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08/07/22 Briefing




The futures for the major indices are mixed as market participants wait for the June jobs report. The S&P 500 futures are down 9 points and are trading 0.2% below fair value. The Nasdaq 100 futures are down 51 points and are trading 0.4% below fair value. The Dow Jones Industrial Average futures are up 12 points and are trading roughly in line with fair value.

In overseas news, Japan's former Prime Minister Shinzo Abe was assassinated while giving a speech at a campaign event. Beijing walked back its earlier announcement indicating mainland China's first vaccine mandate. 

On a related note, President Biden is set to meet with advisors today to discuss cutting Chinese tariffs.

The 2s10s spread remains inverted heading into the open. The 2-yr note yield is down two basis points to 3.00% while the 10-yr note yield is down three basis points to 2.98%.

Energy futures have pulled back some. WTI crude oil futures are down 0.4% to $102.35/bbl. Natural gas futures are down 1.9% to $6.14/mmbtu. Unleaded gasoline futures are down 1.3% to $3.37/gal.

In corporate news:

  • Levi Strauss (LEVI 17.05, +0.64, +3.9%): Levi Strauss beats by $0.06, beats on revs; reaffirms FY22 EPS guidance, revs guidance; also increases dividend by 20%

  • Occidental Petroleum (OXY 62.55, +1.08, +1.8%): 10% owner Berkshire Hathaway (Warren Buffett)bought 12,042,470 shares at $56.69 - $59.50 worth ~$698 mln.

  • WD-40 (WDFC 185.78, -19.07, -9.3%): WD-40 misses by $0.21, misses on revs; guides FY22 EPS below two analyst estimate, revs below two analyst estimate.

  • GameStop (GME 127.78, -7.34, -5.4%): GameStop's CFO departs as the company announces layoffs.

  • Twitter (TWTR 37.28, -1.51, -3.9%): Twitter's moving lower as Elon Musk's bid to buy the company is in jeopardy, according to The Washington Post. Twitter is also laying off 30% of its talent acquisition team, according to the WSJ.

  • Nu Skin Enterprises (NUS 41.94, -1.75, -4.0%): Nu Skin guides Q2 revenue below consensus, citing COVID-related factors in China, the conflict in Ukraine, and a general economic downturn.

  • XPO Logistics (XPO 50.50, +2.04, +4.2%): XPO Logistics was upgraded to Overweight from Equal-Weight at Morgan Stanley.

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the week on a mostly higher note. Japan's Nikkei: +0.1% (+2.2% for the week), Hong Kong's Hang Seng: +0.4% (-0.6% for the week), China's Shanghai Composite: -0.3% (-0.9% for the week), India's Sensex: +0.6% (+3.0% for the week), South Korea's Kospi: +0.7% (+2.0% for the week), Australia's ASX All Ordinaries: +0.6% (+2.3% for the week).

  • In economic data:

  • Japan's May Household Spending -1.9% m/m (expected 0.8%; last 1.0%); -0.5% yr/yr (expected 2.1%; last -1.7%). May Current Account surplus JPY128 bln (expected surplus of JPY186 bln; last surplus of JPY501 bln). June Bank Lending 1.3% yr/yr (last 0.7%) and June Economy Watchers Current Index 52.9 (last 54.0)

  • In news: 

  • Japan's former Prime Minister Abe was assassinated during a campaign speech ahead of this weekend's upper house elections.

  • The approval rating of South Korea's President Yoon fell to 37% from 43%, according to Gallup.

  • FT reported that Chinese property developers are facing $13 bln in dollar-denominated bond payments during the second half of this year.

  • Major European indices trade in mixed fashion. STOXX Europe 600: UNCH (+2.0% week-to-date), Germany's DAX: +0.8% (+1.1% week-to-date), U.K.'s FTSE 100: -0.4% (-0.1% week-to-date), France's CAC 40: +0.2% (+1.4% week-to-date), Italy's FTSE MIB: +0.6% (+1.5% week-to-date), Spain's IBEX 35: -0.3% (-1.0% week-to-date).

