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05/10/22


The S&P 500 futures are down 34 points and are trading 0.9% below fair value. The Nasdaq 100 futures are down 100 points and are trading 0.9% below fair value. The Dow Jones Industrial Average futures are down 287 points and are trading 0.9% below fair value.

Equity futures are weaker this morning after the big rally in recent sessions. There's a feeling that the market got ahead of itself with the rebound effort and with thinking that the Fed would soften its approach soon.

The Reserve Bank of New Zealand raised its official cash rate by 50 basis points to 3.50%, as expected, and there was some debate about a 75 basis point hike. This move follows on the heels of yesterday's decision by the Reserve Bank of Australia to raise its cash rate by only 25 basis points to 2.60%.

Today's OPEC+ meeting is a focal point for market participants. The expectation is that OPEC+ will announce a production cut of 1.5 million barrels per day, according to The Wall Street Journal. Oil prices were on a tear in recent sessions but came well off their highs this morning. WTI crude oil futures, at $87.28/bbl a short time ago, are down 0.4% to $86.11/bbl. 

In other news, Hong Kong's Hang Seng surged 5.9% off its lowest level since late 2011 in a catch-up trade after global equity markets rallied while it was closed for a holiday on Tuesday.

Treasury yields are up this morning, keeping pressure on equity futures. The 10-yr note yield is up seven basis points to 3.69% and the 2-yr note yield is up five basis points to 4.13%.

The weekly MBA Mortgage Application Index showed a big 14.2% decline compared to last week's 3.7% decline, as higher mortgage rates and Hurricane Ian weighed heavily on activity. Other economic data today includes:

  • 8:15 a.m. ET: September ADP Employment Change (Briefing.comconsensus 198K; Prior 132K)

  • 8:30 a.m. ET: August Trade balance (Briefing.comconsensus -$67.9B; Prior -$70.6B)

  • 9:45 a.m. ET: September Final IHS Markit Services PMI (Prior 49.2)

  • 10:00 a.m. ET: September ISM Non-Manufacturing Index (Briefing.comconsensus 56.0%; Prior 56.9%)

In corporate news:

  • Ford (F 12.53, +0.17, +1.38%): upgraded to Overweight from Equal-Weight at Morgan Stanley

  • Morgan Stanley (MS 82.75, -1.22, -1.45%): downgraded to Neutral from Overweight at Atlantic Equities

  • Airbnb (ABNB 111.00, +0.19, +0.17%):  initiated with an Outperform at Bernstein 

  • TSMC (TSM 73.41, +0.60, +0.82%): Morgan Stanley names stock as top pick 

  • Helen of Troy (HELE 92.00, -10.58, -10.31%): beats by $0.06, reports revs in-line; guides FY23 EPS below consensus, revs below consensus 

  • Schnitzer Steel (SCHN 31.70, -0.79, -2.43%): sees Q4 EPS below consensus

  • AutoZone (AZO 2,217.35, +12.32, +0.56%): authorizes additional $2.5 bln for share repurchases 

  • Goldman Sachs (GS 309.92, -4.95, -1.57%): Atlantic Equities downgrades to Underweight from Neutral

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the midweek session on a mostly higher note with Hong Kong's Hang Seng jumping off its lowest level since late 2011 while markets in China and India were closed for holidays. Japan's Nikkei: +0.5%, Hong Kong's Hang Seng: +5.9%, China's Shanghai Composite: CLOSED, India's Sensex: CLOSED, South Korea's Kospi: +0.3%, Australia's ASX All Ordinaries: +1.8%.

  • In economic data:

  • Japan's September Services PMI 52.2 (last 51.9)

  • South Korea's September CPI 0.3% m/m (expected 0.4%; last -0.1%); 5.6% yr/yr (expected 5.7%; last 5.7%)

  • Australia's September Services PMI 50.6 (last 50.4). August Retail Sales 0.6% m/m, as expected (last 1.3%)

  • Singapore's August Retail Sales -1.3% m/m (last 0.7%); 13.0% yr/yr (last 13.9%)

  •  In news:

  •  DigiTimes reported that automakers in China are requesting price cuts on chips that are not in short supply.

  • Japan's Prime Minister Kishida is expected to speak about North Korea's missile launches with South Korea's President Yoon on Thursday.

  • The Reserve Bank of New Zealand raised its official cash rate by 50 bps to 3.50%, as expected, and there was some debate about a bigger hike.

  •  Major European indices trade in the red. STOXX Europe 600: -0.8%, Germany's DAX: -0.8%, U.K.'s FTSE 100: -0.7%, France's CAC 40: -0.7%, Italy's FTSE MIB: -1.7%, Spain's IBEX 35: -1.6%.

  • In economic data:

  • Eurozone's September Services PMI 48.8 (expected 48.9; last 48.9)

  • Germany's August trade surplus EUR1.20 bln (expected surplus of EUR4.00 bln; last surplus of EUR3.40 bln). August Imports 3.4% m/m (expected 1.1%; last 0.1%) and Exports 1.6% m/m (expected 1.1%; last -1.6%). September Services PMI 45.0 (expected 45.4; last 46.9)

  • U.K.'s September Services PMI 50.0 (expected 49.2; last 50.9)

  • France's August Industrial Production 2.4% m/m (expected -0.3%; last -1.6%) and September Services PMI 52.9 (expected 53.0; last 51.2)

  • Italy's September Services PMI 48.8 (expected 49.1; last 50.5). Q2 Public Debt 3.1% (last 9.0%)

  • Spain's September Services PMI 48.5 (expected 49.8; last 50.6)

  •  In news:

  • Final September Services PMI readings for major regional economies were mostly weaker than expected.

  • European Commission President von der Leyen announced that an agreement has been reached on the eighth package of sanctions on Russia.

  • Tesco warned that its profit for the full year will be toward the low end of its guidance.

  • The Bank of England has bought less than GBP4 bln worth of bonds over the past week.

 

U.S. equity futures:

  • S&P 500 Futures: -35 @ 3,756

  • DJIA Futures: -283 @ 30,033

  • Nasdaq 100 Futures: -105 @ 11,477

Overseas:

  • Europe: DAX -0.8%, FTSE -0.7%, CAC -0.7%

  • Asia: Nikkei +0.5%, Hang Seng +5.9%, Shanghai Composite CLOSED

Commodities:

  • Crude Oil -0.35 @ 86.17

  • Nat Gas  -0.111 @ 6.762

  • Gold -15.85 @ 1714.65

  • Silver -0.762  @ 20.337

  • Copper -0.0305 @ 3.4595

U.S. Summary:

  • Earnings/Guidance:

  • Exxon Mobil (XOM) discloses $1.4-1.8 bln negative Q3 impact from change in liquids prices; discloses $1.8-2.2 bln positive Q3 impact from change in gas prices

  • Helen of Troy (HELE) beats by $0.06, reports revs in-line; guides FY23 EPS below consensus, revs below consensus

  • Radiant Logistics (RLGT) says it plans to restate FY21 earnings

  • RPM Inc (RPM) beats by $0.14, beats on revs; guides Q2 revs in-line

  • Schnitzer Steel (SCHN) sees Q4 EPS below consensus

  • SMART Global (SGH) beats by $0.15, reports revs in-line; guides Q1 EPS below consensus, revs in-line

  • General News:

  • Saudi Arabia wants to cut production by 1.5 million barrels per day at today's OPEC meeting, but other producers are unsure, according to the Wall Street Journal

  • EU aiming to introduce new Russian sanctions including a Russian oil price cap, according toPolitico

  • National debt reaches $31 trillion and higher interest rates could add $1 trillion to debt over 10 years, according to the New York Times

  • September Class 8 trucking orders were 53,700 units, according to Act Research

  • Dallas Fed says workers' wages failing to keep up with inflation in the past year, according to Reuters

  • PJSC Gazprom resumes gas exports through Austria

  • 3D Systems (DDD): Additive manufacturing company Amnovis incorporates DDD's DMP Flex 350 Dual into its contract manufacturing workflow

  • Alcoa (AA) tells the London Metal Exchange that Russian metal should not be traded on the benchmark industrial metal bourse, according toBloomberg

  • Altria (MO): Jull Labs will enter financing discussions for potential bankruptcy, according toBloomberg

  • Apple (AAPL) aiming to shift AirPods production to India, according to Reuters

  • atai Life Sciences (ATAI) Announces First Subject Dosed in Phase 1 Trial of Buccal and IV VLS-01, a Synthetic Form of DMT

  • AutoZone (AZO) authorizes additional $2.5 bln for share repurchases

  • Blue Apron (APRN): Barry Salzberg increased active stake to 4.65% (prior ~0.3%)

  • ChampionX (CHX) considering challenge to patent ruling but expects it to have limited impact on financial results

  • Construction Partners (ROAD) says its facilities did not sustain significant damage from Hurricane Ian

  • EOG Resources (EOG) Chairman William R. Thomas to retire; CEO Ezra Y. Yacob appointed Chairman, effective today

  • Fiesta Restaurant (FRGI) says only four of its Florida restaurants remain closed, all other restaurants are open for business

  • GlaxoSmithKline (GSK) reports results from PERLA, the phase II trial of Jemperli (dostarlimab) plus chemotherapy

  • Golden Ocean (GOGL) authorizes share buy back program for maximum of $100 mln of common shares

  • Gray Television (GTN) and NBCUniversal Local's Telemundo Station Group announce news collaboration; partnership will result in Spanish-speaking audiences in 13 Texas DMAs receiving live news on weekday mornings

  • ICF International (ICFI) awarded a recompete task order from NIH to provide digital content management, outreach and engagement support

  • IVERIC bio (ISEE): Deerfield Management increased passive stake to 5.59% (prior ~4.4%)

  • MarketAxess (MKTX) reports September trading volume

  • McDonald's (MCD) bias lawsuit dismissed, according to Reuters

  • Mizuho Financial (MFG)confirms discussing various alliance opportunities with Rakuten ()

  • Nevro (NVRO): FDA approves manufacturing operations in Costa Rica

  • Patterson-UTI (PTEN) CEO says strong demand for drilling and pressure pumping equipment and services combined with limited availability of incremental equipment across the industry continues to bode well for the company

  • Pebblebrook Hotel Trust (PEB) announces that several of its resorts were impacted by Hurricane Ian, but company does not expect the costs to repair damage to be material

  • Piedmont Lithium (PLL): Sayona Quebec Launches Prefeasibility Study for Lithium Carbonate Production

  • Rocket Lab USA (RKLB) preparing to launch its 31st Electron rocket and 151st satellite to orbit during a dedicated mission for General Atomics Electromagnetic Systems October 7

  • Similarweb (SMWB) partners with Alibaba Group (BABA) to enable AliExpress to find new referral traffic sources, evaluate its performance, and scale affiliate partnerships

  • SSR Mining (SSRM) announces positive exploration results for the Akmaktepe Extension Project, including 28.3 meters at 8.23 G/T AU

  • STMicroelectronics (STM): EU Commission approves 292.5 million Italian measure under Recovery and Resilience Facility to support STM in construction of a plant in the semiconductor value chain

  • Target (TGT) announced the hire of Prat Vemana as EVP chief digital and product officer - will join Target Oct. 31

  • Tesla (TSLA) to remove ultrasonic sensors from Model 3 and Model Y, while simultaneously launching its vision-based network for its Autopilot system, according to its website

  • Twitter (TWTR): Elon Musk tweets "Buying Twitter is an accelerant to creating X, the everything app"

  • Twitter (TWTR): Carl Icahn purchased shares of Twitter ahead of Elon Musk reversal, according to the Wall Street Journal

  • M&A:

  • Blackstone (BX) in discussions to buy $5-10 bln in assets from Emerson Electric (EMR), according to Bloomberg

  • CSW Industrials (CSWI) announces strategic deployment of $57.8 mln in completing acquisitions of Cover Guard, AC Guard, and Falcon Stainless

  • Duolingo (DUAL) acquires design and animation studio Gunner; financial details not disclosed

