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14/06/22 Briefing


The S&P 500 futures are up five points and are trading 0.2% above fair value. The Nasdaq 100 futures are up 42 points and are trading 0.2% above fair value. The Dow Jones Industrial Average futures are up 19 points and are trading 0.3% above fair value.

A reassuring earnings report and outlook from Oracle (ORCL) provided a nice distraction from recent selling efforts. ORCL is up 12% in pre-market action. That has helped the futures trade, but the real catalyst for the uplift in the futures market is the significant weakness seen since last week.

The S&P 500 is down 10.0% from its intraday high last Monday while the Nasdaq 100 is down 11.8%. The scope of those losses has stirred some hope that the market could be poised for a rebound effort, although talk of a potential "profit recession," uncertainty about the ultimate impact of the Fed's aggressive rate-hike approach, and unruly bond markets have curtailed buy-the-dip interest.

Separately, the Fed is now expected to raise the target range for the fed funds rate by 75 basis points on Wednesday versus a previously expected 50 basis points. This can be seen in the fed funds futures market, which is assigning a 95.3% probability to such a move, versus just 3.9% a week ago. The sudden shift in expectations follows yesterday's Wall Street Journal report that suggested a 75 basis point increase would likely be under consideration given the impact of the May CPI report.

Some see a more aggressive line by the Fed as a good thing since priority number one is to get inflation, and inflation expectations, under control.

The change in rate-hike expectations has been most acute in the 2-yr note yield. It stood at 2.82% prior to the release of the May CPI report. It shot up to 3.43% yesterday after The Wall Street Journal report. It is currently at 3.32%. The 10-yr note yield for its part also hit 3.43% yesterday and is currently at 3.34% in closely-watched curve-flattening action.

The U.S. Dollar Index is down 0.1% to 104.97. WTI crude futures are up 0.7% to $121.71/bbl.

In corporate news:

  • Oracle (ORCL 71.45, +7.40, +11.6%): beats by $0.16, beats on revs; sees AugQ EPS in-line and revs above consensus; expects its cloud business to organically grow over 30% yr/yr in FY23

  • National Vision (EYE 29.04, +3.76, +14.9%): to join S&P SmallCap 600, effective prior to the open June 16

  • Continental Resources (CLR 69.60, +5.10, +7.9%): announces receipt of "take private" proposal from Hamm Family of $70/share

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Tuesday on a mostly lower note. Japan's Nikkei -1.3%; Hong Kong's Hang Seng unchanged; China's Shanghai Composite +1.0%; India's Sensex -0.3%; South Korea's Kospi -0.5%; and Australia's All Ordinaries -3.7%.

  • In economic data:

  • China's May FDI 17.3% YTD (last 20.5%) o Japan's April Industrial Production -1.5% m/m (last -1.3%) and Capacity Utilization 0.0% m/m (last -1.6%)

  • India's May WPI Inflation 15.88% yr/yr (expected 15.10%; last 15.08%)

  • Australia's May NAB Business Survey 16 (last 19) and NAB Business Confidence 6 (last 10)


  • In news:

  • The Bank of Japan offered to buy JPY100 bln worth of 10- to 25-yr JGBs and JPY50 bln worth of long duration JGBs in addition to its scheduled buying scheme.

  • Samsung warned that its factories in South Korea are dealing with disruptions due to the truckers' strike.

  • China Securities Journal speculated that the People's Bank of China has room to lower the reserve requirement ratio in the second half of the year.



  • Major European indices trade in the red. STOXX Europe 600 -1.1%; Germany's DAX -0.6%; UK's FTSE 100 -0.6%; France's CAC 40 -1.0%; Italy's FTSE MIB -0.7%; and Spain's IBEX 35 -0.6%.

