 10,020 vehicles and delivered 8,054 vehicles during Q4

  • SMART Global (SGH) beats by $0.22, beats on revs; guides FebQ EPS in-line, revs in-line

News:

  • House will resume Speaker of House debate and votes today at 12:00 PM after Republican leader Kevin McCarthy (R-CA) failed in three consecutive votes to secure enough support. Rep. Jim Jordan (R-OH) received 20 votes on the third ballot, CNBC

  • China will pause investments in chip manufacturing, according to Bloomberg

  • New York State will charge $500 mln for NYC casino license, according to the New York Post

  • FBI NICS firearm background checks report: unadjusted criminal background checks rose 8.9% mo/mo to 2.79 mln in December, the highest in nine months

  • Alamo Group (ALG) increases quarterly dividend to $0.22/sh from $0.18/sh

  • Alibaba (BABA): Ant Financial secures approval for $1.5 bln capital plan, according to Bloomberg

  • Allscripts Healthcare (MDRX) changed its name to Veradigm, effective January 1

  • American Axle (AXL) appointed Christopher J May to CFO role, effective January 1

  • AstraZeneca (AZN) receives EMA validation for ENHERTU Type II Variation Application

  • Bausch + Lomb (BLCO) and Novaliq Announce Publication of Pivotal Phase 3 Data on NOV03(Perfluorohexyloctane) in Ophthalmology

  • Bicycle Therapeutics (BCYC) announces that the United States FDA has granted Fast Track Designation to Bicycle's BT8009 monotherapy for the treatment of adult patients with previously treated locally advanced or metastatic urothelial cancer

  • Biogen (BIIB) to collaborate with Alcyone Therapeutics to evaluate a novel device to improve patient experience and access to neurological ASO Therapies

  • CenterPoint (CNP) announces organizational changes; will combine its Houston Electric and Indiana Electric businesses under a single leadership structure

  • CME Group (CME) Reports Record Average Daily Volume of 23.3 Million Contracts Traded in 2022, an Increase of 19%

  • CTO Realty Growth (CTO) announces record 2022 transaction activity and provides corporate update

  • Deciphera Pharmaceuticals (DCPH) Announces Results from ctDNA Analysis from INTRIGUE Phase 3 Clinical Study Demonstrating Substantial Clinical Benefit of QINLOCK in Second-Line GIST Patients with Mutations in KIT Exon 11 and 17/18 Only

  • Enovix (ENVX) at investor conference says it expects Fab-1 improvement activities to extend into 2023, but at a slower rate given the decision to redirect resources to Gen2; expects to exit 2023 at a run rate of under 1 million battery cells produced from the Gen1 equipment in Fab-1

  • Ericsson (ERIC) has decided to exit certain subscale agreements and product offerings, with a one-off negative impact on EBIT of SEK -0.8 bln. in Q4 2022, of which SEK -0.7 bln. is expected to impact cash flow, mainly in 2023

  • EyePoint Pharmaceuticals (EYPT) promotes Jay S. Duker to President and Chief Operating Officer

  • Fulcrum Therapeutics (FULC) announces that Robert J. Gould, Ph.D., former founding chief executive officer of Fulcrum and a current member of the Board of Directors, has been appointed interim chief executive officer, effective January 3, 2023

  • G1 Therapeutics (GTHX) Provides Initial Update on Phase 2 Bladder Cancer Trial; Progression Free Survival (PFS) Data Expected in Mid-2023

  • GE HealthCare (GEHC) completes spin-off and begins trading on Nasdaq

  • Genius Sports (GENI) issues statement following settlement with SoftConstruct

  • Geron (GERN) announces positive top-line results from IMerge phase 3 trial of imetelstat in lower risk MDS

  • Hasbro (HAS) Wizards of the Coast cancelled video game projects, according to Bloomberg

  • Hawaiian Electric (HE) appointed interim CFO Paul K. Ito to CFO role, effective January 1

  • Immutep (IMMP) achieves 50% enrollment milestone in randomised phase IIb TACTI-003 trial for first line head & neck cancer;  also announces successful meeting with the FDA on eftilagimod alpha plus chemotherapy for the treatment of metastatic breast cancer

  • Kaltura (KLTR) approved a re-organization plan that includes downsizing ~11% of the current workforce

  • Kamada (KMDA) announces submission of application to the U.S. FDA to manufacture CYTOGAM at the company's facility in Israel

  • MAG Silver (MAG) received confirmation from Fresnillo that final testing of the downstream power distribution and control systems at the Project was complete

  • Maxar Technologies (MAXR) wins new contracts valued at 35.8 mln

  • MaxCyte (MXCT) signs strategic platform license (SPL) with Catamaran Bio to treat a broad range of cancers, with a primary focus on solid tumors

  • Maxeon Solar (MAXN) and Origis Energy Ltd amend the Solar Module Supply Agreement

  • Nexa Resources (NEXA) production at the Atacocha San Gerardo open pit mine is temporarily suspended

  • Pegasystems (PEGA) announces 4% workforce reduction across various geographies

  • Petrobras (PBR) discloses that Jean-Paul Terra Prates will be nominated for the position of CEO and member of the Board of Directors of Petrobras

