09/10/23 Briefing

The S&P 500 futures are down 28 points and are trading 0.7% below fair value. The Nasdaq 100 futures are down 125 points and are trading 0.8% below fair value. The Dow Jones Industrial Average futures are down 175 points and are trading 0.5% below fair value.

Stock futures indicate a lower open as participants react to the Israel-Hamas war. The bond market is closed today, but the U.S. Dollar Index is up 0.4% to 106.52, reflecting some flight to safety trading. Concerns about a wider, regional conflict are driving a big move in oil prices. WTI crude oil futures are up 4.0% to $86.08/bbl.

Market participants are also looking ahead to the September CPI report and the start of Q3 earnings season later this week.

There is no U.S. economic data of note today.

In corporate news:

• Tesla (TSLA 256.44, -4.09, -1.6%): September China made EV volume fell 10.9% year/year, according to Reuters

• Walgreens (WBA 21.67, -0.14, -0.6%): employees plan walkout next week, according to CNN

• Disney (DIS 83.93, +0.99, +1.2%): Nelson Peltz aiming to increase stake in Disney and wants board seats, according to the WSJ

• Zscaler (ZS 165.15, +1.57, +1.0%): upgraded to Overweight from Equal Weight

• Lockheed Martin (LMT 419.50, +18.77, +4.7%) and RTX (RTX 72.70, +2.93, +4.2%): moving up in response to the Israel-Hamas war

• Bristol Myers Squibb (BMY 55.90, -0.76, -1.3%): Mirati Therapeutics (MRTX) to be acquired by Bristol Myers Squibb for $4.8 bln equity value and up to $5.8 bln including the Contingent Value Right

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Monday's session mixed, stymied by the uncertainty surrounding the response to Hamas's attack against Israel over the weekend and market closures in Japan and South Korea, as well as a typhoon warning that canceled Hong Kong's morning session, that restricted overall trading volume. 

• In economic data:

• China's September FX Reserves $3.115 trln (expected $3.130 trln; last $3.160 trln)

• In news:

• China returned from its Golden Week holiday and saw a modest decline.

• That holiday saw tourism revenue surpass pre-pandemic levels by 1.5%, according to Bloomberg.

• Separately, Nikkei reported that a 10-yr JGB pushing closer to the BOJ's 1.0% effective cap could induce a decision to tweak the yield curve control policy at the October policy meeting.

• Major European indices have taken a mostly defensive posture in the wake of Israel declaring war on Hamas after Hamas launched a surprise attack over the weekend. STOXX Europe 600: -0.2%, Germany's DAX: -0.8%, U.K.'s FTSE 100: +0.1%, France's CAC 40: -0.6%, Italy's FTSE MIB: -0.4%, Spain's IBEX 35: -0.9%

• In economic data:

• Eurozone's October Sentix Investor Confidence -21.9 (expected -24.0; last -21.5)

• Germany's August Industrial Production -0.2% m/m (expected -0.1%; last -0.6%)

• In news:

• Overall losses remain modest in scope, but participants remain leery of the risk of the Israeli-Hamas conflict evolving into a wider regional conflict.

• Economic data was limited Monday, but the October Sentix Investor Confidence report showed some slight weakening versus September.

• Concerns about Italian debt continue to fester, evidenced by a more than 200 basis points spread between Italy's 10-yr and Germany's 10-yr.

• Separately, in an interview with La Tribune Dimanche, ECB President Lagarde said the ECB is not seeing a wage-price spiral at this time and that the ongoing adjustment in Germany's economy is affecting the euro area growth outlook.

• EUR/USD -0.5% to 1.0533 as the Israel-Hamas situation underpins the dollar with flight-to-safety trade.

U.S. equity futures:

• S&P 500 Futures -28 @ 4,314

• DJIA Futures: -175 @ 33,425

• Nasdaq 100 Futures: -125 @ 14,986

Overseas:

• Europe: DAX -0.8%, FTSE +0.1%, CAC -0.6%

• Asia: Nikkei closed for holiday, Hang Seng +0.2%, Shanghai Composite -0.4%

Commodities:

• Crude Oil +2.88 @ 85.67

• Nat Gas +0.045 @ 3.383

• Gold +18.10 @ 1863.30

• Silver +0.047 @ 21.770

• Copper +0.0175 @ 3.6450

Earnings/Guidance:

• Niu Technologies (NIU) sold 265,923 units (down 17.1% yr/yr) in Q3

News:

• Israel formally declared war on Hamas after the militant group launched a surprise assault this weekend that killed hundreds of Israelis. Israeli Prime Minister Benjamin Netanyahu vowed retaliation.

