11/01/23 Briefing

The S&P 500 futures are up 6 points and are trading 0.2% above fair value. The Nasdaq 100 futures are up 16 points and are trading 0.2% above fair value. The Dow Jones Industrial Average futures are up 53 points and are trading 0.2% above fair value.

The equity futures market is slightly positive, but market participants lack conviction ahead of the December Consumer Price Index (CPI) on Thursday followed by bank earnings reports on Friday. Concerns about the Fed triggering a hard landing and earnings estimates possibly getting cut further have driven choppy price action in the market, so investors will be keenly focused on the CPI report and the start of Q4 earnings reporting season. 

The World Bank lowered 2023 global growth expectations to +1.7% from +3.0% expected six months ago and sees 2024 global growth +2.7%.

A short time ago, the FAA tweeted "The FAA is still working to fully restore the Notice to Air Missions system following an outage. The FAA has ordered airlines to pause all domestic departures until 9 a.m. Eastern Timeto allow the agency to validate the integrity of flight and safety information."

The 2-yr Treasury note yield is down one basis point to 4.25% and the 10-yr note yield is down three basis points to 3.59%.

In corporate news:

• Apple (AAPL 130.75, +0.02, flat):  will make screens in house next year and move away from Samsung, according to Bloomberg

• CarMax (KMX 65.50, -1.89, -2.8%): downgraded to Underweight from Neutral at JPMorgan

• Coinbase (COIN 42.18, -1.05, -2.4%): downgraded to Underperform from Neutral at Bank of America

• General Motors (GM 37.27, +0.16, +0.4%): named a top pick for 2023 by Goldman Sachs

• Tesla (TSLA 121.23, +2.38, +2.0%): named a top pick for 2023 by Goldman Sachs; Tesla considering spending $775 mln to expand Austin, Texas factory, according to WSJ

• Keysight (KEYS 175.78, -2.23, -1.3%): downgraded to Neutral from Buy at JPMorgan

• World Wrestling (WWE 93.99, +3.75, +4.2%): Board of Directors unanimously elects Vince McMahon Executive Chairman; Co-CEO Stephanie McMahon to step down 

• Salesforce (CRM 143.13, -4.31, -2.9%): downgraded to Underperform from Market Perform at Bernstein

• ICHOR Corporation (ICHR 25.09, -4.58, -15.4%): guides Q4 and 1Q23 revs below consensus due to weakness in wafer fab equipment demand

• Warner Bros. Discovery (WBD 12.78, +0.22, +1.8%): upgraded to Buy from Neutral at Guggenheim

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Wednesday on a mostly lower note. Japan's Nikkei: +1.0%, Hong Kong's Hang Seng: +0.5%, China's Shanghai Composite: -0.2%, India's Sensex: UNCH, South Korea's Kospi: +0.4%, Australia's ASX All Ordinaries: +1.0% .

  • In economic data:

    • Japan's November Leading Index 97.6 (expected 97.5; last 98.6) and Coincident Indicator -0.5% m/m (last -1.2%)

    • South Korea's December Unemployment Rate 3.3% (last 2.9%)

    • Australia's November Retail Sales 1.4% m/m (expected 0.6%; last 0.4%) and Q4 CPI 7.3% yr/yr, as expected (last 6.9%)

  • In news:

    • The Bank of Japan conducted an unscheduled bond buying operation, offering to buy JGBs with maturities between one and five years. The central bank also conducted fixed amount operations for all other tenors.

    • Fast Retailing will raise wages by up to 40%.

    • Shanghai is reportedly targeting GDP growth of more than 5.5% for 2023.

    • Australia's Q4 CPI was up 7.3% yr/yr, rising past the peak from Q3.

• Major European indices trade in the green. STOXX Europe 600: +0.6%, Germany's DAX: +0.9%, U.K.'s FTSE 100: +0.6%, France's CAC 40: +0.9%, Italy's FTSE MIB: +0.5%, Spain's IBEX 35: +0.1%.

  • In economic data:

    • Italy's November Retail Sales 0.8% m/m (last -0.3%); 4.4% yr/yr (last 1.2%)

    • Spain's November Industrial Production -1.1% yr/yr (last 2.1%)

  • In news:

    • European Central Bank policymaker Villeroy de Galhau said that more rate hikes will be needed and that he does not expect the French economy to experience a hard landing.

    • Labor unions in France are planning strike action for the end of next week after yesterday's announcement of labor reforms, including raising the retirement age to 64.

    • Germany's Mechanical Engineering Industry Association reported a 14% yr/yr drop in November orders.