  • In economic data:

  • France's May trade deficit EUR13.00 bln (expected deficit of EUR12.80 bln; last deficit of EUR12.70 bln). May Current Account deficit EUR3.90 bln (last deficit of EUR2.70 bln) o Italy's May Industrial Production -1.1% m/m, as expected (last 1.4%); 3.4% yr/yr (expected 4.0%; last 3.9%)

  • In news:

  • Bank of Italy Governor Visco said that the ECB intends to call for a 25-bps rate hike at the July meeting, adding that a bigger hike could be made in September if medium-term inflation expectations remain elevated.

  • Germany's biggest landlord, Vonovia, will restrict residential heat at night in the fall.

 

U.S. equity futures:

  • S&P 500 Futures: -6 @ 3,896

  • DJIA Futures: +13 @ 31,397

  • Nasdaq 100 Futures: -48 @ 12,062

Overseas:

  • Europe: DAX +0.8%, FTSE -0.4% CAC +0.2%

  • Asia: Nikkei +0.1%, Hang Seng +0.4%, Shanghai Composite -0.3%

Commodities:

  • Crude Oil -0.17 @ 102.56

  • Nat Gas -0.110 @ 6.187

  • Gold +0.55 @ 1740.25

  • Silver -0.113  @ 19.075

  • Copper +0.0580 @ 3.5140

U.S. Summary:

  • Earnings/Guidance:

  • ASE Technology (ASX) reports June revs increased 33.9% yr/yr to NT$58.0 bln

  • Ashford Hospitality Trust (AHT) reports preliminary Q2 RevPAR of $135, up 73% yr/yr and down 6% compared to 2Q19

  • Braemar Hotels & Resorts (BHR) reports preliminary Q2 RevPAR of $315, up 43% yr/yr and up 28% compared to 2Q19

  • ChipMOS TECHNOLOGIES (IMOS) reports June revs declined 10.6% yr/yr; Q2 revs below consensus

  • Costco (COST) reports that June comparable sales increased by 13.0%, on an adjusted basis

  • Daqo New Energy (DQ) provides H1 financial update for Subsidiary Xinjiang Daqo

  • Endeavour Silver (EDR) Reports Strong Q2 2022 Production Results; Higher Grades at the Guanacevi Mine Drive Strong Operational Performance

  • Hallador Energy (HNRG) signs new coal contracts; raises FY23 outlook

  • Levi Strauss (LEVI) beats by $0.06, beats on revs; reaffirms FY22 EPS guidance, revs guidance; also increases dividend by 20%

  • MRC Global (MRC) raises revenue guidance for Q2 and FY22

  • Nu Skin (NUS) guides Q2 revenue below consensus, citing COVID-related factors in China, the conflict in Ukraine, and a general economic downturn

  • Taiwan Semi (TSM) reports June revs increased 18.5% yr/yr to NT$175.87 bln; Q2 revs above consensus

  • Target Hospitality (TH) sees Q2 and FY22 revs well above consensus

  • Teck Resources (TECK) provides Q2 steelmaking coal sales volumes and realized prices update

  • Upstart (UPST) sees Q2 revs below prior guidance and consensus

  • WD-40 (WDFC) misses by $0.21, misses on revs; guides FY22 EPS below two analyst estimate, revs below two analyst estimate

  • Yamana Gold (AUY) reports preliminary Q2 operating results, including total gold equivalent ounce production of 260,960 GEO; Says year-to-date results comfortably position it to achieve annual production and cost guidance

  • General News:

  • Japan: Former Japanese Prime Minister Shinzo Abe assassinated in Nara

  • Biden administration considering new restrictions on shipments of chipmaking tools to China, according to Reuters

  • U.S. Treasury provides framework for international engagement on digital assets

  • European Central Bank (ECB) releases climate risk stress test results; shows banks' losses lower in an orderly transition scenario than after delayed action

  • CMS issued propsed rule for 2023 Medicare Physician Fee Schedule, proposes physician payment rule to expand access to high-quality care

  • ADC Therapeutics (ADCT) announces exclusive license agreement with Sobi to develop and commercialize ZYNLONTA in Europe

  • Alector (ALEC): AbbVie Biotechnology terminates CD33 collaboration program, one of two programs focused on treating patients with Alzheimer's disease

  • Boeing (BA): Qatar Airways indicates that a provisional agreement to buy up to 50 737 MAX jets has lapsed, according to Reuters

  • Cheniere Energy (LNG) has asked the Biden administration to exempt it from emissions limits for cancer-causing pollutants, according to Reuters

  • Community Bank (CBU) enters into agreement with Jacobi Capital Mgmt, whereby Jacobi will provide investment advisory services to its commercial and high net worth clients in PA

  • Emergent BioSolutions (EBS) enters collaboration agreement with Ridgeback Biotherapeutics to expand the availability of Ebanga treatment for Ebola

  • FuelCell Energy (FCEL) provides project updates

  • GameStop (GME) has laid off employees company-wide, including CFO Mike Recupero, according to Reuters

  • General Dynamics (GD) awarded $280 mln firm-fixed-price Army contract

  • Kaiser Alum (KALU) declares force majeure at its Warrick Rolling Mill due to the limited availability of magnesium

  • Live Nation (LYV) extends CEO Michael Rapino employment contract to December 31, 2027

  • Marathon Digital (MARA) publishes unaudited bitcoin production and miner installation updates for June

  • Occidental Petro (OXY): Berkshire Hathaway raises stake, purchases approx 12 mln shares on July 5-6

  • Optinose (OPTN) Announces Additional Positive Results from ReOpen2 and Initial Results from Pooled Analyses of Both Trials in the ReOpen Program

  • Philip Morris International (PM): Elliot Investment Management builds stake in Swedish Match AB, which PM agreed to purchase for $16 bln in May, according to Bloomberg

  • Radius Health (RDUS) Publishes Investor Presentation Outlining Company's Progress and Board Process Resulting in Agreement to be Acquired at Significant Premium

  • Ranger Oil (ROCC) is increasing its share repurchase program and initiating an inaugural quarterly cash dividend

  • RE/MAX Holdings (RMAX) updates its strategic initiatives; expects to achieve goal of $100 mln in annual mortgage-related revs by 2028

  • Seres Therapeutics (MCRB): Flagship Pioneering increased active stake to 18.9% (prior ~15.6%)

  • Seritage Growth Properties (SRG) filed preliminary proxy materials; appointed Adam Metz as Chairman

  • SIGA Technologies (SIGA) announces UK approval for oral tecovirimat (known in the U.S. as oral TPOXX) for the treatment of smallpox, monkeypox, cowpox, and vaccinia complications

  • Signify Health (SGFY) announces winding down of its Episodes of Care Services (ECS) segment; anticipates these changes will have a positive impact on 2023 earnings

  • Spirit Airlines (SAVE) Announces Intention to Adjourn Special Meeting of Stockholders

  • Teledyne Tech (TDY) receives $62.1 mln in orders from the US Armed Services for its advanced, multi-mission robots

  • Terran Orbital (LLAP) announced the successful completion of CAPSTONE's first TCM burn (TCM-1)

  • Terreno Realty (TRNO) reports operating, investment, and capital markets activity for 2Q22; 97.9% quarter-end occupancy compared to prior quarter of 96.9%

  • Twitter (TWTR) laying off 30% of its talent acquisition team, according to the Wall Street Journal

  • Valero Energy (VLO) authorizes up to $2.5 bln for share repurchases

  • Volvo (VLVLY), Daimler Truck (DTRUY), and the TRATON GROUP completed the final step in forming the previously announced joint venture for charging infrastructure in Europe

  • Voya Financial (VOYA) appoints Heather Lavallee as CEO, succeeding Rodney Martin, Jr., effective January 1, 2023

  • M&A:

  • F-star Therapeutics (FSTX): invoX Pharma commences tender offer for F-star Therapeutics, Inc. at $7.12/share

  • HollySys (HOLI): Buyer Consortium announces engagement of financial advisor and reaffirms non-binding indicative offer of $25 per share to acquire Hollysys

  • Inotiv (NOTV) acquires Protypia for total consideration of $11.0 mln

  • Matterport (MTTR) acquires VHT, Inc. to increase adoption of digital twin technology and expand further into the real estate industry; terms of the transaction not disclosed

  • Tenaris (TS) acquires Benteler Steel & Tube pipe manufacturing plant for $460 mln

  • Twitter (TWTR): Elon Musk's bid to buy the company is in jeopardy, according to The Washington Post

  • Syndicate

  • Annexon (ANNX) announces $130 mln private placement financing

  • Nurix Therapeutics (NRIX) announces $55 mln registered direct offering; 3,945,480 shares at a price of $13.939 per pre-funded warrant

  • Perella Weinberg Partners (PWP) files for 20 mln share common stock offering; also files for 1,942,590 share common stock offering by selling shareholder

  • Provention Bio (PRVB) announces $60 mln private placement

  • IPOs:

  • Priced to Trade:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • SRG +51%, MRC +8.4%, HNRG +6.7%, AHT +5.1%, LEVI +4.9%, RDUS +4.5%, PRVB +3.9%, NRIX +3.7%, BHR +3.2%, SAVE +2.8%, JBSS +1.8%, ULCC +1.8%, OXY +1.4%, LYV +0.9%, TDY +0.8%, SMR +0.7%, MTTR +0.5%

  • Gapping down:

  • UPST -19.2%, WDFC -10.2%, GME -5.4%, ADCT-4.9%, NUS -4.1%, TWTR -4%, MARA -3.7%, AUY-2.6%, EBS -1.3%, TECK -1.1%, PM -0.5%, TSM-0.5%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Eversource Energy (ES) upgraded to Buy from Neutral at Guggenheim; tgt raised to $97

  • Howmet Aerospace (HWM) upgraded to Buy from Hold at The Benchmark Company; tgt $40

  • Interpublic (IPG) upgraded to Overweight from Equal Weight at Wells Fargo; tgt lowered to $33

  • Lennox Int'l (LII) upgraded to Outperform from Market Perform at Cowen; tgt $260

  • Omnicom (OMC) upgraded to Overweight from Equal Weight at Wells Fargo; tgt lowered to $73

  • The Vita Coco Company (COCO) upgraded to Buy from Neutral at BofA Securities; tgt raised to $12

  • Trane (TT) upgraded to Outperform from Market Perform at Cowen; tgt $180

  • XPO Logistics (XPO) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt $75

  • Downgrades:

  • Agilent (A) downgraded to Neutral from Buy at Citigroup; tgt lowered to $140

  • Audacy (AUD) downgraded to Underweight from Equal Weight at Wells Fargo

  • Clear Channel Outdoor (CCO) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $1.50

  • Huntington Banc (HBAN) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $13.50

  • iHeartMedia (IHRT) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $9

  • Illinois Tool (ITW) downgraded to Neutral from Buy at UBS; tgt lowered to $185

  • Kennametal (KMT) downgraded to Sell from Neutral at UBS; tgt lowered to $19

  • Madrigal Pharmaceuticals (MDGL) downgraded to Neutral from Buy at B. Riley Securities; tgt lowered to $75

  • PayPal (PYPL) downgraded to Neutral from Buy at Redburn

  • Peoples Bancorp (PEBO) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $30

  • Six Flags (SIX) downgraded to Neutral from Buy at Citigroup; tgt lowered to $26

  • Upstart (UPST) downgraded to Mkt Perform from Mkt Outperform at JMP Securities

  • Wipro (WIT) downgraded to Underperform from Hold at Jefferies; tgt lowered to $4.70

  • Others:

  • Blueprint Medicines (BPMC) initiated with an Outperform at Oppenheimer; tgt $80

  • DPCM Capital (XPOA) initiated with a Buy at The Benchmark Company; tgt $14

  • ImaRx Therapeutics (IMRX) initiated with a Buy at Chardan Capital Markets; tgt $18

  • MRC Global (MRC) initiated with a Buy at The Benchmark Company; tgt $14

  • Now (DNOW) initiated with a Buy at The Benchmark Company; tgt $13

  • Rocket Pharmaceuticals (RCKT) initiated with an Outperform at Raymond James; tgt $22