• Iran helped plan Hamas's Saturday attack on Israel and gave approval for the attack, according to The Wall Street Journal

• Israel has retaken control of all communities around Gaza. Hundreds of people are dead, according to CNN

• Dept. of Defense directed the movement of the USS Gerald R. Ford Carrier Strike Group to the Eastern Mediterranean

• House Republicans expect to have new Speaker of the House elected this week, according to Bloomberg

• ECB President Lagarde said the ECB is not seeing a wage-price spiral at this time and that the ongoing adjustment in Germany's economy is affecting the euro area growth outlook

• Nikkei reported that a 10-yr JGB pushing closer to the BOJ's 1.0% effective cap could induce a decision to tweak the yield curve control policy at the October policy meeting.

• USGS reported 33 km NNE of Zindah Jan, Afghanistan; thousands dead

• Fed Governor Michelle Bowman (voting FOMC member) expects "it will likely be appropriate for the Committee to raise rates further and hold them at a restrictive level for some time to return inflation to our 2 percent goal in a timely way"

• No serious moment in talks between Las Vegas casinos and hospitality workers, according to Reuters

• Hacker put 23andMe (ME) customer data for sale online, according to Bloomberg

• Alnylam Pharma (ALNY) announces that the U.S. FDA has issued a Complete Response Letter in response to the Company's supplemental New Drug Application for patisiran for the treatment of the cardiomyopathy of transthyretin-mediated amyloidosis

• CME Group (CME) reports sixth consecutive record quarter for Aluminum Futures volume

• GlaxoSmithKline (GSK) and Zhifei announce exclusive strategic vaccine partnership in China

• Newmont Goldcorp (NEM) reached a preliminary agreement with Peasquito Mine's union

• Southwest Air (LUV) announces that its Material Specialists ratified a new collective bargaining agreement

• Tesla (TSLA) September China made EV volume fell 10.9% year/year, according to Reuters

• Trip.comGroup (TCOM) records soaring international travel demand during China's Golden Week

• Walgreens (WBA) employees plan walkout next week, according to CNN

• Nelson Peltz aiming to increase stake in Walt Disney (DIS) and wants board seats, according to The Wall Street Journal

• Volvo (VLVLY): 4,000 UAW members at Mack Trucks have voted to REJECT a tentative agreement, and will STRIKE at 7 am on Monday

M&A:

• Chevron (CVX) was interested in Occidental Petroleum (OXY) at the beginning of the year, according to The Wall Street Journal

• Frontline (FRO) has entered into agreements with Euronav to acquire a high-quality ECO fleet of 24 VLCCs with an average age of 5.3 years, for an aggregate purchase price of USD 2,350 million

• Mirati Therapeutics (MRTX) to be acquired by Bristol Myers Squibb (BMY) for $4.8 bln equity value, or $58.00 per share, in cash and up to $5.8 bln including the Contingent Value Right

• Vitesse (VTS) has acquired additional oil and gas interests in the Williston Basin of North Dakota that will result in approximately $50 million of acquisition and related development capital expenditures, primarily in the third and fourth quarters of 2023

Syndicate:

• Biodexa Pharmaceuticals PLC (BDRX) files for ADS offering

IPOs:

• Priced to Trade:

• No IPOs expected.

Gapping Up/Down

• Gapping up:

• TALS +8.5%, RNA +5.2%, USO +3.6%, MIRM +2.8%, GLD +1.1%, TLT +0.8%, GSK +0.7%, MASI +0.6%

• Gapping down:

• MRTX -2.2%, ZNTL -2%, NIU -1.2%, RYAM -1.2%, USFD -0.9%, IWM -0.8%, QQQ -0.7%, USAC -0.6%, SPY -0.5%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

• Aramark (ARMK) upgraded to Buy from Hold at Jefferies; tgt lowered to $29

• On (ONON) upgraded to Outperform from Neutral at Robert W. Baird; tgt $33

• Zscaler (ZS) upgraded to Overweight from Equal Weight at Barclays; tgt raised to $190

• Lennox Int'l (LII) upgraded to Buy from Sell at Goldman; tgt raised to $455

• MSC Industrial (MSM) upgraded to Buy from Hold at Loop Capital; tgt raised to $124

• Oracle (ORCL) upgraded to Outperform from In-line at Evercore ISI; tgt raised to $135

• Patterson-UTI (PTEN) upgraded to Buy from Neutral at Citigroup; tgt raised to $18

• Downgrades:

• Apollo Global Management (APO) downgraded to Perform from Outperform at Oppenheimer

• Blue Owl Capital (OWL) downgraded to Perform from Outperform at Oppenheimer

• Tenable (TENB) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $47

• Datadog (DDOG) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $105

• Spotify (SPOT) downgraded to Neutral from Buy at Redburn Atlantic; tgt lowered to $160

• Zurn Elkay Water Solutions (ZWS) downgraded to Neutral from Buy at Goldman; tgt lowered to $29

• Others:

• Calidi Biotherapeutics (CLDI) initiated with an Outperform at Robert W. Baird; tgt $9

• Arm Holdings plc (ARM) initiated with a Buy at BofA Securities; tgt $65

• Arm Holdings plc (ARM) initiated with a Buy at Citigroup; tgt $65

• Arm Holdings plc (ARM) initiated with a Buy at Deutsche Bank; tgt $60

• Arm Holdings plc (ARM) initiated with a Buy at Goldman; tgt $62

• Arm Holdings plc (ARM) initiated with a Buy at Guggenheim; tgt $64

• Arm Holdings plc (ARM) initiated with a Buy at Jefferies; tgt $64

• Arm Holdings plc (ARM) initiated with a Buy at Mizuho; tgt $62

• Arm Holdings plc (ARM) initiated with a Buy at Rosenblatt; tgt $85

• Arm Holdings plc (ARM) initiated with a Hold at HSBC Securities; tgt $57

• Arm Holdings plc (ARM) initiated with a Market Perform at BMO Capital Markets; tgt $60

• Arm Holdings plc (ARM) initiated with a Peer Perform at Wolfe Research

• Arm Holdings plc (ARM) initiated with an Outperform at TD Cowen; tgt $63

• Arm Holdings plc (ARM) initiated with an Overweight at Barclays; tgt $65

• Arm Holdings plc (ARM) initiated with an Overweight at JP Morgan; tgt $70

• Confluent (CFLT) initiated with an Equal Weight at CapitalOne; tgt $35

• Prime Medicine (PRME) initiated with an Outperform at BMO Capital Markets; tgt $19

• Triumph Financial (TFIN) assumed with a Neutral at Piper Sandler; tgt $60

Econ Data:

• There is no U.S. economic data of note today

Earnings:

• Monday (Oct 9)

• Morning: None

• Afternoon: None

• Tuesday (Oct 10)

• Morning: NEOG, PEP

• Afternoon:  AZZ

• Wednesday (Oct 11)

• Morning: None

• Afternoon: None

• Thursday (Oct 12)

• Morning: DAL, DPZ, FAST, WBA

• Afternoon: SGH

• Friday (Oct 13)

• Morning: BLK, C, UNH

• Afternoon: None

Asia & Europe detail:

Asia: Nikkei closed, Hang Seng +0.2%, Shanghai Composite -0.4%

Equity indices in the Asia-Pacific region ended Monday's session mixed, stymied by the uncertainty surrounding the response to Hamas's attack against Israel over the weekend and market closures in Japan and South Korea, as well as a typhoon warning that canceled Hong Kong's morning session, that restricted overall trading volume. China returned from its Golden Week holiday and saw a modest decline. That holiday saw tourism revenue surpass pre-pandemic levels by 1.5%, according to Bloomberg. Separately, Nikkei reported that a 10-yr JGB pushing closer to the BOJ's 1.0% effective cap could induce a decision to tweak the yield curve control policy at the October policy meeting.

• In economic data:

• China's September FX Reserves $3.115 trln (expected $3.130 trln; last $3.160 trln)

---Equity Markets---

• Japan's Nikkei: closed for holiday

• Hong Kong's Hang Seng: +0.2%

• China's Shanghai Composite: -0.4%

• India's Sensex: -0.7%

• South Korea's Kospi: closed for holiday

• Australia's ASX All Ordinaries: +0.2%

---FX---

• USD/JPY: -0.1% to 149.13

• USD/CNH: -0.2% to 7.2946

• USD/INR: +0.2% to 83.270

Europe: DAX -0.8%, FTSE +0.1%, CAC -0.6%

Major European indices have taken a mostly defensive posture in the wake of Israel declaring war on Hamas after Hamas launched a surprise attack over the weekend. Overall losses remain modest in scope, but participants remain leery of the risk of the Israeli-Hamas conflict evolving into a wider regional conflict. Economic data was limited Monday, but the October Sentix Investor Confidence report showed some slight weakening versus September. Concerns about Italian debt continue to fester, evidenced by a more than 200 basis points spread between Italy's 10-yr and Germany's 10-yr. Separately, in an interview with La Tribune Dimanche, ECB President Lagarde said the ECB is not seeing a wage-price spiral at this time and that the ongoing adjustment in Germany's economy is affecting the euro area growth outlook. EUR/USD -0.5% to 1.0533 as the Israel-Hamas situation underpins the dollar with flight-to-safety trade.

• In economic data:

• Eurozone's October Sentix Investor Confidence -21.9 (expected -24.0; last -21.5)

• Germany's August Industrial Production -0.2% m/m (expected -0.1%; last -0.6%)

---Equity Markets---

• STOXX Europe 600: -0.2%

• Germany's DAX: -0.8%

• U.K.'s FTSE 100: +0.1%

• France's CAC 40: -0.6%

• Italy's FTSE MIB: -0.4%

• Spain's IBEX 35: -0.9%

---FX---

• EUR/USD: -0.5% to 1.0533

• GBP/USD: -0.5% to 1.2172

• USD/CHF: -0.1% to 0.9088