  • In economic data:

  • Eurozone's June ZEW Economic Sentiment -28.0 (last -29.5)

  • Germany's May CPI 0.9% m/m (expected 0.0%; last 0.8%); 7.9% yr/yr, as expected (last 7.4%). May WPI 1.0% m/m (last 2.1%); 22.9% yr/yr (last 23.8%). June ZEW Economic Sentiment -28.0 (expected -27.5; last -34.3) and ZEW Current Conditions -27.6 (expected -31.0; last -36.5)

  • U.K.'s April Average Earnings Index + Bonus 6.8% yr/yr (expected 7.6%; last 7.0%). April Claimant Count -19,700 (expected -49,400; last -65,500), April three-month employment change 177,000 (expected 105,000; last 83,000), and April Unemployment Rate 3.8% (expected 3.6%; last 3.7%)


  • In news:

  • The EU is reportedly preparing legal action against the U.K. for violating Brexit terms.

  • British Prime Minister Johnson is reportedly resisting pressure from some members of his party to cut taxes due to a concern that it could exacerbate inflation.

  • The European Central Bank is reportedly trying not to divulge its plans to deal with fragmentation in the region as the spread between Italy's 10-yr yield and Germany's 10-yr yield climbs above 250 bps for the first time in over two years.



U.S. equity futures:

  • S&P 500 Futures: +9 @ 3,759

  • DJIA Futures: +53 @ 30,570

  • Nasdaq 100 Futures: +62 @ 11,350

Overseas:

  • Europe: DAX -0.6%, FTSE -0.6%, CAC -1.0%

  • Asia: Nikkei -1.3%, Hang Seng UNCH, Shanghai Composite +1.0%

Commodities:

  • Crude Oil +0.74 @ 121.64

  • Nat Gas +0.155 @ 8.764

  • Gold -11.20 @ 1820.60

  • Silver -0.177 @ 21.078

  • Copper -0.0135 @ 4.1980

U.S. Summary:

  • Earnings:

  • Braze (BRZE) beats by $0.02, beats on revs; guides JulQ EPS above consensus, revs above consensus; guides FY23 EPS above consensus, revs above consensus

  • Core & Main (CNM) beats by $0.14, beats on revs; raises outlook

  • Coty (COTY) reaffirms its FY22 sales growth and earnings outlook ahead of its presentation and discussions tomorrow at the Deutsche Bank dbAccess Global Consumer Conference 2022

  • Li-Cycle (LICY) misses by $0.02; beats on revs

  • Oracle (ORCL) beats by $0.16, beats on revs; sees AugQ EPS in-line and revs above consensus; expects its cloud business to organically grow over 30% yr/yr in FY23

  • Titan Intl (TWI) raises FY22 revenue guidance


  • General News:

  • Fed likely to increase rates by 75 basis points on Wednesday, according to CNBC

  • Beijing coronavirus cases reach three week high amid lockdown fears, according to Bloomberg

  • 2-year and 10-year Treasury yield curve briefly inverted, CNBC

  • Bitcoin continues to decline, Financial Times

  • JP Morgan (JPM) and Goldman (GS) halt trading in Russian debt, according to Bloomberg

  • President Biden is leaning toward ordering USTR to run a "exclusions process" to see if some items can be exempted from China tariffs, according to Axios

  • Lawmakers from both parties have questions regarding gun safety proposal that will provide funding for school safety and provide incentives for states to pass red flag laws, according to the Wall Street Journal

  • Large technology companies will soon make concessions over EU disinformation inquiry, according to Financial Times

  • EU HERA secures vaccines for EU Member states in response to the monkeypox outbreaks

  • Alibaba (BABA) and Tencent (TCEHY) cloud services are falling behind, according to Financial Times

  • Alnylam Pharma (ALNY) receives FDA approval for AMVUTTRA

  • AMC Entertainment (AMC) reports box office highlights from weekend of June 9-12; admissions revenues globally outpaced same weekend in 2019

  • Beacon Roofing Supply (BECN) enters into additional $250 mln accelerated share repurchase program

