05/01/23 Briefing

The S&P 500 futures are up 1 point and are trading roughly in line with fair value. The Nasdaq 100 futures are up 12 points and are trading 0.1% above fair value. The Dow Jones Industrial Average futures are down 15 points and are trading roughly in line with fair value.

The equity futures market is mixed and little changed as participants lack conviction. There's some mixed action in the mega cap space this morning. Those stocks have exhibited fickle behavior recently so market participants are in a wait-and-see mode ahead of the open.

The Santa Claus rally ended with a net gain over the seven day stretch, which historically has been regarded as a positive sign for the start of the new year.

The second ranking IMF official Gita Gopinath warned that the U.S. has not "turned the corner yet" on inflation, according to FT.

The House failed to elect a Speaker yesterday and will return to session at 12:00 p.m. ET todayto resume the voting process. 

The Treasury market trades in mixed fashion this morning. The 2-yr note yield is up two basis points to 4.39% and the 10-yr note yield is down two basis points to 3.70%.

WTI crude oil futures are up 2.0% to $74.28/bbl and natural gas futures are down 2.8% to $3.67/mmbtu. 

Market participants will receive the following economic data today:

• 08:15 ET: December ADP Employment Change Report (Briefing.comconsensus 148K; Prior 127K)

• 08:30 ET: Initial Jobless Claims for week ending Dec. 31 (Briefing.comconsensus 225K; Prior 225K) and Continuing Jobless Claims for week ending Dec. 24 (Prior 1710K)

• 08:30 ET: November Trade Balance (Briefing.comconsensus -$76.4B; Prior -$78.2B)

• 09:45 ET: December Final IHS Markit Services PMI (Prior 44.4)

• 10:30 ET: EIA Natural Gas Inventories (Prior -213 bcf)

• 11:00 ET: EIA Crude Oil Inventories (Prior 0.718M)

In corporate news:

• Amazon.com(AMZN 86.94, +1.80, +2.1%): Amazon plans to eliminate just over 18,000 roles; Several teams are impacted; however, the majority of role eliminations are in its Amazon Stores and PXT organizations

• Walgreens Boots Alliance (WBA 36.65, -0.84, -2.2%): beats by $0.02, beats on revs; reaffirms FY23 EPS guidance, guides FY23 revs in-line

• NovoCure (NVCR 133.00, +62.47, +88.6%): announces LUNAR study met its primary endpoint demonstrating statistically significant and clinically meaningful improvement in overall survival over standard therapies alone

• Western Digital (WDC 34.87, +1.82, +5.5%): aiming to restart merger discussions with Kioxia Holdings Corp, according to Bloomberg

• Coinbase (COIN 35.16, -2.54, -6.7%): downgraded to Market Perform from Outperform at Cowen

• Microsoft (MSFT 229.83, +0.73, +0.3%): D.A. Davidson initiated coverage with a Buy

• Helen of Troy (HELE 115.00, +2.42, +2.2%): beats by $0.15, beats on revs; raises bottom end of FY23 guidance

• Silvergate Capital (SI 12.80, -9.15, -41.7%): was forced to sell assets at losses to cover withdrawals, according to WSJ; confirms select preliminary Q4 financial metrics and provides business update; Silvergate's total deposits from digital asset customers declined to $3.8 billion at the end of the fourth quarter

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region were mixed but China's markets continued their comeback effort. Japan's Nikkei: +0.4%, Hong Kong's Hang Seng: +1.3%, China's Shanghai Composite: +1.0%, India's Sensex: -0.5%, South Korea's Kospi: +0.4%, Australia's All Ordinaries: +0.1%.

  • In economic data:

    • China's December Caixin Services PMI 48.0 (last 46.7)

    • Japan's Monetary Base -6.1% yr/yr (expected -3.2%; last -6.4%); December Household Confidence 30.3 (last 28.6)

    • Hong Kong's December Manufacturing PMI 49.6 (last 48.7)

    • Australia's December Services PMI 47.3 (expected 46.9; last 47.6)

    • Singapore's November Retail Sales -3.7% m/m (last +0.1%) and +6.2% yr/yr (last +10.3%)

  • In news:

    • Hong Kong's Hang Seng jumped 1.3% and is now up 6.4% in 2023.

    • China's Shanghai Composite increased 1.0% and is up 2.1% in 2023. Providing some fuel for the rebound effort was a better-than-feared December Caixin Services PMI (48.0), which remained below 50.0 but improved from the prior month's reading of 46.7, suggesting there was some moderation in the pace of contraction. Also, the report featured a 12-month business outlook that hit a 17-month high.

    • Some hope that China's COVID infection wave is peaking also remained a source of support.

    • Thursday marked the first time in five sessions that the BOJ did not conduct an unscheduled bond purchase operation.

    • Reuters reports that the BOJ is likely to increase its forecast later this month for inflation, excluding fuel.

• Major European indices are little changed so far in Thursday's trade, cooling off a bit after a strong start to the year. STOXX Europe 600: +0.1%, Germany's DAX: -0.1%, U.K.'s FTSE 100: +0.5%, France's CAC 40: flat, Italy's FTSE MIB: +0.2%, Spain's IBEX 35: +0.5%.

  • In economic data:

    • Eurozone's November PPI -0.9% m/m (expected -0.9%; last -3.0%) and +27.1% yr/yr (expected +27.5%; last +30.5%)

    • Germany's November Exports -0.3% m/m (expected +0.2%; last +0.8%) and Imports -3.3% m/m (expected -0.5%; last -2.4%)

    • UK's December Services PMI 49.9 (expected 50.0; last 48.8)

    • Italy's December CPI +0.3% m/m (expected +0.1%; last +0.5%) and +11.6% yr/yr (expected +11.6%; last +11.8%)

  • In news:

    • November PPI data for the eurozone contributed to the peak inflation view; meanwhile, some weaker-than-expected November trade data for Germany added to the economic slowdown worries.

    • Businesses in the UK anticipate ongoing pressures from inflation and wage increases, according to a Bank of England Survey cited by Bloomberg. EUR/USD +0.1% to 1.0607.

U.S. equity futures:

• S&P 500 Futures: -1 @ 3,852

• DJIA Futures: -30 @ 33,240

• Nasdaq 100 Futures: +10 @ 10,925

Overseas:

• Europe: DAX -0.1%, FTSE +0.5%, CAC UNCH

• Asia: Nikkei +0.4%, Hang Seng +1.3%, Shanghai Composite +1.0%

Commodities:

• Crude Oil +1.43 @ 74.27

• Nat Gas -0.178 @ 3.994

• Gold -8.50 @ 1850.50

• Silver +0.397 @ 23.567

• Copper +0.0775 @ 3.818

Earnings/Guidance:

• AngioDynamics (ANGO) misses by $0.04, beats on revs; reaffirms FY23 EPS guidance, revs guidance

• Buckle (BKE) reports December comparable store sales increased 7.0% yr/yr

• Conagra (CAG) beats by $0.15, beats on revs; raises FY23 EPS above consensus

• Constellation Brands (STZ) reports Q3 (Nov) results, beats on revs

• Exxon Mobil (XOM) discloses earnings excluding identified items is defined as earnings excluding individually significant non-operational events with an absolute corporate total earnings impact of at least $250 million in a given quarter

• Helen of Troy (HELE) beats by $0.15, beats on revs; raises bottom end of FY23 guidance

• Inter Parfums (IPAR) raises its FY22 guidance; guides FY23 earnings and revs mostly above consensus

• Lindsay Corp (LNN) beats by $0.47, misses on revs

• Magnolia Oil & Gas (MGY) announces preliminary Q4 oil and gas production volumes in the range of 73-74 Mboe/day compared to midpoint of prior guidance of 78 Mboe/day; FY23 guidance remains unchanged

• MorphoSys (MOR) sees FY22 Monjuvi sales of $89.4 mln

• MSC Industrial (MSM) beats by $0.02, beats on revs; reaffirms FY23 guidance

• Neogen (NEOG) beats by $0.01, reports revs in-line

• Personalis (PSNL) guides Q4 revs above consensus

• Resources Connection (RGP) beats by $0.01 (two analyst estimate), reports revs in-line

• Richardson Elec (RELL) reports Q2 EPS of $0.39 vs $0.29 single analyst estimate; revs +22.1% yr/yr to $65.905 mln vs $64.5 mln single analyst estimate

• RPM Inc (RPM) reports EPS in-line, misses on revs; guides Q3 revs in-line

• Silvergate Capital (SI) confirms select preliminary Q4 financial metrics and provides business update; Silvergate's total deposits from digital asset customers declined to $3.8 billion at the end of the fourth quarter

• Simply Good Foods (SMPL) beats by $0.01, reports revs in-line; reaffirms FY23 guidance

• Simulations Plus (SLP) misses by $0.06, misses on revs; guides FY23 EPS in-line, reaffirms FY23 revs guidance; co says its strategy now allows for investments and partnerships; also announces $50 mln share buyback authorization

• Stem (STEM) in slide presentation reaffirms FY22 guidance

• T-Mobile US (TMUS) provides preliminary key customer results for Q4 and FY22; adds 6.4 mln postpaid customers and 2.0 mln broadband customers in 2022

• Walgreens Boots Alliance (WBA) beats by $0.02, beats on revs; reaffirms FY23 EPS guidance, guides FY23 revs in-line

• Xeris Biopharma (XERS) updated its outlook for FY22 expecting net product revenue to be at the top of its guidance range of $105-110 mln

• Zymeworks (ZYME) provides corporate update on key strategic priorities and outlook for 2023

News:

• Rep. Kevin McCarthy (R-CA) made concessions to try and secure votes for Speaker of the House. He will allow more Freedom Caucus members to serve on the House Rules Committee, which dictates how and whether bills come to the floor. He will also allow one member to call a vote to remove the Speaker. House will return to session at 12:00 today, but it is unlikely Mr. McCarthy will reach 218 votes despite these concessions, according to CNN

• Second ranking IMF official Gita Gopinath warns US has not "turned the corner yet" on inflation, according to Financial Times

• EU encouraging member states to require coronavirus tests for travelers from China, according to the Wall Street Journal

• China will open border with Hong Kong on Sunday, according to Reuters

• UK announces new economic plan

• 89bio (ETNB) provides business update and outlook for 2023

• ALX Oncology (ALXO) provides corporate update and highlights key milestones in 2023

• Amazon (AMZN) plans to eliminate just over 18,000 roles; Several teams are impacted; however, the majority of role eliminations are in its Amazon Stores and PXT organizations

• AMD (AMD) Unveils Suite of New Radeon GPUs to Power High-Performance, Power-Efficient Gaming Laptops

• Apple (AAPL) to sign iPhone production contract with Luxshare Precision (HNHPF), according to Financial Times

• AT&T (T) CFO Updates Shareholders at Citi Media & Entertainment Conference

• Avista (AVA) provides investor updates - experienced elevated natural gas and power prices throughout December

• Biotech Acquisition Company (BIOT) Announces Plan for New Sponsor to Make Additional Contributions to Trust Account Upon Approval of Proposed Extension Amendment

• Cardiovascular Systems (CSII) submitted a 510(k) premarket notification to the U.S. FDA for its thrombectomy devices intended to treat peripheral vascular disease

• Compass (COMP) implemented a further workforce reduction

• Delek US Holdings (DK) announces 2023 capital spending budget of approximately $350 mln on a consolidated basis

• Dell (DELL) aiming to phase out Chinese chips by 2024, according to Nikkei

• EyePoint Pharmaceuticals (EYPT) Provides Business Update and Key 2023 Clinical Timelines

• GlaxoSmithKline (GSK) and WuXi Biologics enter into license agreement on multiple novel bi- & multi-specific T cell engagers

• Grupo Aeroportuario del Pacifico (PAC) reports December traffic increased 18.6% vs 2019; 18.8% yr/yr

• Hawaiian Holdings (HA) and Boeing (BA) agree to defer delivery of ten Boeing 787-9 aircraft previously scheduled for Q4 delivery

• Healthcare Realty (HR) provides update of planned asset sales and joint ventures

• InflaRx (IFRX) Provides Update on Planned Phase III Study Design in Pyoderma Gangrenosum with Vilobelimab and Status of its EUA Application in Critically Ill COVID-19 Patients

• Intellia Therapeutics (NTLA) announces its strategic priorities for the upcoming two years as the Company enters its next phase of pipeline execution and platform innovation

• Jazz Pharma (JAZZ) filed a patent infringement suit against ANDA Filers

• Johnson & Johnson's (JNJ) consumer health unit Kenvue files IPO docs with SEC

• KalVista Pharmaceuticals (KALV) announces Benjamin Palleiko promoted to President

• Lordstown Motors (RIDE) discloses it has produced 31 vehicles for sale, of which six have been delivered to customers

• Luminar Technologies (LAZR) announces additional production wins for multiple consumer vehicle models with leading automakers

• MarketAxess (MKTX) reports monthly volume metrics - delivered another strong month with a 27% increase in total credit ADV

• NovoCure (NVCR) announces LUNAR study met its primary endpoint demonstrating statistically significant and clinically meaningful improvement in overall survival over standard therapies alone

• NuScale Power (SMR) completes submission of Standard Design Approval (SDA) application to the U.S Nuclear Regulatory Commission for its updated small modular reactor design

• Precision Drilling (PDS) exceeds debt repayment guidance; provides capital allocation and operational updates

• Riot Platforms (RIOT) announces December 2022 production and operations updates

• Sanofi (SNY) and AstraZeneca (AZN) receive FDA acceptance for nirsevimab application as first protective option against RSV disease for all infants

• Scorpio Tankers (STNG) reports repurchase of shares; President purchases call options; receives new credit facility

• Seres Therapeutics (MCRB) announces the appointment of Claire M. Fraser, Ph.D., to its Board of Directors and announces SER-155 Phase 1b study progress

• Silvergate (SI) was forced to sell assets at losses to cover withdrawals, according to the Wall Street Journal

• Sonendo (SONX) subsidiary PIPStek files patent infringement lawsuit against BIOLASE

• Sony (SONY) and Honda (HMC) will introduce EV prototype that uses Qualcomm (QCOM) technology, according to Reuters

• Southern (SO) announces succession plan, executive management changes; Chris Womack has been appointed president of Southern Company and elected as a member of the Board of Directors of SO; Mr. Womack also has been appointed CEO of SO effective immediately

• Takeda Pharma (TAK) announces favorable Phase 3 safety and efficacy results of TAK-755 as compared to standard of care in congenital thrombotic thrombocytopenic purpura

• Theseus Pharmaceuticals (THRX) Highlights Key Anticipated 2023 Milestones and Announces BCR-ABL as Target for Third Development Program

• Tradeweb Markets (TW) reports December total volume +6% yr/yr to $21.2 trln, ADV +11.6% yr/yr to $1.02 trln

• Transocean (RIG) announces contract awards or extensions for five of its drilling rigs totaling ~488 mln

• Walgreens (WBA) and CVS (CVS) will begin selling abortion pills, according to Reuters

• Xerox (XRX) enters into Forward Funding Agreement with PEAC Solutions to drive growth of Xerox's FITTLE business

• Y-mAbs Therapeutics (YMAB) undergoes restructuring plan; provides financial outlook

• Zai Lab (ZLAB) and Novocure (NVCR) announce the LUNAR study met its primary endpoint, demonstrating a statistically significant and clinically meaningful improvement in overall survival over standard therapies alone

M&A:

• Alpha Healthcare Acquisition Corp. III (ALPA) announces merger with Carmell Therapeutics

• Forward Air (FWRD) acquires Land Air Express, a privately held full service expedited LTL provider for $56.5 mln; expected to close in January 2023

• Henry Schein (HSIC) acquired majority interest in Unitas PPO Solutions, a privately held service provider that works with dental practices; financial terms of the transaction were not disclosed

• Mount Rainier Acquisition Corp. (RNER) stockholders approve business combination with HUB Cyber Security; expected to close in late January 2023

• Royal Gold (RGLD) subsidiary acquires two portions of gross smelter return royalty for $204.1 mln

• Western Digital (WDC) aiming to restart merger discussions with Kioxia Holdings Corp, according to Bloomberg

• Zimmer Biomet (ZBH) to acquire Embody for $155 mln at closing and up to an additional $120 mln

Syndicate:

• Geron (GERN) files mixed securities shelf offering; announces proposed public offering of $175 mln of shares of its common stock

IPOs:

• Expect to Price:

  • No IPOs expected.

Gapping Up/Down

• Gapping up:

  • RNER +25.9%, ALPA +8.5%, RELL +7.4%, LAZR +3%, RIG +2.8%, AMZN +2.7%, HA +2.4%, SONX +2.4%, IPAR +2.4%, RIOT +2.3%, STNG +2.3%, ETNB +2.2%, PSNL +1.8%, MDXG +1.7%, ADC +1%, FWRD +1%, XOM +1%, RIDE +0.9%, TMUS +0.8%

• Gapping down:

  • GERN -10%, YMAB -7%, SLP -5.4%, ZYME -3.1%, JAZZ -2.2%, MGY -1.9%, XRX -1.4%, AVA -1.2%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

  • Cullen/Frost (CFR) upgraded to Buy from Neutral at BofA Securities; tgt $155

  • FibroGen (FGEN) upgraded to Buy from Neutral at BofA Securities; tgt raised to $27

  • Interpublic (IPG) upgraded to Neutral from Underperform at BofA Securities; tgt raised to $36

  • Olin (OLN) upgraded to Overweight from Equal Weight at Barclays; tgt raised to $65

  • Reinsurance Group of America (RGA) upgraded to Outperform from In-line at Evercore ISI; tgt raised to $167

• Downgrades:

  • Pearson Plc (PSO) downgraded to Underperform from Neutral at BofA Securities

  • PNC (PNC) downgraded to Underperform from Neutral at BofA Securities; tgt raised to $160

  • Prudential Plc (PUK) downgraded to Underperform from Neutral at Exane BNP Paribas

• Others:

  • Adaptimmune Therapeutics (ADAP) initiated with a Buy at EF Hutton; tgt $15

  • Adaptive Biotechnologies (ADPT) initiated with a Sector Outperform at Scotiabank; tgt $15

  • Allogene (ALLO) initiated with a Buy at EF Hutton; tgt $15

  • Amylyx Pharmaceuticals (AMLX) initiated with a Buy at BofA Securities; tgt $50

  • Atara Biotherapeutics (ATRA) initiated with a Buy at EF Hutton; tgt $25

  • Bicycle Therapeutics (BCYC) initiated with a Buy at EF Hutton; tgt $55

  • BioAtla (BCAB) initiated with a Buy at EF Hutton; tgt $25

  • Bionano Genomics (BNGO) initiated with a Sector Outperform at Scotiabank; tgt $4

  • Century Therapeutics (IPSC) initiated with a Buy at EF Hutton; tgt $18

  • CRISPR Therapeutics (CRSP) initiated with a Buy at EF Hutton; tgt $75

  • Fate Therapeutics (FATE) initiated with a Buy at EF Hutton; tgt $16

  • G1 Therapeutics (GTHX) initiated with a Buy at EF Hutton; tgt $35

  • Merus (MRUS) initiated with a Buy at EF Hutton; tgt $35

  • Pacific Biosciences (PACB) initiated with a Sector Outperform at Scotiabank; tgt $12

  • Rain Oncology (RAIN) initiated with a Buy at EF Hutton; tgt $16

  • Replimune (REPL) initiated with a Buy at EF Hutton; tgt $60

  • Twist Bioscience (TWST) initiated with a Sector Outperform at Scotiabank; tgt $33

  • Veracyte (VCYT) initiated with a Sector Outperform at Scotiabank; tgt $33

Upcoming Events:

• Econ Data:

  • 08:15 ET: ADP Employment Change for Dec (Briefing.comConsensus 148K; Prior 127K)

  • 08:30 ET: Initial Claims for Dec 31 (Briefing.comConsensus 225K; Prior 225K)

  • 08:30 ET: Continuing Claims for Dec 24 (Briefing.comConsensus NA; Prior 1710K)

  • 08:30 ET: Trade Balance for Nov (Briefing.comConsensus -$76.4B; Prior -$78.2B)

  • 10:30 ET: IHS Markit Services PMI - Final for Dec (Briefing.comConsensus NA; Prior 44.4)

  • 10:30 ET: EIA Natural Gas Inventories for Dec 31 (Briefing.comConsensus NA; Prior -213 bcf)

  • 11:00 ET: EIA Crude Oil Inventories for Dec 31 (Briefing.comConsensus NA; Prior 0.718M) 

• 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 +0.4%, Hang Seng +1.3%, Shanghai Composite +1.0%

Equity indices in the Asia-Pacific region were mixed but China's markets continued their comeback effort. Hong Kong's Hang Seng jumped 1.3% and is now up 6.4% in 2023. In turn, China's Shanghai Composite increased 1.0% and is up 2.1% in 2023. Providing some fuel for the rebound effort was a better-than-feared December Caixin Services PMI (48.0), which remained below 50.0 but improved from the prior month's reading of 46.7, suggesting there was some moderation in the pace of contraction. Also, the report featured a 12-month business outlook that hit a 17-month high. Some hope that China's COVID infection wave is peaking also remained a source of support. Notably, Thursday marked the first time in five sessions that the BOJ did not conduct an unscheduled bond purchase operation. Reuters reports that the BOJ is likely to increase its forecast later this month for inflation, excluding fuel.

• In economic data:

  • China's December Caixin Services PMI 48.0 (last 46.7)

  • Japan's Monetary Base -6.1% yr/yr (expected -3.2%; last -6.4%); December Household Confidence 30.3 (last 28.6)

  • Hong Kong's December Manufacturing PMI 49.6 (last 48.7)

  • Australia's December Services PMI 47.3 (expected 46.9; last 47.6)

  • Singapore's November Retail Sales -3.7% m/m (last +0.1%) and +6.2% yr/yr (last +10.3%)

---Equity Markets---

• Japan's Nikkei: +0.4%

• Hong Kong's Hang Seng: +1.3%

• China's Shanghai Composite: +1.0%

• India's Sensex: -0.5%

• South Korea's Kospi: +0.4%

• Australia's All Ordinaries: +0.1%

---FX---

• USD/JPY: -0.1% to 132.48

• USD/CNH: -0.3% to 6.8777

• USD/INR: -0.2% to 82.432

Europe: DAX -0.1%, FTSE +0.5%, CAC UNCH

Major European indices are little changed so far in Thursday's trade, cooling off a bit after a strong start to the year. November PPI data for the eurozone contributed to the peak inflation view; meanwhile, some weaker-than-expected November trade data for Germany added to the economic slowdown worries. Businesses in the UK anticipate ongoing pressures from inflation and wage increases, according to a Bank of England Survey cited by Bloomberg. EUR/USD +0.1% to 1.0607.

• In economic data:

  • Eurozone's November PPI -0.9% m/m (expected -0.9%; last -3.0%) and +27.1% yr/yr (expected +27.5%; last +30.5%)

  • Germany's November Exports -0.3% m/m (expected +0.2%; last +0.8%) and Imports -3.3% m/m (expected -0.5%; last -2.4%)

  • UK's December Services PMI 49.9 (expected 50.0; last 48.8)

  • Italy's December CPI +0.3% m/m (expected +0.1%; last +0.5%) and +11.6% yr/yr (expected +11.6%; last +11.8%)

---Equity Markets---

• STOXX Europe 600: +0.1%

• Germany's DAX: -0.1%

• U.K.'s FTSE 100: +0.5%

• France's CAC 40: flat

• Italy's FTSE MIB: +0.2%

• Spain's IBEX 35: +0.5%

---FX---

• EUR/USD: +0.1% to 1.0607

• GBP/USD: -0.3% to 1.2017

• USD/CHF: -0.2% to 0.9270