U.S. equity futures:

• S&P 500 Futures: +9 @ 3,928

• DJIA Futures: +59 @ 33,763

• Nasdaq 100 Futures: +18 @ 11,223

Overseas:

• Europe: DAX +0.9%, FTSE +0.6%, CAC +0.9%

• Asia: Nikkei +1.0%, Hang Seng +0.5%, Shanghai -0.2%

Commodities:

• Crude Oil +0.56 @ 75.68

• Nat Gas +0.063 @ 3.702

• Gold +4.95 @ 1881.45

• Silver +0.255 @ 23.92

• Copper +0.0280 @ 4.1063

Earnings/Guidance:

• AdaptHealth (AHCO) reaffirms FY22 revs outlook; sees FY22 Adj EBITDA at low end of guidance

• Axcelis Tech (ACLS) guides Q4 and FY22 EPS and revs nicely above consensus; expects yr/yr growth in 2023 based on robust demand

• Axonics Modulation (AXNX) sees Q4 revs, FY23 revs above consensus

• Backblaze (BLZE) reaffirms Q4 revenue and Adj. EBITDA margin guidance

• Commvault Systems (CVLT) guides Q3 EPS and revs below consensus due to slower-than-expected buying patterns

• Dentsply Sirona (XRAY) reaffirms FY22 EPS guidance; sees FY22 revs at high end of prior range

• Evolent Health (EVH) reaffirms previously issued revenue and Adjusted EBITDA guidance for the year ended December 31, 2022 ahead of conference

• Gatos Silver (GATO) reports record silver production and exceeds 2022 production guidance

• Ginkgo Bioworks (DNA) reaffirms FY22 revs guidance

• ICHOR Corporation (ICHR) guides Q4 and 1Q23 revs below consensus due to weakness in wafer fab equipment demand

• Impinj (PI) guides Q4 revenue above consensus

• InMode (INMD) sees Q4 EPS and revs better than consensus; guidance FY23 revs above expectations

• Integra (IART) guides Q4 EPS above consensus, revs in-line; reiterates plans to initiate a $150 mln share repurchase in 2023

• Tandem Diabetes Care (TNDM) guides Q4 net sales above consensus

• Teck Resources (TECK) provides steelmaking coal sales and pricing update; sales below guidance

• Valmont (VMI) provides 3-5 year financial targets in slide presentation

• Victoria's Secret (VSCO) sees Q4 EPS below consensus; reaffirms Q4 revs; announces new $250 million share repurchase authorization

News:

• House votes overwhelmingly to setup bipartisan select committee to discover ways US can counter China's economic power, according to Bloomberg

• FAA experiencing a computer outage; flights grounded across US - CNBC

• FAA tweets another update "Cleared Update No. 2 for all stakeholders: The FAA is still working to fully restore the Notice to Air Missions system following an outage. While some functions are beginning to come back on line, National Airspace System operations remain limited"

• World Bank: 2023 global growth to slow to +1.7% from +3.0% expected six months ago; global economy projected to growth +2.7% in 2024

• European Commission to ask Big Tech and EU telecoms about investment plans, according to Reuters

• EU wants to ask technology companies about cloud infrastructure, according to Reuters

• Illinois bans sale or possession of semiautomatic weapons. This will receive court challenges and could be overturned, according to NBC News

• Voyager seeking to expedite U.S. national security review that could delay or block proposed $1.0 bln sale to Binance, according to Reuters

• American Intl (AIG) CFO Shane Fitzsimons to take temporary medical leave of absence, effective immediately; former CFO Mark Lyons appointed interim CFO

• Apple (AAPL) will make screens in house next year and move away from Samsung (SSNLF), according to Bloomberg

• Avanos Medical (AVNS) approved a three-year transformation process with details in presentation

• Barrick (GOLD) broadens copper base in Saudi Arabia

• Best Buy (BBY) looks to take on Amazon Prime (AMZN) with free shipping benefits on all orders for My Best Buy members, according to CNET

• Biogen (BIIB): FDA Commissioner defends decision to approve Aduhelm, according to the Wall Street Journal

• BioXcel Therapeutics (BTAI) announces promising top-line data from its Phase 2 trial of BXCL701 in combination with KEYTRUDA in small cell neuroendocrine metastatic castration-resistant prostate cancer patients

• Blend Labs (BLND) announces strategic and financial initiatives to achieve path to profitability

• Brookdale Senior Living (BKD) reports occupancy for December

• China Southern Airlines (ZNH) scheduled Boeing (BA) 737 Max flights for Friday, according to Reuters

