12/07/23 Briefing

The S&P 500 futures are up 11 points and are trading 0.3% above fair value. The Nasdaq 100 futures are up 52 points and are trading 0.3% above fair value. The Dow Jones Industrial Average futures are up 68 points and are trading 0.2% above fair value.

Stock futures are moving higher ahead of the June Consumer Price Index report at 8:30 a.m. ET. The positive bias has been helped along by a drop in market rates and carryover momentum after a relatively strong showing for the broader market over the last two sessions. 

The 2-yr note yield is down four basis points to 4.85% and the 10-yr note yield is down three basis points to 3.95%. The U.S. Dollar Index is down 0.2% to 101.49.

Other economic data today included the weekly MBA Mortgage Applications Index, which rose 0.9% after last week's 4.4% decline. Weekly EIA Crude Oil Inventories (prior -1.51 million barrels) will be released at 10:30 a.m. ETand the Fed's Beige Book for July will be released at 2:00 p.m. ET. 

Separately, the Reserve Bank of New Zealand left its official cash rate unchanged at 5.50%, as expected. 

In corporate news:

• VMware (VMW 155.00, +3.47, +2.3%): Broadcom (AVGO) confirms it received conditional approval today from the European Commission to complete its acquisition of VMware (VMW)

• Walt Disney (DIS 89.61, +0.12, +0.1%): exploring strategic options for its Star India business, including a joint venture or a sale, according to WSJ

• Illumina (ILMN 184.45, -0.37, -0.2%): EU commission fines ILMN and GRAIL for implementing their acquisition without prior merger control approval

• Netflix (NFLX 441.67, +1.46, +0.3%): UBS raised its price target to $525 from $390

• Coinbase Global (COIN 89.40, +0.25, +0.3%): downgraded to Neutral from Overweight at Atlantic Equities

• NVIDIA (NVDA 425.83, +1.78, +0.4%): in discussions to be anchor investor in Arm IPO, according to FT

• Coty (COTY 13.50, +0.49, +3.8%): Kim Kardashian in talks to buy back 20% stake of SKKN sold to Coty, according to WSJ

• Stellantis (STLA 18.33, +0.33, +1.8%): upgraded to Buy from Neutral at BofA Securities 

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended the midweek session on a mixed note. Japan's Nikkei: -0.8%, Hong Kong's Hang Seng: +1.1%, China's Shanghai Composite: -0.8%, India's Sensex: -0.3%, South Korea's Kospi: +0.5%, Australia's ASX All Ordinaries: +0.4%.

• In economic data:

• Japan's June PPI -0.2% m/m (expected 0.1%; last -0.7%); 4.1% yr/yr (expected 4.3%; last 5.2%). May Core Machinery Orders -7.6% m/m (expected 1.0%; last 5.5%); -8.7% yr/yr (expected -0.2%; last -5.9%)

• South Korea's June Unemployment Rate 2.6% (expected 2.5%; last 2.5%)

• New Zealand's May Visitor Arrivals -27.5% m/m (expected 60.5%; last -16.9%)

• In news:

• Komatsu reported its third consecutive month of falling yr/yr excavator demand in China.

• Japan's PPI decelerated for the sixth consecutive month, slowing the growth rate to a level not seen in two years.

• The Reserve Bank of New Zealand left its official cash rate at 5.50%, as expected, making for the first pause in the hiking cycle since August 2021.

• Major European indices trade in positive territory. STOXX Europe 600: +0.8%, Germany's DAX: +0.9%, U.K.'s FTSE 100: +1.2%, France's CAC 40: +0.7%, Italy's FTSE MIB: +1.1%, Spain's IBEX 35: +0.5%.

• In economic data:

• Spain's June CPI 0.6% m/m, as expected (last 0.0%); 1.9% yr/yr, as expected (last 3.2%). Core CPI 5.9% yr/yr, as expected (last 6.1%)

• In news:

• The Bank of England released the results of its latest stress test, which was passed by all banks.

• Bank of England Governor Bailey said that policymakers will remain vigilant to how higher rates are being transmitted through the economy.

• British Prime Minister Sunak said that the fight against inflation is more important than cutting taxes before the next election.

• Spain was the first EU member state to reach the 2.0% inflation target as CPI decelerated to 1.9% yr/yr in the reading for June.

U.S. equity futures:

• S&P 500 Futures: +11 @ 4,451

• DJIA Futures: +52 @ 34,313

• Nasdaq 100 Futures: +52 @ 15,171

Overseas:

• Europe: DAX +0.9%, FTSE +1.2%, CAC +0.7%

• Asia: Nikkei -0.8%; Hang Seng +1.1%, Shanghai Composite -0.8%

Commodities:

• Crude Oil +0.29 @ 75.12

• Nat Gas -0.038 @ 2.693

• Gold +2.60 @ 1939.70

• Silver +0.084 @ 23.365

• Copper +0.0353 @ 3.8013

Earnings/Guidance:

• AngioDynamics (ANGO) reports EPS in-line, revs in-line; guides FY24 EPS below consensus, revs below consensus

• Callon Petroleum (CPE) reported Q2 net loss on purchased oil and gas of $3,312K

• Fortuna Silver Mines (FSM) reports Q2 production of 93,454 gold equivalent ounces

• InMode (INMD) sees Q2 EPS and revs above consensus; raises FY23 outlook

• Orla Mining (ORLA) provides Q2 operational results

• Vital Energy (VTLE) provides prelim Q2 results; increases FY23 production outlook

• ZIM Integrated Shipping (ZIM) lowers FY23 outlook

News:

• G7 will provide long term security commitments to Ukraine, according to Financial Times

• FTC court losses are raising questions about chair Lina Khan's strategy, according to the New York Times

• Large automakers reach deal on battery metals, according to the Wall Street Journal

• SEC aiming to remove "swing pricing" from money market rules, according to Bloomberg

• Acadia Healthcare (ACHC) intends to challenge New Mexico jury verdict related to June 2023 trial awarding a plaintiff compensatory damages of $80 mln and punitive damaged of $405 mln

• Akamai (AKAM) Charts Course for the Next Decade of Cloud Computing with New Sites, Services, and Capabilities

• American Lithium Corp. (AMLI) intersects highest grade lithium and cesium samples encountered to date at Falchani - up to 5,645 ppm lithium and up to 12,610 ppm cesium

• AstraZeneca (AZN): Enhertu approved in China as the first HER2-directed therapy for patients with HER2-low metastatic breast cancer

• BlueLinx (BXC) announces that Andrew Wamser will join company as Senior Vice President and Chief Financial Officer-Elect, effective July 17, 2023

• Brookdale Senior Living (BKD) reports that June weighted average occupancy increased 160 bps yr/yr to 76.8%

• Cohen & Steers (CNS) reports preliminary assets under management of $80.4 bln for June 30, 2023, an increase of $2.6 bln from May 31, 2023

• Coinbase (COIN): Cathie Wood sold Coinbase shares, according to Bloomberg

• Coty (COTY): Kim Kardashian in talks to buy back 20% stake of SKKN sold to Coty, according to the Wall Street Journal

• Cummins (CMI) increases quarterly dividend ~7% to $1.68/share from $1.57/share

• CVS (CVS) resolved system outage that caused prescription filling backup, according to the Wall Street Journal

• DTE Energy (DTE) announced settlement agreement with nearly two dozen organizations from across Michigan

• EOG Resources (EOG) detailed Q2 derivative contracts and other price risk management updates

• Ford (F) Next unit CEO Franck Louis Victor was arrested, according to Bloomberg

• GoodRx (GDRX) and CVS to launch Caremark Cost Saver

• Google (GOOG) ends plans for artificial intelligence chatbot marketed towards Gen Z users, CNBC

• Huntington Ingalls (HII) awarded $84 mln contract to continue supporting the National Geospatial Agency's IT enterprise cloud migration

• Incyte (INCY) Announces Positive Topline Results from Phase 3 Trial Evaluating Ruxolitinib Cream (Opzelura) in Children with Atopic Dermatitis

• Life Storage (LSI) CFO Alexander Gress passed away on July 9; appointed COO David Dodman as CFO, effective immediately; will also continue to serve as COO

• McEwen Mining (MUX) reports latest assay results

• Microsoft (MSFT) and KPMG enter landmark agreement to put AI at the forefront of professional services

• Nano Dimension (NNDM): U.S. District Court Dismisses Frivolous Lawsuit Filed by Nano Dimension Against Murchinson and Other Shareholders

• NatWest Group (NWG) provides BOE stress test results

• Noble Corporation (NE) initiates a quarterly dividend of $0.30/share, payable on September 14to shareholders of record at close on August 17

• PeopleS BancorP inc. (PEBO) announces planned retirement of Chuck Sulerzyski and election of Tyler Wilcox as next CEO

• Petrobras (PBR) entered into a new natural gas contract with Comgs, effective from January 2024 until December 2034, in the estimated amount of R$ 56 billion

• Plug Power (PLUG) to supply two 5 MW PEM Electrolyzers for Australian Green Hydrogen Projects

• POSCO (PKX) details future business plans and LiB materials business updates

• Rio Tinto (RIO) and Sumitomo to build Gladstone hydrogen pilot plant to trial lower-carbon alumina refining

• RTX (RTX) unit Pratt & Whitney signs modification for F117 engine sustainment support contract for C-17 Globemaster III

• SoftBank (SFTBY) mulling US listing for PayPal (PYPL) business, according to Reuters

• Terex (TEX) increases its quarterly dividend by 13% to $0.17/share; annual yield of 1.1%

• Ticketmaster (LYV) halted Taylor Swift ticket sales because of vendor issue, according to the New York Post

• Verizon (VZ) and AT&T (T) did little to fix toxic lead cables, according to the Wall Street Journal

• Walt Disney (DIS) exploring strategic options for its Star India business, including a joint venture or a sale, according to the Wall Street Journal

M&A:

• Athena Technology Acquisition Corp. II (ATEK) extended the period of time it has to consummate its initial business combination by one month from July 14, 2023 to August 14, 2023

• Consolidated Comms (CNSL): Wildcat Capital wants CNSL to reject take private offer, according to Reuters

• Illumina (ILMN): EU commission fines ILMN and GRAIL for implementing their acquisition without prior merger control approval

• Northern Oil & Gas (NOG) provides update on Northern Delaware Basin properties acquisition from Alpha Energy Partners

• Paratek Pharma (PRTK): NexPoint issues demand letter to PRTK to make available books and record regarding proposed acquisition of the company

• VMware (VMW): EU Commission clears acquisition of VMware by Broadcom (AVGO), subject to conditions

Syndicate:

• EHang (EH) $23 mln private placement led by South Korean Strategic Investor Lee Soo Man

IPOs:

• Nvidia (NVDA) in discussions to be anchor investor in Arm IPO, according to Financial Times

• Expected to Price:

• Apogee Therapeutics (Nasdaq: APGE): The biotech company developing biologics for treatment of atopic dermatitis, COPD, and related inflammatory and immunology indications is expected to price its 15.6 M share IPO between $15-$17.

Gapping Up/Down

• Gapping up:

• GDRX +4.6%, LSI +2.7%, LYG +2.7%, VMW +2.3%, VTLE +1.9%, TEX +1.8%, PRTA +1.8%, PLUG +1.5%, BCS +1.2%, HII +1.1%, NWG +1.1%, HSBC +1.1%, INCY +0.9%, AVGO +0.6%

• Gapping down:

• SILK -24.8%, ACHC -5.1%, NE -2.3%, BKD -0.9%, CMI -0.7%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

• AstraZeneca (AZN) upgraded to Buy from Neutral at UBS

• Marathon Oil (MRO) upgraded to Neutral from Sell at Goldman; tgt $25

• Sealed Air (SEE) upgraded to Outperform from Neutral at Robert W. Baird; tgt $49

• TJX (TJX) upgraded to Buy from Hold at Loop Capital; tgt raised to $95

• Downgrades:

• APA Corp. (APA) downgraded to Sell from Neutral at Goldman; tgt $30

• Coinbase Global (COIN) downgraded to Neutral from Overweight at Atlantic Equities; tgt raised to $80

• Grainger (GWW) downgraded to Neutral from Buy at UBS; tgt raised to $820

• Redfin (RDFN) downgraded to Underperform from Neutral at DA Davidson; tgt $10

• Others:

• Alkami Technology (ALKT) initiated with a Buy at Goldman; tgt $21

• Canadian Natrl Res (CNQ) initiated with a Buy at UBS

• Cenovus Energy (CVE) initiated with a Neutral at UBS

• DoubleVerify (DV) initiated with an Overweight at Stephens; tgt $47

• Fresenius Medical (FMS) initiated with a Buy at Goldman

• Imperial Oil (IMO) initiated with a Buy at UBS

• Jack Henry (JKHY) initiated with a Neutral at Goldman; tgt $173

• nCino (NCNO) initiated with a Neutral at Goldman; tgt $32

• Ovintiv (OVV) resumed with a Neutral at Goldman; tgt $38

• Philips (PHG) initiated with a Buy at Goldman

• Q2 Holdings (QTWO) initiated with a Buy at Goldman; tgt $38

• Standard BioTools (LAB) initiated with an Overweight at KeyBanc Capital Markets; tgt $4

• Suncor Energy (SU) initiated with a Buy at UBS

Econ Data:

• 07:00 ET: MBA Mortgage Applications Index for July 8 (Briefing.comConsensus NA; Prior -4.4%)

• 08:30 ET: CPI for June (Briefing.comConsensus 0.3%; Prior 0.1%)

• 08:30 ET: Core CPI for June (Briefing.comConsensus 0.3%; Prior 0.4%)

• 10:30 ET: EIA Crude Oil Inventories for July 8 (Briefing.comConsensus NA; Prior -1.51M)

• 14:00 ET: Fed's Beige Book for July

Earnings:

• Monday (July 10)

• Morning: HELE

• Afternoon: PSMT WDFC

• Tuesday (July 11)

• Morning: None

• Afternoon: None

• Wednesday (July 12)

• Morning: ANGO

• Afternoon: MLKN

• Thursday (July 13)

• Morning: CTAS CAG DAL FAST PEP PGR

• Afternoon: WAFD

• Friday (Jul 14) 

• Morning: BLK C ERIC JPM STT UNH WFC

• Afternoon: None

Asia & Europe detail:

Asia: Nikkei -0.8%; Hang Seng +1.1%, Shanghai Composite -0.8%

Equity indices in the Asia-Pacific region ended the midweek session on a mixed note. Komatsu reported its third consecutive month of falling yr/yr excavator demand in China. Japan's PPI decelerated for the sixth consecutive month, slowing the growth rate to a level not seen in two years. The Reserve Bank of New Zealand left its official cash rate at 5.50%, as expected, making for the first pause in the hiking cycle since August 2021.

• In economic data:

• Japan's June PPI -0.2% m/m (expected 0.1%; last -0.7%); 4.1% yr/yr (expected 4.3%; last 5.2%). May Core Machinery Orders -7.6% m/m (expected 1.0%; last 5.5%); -8.7% yr/yr (expected -0.2%; last -5.9%)

• South Korea's June Unemployment Rate 2.6% (expected 2.5%; last 2.5%)

• New Zealand's May Visitor Arrivals -27.5% m/m (expected 60.5%; last -16.9%)

---Equity Markets---

• Japan's Nikkei: -0.8%

• Hong Kong's Hang Seng: +1.1%

• China's Shanghai Composite: -0.8%

• India's Sensex: -0.3%

• South Korea's Kospi: +0.5%

• Australia's ASX All Ordinaries: +0.4%

---FX---

• USD/JPY: -0.5% to 139.60

• USD/CNH: -0.2% to 7.1972

• USD/INR: -0.2% to 82.23

Europe: DAX +0.9%, FTSE +1.2%, CAC +0.7%

Major European indices trade in positive territory. The Bank of England released the results of its latest stress test, which was passed by all banks. Bank of England Governor Bailey said that policymakers will remain vigilant to how higher rates are being transmitted through the economy. British Prime Minister Sunak said that the fight against inflation is more important than cutting taxes before the next election. Spain was the first EU member state to reach the 2.0% inflation target as CPI decelerated to 1.9% yr/yr in the reading for June.

• In economic data:

• Spain's June CPI 0.6% m/m, as expected (last 0.0%); 1.9% yr/yr, as expected (last 3.2%). Core CPI 5.9% yr/yr, as expected (last 6.1%)

---Equity Markets---

• STOXX Europe 600: +0.8%

• Germany's DAX: +0.9%

• U.K.'s FTSE 100: +1.2%

• France's CAC 40: +0.7%

• Italy's FTSE MIB: +1.1%

• Spain's IBEX 35: +0.5%

---FX---

• EUR/USD: +0.1% to 1.1019

• GBP/USD: -0.1% to 1.2920

• USD/CHF: -0.1% to 0.8783