  • Phathom Pharmaceuticals (PHAT): FDA notified the company that no action will be taken on its NDA for vonoprazan; as such, Phathom no longer expects product launches for H. pylori or erosive esophagitis in 1Q23

  • Primoris Services (PRIM) awarded solar project contracts worth $290 mln

  • Roivant Sciences (ROIV) announces statistically significant and clinically meaningful results from the induction period of TUSCANY-2, a large global phase 2b study of subcutaneous RVT-3101 for the treatment of ulcerative colitis in both the overall and the biomarker positive patient populations

  • Salesforce (CRM) announced a restructuring plan intended that includes a reduction of current workforce by ~10%

  • Southwest Air (LUV) will offer 25,000 pts to travelers affected by its holiday travel, according to the Wall Street Journal

  • Talos Energy's (TALO) Lime Rock and Venice prospects successfully discovered commercial quantities of oil and natural gas during sequential drilling operations in Q4

  • Tesla (TSLA): Cathie Wood (ARKK) purchased more shares of Tesla, according to Bloomberg

  • Vera Therapeutics (VERA) Announces Positive Topline Results of Phase 2b ORIGIN Clinical Trial of Atacicept for the Treatment of IgA Nephropathy

  • Verrica Pharmaceuticals (VRCA) Announces the Successful Technology Transfer of Bulk Solution Manufacturing of VP-102 to Piramal Pharma Solutions

  • Vir Biotechnology (VIR): Critical Phase 2 readouts anticipated in 2023 for three advanced programs - hepatitis B, hepatitis D and influenza; will highlight at its conference on January 10

  • Wash. Federal (WAFD) CEO Brent Beardall to take temporary leave of absence while recovering from injuries sustained during a small plane crash

  • XOMA (XOMA) announces Jim Neal has retired as Chief Executive Officer; Owen Hughes appointed Executive Chairman of the Board of Directors and Brad Sitko joins as Chief Investment Officer

M&A:

  • Benson Hill (BHIL) to sell the assets and equity related to its Fresh business for an aggregate purchase price of $21 mln; maintains 2022 and 2025 EBITDA and free cash flow guidance for its Ingredients segment

  • Certara (CERT) has acquired Vyasa Analytics; financial terms were not disclosed

  • Essential Utilities (WTRG) to sell its West Virginia natural gas utility assets to Hope Gas; expected to close by the middle of 2023; financial details not disclosed

  • Greenbrier (GBX) acquires GBX Leasing, its railcar leasing joint venture

  • Kenon Holdings' (KEN) subsidiary OPC Energy announces agreement by CPV, a subsidiary of OPC, to acquire wind energy power plants in the U.S.

  • Procaps Group (PROC) announces the termination of its previously-reported definitive agreement to acquire Grupo Somar from the sellers under the SPA

  • Progress Software (PRGS) to acquire MarkLogic for $355 mln; co also expects Q4 non-GAAP revs and EPS to be within or above the high-end of prior guidance

  • Quipt Home Medical (QIPT) acquires Great Elm Healthcare

  • Sterling Check Corp. (STER) has acquired Socrates Ltd.; financial terms not disclosed

Syndicate:

  • Amazon (AMZN) discloses it entered into a credit agreement

  • Kimco Realty (KIM) files mixed securities shelf offering

IPOs:

  • Expect to Price:

    • No IPOs expected.

Gapping Up/Down

  • Gapping up:

    • GERN +17.1%, SGH +8.7%, PERI +6.6%, NGL +5.3%, QIPT +5%, GEHC +4.4%, TERN +3.8%, NEXA +2.1%, GE +2.1%, CRM +2.1%, PRGS +2%, WTRG +1.9%, IGT+1.8%, AZN +1.8%, GBX +1.7%, GTHX +1.7%, ROIV+1.4%, PRIM +1%, ERIC +1%, RIVN +0.9%, GOL+0.8%, SWBI +0.7%, ALG +0.7%, LUV +0.7%, PL+0.7%

  • Gapping down:

    • VERA -62.9%, PHAT -21.6%, RGR -3.9%, KIM -3.3%, GENI -2.9%, BHIL -2.4%, PTEN -2.4%, AXL -2.2%, IMMP -2.2%, BMRN -2%, ADCT -1.1%, CSWC -0.8%

 


Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

    • Amwell (AMWL) upgraded to Buy from Neutral at BofA Securities; tgt $4.20

    • Burlington Stores (BURL) upgraded to Buy from Hold at Loop Capital; tgt $200

    • Celanese (CE) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt raised to $125

    • DBV Technologies (DBVT) upgraded to Buy from Hold at Societe Generale

    • Deciphera Pharmaceuticals (DCPH) upgraded to Buy from Neutral at Guggenheim; tgt $22

    • Etsy (ETSY) upgraded to Buy from Hold at Needham; tgt $160

  • Downgrades:

    • Apollo Endosurgery (APEN) downgraded to Hold from Buy at Stifel; tgt $10

    • AvalonBay (AVB) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $179

    • Boston Properties (BXP) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $74