• CME Group reports international ADV rose 15% yr/yr

• Cohen & Steers (CNS) reports preliminary assets under management decreased 4.5% month/month for December 31, 2022 to $80.4 bln

• Disney (DIS) provides theme park access at lower prices, according to the Wall Street Journal

• Equinox Gold (EQX) reports 150,439 ounces of gold produced in fourth quarter, 532,319 ounces of gold produced in 2022

• Exxon Mobil (XOM): major offshore oil field developed by a consortium led by XOM will add 1.3 bln barrels of recoverable oil reserves to the 10 bln barrel Guyana-Surinam basin, according to The Hill

• FedEx (FDX) plans to scale back further on Sunday package deliveries as e-commerce demand continues to weaken, according to Bloomberg

• First Financial (FFIN) elects Michelle S. Hickox as EVP and CFO to replace James R. Gordon; effective January 9, 2023

• Glaukos (GKOS) announces positive results for a prospective, multi-center clinical trial designed to evaluate the safety of the surgical exchange procedure for iDose TR; also Announces Positive Clinical Updates for Several Corneal Health Pipeline Programs

• Halozyme Therapeutics (HALO) guides FY23 EPS and revs below consensus; also provides anticipated 2023 Key Events; plans up to $150 mln in share repurchases in 2023

• Hewlett Packard Enterprise (HPE) announces that Frank D'Amelio, former CFO of Pfizer (PFE), has been appointed to its Board of Directors

• Intellia Therapeutics (NTLA) announces the U.K. Medicines and Healthcare products Regulatory Agency has awarded the Innovation Passport for NTLA-2002

• Ivanhoe Electric (IE) entered into a binding Heads of Terms with Saudi Arabian Mining Company Ma'aden

• Masimo (MASI): ITC Judge rules Apple violated U.S. Trade Laws by infringing Masimo Pulse Oximeter Patent

• MediciNova (MNOV) receives a notice of allowance for a new patent covering MN-001 and MN-002

• Northrop Grumman (NOC) awarded $464 mln U.S. Air Force contract

• Olin (OLN) and Mitsui & Co's joint venture Blue Water Alliance receives all necessary regulatory approvals and is beginning operations

• Palomar Holdings (PLMR) enters into new multi-year fronting arrangement with Advanced AgProtection, a managing general agent

• PDF Solutions (PDFS) and proteanTecs announce collaboration on combined semiconductor analytics intended to provide insights on yield, quality, and reliability

• ProKidney (PROK) Announces Publication of Trial Design for Phase 2 Multicenter Clinical Trial of REACT for Late Stage 4 Diabetes-Related Chronic Kidney Disease

• Scorpio Tankers Inc. (STNG) Announces Update on Daily TCE Revenues and Securities Repurchase Program

• TechnipFMC (FTI) awarded "significant" contract by Wintershall Dea Norge AS for its Dvalin North project

• Tesla (TSLA) filing for $717 mln expansion of Gigafactory Texas, according to Electrek

• TSMC (TSM) received 3nm orders from Broadcom (AVGO), according to Digitimes

• Viasat (VSAT) awarded Civil Aviation Administration of China (CAAC) Validation of Supplemental Type Certificate (VSTC) to install its advanced Ka-band satellite connectivity system on the Boeing 737 (BA) aircraft series

• Wells Fargo (WFC) is stepping back from housing market, according to CNBC

• West Fraser (WFG) will indefinitely curtail its Perry Sawmill in FL later this month as a result of high fiber costs and softening lumber markets

• World Wrestling (WWE) Board of Directors unanimously elects Vince McMahon Executive Chairman

M&A:

• 1-800-FLOWERS(FLWS) acquires the Things Remembered brand and product offerings; retail stores are not part of the transactions; financial details not disclosed

• Franchise Group (FRG) is considering going private in mgmt buyout; firm also separately eyeing potential deal to acquire CONN, according to the Wall Street Journal

• Merck (MRK) completes tender offer to acquire Imago BioSciences (IMGO)

• StarTek's (SRT) ESM Holdings to divest stake in Contact Center Company to Solutions; expected to be completed during the second quarter of 2023

Syndicate:

• Cactus (WHD) announces $125 mln public offering of common stock

IPOs:

• Expect to Price:

  • Skyward Specialty Insurance Group (Nasdaq: SKWD): The specialty insurance company delivering commercial property and casualty products and solutions is expected to price its 8.5 M share IPO between $14-$16.

Gapping Up/Down

• Gapping up:

  • PROK +54.4%, WWE +7%, CONN +6.4%, BLZE +5.8%, HKD +5.7%, GATO +5.7%, FFIN +5%, PI +4.9%, MASI+3%, BLND +2.9%, FTI +1.7%, AHCO +1.5%, VSAT+0.8%, MNOV +0.8%, ITRI +0.7%, TNDM +0.7%, TSLA+0.6%, AMZN +0.5%

• Gapping down:

  • ICHR -16.8%, PLMR -4.2%, CVLT -3.5%, WHD -3.2%, HALO -3.1%, BBY -1.4%, WFG -1%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

  • Blackstone (BX) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $95

  • Chemours (CC) upgraded to Buy from Neutral at BofA Securities; tgt raised to $40

  • Pool (POOL) upgraded to Buy from Hold at Deutsche Bank; tgt $417

  • TopBuild (BLD) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $227

  • Warner Bros. Discovery (WBD) upgraded to Buy from Neutral at Guggenheim; tgt $16.50

• Downgrades:

  • Allegiant Travel (ALGT) downgraded to Neutral from Positive at Susquehanna; tgt $90

  • SiteOne Landscape Supply (SITE) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $126

  • STMicroelectronics (STM) downgraded to Sell from Neutral at Goldman

  • Watts Water Tech. (WTS) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $150

• Others:

  • Autodesk (ADSK) initiated with a Buy at Berenberg; tgt $230

Upcoming Events:

• Econ Data:

  • 07:00 ET: MBA Mortgage Applications Index for Jan 7 (Briefing.comConsensus NA; Prior -13.2%)

  • 10:30 ET: EIA Crude Oil Inventories for Jan 7 (Briefing.comConsensus NA; Prior 1.69 M)

• Earnings:

  • Monday (Jan 9)

    • Morning:  AYI CMC TLRY

    • Afternoon: ACCD AZZ JEF PSMT WDFC

  • Tuesday (Jan 10)

    • Morning: ACI BBBY SNX

  • Wednesday (Jan 11)

    • Afternoon:  KBH

  • Friday (Jan 13) 

    • Morning:  BAC BLK BK C DAL FRC JPM UNH WFC

Asia & Europe detail:

Asia: Nikkei +1.0%, Hang Seng +0.5%, Shanghai -0.2%

Equity indices in the Asia-Pacific region ended Wednesday on a mostly lower note. The Bank of Japan conducted an unscheduled bond buying operation, offering to buy JGBs with maturities between one and five years. The central bank also conducted fixed amount operations for all other tenors. Fast Retailing will raise wages by up to 40%. Shanghai is reportedly targeting GDP growth of more than 5.5% for 2023. Australia's Q4 CPI was up 7.3% yr/yr, rising past the peak from Q3.

• In economic data:

  • Japan's November Leading Index 97.6 (expected 97.5; last 98.6) and Coincident Indicator -0.5% m/m (last -1.2%)

  • South Korea's December Unemployment Rate 3.3% (last 2.9%)

  • Australia's November Retail Sales 1.4% m/m (expected 0.6%; last 0.4%) and Q4 CPI 7.3% yr/yr, as expected (last 6.9%)

---Equity Markets---

• Japan's Nikkei: +1.0%

• Hong Kong's Hang Seng: +0.5%

• China's Shanghai Composite: -0.2%

• India's Sensex: UNCH

• South Korea's Kospi: +0.4%

• Australia's ASX All Ordinaries: +1.0%

---FX---

• USD/JPY: +0.2% to 132.53

• USD/CNH: UNCH at 6.7826

• USD/INR: +0.1% to 81.63

Europe: DAX +0.9%, FTSE +0.6%, CAC +0.9%

Major European indices trade in the green. European Central Bank policymaker Villeroy de Galhau said that more rate hikes will be needed and that he does not expect the French economy to experience a hard landing. Labor unions in France are planning strike action for the end of next week after yesterday's announcement of labor reforms, including raising the retirement age to 64. Germany's Mechanical Engineering Industry Association reported a 14% yr/yr drop in November orders.

• In economic data:

  • Italy's November Retail Sales 0.8% m/m (last -0.3%); 4.4% yr/yr (last 1.2%)

  • Spain's November Industrial Production -1.1% yr/yr (last 2.1%)

---Equity Markets---

• STOXX Europe 600: +0.6%

• Germany's DAX: +0.9%

• U.K.'s FTSE 100: +0.6%

• France's CAC 40: +0.9%

• Italy's FTSE MIB: +0.5%

• Spain's IBEX 35: +0.1%

---FX---

• EUR/USD: UNCH at 1.0734

• GBP/USD: -0.3% to 1.2111

• USD/CHF: +0.5% to 0.9270