  • HSBC (HSBC) considering sale of Canadian unit, according to Reuters

  • InterActiveCorp (IAC) to sell its Bluecrew business unit to EmployBridge

  • Procaps Group (PROC) received approval from the Mexican antitrust authority regarding the Company's previously-announced acquisition of Grupo Somar

  • Sensient (SXT) acquires Endemix, a natural color and extracts company

  • SPS Commerce (SPSC) acquires mdf commerce's InterTrade Systems for $49 mln in cash; expects modest Q4 accretion for revs

  • Twitter (TWTR): Banks funding Elon Musk's desk to purchase Twitter could face losses, according toReuters

  • Syndicate

  • Amylyx Pharmaceuticals (AMLX) commences public offering of 6.0 mln shares of common stock

  • BrightSpire Capital (BRSP) files mixed securities shelf offering; files for 34,911,944 share common stock offering by selling shareholder

  • KORE Group (KORE) files for 31,123,253 share common stock offering by selling shareholders

  • Joby Aviation (JOBY) files for $1.0 bln mixed securities shelf offering

  • IPOs:

  • Expected to Price:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • RLGT +6.8%, GOGL +3.3%, SCM +3.3%, VXX +1.6%, PEB +1.3%, AZO +0.6%

  • Gapping down:

  • KORE -9.3%, NVRO -5%, SGH -3.3%, AMLX -3.1%, BRSP -3%, SCHN -2.4%, JOBY -2.2%, DDOG -1.7%, TSLA -1.3%, IWM -1.3%, AA -1.2%, RKLB -0.9%, SPY -0.9%, QQQ -0.9%, DIA -0.9%, TLT -0.8%, DUOL-0.7%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Avantor (AVTR) upgraded to Buy from Neutral at Citigroup; tgt $28

  • Church & Dwight (CHD) upgraded to Buy from Hold at Deutsche Bank; tgt lowered to $85

  • Ford Motor (F) upgraded to Overweight from Equal-Weight at Morgan Stanley

  • Silicon Motion (SIMO) upgraded to Positive from Neutral at Susquehanna; tgt $108

  • Downgrades:

  • Cross Country (CCRN) downgraded to Hold from Buy at Truist; tgt $36

  • Farmers National (FMNB) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $14.50

  • Goldman Sachs (GS) downgraded to Underweight from Neutral at Atlantic Equities; tgt $290

  • Janus Henderson Group (JHG) downgraded to Underperform from Neutral at Credit Suisse; tgt $19

  • Laredo Petroleum (LPI) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $83

  • Lumen Technologies (LUMN) downgraded to Equal Weight from Overweight at Wells Fargo; tgt $8

  • Morgan Stanley (MS) downgraded to Neutral from Overweight at Atlantic Equities; tgt lowered to $85

  • Penumbra (PEN) downgraded to Neutral from Buy at Citigroup; tgt raised to $217

  • Poshmark (POSH) downgraded to Equal Weight from Overweight at Barclays; tgt raised to $18

  • Sotera Health (SHC) downgraded to Neutral from Buy at Citigroup; tgt lowered to $9

  • SVB Financial Group (SIVB) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $351

  • Others:

  • Adeia Inc. (ADEA) initiated with an Overweight at Stephens; tgt $17

  • Airbnb (ABNB) initiated with an Outperform at Bernstein; tgt $143

  • Horizon Technology Finance (HRZN) initiated with a Neutral at Janney; tgt $10

  • Pharvaris N.V. (PHVS) initiated with a Buy at Bryan Garnier; tgt $16

  • Redwood Trust (RWT) initiated with an Outperform at Wedbush; tgt $9

Upcoming Events:

  • Econ Data:

  • 07:00 ET: MBA Mortgage Applications Index for Oct 1 (Briefing.comConsensus NA; Prior -3.7%)

  • 08:15 ET: ADP Employment Change for Sep (Briefing.comConsensus 198K; Prior 132K)

  • 08:30 ET: Trade Balance for Aug (Briefing.comConsensus -$67.9B; Prior -$70.6B)

  • 09:45 ET: IHS Markit Services PMI - Final for Sep (Briefing.comConsensus NA; Prior 49.2)

  • 10:00 ET: ISM Non-Manufacturing Index for Sep (Briefing.comConsensus 56.0%; Prior 56.9%)

  • 10:30 ET: EIA Crude Oil Inventories for Oct 1 (Briefing.comConsensus NA; Prior -0.215M)

  • Earnings

  • Tuesday (Oct 4)

  • Morning: AYI

  • Afternoon:  SGH

  • Wednesday (Oct 5)

  • Morning:  HELE LW RPM

  • Afternoon:  RGP

  • Thursday (Oct 6)

  • Morning: ANGO CAG STZ MKC

  • Afternoon:  ACCD LEVI

  • Friday (Oct 7) 

  • Morning:  TLRY


Asia & Europe detail:

Asia: Nikkei +0.5%, Hang Seng +5.9%, Shanghai Composite CLOSED

Equity indices in the Asia-Pacific region ended the midweek session on a mostly higher note with Hong Kong's Hang Seng jumping off its lowest level since late 2011 while markets in China and India were closed for holidays. DigiTimes reported that automakers in China are requesting price cuts on chips that are not in short supply. Japan's Prime Minister Kishida is expected to speak about North Korea's missile launches with South Korea's President Yoon on Thursday. The Reserve Bank of New Zealand raised its official cash rate by 50 bps to 3.50%, as expected, and there was some debate about a bigger hike.

  • In economic data:

  • Japan's September Services PMI 52.2 (last 51.9)

  • South Korea's September CPI 0.3% m/m (expected 0.4%; last -0.1%); 5.6% yr/yr (expected 5.7%; last 5.7%)

  • Australia's September Services PMI 50.6 (last 50.4). August Retail Sales 0.6% m/m, as expected (last 1.3%)

  • Singapore's August Retail Sales -1.3% m/m (last 0.7%); 13.0% yr/yr (last 13.9%)

---Equity Markets---

  • Japan's Nikkei: +0.5%

  • Hong Kong's Hang Seng: +5.9%

  • China's Shanghai Composite: CLOSED

  • India's Sensex: CLOSED

  • South Korea's Kospi: +0.3%

  • Australia's ASX All Ordinaries: +1.8%

---FX---

  • USD/JPY: +0.1% to 144.37

  • USD/CNH: +0.4% to 7.0604

  • USD/INR: +0.1% to 81.52

Europe: DAX -0.8%, FTSE -0.7%, CAC -0.7%

Major European indices trade in the red. Final September Services PMI readings for major regional economies were mostly weaker than expected. European Commission President von der Leyen announced that an agreement has been reached on the eighth package of sanctions on Russia. Tesco warned that its profit for the full year will be toward the low end of its guidance. The Bank of England has bought less than GBP4 bln worth of bonds over the past week.

  • In economic data:

  • Eurozone's September Services PMI 48.8 (expected 48.9; last 48.9)

  • Germany's August trade surplus EUR1.20 bln (expected surplus of EUR4.00 bln; last surplus of EUR3.40 bln). August Imports 3.4% m/m (expected 1.1%; last 0.1%) and Exports 1.6% m/m (expected 1.1%; last -1.6%). September Services PMI 45.0 (expected 45.4; last 46.9)

  • U.K.'s September Services PMI 50.0 (expected 49.2; last 50.9)

  • France's August Industrial Production 2.4% m/m (expected -0.3%; last -1.6%) and September Services PMI 52.9 (expected 53.0; last 51.2)

  • Italy's September Services PMI 48.8 (expected 49.1; last 50.5). Q2 Public Debt 3.1% (last 9.0%)

  • Spain's September Services PMI 48.5 (expected 49.8; last 50.6)

---Equity Markets---

  • STOXX Europe 600: -0.8%

  • Germany's DAX: -0.8%

  • U.K.'s FTSE 100: -0.7% 

  • France's CAC 40: -0.7%

  • Italy's FTSE MIB: -1.7%

  • Spain's IBEX 35: -1.6%

---FX---

  • EUR/USD: -0.6% to 0.9921

  • GBP/USD: -1.0% to 1.1356

  • USD/CHF: +0.5% to 0.9841


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