    • Crown (CCK) downgraded to Neutral from Outperform at Robert W. Baird; tgt $80

    • Cousins Prop (CUZ) downgraded to Underperform from Neutral at Mizuho; tgt lowered to $22

    • Digital Realty Trust (DLR) downgraded to Underperform from Neutral at Credit Suisse; tgt lowered to $81

    • Duck Creek Technologies (DCT) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $11

    • Emerson (EMR) downgraded to Neutral from Buy at UBS; tgt lowered to $100

  • Others:

    • Altus Power (AMPS) initiated with an Outperform at Evercore ISI; tgt $15

    • Amazon (AMZN) initiated with a Buy at New Street; tgt $130

    • Biohaven (BHVN) initiated with an Overweight at JP Morgan; tgt $23

    • Clearfield (CLFD) initiated with an Outperform at Cowen; tgt $141

    • Cleveland-Cliffs (CLF) resumed with a Neutral at BofA Securities; tgt $19

    • Commercial Metals (CMC) resumed with a Neutral at BofA Securities; tgt $55

    • Entegris (ENTG) initiated with a Buy at Needham; tgt $86

    • EZCORP (EZPW) initiated with a Buy at Canaccord Genuity; tgt $14

Upcoming Events:

  • Econ Data:

    • 07:00 ET: MBA Mortgage Applications Index for Dec 31 (Briefing.comConsensus NA; Prior 0.9%)

    • 10:00 ET: ISM Manufacturing Index for Dec (Briefing.comConsensus 48.5%; Prior 49.0%)

    • 10:00 ET: JOLTS - Job Openings for Nov (Briefing.comConsensus NA; Prior 10.334M)

    • 14:00 ET: FOMC Minutes

  • 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 -1.5%, Hang Seng +3.2%, Shanghai +0.2%

Equity indices in the Asia-Pacific region were mixed with some decent moves on either side of the unchanged line. Japan's Nikkei was the weakest link, returning from yesterday's holiday. A stronger yen, which coincided with a Nikkei report that PM Kushida will aim to speak with the new BOJ Governor about whether to adjust the 2% inflation target, has garnered some attribution for the weakness. Conversely, the Hang Seng surged with a 3.2% gain as investors took a liking to the prospect of China providing more fiscal support, particularly for major property developers. In other news, Bloomberg reports that China is going to pause its semiconductor investment plan due to the rising COVID costs it is incurring, the Bank of Japan conducted another unscheduled bond purchase operation, and the Japanese press is reporting that PM Kishida and President Biden are slated to discuss North Korea, Ukraine, and Taiwan on January 13.

  • In economic data:

    • Japan's December Manufacturing PMI 48.9 (expected 48.8; last 49.0)

    • India's Nikkei Services PMI 58.5 (expected 55.5; last 56.4)

---Equity Markets---

  • Japan's Nikkei: -1.5%

  • Hong Kong's Hang Seng: +3.2%

  • China's Shanghai Composite: +0.2%

  • India's Sensex: -1.0%

  • South Korea's Kospi: +1.7%

  • Australia's All Ordinaries: +1.7%

---FX---

  • USD/JPY: -0.4% to 130.51

  • USD/CNH: -0.5% to 6.8874

  • USD/INR: +0.1% to 82.788

 

Europe: DAX +1.6%, FTSE +0.6%, CAC +1.7%

Major European indices are sporting some nice-sized gains in Wednesday's trade, driven by hopes of a soft-landing scenario that have been forged on the back of some relatively pleasing December Services PMI reports for the eurozone, encouraging inflation data out of France and Germany, and the relief of plummeting natural gas prices. Sovereign bond yields have come down nicely in response to the inflation data. The 10-yr German bund yield is down 12 basis points to 2.27%. EUR/USD +0.6% to 1.0609.

  • In economic data:

    • Eurozone's December Services PMI 49.8 (expected 49.1; last 48.5)

    • Germany's November Import Price Index -4.5% m/m (expected -1.6%; last -1.2%) and +14.5% yr/yr (expected +18.0%; last +23.5%); December Services PMI 49.2 (expected 49.0; last 46.1)

    • France's December CPI -0.1% m/m (expected +0.4%; last +0.3%) and +5.9% yr/yr (expected +6.4%; last +6.2%)

    • Spain's December Services PMI 51.6 (expected 50.8; last 51.2)

    • Italy's December Services PMI 49.9 (expected 49.5; last 49.5)

    • UK's November Mortgage Approvals 46.08K (expected 55.00K; last 57.88K)

    • Switzerland's December CPI -0.2% m/m (expected -0.2%; last +0.1%) and +2.8% yr/yr (expected +2.9%; last +3.0%)

---Equity Markets---

  • STOXX Europe 600: +1.3%

  • Germany's DAX: +1.6%

  • U.K.'s FTSE 100: +0.6%

  • France's CAC 40: +1.7%

  • Italy's FTSE MIB: +1.3%

  • Spain's IBEX 35: +1.5%

---FX---

  • EUR/USD: +0.6% to 1.0609

  • GBP/USD: +0.7% to 1.2050

  • USD/CHF: -0.9% to 0.9275

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