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07/06/22 Briefing


The S&P 500 futures are down 33 points and are trading 0.8% below fair value. The Nasdaq 100 futures are down 141 points and are trading 1.1% below fair value. The Dow Jones Industrial Average futures are down 213 points and are trading 0.6% below fair value.

This morning's negative disposition is rooted in concerns about economic and earnings growth potential, which have been stirred by a larger-than-expected rate hike by the Reserve Bank of Australia (50 basis points to 0.85%), weaker-than-expected German factory orders for April, and Target (TGT) cutting its Q2 operating margin rate guidance in conjunction with a plan to reduce excess inventory.

The bulk of the weakness in the futures market came ahead of Target's warning, yet that warning has kept the pressure on since it is expected to be a harbinger of profit warnings from other retailers in coming weeks.

Today's economic calendar features the release of the April Trade Balance Report (8:30 a.m. ET) and the April Consumer Credit Report (3:00 p.m. ET).

The 10-yr note yield is down one basis point to 3.03%. The 2-yr note yield is unchanged at 2.72%. WTI crude futures are down 0.3% to $118.11/bbl and natural gas futures are up 1.8% to $9.49/mmbtu.

In corporate news:

  • Target (TGT 144.82, -14.85, -9.3%): lowers Q2 operating margin guidance to ~2% (prior 5.3%) in conjunction with plan to focus on inventory optimization; reaffirms FY23 revenue growth in low-to-mid-single digit range

  • Walmart (WMT 120.46, -4.41, -3.5%): trading lower in response to the warning from Target

  • Kohl's (KSS 46.00, +3.88, +9.2%): enters into three-week exclusive negotiations with Franchise Group for possible acquisition of company for $60.00 per share

  • J.M. Smucker (SJM 122.00, -1.26, -1.0%): beats by $0.34, beats on revs; guides FY23 EPS below consensus, revs above consensus

  • Tractor Supply Co. (TSCO 196.52, -2.57, -1.3%): guides Q2 EPS and revenue slightly above consensus; sees comparable store sales growth of 5%

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Tuesday on a mostly lower note. Japan's Nikkei +0.1%; Hang Kong's Hang Seng -0.6%; China's Shanghai Composite +0.2%; India's Sensex -1.0%; South Korea's Kospi -1.7%; and Australia's All Ordinaries -1.5%.

  • In economic data:

  • Japan's April Household Spending 1.0% m/m (expected 1.3%; last 4.1%); -1.7% yr/yr (expected -0.8%; last -2.3%). April Overall Wage Income 1.7% yr/yr (last 2.0%). April Leading index 2.1% m/m (last 0.7%) and Coincident Indicator 0.0% m/m (last 0.5%)

  • Australia's May AIG Services Index 49.2 (last 57.8). April Building Permits -2.4% m/m (prior -19.2%) and April Private House Approvals 0.5% m/m (last -3.0%)


  • In news:

  • Sony's CEO said that his company could IPO its electric vehicle joint venture with Hyundai.

  • Japan may legalize sports betting.

  • Foreign tourists visiting Japan will have to acquire private medical insurance and will have to be chaperoned during their stay.

  • The Reserve Bank of Australia raised its cash rate by 50 bps to 0.85% against expectations for a 25-bps hike.



  • Major European indices trade in the red amid renewed concerns about inflation weighing on growth. STOXX Europe 600 -0.4%; Germany's DAX -1.3%; UK's FTSE 100 -0.4%; France's CAC 40 -1.2%; Italy's FTSE MIB -1.4%; Spain's IBEX 35 -0.4%.

  • In economic data:

  • Eurozone's June Sentix Investor Confidence -15.8 (expected -20.0; last -22.6)

  • Germany's April Factory Orders -2.7% m/m (expected 0.3%; last -4.2%). May IHS Markit Construction PMI 45.4 (last 46.0)

  • U.K.'s May Services PMI 53.4 (expected 51.8; last 58.9)

  • Spain's April Industrial Production 2.4% yr/yr (expected -0.2%; last 0.1%)


  • In news:

  • British Prime Minister Johnson survived his no-confidence vote by 32 votes.

  • European Central Bank policymaker Muller said that a drop in energy and food prices should not be expected.

  • Italy's stats agency lowered Italy's growth forecast for 2022 to 2.8% from 4.7%.