  • Vertex Energy (VTNR) initiated with an Outperform at Oppenheimer; tgt $18

Upcoming Events:

  • Econ Data:

  • 08:30 ET: Nonfarm Payrolls for June (Briefing.comConsensus 250K; Prior 390K)

  • 08:30 ET: Nonfarm Private Payrolls for June (Briefing.comConsensus 275K; Prior 333K)

  • 08:30 ET: Avg. Hourly Earnings for June (Briefing.comConsensus 0.3%; Prior 0.3%)

  • 08:30 ET: Unemployment Rate for June (Briefing.comConsensus 3.6%; Prior 3.6%)

  • 08:30 ET: Average Workweek for June (Briefing.comConsensus 34.6; Prior 34.6)

  • 10:00 ET: Wholesale Inventories for May (Briefing.comConsensus NA; Prior 2.2%)

  • 15:00 ET: Consumer Credit for May (Briefing.comConsensus NA; Prior $38.0B)

  • Earnings:

  • Thursday (Jul 7)

  • Morning: HELE

  • Afternoon:  LEVI WDFC

Asia & Europe detail:

Asia: Nikkei +0.1%, Hang Seng +0.4%, Shanghai Composite -0.3%

Equity indices in the Asia-Pacific region ended the week on a mostly higher note. Japan's former Prime Minister Abe was assassinated during a campaign speech ahead of this weekend's upper house elections. The approval rating of South Korea's President Yoon fell to 37% from 43%, according to Gallup. FT reported that Chinese property developers are facing $13 bln in dollar-denominated bond payments during the second half of this year.

  • In economic data:

  • Japan's May Household Spending -1.9% m/m (expected 0.8%; last 1.0%); -0.5% yr/yr (expected 2.1%; last -1.7%). May Current Account surplus JPY128 bln (expected surplus of JPY186 bln; last surplus of JPY501 bln). June Bank Lending 1.3% yr/yr (last 0.7%) and June Economy Watchers Current Index 52.9 (last 54.0)

---Equity Markets---

  • Japan's Nikkei: +0.1% (+2.2% for the week)

  • Hong Kong's Hang Seng: +0.4% (-0.6% for the week)

  • China's Shanghai Composite: -0.3% (-0.9% for the week)

  • India's Sensex: +0.6% (+3.0% for the week)

  • South Korea's Kospi: +0.7% (+2.0% for the week)

  • Australia's ASX All Ordinaries: +0.6% (+2.3% for the week)

---FX---

  • USD/JPY: -0.1% to 135.88

  • USD/CNH: +0.2% to 6.7031

  • USD/INR: +0.2% to 79.26

Europe: DAX +0.8%, FTSE -0.4% CAC +0.2%

Major European indices trade in mixed fashion. Bank of Italy Governor Visco said that the ECB intends to call for a 25-bps rate hike at the July meeting, adding that a bigger hike could be made in September if medium-term inflation expectations remain elevated. Germany's biggest landlord, Vonovia, will restrict residential heat at night in the fall.

  • In economic data:

  • France's May trade deficit EUR13.00 bln (expected deficit of EUR12.80 bln; last deficit of EUR12.70 bln). May Current Account deficit EUR3.90 bln (last deficit of EUR2.70 bln) o Italy's May Industrial Production -1.1% m/m, as expected (last 1.4%); 3.4% yr/yr (expected 4.0%; last 3.9%)

---Equity Markets---

  • STOXX Europe 600: UNCH (+2.0% week-to-date)

  • Germany's DAX: +0.8% (+1.1% week-to-date)

  • U.K.'s FTSE 100: -0.4% (-0.1% week-to-date)

  • France's CAC 40: +0.2% (+1.4% week-to-date)

  • Italy's FTSE MIB: +0.6% (+1.5% week-to-date)

  • Spain's IBEX 35: -0.3% (-1.0% week-to-date)

---FX---

  • EUR/USD: -0.2% to 1.0143

  • GBP/USD: -0.2% to 1.1995

  • USD/CHF: +0.3% to 0.9768


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The S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures