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13/10/22 Briefing

The S&P 500 futures are up 32 points and are trading 0.9% above fair value. The Nasdaq 100 futures are up 69 points and are trading 0.7% above fair value. The Dow Jones Industrial Average futures are up points and are trading 1.0% above fair value.

Equity futures trade higher this morning after six consecutive losing sessions for the S&P 500 and Nasdaq Composite. Market participants remain in wait-and-see mode ahead of the September Consumer Price Index at 8:30 a.m. ET.  

The behavior of the Treasury and gilt markets has provided underlying support for a rebound trade. This follows news that UK officials are discussing how the country can back down from its stimulus plan, according to Bloomberg. The 10-yr Treasury note yield is down five basis points to 3.85% and the 2-yr note yield is down two basis points to 4.27%. The 10-yr gilt yield is down 35 basis points to 4.17%.

The U.S Dollar Index dropped recently, down 0.5% to 112.74, acting as another supportive factor. GBP/USD +1.4% to 1.1262.

Several companies reported earnings since yesterday's close and the initial response has been positive.  

As an aside, Applied Materials issued an earnings warning for Q4, which is leading to related weakness in other semiconductor equipment names.

In corporate news:

  • Walgreens Boots Alliance (WBA 33.43 +1.49 +4.66%): beats by $0.03, reports revs in-line; guides FY23 EPS in-line

  • Delta Air Lines (DAL 30.40 +1.19 +4.07%): misses by $0.02, beats on revs; guides Q4 EPS above consensus, revs in-line

  • BlackRock (BLK 534.30 +3.20 +0.60%): beats by $2.28, beats on revs

  • Taiwan Semiconductor Manufacturing (TSM 65.71 +1.60 +2.50%): beats by NT$0.44, reports revs in-line; guides Q4 revs above consensus; expects to cut capex by at least 10%

  • Applied Materials (AMAT 75.04 -0.97 -1.28%):  Lowers guidance for OctQ due to new export regulations for US semiconductor technology sold in China; also expects JanQ to see similar impact

  • A.O. Smith (AOS 45.45 -3.68 -7.49%): reports prelim Q3 results below consensus; lowers FY22 guidance

  • Comcast (CMCSA 29.30 +0.61 +2.13%): Citigroup upgrades from Buy to Neutral

  • American Express (AXP 135.90 -0.32 -0.23%): Citigroup downgrades to Sell from Neutral 

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Thursday on a lower note. Japan's Nikkei: -0.6%, Hong Kong's Hang Seng: -1.9%, China's Shanghai Composite: -0.3%, India's Sensex: -0.7%, South Korea's Kospi: -1.8%, Australia's ASX All Ordinaries: -0.1%.

  • In economic data:

  • Japan's September PPI 0.7% m/m (expected 0.2%; last 0.4%); 9.7% yr/yr (expected 8.8%; last 9.4%). September Bank Lending 2.3% yr/yr (expected 2.0%; last 1.9%)

  • Australia's October Inflation Expectations 5.4% (last 5.4%)

  • New Zealand's September FPI 0.4% m/m (last 1.1%)

  • In news:

  • The approval rating of the Japanese government has dropped to 27.4%, the lowest level since last year's election.

  • A Bank of Japan survey showed that 85.7% of respondents expect higher prices a year from now, down from 87.1% in last quarter's report.

  • Taiwan Semiconductor Manufacturing Company announced that capital spending will be reduced by at least 10% for the fiscal year.

  • China Securities Times reported that some municipalities have purchased properties or encouraged buying by state-owned enterprises to boost confidence in the property market.

  • Major European indices trade in the green. STOXX Europe 600: +0.1%, Germany's DAX: +1.0%, U.K.'s FTSE 100: +0.1%, France's CAC 40: +0.4%, Italy's FTSE MIB: +0.9%, Spain's IBEX 35: +0.9%.

  • In economic data:

  • Germany's September CPI 1.9% m/m, as expected (last 0.3%); 10.0% yr/yr, as expected (last 7.9%)

  • Swiss September PPI 0.2% m/m (last -0.1%); 5.4% yr/yr (last 5.5%)

  • In news:

  • Gilts are also on the rise, sending the U.K.'s 10-yr yield lower by 17 bps to 4.25%.

  • European Central Bank policymaker Holzmann said that he is in favor of a 75-bps rate hike at the October meeting, followed by a 50-bps increase in December.

  • British Prime Minister Truss is reportedly under pressure to allow for an increase to the corporate tax rate.

 

U.S. equity futures:

  • S&P 500 Futures: +35 @ 3,612

  • DJIA Futures: +294 @ 29,505

  • Nasdaq 100 Futures: +76 @ 10,863

Overseas:

  • Europe: DAX +1.0%, FTSE +0.1%, CAC +0.4%

  • Asia: Nikkei -0.6%, Hang Seng -1.9%, Shanghai Composit -0.3%

Commodities:

  • Crude Oil +0.28 @ 87.55

  • Nat Gas  +0.092 @ 6.527

  • Gold +7.90 @ 1685.40

  • Silver +0280  @ 19.218

  • Copper +0.0260 @ 3.451

U.S. Summary:

  • Earnings/Guidance:

  • ACCO Brands (ACCO) sees Q3 EPS and revs below consensus; lowers FY22 outlook

  • A.O. Smith (AOS) reports prelim Q3 results; lowers FY22 guidance

  • Applied Materials (AMAT) lowers guidance for OctQ due to new export regulations for US semiconductor technology sold in China; also expects JanQ to see similar impact

  • BlackRock (BLK) beats by $2.28, beats on revs

  • Commercial Metals (CMC) beats by $0.17, beats on revs

  • Delta Air Lines (DAL) misses by $0.02, beats on revs; guides Q4 EPS above consensus, revs in-line

  • Domino's Pizza (DPZ) misses by $0.19, reports revs in-line

  • Duck Creek Technologies (DCT) beats by $0.01, beats on revs; guides Q1 EPS below consensus, revs in-line; guides FY23 EPS in-line, revs above consensus

  • Eldorado Gold (EGO) reports Q3 gold production of 118,790 ounces; remains on track to achieve low end of full-year guidance of 460,000 ounces

  • Eli Lilly (LLY) expects its Q3 results to include acquired IPR&D and development milestone charges of approx. $62.4 mln on a pre-tax basis, representing a $0.06 hit to GAAP and non-GAAP EPS

  • Fastenal (FAST) beats by $0.02, beats on revs

  • GOL Linhas Aereas Inteligentes S.A. (GOL) provides Q3 update

  • QuidelOrtho (QDEL) provides preliminary Q3 outlook; guides Q3 revs well above consensus

  • SuRo Capital (SSSS) provides Q3 prelim investment portfolio update: expects NAV per share to be $7.55-8.05

  • Taiwan Semiconductor Manufacturing (TSM) beats by NT$0.44, reports revs in-line; guides Q4 revs above consensus

  • TimkenSteel (TMST) guides for Q3, says incident at melt shop significantly impacted profitability in Q3

  • Two Harbors Investment (TWO) announces preliminary Q3 results; book value per share estimated to be between $4.09-4.13

  • Victoria's Secret (VSCO) expects Q3 earnings and operating income to be at the high end of its prior range; expects Q3 net sales to decline in the high single-digit range yr/yr

  • Walgreens Boots Alliance (WBA) beats by $0.03, reports revs in-line; guides FY23EPS in-line

  • News:

  • Treasury Secretary Janet Yellen says she is "worried about a loss of adequate liquidity" in the US Treasury market, according to Bloomberg

  • UK Prime Minister Liz Truss is under pressure by MPs to re-write mini budget, according to Financial Times

  • UK officials are discussing how the country can back down from tax cut plan, according to Bloomberg

  • Shanghai expands COVID restrictions, according toFinancial Times

  • White House issues national security strategy

  • IEA says deterioration of the economy and higher prices sparked by an OPEC+ plan to cut supply are slowing world oil demand

  • 908 Devices (MASS) notes its collaboration with CPI improves mAbs cell culture outcomes using at-line cell culture media analysis

  • Aehr Test Systems (AEHR) receives order from new customer for FOX Wafer level burn-in system for silicon carbide semiconductors for electric vehicles

  • Amazon (AMZN) Project Kuiper satellites will fly on the new Vulcan Centaur rocket in early 2023

  • Apple (AAPL): Initial sales of Apple iPhone 14 and iPhone 14 Plus are below expectations, according to Digitimes

  • Barrick (GOLD) reports strong year-to-date copper performance and higher gold grades in Q4 expected to drive delivery of 2022

  • BioMarin Pharmaceutical (BMRN): FDA accepts resubmission of BLA for its investigational AAV gene therapy

  • Black Hills Corp's (BKH) Wyoming electric utility subsidiary receives approval for transmission expansion project

  • Blackstone (BX) aiming to partner with Resolution Life, according to the Wall Street Journal

  • BYD Company (BYDDY) launches EV model in India, plans to amass 40% market share by 2030, according to Digitimes

  • Castle Biosciences (CSTL): Results from a Randomized Controlled Trial Show That TissueCypher Barrett's Esophagus Test Results Can Significantly Improve the Accuracy of Risk Assessments and Adherence to Guideline-Recommended Patient Management

  • Chevron (CVX) CEO Mike Wirth says western governments have worsened energy shortages by promoting climate change policies, according to Financial Times

  • Digital World Acquisition Corp (DWAC): Google (GOOG) approved Truth Social for its Play Store, according to Axios

  • Editas Medicine (EDIT) announced ex vivo and in vivo preclinical data supporting its experimental medicine EDIT-103 for the treatment of rhodopsin-associated autosomal dominant retinitis pigmentosa

  • Generac (GNRC) COO Thomas F. Pettit to resign to pursue another opportunity, effective November 1

  • GlaxoSmithKline's (GSK) older adult respiratory syncytial virus vaccine candidate shows 94.1% reduction in severe RSV disease and overall vaccine efficacy of 82.6% in pivotal trial

  • GXO Logistics (GXO) plans to hire more than 22,000 team members by the end of 2022 to support its global warehouse ops following record customer growth, new warehouse startups, as well as the peak holiday season

  • Intl Game Tech. PLC (IGT) subsidiary signs seven-year contract extension with the Georgia Lottery Corporation to deploy lottery and iLottery products

  • Kohl's (KSS): Macellum Advisors wants Kohl's to replace board members, according to the Wall Street Journal

  • LianBio (LIAN) reports that its partner BridgeBio Pharma informed LianBio that Helsinn Healthcare is permanently discontinuing distribution of the drug and anticipates requesting withdrawal of the NDA in the US

  • Nevro (NVRO) receives FDA approval for HFX iQ Spinal Cord Stimulation System

  • Ocugen (OCGN) provides update on OCU400 Phase 1/2 Cohort 2

  • Orchid Island Capital (ORC) increases its stock repurchase authorization by 4.3 mln shares, bringing the total to 5.0 mln shares or around 15% of outstanding shares; announces Q3 results

  • Pfizer (PFE) and and BioNTech (BNTX) announce positive early data from clinical trial of omicron BA.4/BA.5-adapted bivalent booster in individuals 18 years and older

  • Relmada Therapeutics (RLMD) Announces Top-line Results from Phase 3 RELIANCE III Trial for REL-1017 as a Monotherapy for the Treatment of Major Depressive Disorder

  • Samsung (SSNLF) receives 1 year exemption to chip restrictions, according to the Wall Street Journal

  • SIGA Technologies (SIGA) provides update on clinical trials to assess use of TPOXX for treatment of monkeypox; trials are currently underway

  • SiriusPoint (SPNT) announces appointment of Steve Yendall as CFO, effective October 31, 2022

  • Southwest Air (LUV) announces that its Aircraft Appearance Technicians voted in favor of new five-year agreement

  • Squarespace (SQSP) announces appointment of Nathan Gooden as CFO and Treasurer, effective October 18, 2022

  • Tattooed Chef (TTCF) will restate its 2Q22, 1Q22, and quarterly and annual financial statements for 2021 to address accounting issues

  • Victoria's Secret (VSCO) presents strategic growth plan: to focus on growing market share, building its global footprint, and transformation its foundation

  • Zebra Tech (ZBRA) introduces PartnerConnect Location and Tracking Specialization for partners focused on selling RFID and real-time location systems

  • M&A:

  • Colliers (CIGI) will acquire a controlling interest in Arcadia Management Group; financial details not disclosed

  • PLAYSTUDIOS (MYPS) acquires Brainium, a long-standing publisher of casual games

  • SunOpta (STKL) announces sale of its sunflower business to Pacific Avenue Capital Partners for $16.0 million

  • Syndicate

  • DICE Therapeutics (DICE) prices offering of 8,219,178 shares of its common stock at $36.50 per share

  • First Foundation (FFWM) files mixed securities shelf offering

  • VectivBio (VECT) prices underwritten offering of 16.7 mln ordinary shares at $7.50 per share

  • IPOs:

  • Expected to Price:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • DWAC +13.4%, DCT +8.9%, QDEL +5.6%, NVRO +5%, AIV +4.9%, GOL +4.7%, AZEK +4.3%, SQSP +3.6%, VSCO +3.5%, TTCF +3.1%, TSM +2.6%, AVEO +2.4%, OCGN +1.8%, ZBRA +1.4%, SSSS +1.3%, BMRN+1.3%, IGT +0.9%

  • Gapping down:

  • TMST -3.8%, ORC -3.1%, LIAN -1.6%, BKH -1.2%, ACLS -1.2%, DICE -1.2%, AMAT -1.1%, KLAC -1%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Altice USA (ATUS) upgraded to Buy from Neutral at Citigroup; tgt lowered to $8

  • Amcor (AMCR) upgraded to Buy from Underperform at BofA Securities

  • Las Vegas Sands (LVS) upgraded to Neutral from Underperform at BofA Securities; tgt $37

  • Downgrades:

  • Albemarle (ALB) downgraded to Hold from Buy at Berenberg; tgt raised to $270

  • American Express (AXP) downgraded to Sell from Neutral at Citigroup; tgt lowered to $130

  • Avery Dennison (AVY) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $172

  • Boise Cascade (BCC) downgraded to Underperform from Neutral at BofA Securities

  • Others:

  • Abiomed (ABMD) initiated with a Buy at Mizuho; tgt $300

  • ADMA Biologics (ADMA) initiated with a Buy at Mizuho; tgt $5

  • Axalta Coating Systems (AXTA) initiated with a Buy at Goldman; tgt $29

  • Establishment Labs (ESTA) initiated with a Buy at Mizuho; tgt $70

  • Haemonetics (HAE) initiated with a Buy at Mizuho; tgt $90

  • Hologic (HOLX) initiated with a Buy at Mizuho; tgt $75

  • Intuitive Surgical (ISRG) initiated with a Neutral at Mizuho; tgt $215

  • Lantheus Holdings (LNTH) initiated with a Buy at Mizuho; tgt $105

  • Medtronic (MDT) initiated with a Buy at Mizuho; tgt $100

  • MiMedx Group (MDXG) initiated with a Buy at Mizuho; tgt $7

  • STAAR Surgical (STAA) initiated with a Buy at Mizuho; tgt $85

Upcoming Events:

  • Econ Data:

  • 08:30 ET: CPI for Sep (Briefing.comConsensus 0.2%; Prior 0.1%)

  • 08:30 ET: Core CPI for Sep (Briefing.comConsensus 0.4%; Prior 0.6%)

  • 08:30 ET: Initial Claims for Oct 8 (Briefing.comConsensus 225K; Prior 219K)

  • 08:30 ET: Continuing Claims for Oct 1 (Briefing.comConsensus NA; Prior 1361K)

  • 10:30 ET: EIA Natural Gas Inventories for Oct 8 (Briefing.comConsensus NA; Prior +129 bcf)

  • 11:00 ET: EIA Crude Oil Inventories for Oct 8 (Briefing.comConsensus NA; Prior -3.36M)

  • 14:00 ET: Treasury Budget for Sep (Briefing.comConsensus NA; Prior -$219.6B)

  • 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 -0.6%, Hang Seng -1.9%, Shanghai Composit -0.3%

Equity indices in the Asia-Pacific region ended Thursday on a lower note. The approval rating of the Japanese government has dropped to 27.4%, the lowest level since last year's election. A Bank of Japan survey showed that 85.7% of respondents expect higher prices a year from now, down from 87.1% in last quarter's report. Taiwan Semiconductor Manufacturing Company announced that capital spending will be reduced by at least 10% for the fiscal year. China Securities Times reported that some municipalities have purchased properties or encouraged buying by state-owned enterprises to boost confidence in the property market.

  • In economic data:

  • Japan's September PPI 0.7% m/m (expected 0.2%; last 0.4%); 9.7% yr/yr (expected 8.8%; last 9.4%). September Bank Lending 2.3% yr/yr (expected 2.0%; last 1.9%)

  • Australia's October Inflation Expectations 5.4% (last 5.4%)

  • New Zealand's September FPI 0.4% m/m (last 1.1%)

---Equity Markets---

  • Japan's Nikkei: -0.6%

  • Hong Kong's Hang Seng: -1.9%

  • China's Shanghai Composite: -0.3%

  • India's Sensex: -0.7%

  • South Korea's Kospi: -1.8%

  • Australia's ASX All Ordinaries: -0.1%

---FX---

  • USD/JPY: UNCH at 146.79

  • USD/CNH: +0.3% to 7.1914

  • USD/INR: +0.1% to 82.26

 

Europe: DAX +1.0%, FTSE +0.1%, CAC +0.4%

Major European indices trade in the green. Gilts are also on the rise, sending the U.K.'s 10-yr yield lower by 17 bps to 4.25%. European Central Bank policymaker Holzmann said that he is in favor of a 75-bps rate hike at the October meeting, followed by a 50-bps increase in December. British Prime Minister Truss is reportedly under pressure to allow for an increase to the corporate tax rate.

  • In economic data:

  • Germany's September CPI 1.9% m/m, as expected (last 0.3%); 10.0% yr/yr, as expected (last 7.9%)

  • Swiss September PPI 0.2% m/m (last -0.1%); 5.4% yr/yr (last 5.5%)

---Equity Markets--- 

  • STOXX Europe 600: +0.1%

  • Germany's DAX: +1.0%

  • U.K.'s FTSE 100: +0.1%

  • France's CAC 40: +0.4%

  • Italy's FTSE MIB: +0.9%

  • Spain's IBEX 35: +0.9%

---FX---

  • EUR/USD: +0.2% to 0.9721

  • GBP/USD: +0.5% to 1.1159

  • USD/CHF: +0.1% to 0.9982



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