U.S. equity futures:

  • S&P 500 Futures: -32 @ 4,090

  • DJIA Futures: -200 @ 32,708

  • Nasdaq 100 Futures: 128 @ 12,472

Overseas:

  • Europe: DAX -1.3%, FTSE -0.4%, CAC -1.2%

  • Asia: Nikkei +0.1%, Hang Seng -0.6%, Shanghai Composite +0.2%

Commodities:

  • Crude Oil -0.36 @ 118.14

  • Nat Gas +0.137 @ 9.459

  • Gold +7.20 @ 1850.90

  • Silver -0.037 @ 22.055

  • Copper -0.0600 @ 4.3750

U.S. Summary:

  • Earnings:

  • Booz Allen Hamilton (BAH) reaffirms FY23 EPS/rev guidance in slide presentation

  • Callon Petroleum (CPE) reaffirms 2022 production and expense guidance

  • Cano Health (CANO) reaffirms outlook at Investor Day

  • Coupa Software (COUP) beats by $0.03, beats on revs; guides Q2 EPS above consensus, revs below consensus; guides FY23 EPS above consensus, revs in-line

  • Dave & Buster's (PLAY) beats by $0.21, beats on revs

  • Ecolab (ECL) in slide presentation sees Q2 EPS below consensus

  • G-III Apparel (GIII) beats by $0.14, beats on revs; guides Q2 EPS above consensus, revs above consensus; guides FY23 EPS above consensus, revs above consensus

  • GitLab (GTLB) beats by $0.08, beats on revs; guides Q2 EPS above consensus, revs above consensus; guides FY23 EPS above consensus, revs above consensus

  • HealthEquity (HQY) beats by $0.01, reports revs in-line; guides FY23 EPS in-line, revs above consensus

  • Hello Group (MOMO) beats by RMB0.32, reports revs in-line; guides Q2 revs below consensus

  • Hubbell (HUBB) sees FY22 adjusted EPS at upper half of prior range

  • J.M. Smucker (SJM) beats by $0.34, beats on revs; guides FY23 EPS below consensus, revs above consensus

  • National Health (NHI) reaffirms FY22 normalized FFO guidance

  • PNM Resources (PNM) reaffirms FY22 and FY23 EPS guidance in advance of investor meetings

  • REV Group (REVG) misses by $0.07, misses on revs; lowers FY22 revs below consensus

  • Target (TGT) announces updated 2022 plan focused on inventory optimization; reaffirms FY23 revenue growth in the low- to mid-single digit range, and expects to maintain or gain market share; lowers Q2 op margin guidance

  • Tractor Supply (TSCO) guides Q2 EPS and revenue slightly above consensus; sees comparable store sales growth of 5%

  • United Micro (UMC) reports May sales increased 42.1% yr/yr to NT$24.43 bln

  • United Natural Foods (UNFI) beats by $0.12, beats on revs; raises FY22 EPS above consensus, revs above consensus

  • Welltower (WELL) raises its Q2 FFO guidance due to better-than-anticipated QTD Seniors Housing Operating fundamentals


  • General News:

  • Secretary of State Anthony Blinken says Russia is stealing grain from Ukraine and selling it, according to Reuters

  • UK Prime Minister Boris Johnson survived no confidence resolution by a vote of 211 to 148, according to the New York Times

  • Reserve Bank of Australia decided to increase the cash rate target by 50 basis points to 85 basis points

  • New congressional proposal would treat digital assets as commodities, according to CNBC

  • 5E Advanced Materials (FEAM) signs letter of intent with Corning (GLW) to supply boron specialty materials

  • Annexon (ANNX) reports phase 2 clinical trial results demonstrating upstream classical complement inhibition associated with clinical benefit in Huntington's disease

  • Apple (AAPL) provides developers with even more powerful technologies to push the app experience forward

  • Axon (AXON) ended idea to develop drones that would incapacitate mass shooters, according to the Wall Street Journal

  • Cazoo (CZOO) announces business realignment plan

  • Comcast (CMCSA): Universal Beijing will reopen on June 15, according to Reuters

  • Editas Medicine (EDIT) and Immatics N.V. (IMTX) announce strategic research collaboration and licensing agreement

  • Eli Lilly (LLY) reports eight out of ten patients maintained skin clearance at one year in Lilly's Lebrikizumab Atopic Dermatitis Monotherapy Trials

  • Eli Lilly (LLY) reports New analyses of Mounjaro (tirzepatide) injection for the treatment of adults with type 2 diabetes presented at the American Diabetes Association's 82nd Scientific Sessions

  • Emergent BioSolutions (EBS): JNJ plans to terminate Covid-19 vaccine supply deal with EBS, according to the Wall Street Journal

  • Emergent BioSolutions (EBS) discloses Janssen updates

  • Fortuna Silver Mines (FSM) drills 18.3 g/t gold over 11.9 meters at the Sgula Project, Cte d'Ivoire

  • Ginkgo Bioworks (DNA) announced a collaboration with Novo Nordisk (NVO) to create novel expression hosts for pharmaceutical products

  • Gores Guggenheim (GGPI): Polestar has announced that the world premiere of its next car, the Polestar 3 electric performance SUV, will be in October 2022

  • Granite (GVA) plans to develop new aggregate operation in Utah

  • Green Dot (GDOT) settles litigation with Republic Bank & Trust Company

  • Grupo Aeroportuario Del Sureste (ASR) reports that passenger traffic for May 2022 increased by 20.4% vs. May 2019 to 5.5 mln passengers

  • Heritage Insurance (HRTG) announces details of 2022-2023 catastrophe reinsurance program

  • Hippo (HIPO) announces appointment of Richard McCathron as CEO

  • Intl Game Tech. PLC (IGT) will deliver 960 Cobalt 27 video lottery terminals (VLTs) to Manitoba Liquor and Lotteries Corporation

  • Jazz Pharmaceuticals (JAZZ) Presents Positive Data from Phase 2/3 Trial of Rylaze (asparaginase erwinia chrysanthemi (recombinant)-rywn) in Acute Lymphoblastic Leukemia or Lymphoblastic Lymphoma at the ASCO 2022 Annual Meeting

  • Lattice Semi (LSCC) expands partnership with AMI

  • Merck (MRK) to Hold Investor Event to Highlight Oncology Portfolio and Pipeline

  • Moderna (MRNA) announced the first participants have been dosed in a Phase 3 study of the Company's seasonal influenza vaccine candidate

  • Novavax (NVAX): FDA will hold meeting regarding NVAX COVID-19 vaccine for individuals 18 and older today at 8:30 ET

  • Peloton (PTON) names Liz Coddington as CFO, effective June 13; succeeds Jill Woodworth, who has decided to step down

  • Philips (PHG) names Willem Appelo as COO

  • Remitly Global (RELY) appoints Hemanth Munipalli to succeed Susanna Morgan as CFO, effective July 18

  • Retractable Technologies (RVP) announces workforce reduction

  • Sanofi (SNY) launches 2022 global Employee Stock Purchase Plan for 86,000 people

  • Seres Therapeutics (MCRB) announces confirmatory results from ECOSPOR IV, an open-label study for SER-109, an investigational oral microbiome therapeutic for the prevention of recurrent C. difficile infection

  • Singular Genomics Systems (OMIC) announces collaboration with TwinStrand Biosciences

  • SmileDirectClub (SDC) announces appointment of Troy Crawford as CFO, effective June 6, 2022

  • Stellantis (STLA): US wants Mexico to investigate Stellantis labor rights violations, according to Reuters

  • Taiwan Semiconductor (TSM): Chinese economist says China should seize Taiwan Semiconductor if US sanctions are increased, according to Bloomberg

  • Tandem Diabetes Care (TNDM) presents real-world data demonstrating benefits of t:slim X2 insulin pump with Control-IQ technology

  • Transocean (RIG) awarded a $181 mln contract extension from Equinor Energy AS

  • TreeHouse Foods (THS) CFO William J. Kelley Jr. will step down to pursue another professional opportunity; reaffirmed its previously issued full year 2022 guidance

  • Twitter (TWTR): Texas AG launches investigation into TWTR over fake bot accounts

  • Veru (VERU) submits emergency use authorization application to U.S. FDA for Sabizabulin, its novel, oral antiviral and anti-inflammatory drug candidate for hospitalized covid-19 patients at high risk for ARDS

  • Zoom Video (ZM) appoints Greg Tomb as President, effective June 7


  • M&A:

  • Global Consumer Acquisition Corp (GACQ) to extend deadline to complete business combination

  • Henry Schein (HSIC) to acquire Condor Dental Research Company, a privately held dental distribution company in Switzerland

  • KKR (KKR) agrees to acquire majority interest in apexanalytix; terms not disclosed

  • Kohl's (KSS) Board of Directors enters into three-week exclusive negotiations with Franchise Group (FRG)

  • Pearson Plc (PSO) to sell its local K12 Courseware businesses in Italy and Germany to Sanoma Corporation

  • Quipt Home Medical (QIPT) acquired NorCal Respiratory; acquisition adds $3.2 million in annualized revenues, over 650K Adjusted EBITDA post integration

  • TrueCar (TRUE) acquires California-based Digital Motors; financial details not disclosed


  • Syndicate:

  • M/I Homes (MHO) files mixed securities shelf offering


  • IPOs:

  • Priced to Trade:

  • No IPOs expected.



Gapping Up/Down

  • Gapping up:

  • KSS +14.3%, RWT +12.5%, GTLB +10.7%, NVAX+4.1%, EBS +3%, FRG +2.7%, HQY +2.5%, VERU+1.9%, LLY +1.2%, RELY +1.1%, FSM +1.1%, LSCC+1%, PTON +1%, TNDM +0.8%, COUP +0.8%, NHI+0.6%, KKR +0.5%, TSCO +0.5%


  • Gapping down:

  • RVP -8%, SDC -3.1%, MOMO -2.7%, WELL -2.3%, TWTR -1.6%, RIG -1.4%, GVA -1.1%, ZM -0.8%


Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • AmerisourceBergen (ABC) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $178

  • Anglo American (NGLOY) upgraded to Buy from Hold at Jefferies

  • Arch Coal (ARCH) upgraded to Buy from Hold at Jefferies; tgt raised to $225

  • BHP Group (BHP) upgraded to Buy from Hold at Jefferies; tgt raised to $82

  • British Land (BTLCY) upgraded to Overweight from Underweight at Barclays

  • Exxon Mobil (XOM) upgraded to Outperform from In-line at Evercore ISI; tgt raised to $120

  • Lear (LEA) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $180

  • Liberty Global (LBTYA) upgraded to Buy from Hold at Berenberg; tgt $30

  • McKesson (MCK) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $378

  • Mirati Therapeutics (MRTX) upgraded to Mkt Outperform from Mkt Perform at JMP Securities; tgt $72

  • Novo Nordisk A/S (NVO) upgraded to Overweight from Neutral at JP Morgan

  • Peabody Energy (BTU) upgraded to Buy from Hold at Jefferies; tgt raised to $36

  • Plexus (PLXS) upgraded to Outperform from Mkt Perform at Raymond James; tgt $100

  • Ramaco Resources (METC) upgraded to Buy from Hold at Jefferies; tgt raised to $25

  • Rio Tinto (RIO) upgraded to Buy from Hold at Jefferies; tgt raised to $93

  • South32 (SOUHY) upgraded to Buy from Hold at Jefferies

  • Tyler Tech (TYL) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $435

  • Vale S.A. (VALE) upgraded to Buy from Hold at Jefferies; tgt raised to $24

  • Warrior Met Coal (HCC) upgraded to Buy from Hold at Jefferies; tgt raised to $50

  • XP (XP) upgraded to Buy from Neutral at UBS; tgt lowered to $31


  • Downgrades:

  • Booz Allen Hamilton (BAH) downgraded to Equal Weight from Overweight at Barclays; tgt $95

  • Devon Energy (DVN) downgraded to In-line from Outperform at Evercore ISI; tgt $80

  • Leidos (LDOS) downgraded to Equal Weight from Overweight at Barclays; tgt $105

  • Occidental Petro (OXY) downgraded to In-line from Outperform at Evercore ISI; tgt $74


  • Others:

  • GXO Logistics (GXO) resumed with an Equal Weight at Barclays; tgt $60

  • Marqeta (MQ) initiated with a Buy at UBS; tgt $14

  • ProFrac Holding (PFHC) initiated with a Buy at Seaport Research Partners; tgt $26

  • ProFrac Holding (PFHC) initiated with a Buy at Stifel; tgt $24

  • ProFrac Holding (PFHC) initiated with an Overweight at JP Morgan; tgt $25

  • ProFrac Holding (PFHC) initiated with an Overweight at Morgan Stanley; tgt $30

  • ProFrac Holding (PFHC) initiated with an Overweight at Piper Sandler; tgt $31.50

  • RLI Corp (RLI) initiated with a Mkt Perform at Raymond James

  • WalkMe Ltd. (WKME) resumed with an Equal-Weight at Morgan Stanley; tgt $13


Upcoming Events:

  • Econ Data:

  • 08:30 ET: Trade Balance for Apr (Briefing.comConsensus -$89.6B; Prior -$109.8B)

  • 15:00 ET: Consumer Credit for Apr (Briefing.comConsensus $34.0B; Prior $52.4B)


  • Earnings:

  • Monday (Jun 6)

  • Morning: SAIC

  • Afternoon: COUP GTLB


  • Tuesday (Jun 7)

  • Morning: ASO CBRL PLAY GIII MOMO SJM REVG UNFI

  • Afternoon: CASY GWRE SMAR CURV VRNT


  • Wednesday (Jun 8)

  • Morning: BF.B CPB KC LOVE OLLI THO VRA

  • Afternoon: ABM BASE FIVE GEF AVO OXM YEXT


  • Thursday (Jun 9)

  • Morning: BILI FCEL NIO SIG

  • Afternoon: CMTL DOCU SFIX MTN


  • Friday (Jun 10)

  • None



Asia & Europe detail:

Asia: Nikkei +0.1%, Hang Seng -0.6%, Shanghai Composite +0.2%

Equity indices in the Asia-Pacific region ended Tuesday on a mostly lower note. Sony's CEO said that his company could IPO its electric vehicle joint venture with Hyundai. Japan may legalize sports betting. Foreign tourists visiting Japan will have to acquire private medical insurance and will have to be chaperoned during their stay. The Reserve Bank of Australia raised its cash rate by 50 bps to 0.85% against expectations for a 25-bps hike.

  • In economic data:

  • Japan's April Household Spending 1.0% m/m (expected 1.3%; last 4.1%); -1.7% yr/yr (expected -0.8%; last -2.3%). April Overall Wage Income 1.7% yr/yr (last 2.0%). April Leading index 2.1% m/m (last 0.7%) and Coincident Indicator 0.0% m/m (last 0.5%)

  • Australia's May AIG Services Index 49.2 (last 57.8). April Building Permits -2.4% m/m (prior -19.2%) and April Private House Approvals 0.5% m/m (last -3.0%)


---Equity Markets---

  • Japan's Nikkei: +0.1%

  • Hong Kong's Hang Seng: -0.6%

  • China's Shanghai Composite: +0.2%

  • India's Sensex: -1.0%

  • South Korea's Kospi: -1.7%

  • Australia's ASX All Ordinaries: -1.5%

---FX---

  • USD/JPY: +0.7% to 132.75

  • USD/CNH: +0.3% to 6.6681

  • USD/INR: -0.1% to 77.74

Europe: DAX -1.3%, FTSE -0.4%, CAC -1.2%

Major European indices trade in the red amid renewed concerns about inflation weighing on growth. British Prime Minister Johnson survived his no-confidence vote by 32 votes. European Central Bank policymaker Muller said that a drop in energy and food prices should not be expected. Italy's stats agency lowered Italy's growth forecast for 2022 to 2.8% from 4.7%.

  • In economic data:

  • Eurozone's June Sentix Investor Confidence -15.8 (expected -20.0; last -22.6)

  • Germany's April Factory Orders -2.7% m/m (expected 0.3%; last -4.2%). May IHS Markit Construction PMI 45.4 (last 46.0)

  • U.K.'s May Services PMI 53.4 (expected 51.8; last 58.9)

  • Spain's April Industrial Production 2.4% yr/yr (expected -0.2%; last 0.1%)


---Equity Markets---

  • STOXX Europe 600: -0.4%

  • Germany's DAX: -1.3%

  • U.K.'s FTSE 100: -0.4%

  • France's CAC 40: -1.2%

  • Italy's FTSE MIB: -1.4%

  • Spain's IBEX 35: -0.4%

---FX---

  • EUR/USD: -0.3% to 1.0665

  • GBP/USD: -0.4% to 1.2489

  • USD/CHF: +0.6% to 0.9764

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