  • Centerspace (CSR) authorized the repurchase up to $50 mln of its common shares

  • DoorDash (DASH) announce new restaurant review features

  • EnLink Midstream (ENLC) announces retirement of Chairman and CEO Barry Davis, names Jesse Arenivas as new CEO

  • Finance of America (FOA) CEO Patricia L. Cook to sep down on June 30

  • GAN Limited (GAN) extends its previously authorized $5 mln share repurchase program to November 30, 2022

  • ICF International (ICFI) recently awarded a $30 mln contract by U.S. Department of Defense Defense Health Agency

  • Incyte (INCY) and Lilly (LLY) receives FDA approval for OLUMIANT

  • Latham Group (SWIM) provides CFO succession plan

  • Momentus (MNTS) provides third Mission Update for Vigoride-3 spacecraft

  • Outset Medical (OM) implements shipment hold on the distribution of its Tablo Hemodialysis System pending FDA review and clearance of recent 510(k) submission; expects Q2 revs of at least $25 mln

  • Overseas Shipholding Group (OSG) authorizes the repurchase of up to five million shares of its stock

  • PacWest Bancorp (PACW) appoints Paul W. Taylor as President, effective July 1

  • Pfizer (PFE), MorphoSys (MOR), and Incyte (INCY) enter into clinical collaboration for Monjuvi in combination with TTI-622

  • Sana Biotechnology (SANA) Announces Multiple Preclinical Data Presentations to Showcase Its Hypoimmune Platform, Including in Type 1 Diabetes, at the Upcoming ISSCR 2022 Annual Meeting

  • Sea Limited (SE) aiming to reduce jobs in shopping and food and will pull out of Spain, according to Bloomberg

  • Sibanye-Stillwater (SBSW) discloses details of "significant" flood event

  • Software Acquisition Group Inc. III (SWAG): Nogin announces appointment of Jonathan Huberman as Co-CEO, effective upon combination closing

  • Southwestern Energy (SWN) announced a multi-year, certified Responsibly Sourced Gas sales agreement to the North American subsidiary of Uniper, one of Germany's largest publicly listed energy supply companies

  • Stantec (STN) has been selected to lead construction management for the US$220 million Blue Line Bus Rapid Transit project in the City of Indianapolis

  • TeraWulf (WULF) announces recent financing actions to assist in effort to ramp mining operations in 2H22

  • Twitter (TWTR): Elon Musk will participate in meeting with Twitter employees Thursday, according to the Wall Street Journal

  • United Rentals (URI) CFO Jessica Graziano will be leaving the company on July 29, 2022, for another opportunity

  • Univar Solutions (UNVR) subsidiary announces new distribution agreement with BOAI NKY Pharmaceuticals

  • Xperi's (XPER) Adeia receives decision in Videotron litigation


  • M&A:

  • Apollo Global Management (APO) announces that funds managed by its affiliates to acquire Cardenas Markets, a grocery retailer focused on serving the Hispanic community

  • AssetMark (AMK) reaches agreement to acquire Adhesion Wealth; terms not disclosed

  • Balchem (BCPC) to acquire Kappa Bioscience AS, science-based manufacturer of specialty vitamin K2 for the human nutrition industry, headquartered in Oslo, Norway, for ~$338 mln

  • Continental Resources (CLR) announces receipt of "take private" proposal from Hamm Family of $70/share

  • CrossFirst Bankshares (CFB) agrees to acquire Farmers & Stockmens Bank in an all-cash transaction

  • HYZON Motors (HYZN) acquires Orten Betriebs GmbH and Orten Electric Trucks GmbH

  • ITT (ITT) announced its investment in CRP Technology and CRP USA

  • Moringa Acquisition Corp (MACA) agrees to combine with Holisto

  • Oshkosh (OSK) acquires Canada-based Maxi-Mtal; financial terms not disclosed

  • ResMed (RMD) acquires MEDIFOX DAN for $1 bln

  • Spirit Airlines (SAVE) provides update on discussions with Frontier (ULCC) and JetBlue (JBLU); expects to bring the process to a conclusion and provide an update to stockholders ahead of the Special Meeting of Spirit Stockholders scheduled for June 30, 2022

  • VersaBank (VBNK) acquires OCC-Chartered National US Bank


  • Syndicate:

  • Day One Biopharmaceuticals (DAWN) commenced an underwritten public offering of $125.0 million of shares of its common stock


  • IPOs:

  • Priced to Trade:

  • No IPOs expected.



Gapping Up/Down

  • Gapping up:

  • EYE +13.2%, ORCL +12.9%, WULF +7.5%, HYZN+7.2%, BRZE +7.2%, OSG +6.8%, MOR +6.5%, ICFI+5%, GAN +3.3%, LICY +1.8%, BECN +1.5%, COTY+1.1%, UNVR +1%, RMD +1%


  • Gapping down:

  • OM -21.6%, RDBX -8.8%, XPER -8.3%, MNTS -3.9%, FOA -2.6%, GRPN -2%, ZYXI -0.7%, INCY -0.7%


Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Abercrombie & Fitch (ANF) provides 2025 and longer term financial targets

  • B&G Foods (BGS) upgraded to Neutral from Underweight at Piper Sandler; tgt lowered to $23

  • NetApp (NTAP) upgraded to Buy from Hold at Deutsche Bank; tgt lowered to $84

  • Nokia (NOK) upgraded to Buy from Neutral at Citigroup

  • PBF Energy (PBF) upgraded to Overweight from Equal Weight at Wells Fargo; tgt $57

  • Tractor Supply (TSCO) upgraded to Buy from Neutral at BofA Securities; tgt raised to $260

  • U.S. Silica (SLCA) upgraded to Outperform from In-line at Evercore ISI; tgt $20


  • Downgrades:

  • AeroClean Technologies (AERC) downgraded to Hold from Buy at The Benchmark Company

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

  • Best Buy (BBY) downgraded to Neutral from Buy at BofA Securities

  • Chemours (CC) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $44

  • Coinbase Global (COIN) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $68

  • Envista (NVST) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $46

  • Henry Schein (HSIC) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $88

  • Hewlett Packard Enterprise (HPE) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $16

  • Huntsman (HUN) downgraded to Underperform from Buy at BofA Securities; tgt lowered to $34

  • Legacy Housing (LEGH) downgraded to Neutral from Buy at B. Riley Securities; tgt $16

  • Netflix (NFLX) downgraded to Sell from Hold at The Benchmark Company; tgt $157

  • Omnicom (OMC) downgraded to Hold from Buy at Edward Jones


  • Others:

  • Ashford (AINC) initiated with an Outperform at Oppenheimer; tgt $28

  • Chesapeake Energy (CHK) initiated with an Outperform at Credit Suisse; tgt $115

  • Coherus BioSciences (CHRS) initiated with a Neutral at UBS; tgt $7

  • Horizon Pharma (HZNP) initiated with a Buy at UBS; tgt $139

  • Intra-Cellular Therapies (ITCI) initiated with a Buy at UBS; tgt $75

  • Jazz Pharma (JAZZ) initiated with a Buy at UBS; tgt $194

  • Marathon Petroleum (MPC) initiated with an Outperform at BMO Capital Markets; tgt $135

  • Phillips 66 (PSX) initiated with an Outperform at BMO Capital Markets; tgt $132

  • Royalty Pharma (RPRX) resumed with a Buy at UBS; tgt $47

  • Teva Pharma (TEVA) resumed with a Neutral at UBS; tgt $10

  • Valero Energy (VLO) initiated with a Market Perform at BMO Capital Markets; tgt $155

  • Viad Corp initiated with an Outperform at Oppenheimer; tgt $42

  • Viatris (VTRS) initiated with a Sell at UBS; tgt $9


Upcoming Events:

  • Econ Data:

  • 06:00 ET: NFIB Small Business Optimism for May (Briefing.comConsensus NA; Prior 93.2)

  • 08:30 ET: PPI for May (Briefing.comConsensus 0.8%; Prior 0.5%)

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


  • Earnings:

  • Monday (Jun 13)

  • Afternoon: ORCL


  • Tuesday (Jun 14)

  • Morning: CNM

  • Afternoon: CXM


  • Thursday (Jun 16)

  • Morning: CMC JBL KR

  • Afternoon: ADBE



Asia & Europe detail:

Asia: Nikkei -1.3%, Hang Seng UNCH, Shanghai Composite +1.0%

Equity indices in the Asia-Pacific region ended Tuesday on a mostly lower note. The Bank of Japan offered to buy JPY100 bln worth of 10- to 25-yr JGBs and JPY50 bln worth of long duration JGBs in addition to its scheduled buying scheme. Samsung warned that its factories in South Korea are dealing with disruptions due to the truckers' strike. China Securities Journal speculated that the People's Bank of China has room to lower the reserve requirement ratio in the second half of the year.

  • In economic data:

  • China's May FDI 17.3% YTD (last 20.5%) o Japan's April Industrial Production -1.5% m/m (last -1.3%) and Capacity Utilization 0.0% m/m (last -1.6%)

  • India's May WPI Inflation 15.88% yr/yr (expected 15.10%; last 15.08%)

  • Australia's May NAB Business Survey 16 (last 19) and NAB Business Confidence 6 (last 10)


---Equity Markets---

  • Japan's Nikkei: -1.3%

  • Hong Kong's Hang Seng: UNCH

  • China's Shanghai Composite: +1.0%

  • India's Sensex: -0.3%

  • South Korea's Kospi: -0.5%

  • Australia's ASX All Ordinaries: -3.7%

---FX---

  • USD/JPY: -0.1% to 134.26

  • USD/CNH: -0.4% to 6.7527

  • USD/INR: -0.1% to 78.01

Europe: DAX -0.6%, FTSE -0.6%, CAC -1.0%

Major European indices trade in the red. The EU is reportedly preparing legal action against the U.K. for violating Brexit terms. British Prime Minister Johnson is reportedly resisting pressure from some members of his party to cut taxes due to a concern that it could exacerbate inflation. The European Central Bank is reportedly trying not to divulge its plans to deal with fragmentation in the region as the spread between Italy's 10-yr yield and Germany's 10-yr yield climbs above 250 bps for the first time in over two years.

  • In economic data:

  • Eurozone's June ZEW Economic Sentiment -28.0 (last -29.5)

  • Germany's May CPI 0.9% m/m (expected 0.0%; last 0.8%); 7.9% yr/yr, as expected (last 7.4%). May WPI 1.0% m/m (last 2.1%); 22.9% yr/yr (last 23.8%). June ZEW Economic Sentiment -28.0 (expected -27.5; last -34.3) and ZEW Current Conditions -27.6 (expected -31.0; last -36.5)

  • U.K.'s April Average Earnings Index + Bonus 6.8% yr/yr (expected 7.6%; last 7.0%). April Claimant Count -19,700 (expected -49,400; last -65,500), April three-month employment change 177,000 (expected 105,000; last 83,000), and April Unemployment Rate 3.8% (expected 3.6%; last 3.7%)


---Equity Markets---

  • STOXX Europe 600: -1.1%

  • Germany's DAX: -0.6%

  • U.K.'s FTSE 100: -0.6%

  • France's CAC 40: -1.0%

  • Italy's FTSE MIB: -0.7%

  • Spain's IBEX 35: -0.6%

---FX---

  • EUR/USD: +0.3% to 1.0436

  • GBP/USD: -0.4% to 1.2079

  • USD/CHF: -0.4% to 0.9937

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The S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures