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11/10/22 Briefing

The S&P 500 futures are down 19 points and are trading 0.5% below fair value. The Nasdaq 100 futures are down 64 points and are trading 0.5% below fair value. The Dow Jones Industrial Average futures are down 123 points and are trading 0.3% below fair value.

Equity futures indicate a lower open as market participants play a waiting game ahead of the FOMC Minutes for the September meeting and key PPI and CPI reports later this week. Particpants are also responding to news of the Bank of England intervening again to support the Gilt market. Today the BoE it will buy index-linked gilts to mitigate dysfunction in the market and "fire sale" dynamics. 

The U.K.'s Pension and Lifetime Savings Association called on the Bank of England to continue its emergency Gilt buying program until at least the end of the month. GBP/USD +0.3% to 1.1087.

New restrictions were announced in Chinese cities amid rising COVID cases.

President Biden and G7 leaders are set to hold a virtual meeting today to discuss continued support of Ukraine, according to Reuters.

The 10-yr Treasury note yield, which reached 4.00% overnight, is up four basis points to 3.93%. The 2-yr note yield is unchanged at 4.31%.

Earlier this morning, the September NFIB Small Business Optimism reading came in at 92.1 following a reading of 91.8 in August.

In corporate news:

  • KLA Corporation (KLAC 292.20, -7.14, -2.39%):  will stop offering some supplies to Chinese customers, according to Reuters

  • Zoom (ZM 71.50, -2.22, -3.01%): downgraded to Equal Weight from Overweight at Morgan Stanley

  • Warner Music Group (WMG 23.00, +0.65, +2.91%): initiated with a Buy at Goldman

  • Leggett & Platt (LEG 32.00, -2.68, -7.73%): lowers its FY22 outlook due to an increasingly challenged global economic environment and consumer backdrop

  • American Airlines (AAL 12.31, +0.26, +2.16%): raises Q3 revenue guidance 

  • Amgen (AMGN 238.00, +5.85, +2.5%): Morgan Stanley upgraded to Overweight from Equal Weight 

  • Qorvo (QRVO 78.79, -3.17, -3.87%): Well Fargo downgraded to Equal Weight from Overweight

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Tuesday on a mostly lower note. Japan's Nikkei: -2.6%, Hong Kong's Hang Seng: -2.2%, China's Shanghai Composite: +0.2%, India's Sensex: -1.5%, South Korea's Kospi: -1.8%, Australia's ASX All Ordinaries: -0.4%.

  • In economic data:

  • Japan's August Current Account deficit JPY530 bln (expected deficit JPY470 bln; last deficit JPY630 bln). September Economy Watchers Current Index 48.4 (expected 47.9; last 45.5)

  • Australia's August Building Approvals 28.1% m/m and Private House Approvals 4.1% m/m (last 0.8%). September NAB Business Survey 25 (last 22) and Business Confidence 5 (last 10). October Westpac Consumer Sentiment -0.9% m/m (last 3.9%).

  • New Zealand's September Electronic Card Retail Sales 1.4% m/m (last 1.0%); 28.6% yr/yr (last 26.9%)

  • In news:

  • Japan's Prime Minister Kishida said that he is not looking to shorten the tenure of Bank of Japan Governor Kuroda, adding that he supports the central bank's policy despite its effect on the yen.

  • China reportedly plans to conduct mass coronavirus testing in Shanghai, fueling concerns about the potential for new lockdowns.

  • Australia's Treasurer said that the budget, which will be released on October 25, will not forecast a recession.

  • Major European indices trade in the red. STOXX Europe 600: -0.7%, Germany's DAX: -0.6%, U.K.'s FTSE 100: -0.8%, France's CAC 40: -0.3%, Italy's FTSE MIB: -1.2%, Spain's IBEX 35: -0.6%.

  • In economic data:

  • U.K.'s August Average Earnings Index + Bonus 6.0% yr/yr (expected 5.9%; last 5.5%). August three-month employment change -109,000 (expected -155,000; last 40,000) and August Unemployment Rate 3.5% (expected 3.6%; last 3.6%). September Claimant Count 25,500 (expected 4,200; last 1,100)

  • Italy's August Industrial Production 2.3% m/m (expected 0.2%; last 0.5%); 2.9% yr/yr (expected -0.4%; last -1.3%)

  • In news:

  • The U.K.'s Pension and Lifetime Savings Association called on the Bank of England to continue its emergency Gilt buying program until at least the end of the month.

  • The U.K.'s unemployment rate reached its lowest level since 1974 in the August reading.

  • Mercedes reported that its Q3 deliveries increased 21% yr/yr thanks to growth in all regions. A German trade union called for a worker strike at Amazon warehouses during this week's sales event.

 

U.S. equity futures:

  • S&P 500 Futures: -22 @ 3,591

  • DJIA Futures: -131 @ 29,072

  • Nasdaq 100 Futures: -72 @ 10,855

Overseas:

  • Europe: DAX -0.6%, FTSE -0.8%, CAC -0.3%

  • Asia: Nikkei -2.6%, Hang Seng -2.2%, Shanghai Composite +0.2%

Commodities:

  • Crude Oil -1.83 @ 89.30

  • Nat Gas  +0.076 @ 6.511

  • Gold +0.80 @ 1676.00

  • Silver -0.263  @ 19.352

  • Copper +0.0500 @ 3.4365

U.S. Summary:

  • Earnings/Guidance:

  • AGNC Investment (AGNC) announces preliminary estimates for certain financial measures for Q3 in light of recent market volatility

  • American Airlines (AAL) raises Q3 revenue guidance

  • ASE Technology (ASX) reports Sept revs increased 24% yr/yr to NT$66.65 bln; Q3 revs above consensus

  • AZZ (AZZ) misses by $0.14, misses on revs

  • Buenaventura SA (BVN) reports Q3 gold production

  • Endeavour Silver (EXK) Produces 1,458,448 oz Silver and 9,194 oz Gold for 2.2 Million oz Silver Equivalent in Q3 2022

  • Gran Tierra Energy (GTE) achieved Q3 average production of approximately 30,391 bopd, up 5% from one year ago

  • Hecla Mining (HL) raises production guidance

  • Leggett & Platt (LEG) lowers its FY22 outlook due to an increasingly challenged global economic environment and consumer backdrop

  • New Relic (NEWR) sees Q2 revs exceeding high end of prior guidance

  • Orthofix (OFIX) reports upside Q3 sales

  • SeaSpine (SPNE) raises Q3 guidance; raises FY22 guidance

  • SkillSoft (SKIL) appoints Richard Walker as CFO effective Oct. 28, 2022; reaffirms FY23outlook

  • News:

  • China coronavirus cases are rising again as the country closes some schools and reaffirms zero-COVID policy, CNBC

  • Goldman Sachs believes it is too early to price in a Fed pivot, according to Bloomberg

  • 10 Year Treasury yield hit 4% overnight, now trading near 3.94%

  • Bank of England widens gilt purchase operations to include index-linked gilts

  • Several local and state judges are expanding gun rights and striking down limits on concealed carry, according to the Wall Street Journal

  • Gartner says worldwide PC shipments totaled 68 million units in the third quarter of 2022, a 19.5% decrease yr/yr

  • White House announces measures to improve America's cybersecurity

  • Oxford University nasal version of coronavirus vaccine fails in trial, according to Financial Times

  • Adobe (ADBE): Cathie Wood purchased more shares of Adobe, according to Bloomberg

  • AerCap (AER) announced its major business transactions during the third quarter 2022

  • Air Lease (AL) reports As of September 30, 2022, ALC's fleet was comprised of 405 owned aircraft and 87 managed aircraft, with 412 new aircraft on order from Boeing (BA) and Airbus (EADSY) set to deliver through 2028

  • Albireo (ALBO) reports positive topline data from Phase 3 Trial of Bylvay (odevixibat) in Alagille Syndrome

  • Alithya (ALYA) signs largest CRM contract to date in Canada's Higher Education practice

  • Alpine Income Property Trust (PINE) reports it collected 100% of contractual base rents in Q3

  • Amarin (AMRN): Sarissa Capital Has Commenced the Process to Call a Special Meeting of Amarin Shareholders to Remove and Replace Certain Board Members

  • Angi Inc. (ANGI) announces that Oisin Hanrahan steps down as CEO, and appoints Joey Lavin, CEO of IAC and Chairman of Agin, as new CEO

  • Annovis Bio (ANVS) announces publication of phase 2a clinical data in the journal of prevention of Alzheimer's disease

  • AssetMark (AMK) issues its September AMK Report; platform assets decreased 8.5% yr/yr to $79.4 bln, net flows down 76.4% to $228 mln

  • BioLife Solutions (BLFS) and CSafe announce partnership to expand supply chain solutions for the cell and gene therapy market

  • Brookdale Senior Living (BKD) reports September 2022 occupancy; sequential occupancy grew 50 bps on a weighted average and month-end basis; achieved 11 straight months of yr/yr weighted average occupancy growth

  • Carvana (CVNA) believes paperwork issues for Michigan dealership have been corrected, according to Bloomberg

  • CME Group (CME) reports international ADV reached 6.1 mln contracts in Q3

  • Cohen & Steers (CNS) reports preliminary assets under management of $79.2 billion as of September 30, a decrease of $10.6 billion from assets under management at August 31

  • DICE Therapeutics (DICE) announces "positive" topline data from its Phase 1 clinical trial of DC-806, an oral small molecule antagonist of the pro-inflammatory cytokine IL-17

  • Eli Lilly (LLY) factory has more quality problems, according to Reuters

  • Evolent Health (EVH) provided context regarding the announcement by Bright Health Group (BHG)

  • Flowserve (FLS) awarded contract to supply vertical turbine pumps to McMillen Jacobs Associates

  • General Motors (GM) announced the introduction of Ultium Home and Ultium Commercial

  • Invitation Homes (INVH) provides preliminary assessment of Hurricane Ian impact

  • Joby Aviation (JOBY) and Delta (DAL) partner to pioneer home-to-airport transportation

  • Kaman (KAMN) selected to build a logistics UAS prototype for U.S. Marine Corps

  • KLA Corp (KLAC) will stop offering some supplies to Chinese customers, according to Reuters

  • Light & Wonder (LNW) names Matt Wilson as President and CEO, effective immediately; Wilson has served as interim CEO since August 2022

  • Meta Platforms (META): FTC aiming to scale back Meta lawsuit challenging deal to purchase Within Unlimited, according to the Wall Street Journal

  • Meta Platforms (META): Russian state media reporting that Russia has added META to list of "terrorist organizations" - CNBC

  • NASDAQ (NDAQ) reports September 2022 volumes; U.S. equity options volume up 2.9% from August to 282 mln contracts, European options and futures volume up 3.3% to 6.2 mln contracts

  • PagSeguro Digital (PAGS) announced that Mr. Alexandre Magnani will become the company's sole CEO

  • Procter & Gamble (PG) investors looking to challenge chairman role, according to Reuters

  • Rigel Pharma (RIGL) receives guidance from FDA's review of its re-analysis of data from the Phase 3 trial of fostamatinib; does not expect to file a supplemental New Drug Application; will reduce workforce by 16%

  • Regeneron Pharma (REGN) and Sanofi (SNY) report Dupixent (dupilumab) Late-Breaking Phase 3 Data Presented at UEG Week 2022 Showed Significant Histological Remission of Eosinophilic Esophagitis (EoE) in Children 1 to 11 Years Old

  • Reliance Steel (RS) announces executive leadership succession; Karla Lewis to Succeed James Hoffman as CEO in January 2023

  • Sarcos Technology (STRC) appoints Drew Hamer as CFO

  • Sealed Air (SEE) CFO to retire

  • Sonoco Products (SON) subsidiary Sonoco ThermoSafe expands its Orion Rental packaging program in Europe, adding an additional reclamation service station in Brussels

  • SWK Holdings' (SWKS) Subsidiary, Enteris BioPharma, Receives $5 Million Milestone Payment from Cara Therapeutics

  • Voyager Therapeutics (VYGR) presents data characterizing a novel CNS receptor and demonstrating the low-dose potential of TRACER generated capsid families

  • XPO Logistics' (XPO) board of directors approves previously announced separation of RXO

  • XPO Logistics (XPO) CFO Ravi Tulsyan to leave the company after assisting with CFO transition; Carl Anderson to succeed as CFO, effective November 8

  • Zscaler (ZS) President Amit Sinha to resign, effective October 21, to accept CEO position at another company; will remain as member of the Board

  • M&A:

  • Andersons (ANDE) agrees to purchase the assets of Mote Farm Service, Inc.; financial details not disclosed

  • California Water (CWT) subsidiary Washington Water Service receives approval to acquire Stroh's Water Company; expected to close by 1Q23; financial details not disclosed

  • Horizon Acquisition Corporation II (HZON): Flexjet announces business combination with HZON, plans to trade on the NYSE; deal expected to close in 2Q23

  • Nektar Therapeutics (NKTR) and PureTech Health plc mutually agreed to terminate discussions regarding a possible business combination

  • Northern Oil & Gas (NOG) to acquire certain non-operated interests in Delaware Basin for $130.0 mln in cash; proposes convertible senior notes offering

  • Orthofix (OFIX) and SeaSpine (SPNE) to combine in merger of equals to create leading global spine and orthopedics company

  • Perficient (PRFT) announces the acquisition of Ameex Technologies Corporation; financial terms were nto disclosed

  • ReneSola (SOL) acquired Emeren Limited, a United Kingdom-based utility-scale solar power and battery projects developer in Europe; expected to generate healthy EBITDA immediately

  • Syndicate

  • Northern Oil & Gas (NOG) proposes convertible senior notes offering

  • IPOs:

  • Expected to Price:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • SPNE +11.7%, STRC +4.8%, ANGI +4.4%, BKD +4.2%, JOBY +2.9%, VXX +1.9%, OFIX +1.4%, ANDE +1.3%, FLS +1.2%

  • Gapping down:

  • RIGL -9.6%, LEG -7.8%, ASX -4.3%, ZS -3.4%, SON-3%, AZZ -2.6%, USO -1.8%, XPO -1.3%, CNS -1.2%, QQQ -0.9%, IWM -0.9%, AGNC -0.9%, CPT -0.8%, SPY -0.8%, DIA -0.7%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • AmerisourceBergen (ABC) upgraded to Buy from Neutral at BofA Securities; tgt raised to $169

  • Downgrades:

  • Cogent Communications (CCOI) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $56

  • Others:

  • Analog Devices (ADI) initiated with an Outperform at Cowen; tgt $180

  • Barnes Group (B) initiated with a Peer Perform at Wolfe Research

  • Boeing (BA) initiated with an Outperform at Wolfe Research; tgt $180

  • Bombardier (BDRBF) initiated with an Outperform at Wolfe Research

  • Coca-Cola (KO) initiated with an Outperform at Wolfe Research; tgt $63

  • Curtiss-Wright (CW) initiated with an Outperform at Wolfe Research; tgt $170

  • Embraer SA (ERJ) initiated with an Outperform at Wolfe Research; tgt $14

  • General Dynamics (GD) initiated with an Outperform at Wolfe Research; tgt $265

  • HEICO (HEI) initiated with a Peer Perform at Wolfe Research

  • Hexcel (HXL) initiated with a Peer Perform at Wolfe Research

  • Howmet Aerospace (HWM) assumed with an Outperform at Wolfe Research; tgt $44

  • Huntington Ingalls (HII) initiated with an Outperform at Wolfe Research; tgt $315

  • L3Harris (LHX) initiated with a Peer Perform at Wolfe Research

  • Lockheed Martin (LMT) initiated with a Peer Perform at Wolfe Research

  • Northrop Grumman (NOC) initiated with an Outperform at Wolfe Research; tgt $565

  • Raytheon Technologies (RTX) initiated with a Peer Perform at Wolfe Research

  • Spirit Aerosystems (SPR) initiated with an Underperform at Wolfe Research; tgt $24

  • Transdigm Group (TDG) initiated with an Outperform at Wolfe Research; tgt $650

  • Triumph Group (TGI) initiated with an Underperform at Wolfe Research; tgt $9

  • Virgin Galactic (SPCE) initiated with an Underperform at Wolfe Research; tgt $4

  • Warner Music Group (WMG) initiated with a Buy at Goldman; tgt $32

  • Woodward (WWD) initiated with an Outperform at Wolfe Research; tgt $100

Upcoming Events:

  • Econ Data:

  • 06:00 ET: NFIB Small Business Optimism for Sep (Briefing.comConsensus NA; Prior 91.8)

  • Earnings

  • Tuesday (Oct 11)

  • Morning: AZZ

  • Afternoon:  PEP

  • Wednesday (Oct 12)

  • Afternoon:  DCT

  • Thursday (Oct 13)

  • Morning: BLK CMC DAL DPZ FAST PGR TSM WBA

  • Friday (Oct 14) 

  • Morning:  C FRC JPM MS PNC USB UNH WFC


Asia & Europe detail:

Asia: Nikkei -2.6%, Hang Seng -2.2%, Shanghai Composite +0.2%

Equity indices in the Asia-Pacific region ended Tuesday on a mostly lower note. Japan's Prime Minister Kishida said that he is not looking to shorten the tenure of Bank of Japan Governor Kuroda, adding that he supports the central bank's policy despite its effect on the yen. China reportedly plans to conduct mass coronavirus testing in Shanghai, fueling concerns about the potential for new lockdowns. Australia's Treasurer said that the budget, which will be released on October 25, will not forecast a recession.

  • In economic data:

  • Japan's August Current Account deficit JPY530 bln (expected deficit JPY470 bln; last deficit JPY630 bln). September Economy Watchers Current Index 48.4 (expected 47.9; last 45.5)

  • Australia's August Building Approvals 28.1% m/m and Private House Approvals 4.1% m/m (last 0.8%). September NAB Business Survey 25 (last 22) and Business Confidence 5 (last 10). October Westpac Consumer Sentiment -0.9% m/m (last 3.9%).

  • New Zealand's September Electronic Card Retail Sales 1.4% m/m (last 1.0%); 28.6% yr/yr (last 26.9%)

---Equity Markets---

  • Japan's Nikkei: -2.6%

  • Hong Kong's Hang Seng: -2.2%

  • China's Shanghai Composite: +0.2%

  • India's Sensex: -1.5%

  • South Korea's Kospi: -1.8%

  • Australia's ASX All Ordinaries: -0.4%

---FX---

  • USD/JPY: UNCH at 145.66

  • USD/CNH: +0.2% to 7.1692

  • USD/INR: -0.1% to 82.31

Europe: DAX -0.6%, FTSE -0.8%, CAC -0.3%

Major European indices trade in the red. The Bank of England expanded its emergency bond buying program to include index-linked Gilts. The U.K.'s Pension and Lifetime Savings Association called on the Bank of England to continue its emergency Gilt buying program until at least the end of the month. The U.K.'s unemployment rate reached its lowest level since 1974 in the August reading. Mercedes reported that its Q3 deliveries increased 21% yr/yr thanks to growth in all regions. A German trade union called for a worker strike at Amazon warehouses during this week's sales event.

  • In economic data:

  • U.K.'s August Average Earnings Index + Bonus 6.0% yr/yr (expected 5.9%; last 5.5%). August three-month employment change -109,000 (expected -155,000; last 40,000) and August Unemployment Rate 3.5% (expected 3.6%; last 3.6%). September Claimant Count 25,500 (expected 4,200; last 1,100)

  • Italy's August Industrial Production 2.3% m/m (expected 0.2%; last 0.5%); 2.9% yr/yr (expected -0.4%; last -1.3%)

---Equity Markets---

  • STOXX Europe 600: -0.7%

  • Germany's DAX: -0.6%

  • U.K.'s FTSE 100: -0.8%

  • France's CAC 40: -0.3%

  • Italy's FTSE MIB: -1.2%

  • Spain's IBEX 35: -0.6%

---FX---

  • EUR/USD: +0.3% to 0.9736

  • GBP/USD: +0.4% to 1.1095

  • USD/CHF: -0.3% to 0.9958



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