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14/07/22 Briefing




The S&P 500 futures are down 54 points and are trading 1.4% below fair value. The Nasdaq 100 futures are down 103 points and are trading 0.9% below fair value. The Dow Jones Industrial Average futures are down 422 points and are trading 1.4% below fair value.

There is still a bit of hesitation driving sentiment today after JPMorgan (JPM 108.56, -3.35, -3.0%) and Morgan Stanley (MS 75.00, +0.02, +0.1%) both reported worse-than-expected earnings and revenue. JPMorgan also suspended stock buybacks.

A few Fed officials have made comments fueling fears of a 100 bps rate hike for the next meeting instead of the expected 75 bps. Atlanta Fed President Bostic (not an FOMC voter) said 'everything is in play' to combat price pressures. Cleveland Fed President Mester (FOMC voter) said that the central bank will need to go well beyond the neutral level of rates.

Concerns about European fragmentation is in play with the potential collapse of the Italian government. Italy's 5-star movement said it would not participate in a parliamentary confidence vote and Prime Minister Draghi said he would not head an administration without the 5-star movement's participation. 

The 2s10s spread has become more inverted with the 2-yr note yield up five basis points to 3.17%. The 10-yr note yield is up two basis points to 2.93%.

The energy complex has mostly made downside moves overnight. WTI crude oil futures are down 2.0% to $94.40/bbl. Unleaded gasoline futures are down 3.1% to $3.13/gal. Natural gas futures remain higher, up 0.9% to $6.64/mmbtu. 

In corporate news:

  • JPMorgan (JPM 108.56, -3.35, -3.0%): JPMorgan Chase misses by $0.15, misses on revs; suspends stock buybacks

  • Morgan Stanley (MS 75.00, +0.02, +0.1%): Morgan Stanley misses by $0.17, misses on revs

  • Taiwan Semi (TSM 82.69, +1.40, +1.7%): Taiwan Semi beats by NT$0.62, beats on revs; guides Q3 revs above consensus

  • Conagra (CAG 35.50, -0.24, -0.7%): Conagra beats by $0.02, reports revs in-line; guides FY23 EPS below consensus

  • Intel (INTC 37.06, -0.15, -0.4%): Intel has informed customers that it plans to raise prices on a majority of microprocessors and chip products later this year, according to Nikkei

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Thursday on a mostly lower note. Japan's Nikkei: +0.6%, Hong Kong's Hang Seng: -0.2%, China's Shanghai Composite: -0.1%, India's Sensex: -0.2%, South Korea's Kospi: -0.3%, Australia's ASX All Ordinaries: +0.6%.

  • In economic data:

  • Japan's May Industrial Production -7.5% m/m (last -4.9%) and Capacity Utilization -9.2% m/m (last 0.0%)

  • India's June WPI Inflation 15.18% yr/yr (expected 15.50%; last 15.88%)

  • Australia's June employment change 88,400 (expected 30,000; last 60,600) and full employment change 52,900 (last 69,400). June Unemployment Rate 3.5% (expected 3.8%; last 3.9%) and Participation Rate 66.8% (expected 66.7%; last 66.7%). MI Inflation Expectations 6.3% (last 6.7%)

  • Singapore's Q2 GDP 0.1% qtr/qtr (last 1.4%); 4.8% yr/yr (expected 5.2%; last 4.0%)

  • In news:

  • Japan's chief cabinet secretary expressed concern about the rapid weakening of the yen, which fell to its lowest level against the dollar since 1998.

  • Tokyo is expected to raise its coronavirus alert level.

  • China's National Development and Reform Commission said that the 2022 CPI target of about 3.0% remains within reach.

  • Australia's unemployment rate fell to its lowest level since 1974, boosting expectations for a 75-bps rate hike from the Reserve Bank of Australia.

  • Major European indices trade in the red with Italy's MIB (-2.6%) showing relative weakness. STOXX Europe 600: -1.0%, Germany's DAX: -1.1%, U.K.'s FTSE 100: -0.8%, France's CAC 40: -1.2%, Italy's FTSE MIB: -2.6%, Spain's IBEX 35: -1.6%.

  • In economic data:

  • Germany's June WPI 0.1% m/m (last 1.0%); 21.2% yr/yr (last 22.9%)

  • Swiss June PPI 0.3% m/m (expected 0.9%; last 0.9%)

  • In news: 

  • Italy's Prime Minister Draghi will face a confidence vote and there is speculation that M5S will boycott the vote, which could lead to a collapse of the current government.

  • Shell's CEO warned that Europe may be headed for energy rationing in the winter.

  • The European Commission will reportedly lower the EU's 2022 growth forecast to 2.6% from 2.8% and cut the outlook for 2023 to 1.4% from 2.3%.

  • The inflation forecast for this year was raised to 7.6% from 6.1% while the outlook for 2023 was increased to 4.0% from 2.7%.

 


U.S. equity futures:

  • S&P 500 Futures: -54 @ 3,747

  • DJIA Futures: -435 @ 30,335

  • Nasdaq 100 Futures: -117 @ 11,611

Overseas:

  • Europe: DAX -1.1%, FTSE -0.8%, CAC -1.2%

  • Asia: Nikkei +0.6%, Hang Seng -0.2%, Shanghai Composite -0.1%

Commodities:

  • Crude Oil -1.83 @ 94.47

  • Nat Gas +0.117 @ 6.806

  • Gold -24 @ 1711

  • Silver -0.581  @ 18.613

  • Copper -0.0575 @ 3.2650

U.S. Summary:

  • Earnings/Guidance:

  • Azenta (AZTA) lowers guidance for JunQ revs, guides EPS in-line

  • B2Gold (BTG) reports Q2 gold production in-line with budget; on track to meet FY22 guidance

  • Barrick (GOLD): Strong performance across portfolio allows production to keep pace with 2022 goals

  • Conagra (CAG) beats by $0.02, reports revs in-line; guides FY23 EPS below consensus

  • Eldorado Gold (EGO) announces Q2 preliminary gold production of 113,462 ounces and maintains full year production guidance of 460,000 to 490,000 ounces

  • Ericsson (ERIC) misses by SEK0.33, beats on revs

  • First Republic Bank (FRC) beats by $0.08, beats on revs

  • Horace Mann (HMN) trims its FY22 earnings guidance due to higher-than-historical average catastrophe activity and equity market declines

  • JPMorgan Chase (JPM) misses by $0.15, misses on revs; suspends stock buybacks

  • Largo Resources (LGO) reports stronger second quarter 2022 production and sales results with 3,291 tonnes of V2O5 equivalent sold; announces automatic repurchase plan pursuant to its normal course issuer bid

  • Pacira BioSciences (PCRX) reports downside revs

  • Taiwan Semi (TSM) beats by NT$0.62, beats on revs; guides Q3 revs above consensus

  • Talos Energy (TALO) provides Q2 updates; Average daily production between 65.0 and 65.5 thousand barrels of oil equivalent

  • Wash. Federal (WAFD) beats by $0.13, beats on revs

  • Welltower (WELL) expects to achieve Q2 FFO guidance of $0.84-0.87

  • General News:

  • White House releases joint statement of the leaders of India, Israel, United Arab Emirates, and the United States

  • Shell CEO cautions that Europe may need to ration energy in the winter, according to Reuters

  • EC releases Summer 2022 Economic Forecast: Russia's war worsens the outlook

  • Alibaba (BABA) to layoff a third of its staff in its in-house deals team citing slowdown in deal-making pace, according to Reuters

  • Amazon (AMZN): EC seeks feedback on commitments offered by Amazon concerning marketplace seller data and access to Buy Box and Prime

  • Amazon (AMZN) looking to settle antitrust charges in the EU, according to the Wall Street Journal

  • Amryt Pharma plc (AMYT): FDA grants Orphan Drug Designation to Mycapssa for the treatment of Carcinoid Syndrome

  • BeiGene (BGNE) provides regulatory update on BLA for Tislelizumab

  • Blackbaud (BLKB) names Kevin Gregoire as COO

  • Clene (CLNE) and its wholly owned subsidiary Clene Nanomedicine Inc. report significantly improved survival in ALS patients initially treated with CNM-Au8 compared to initially randomized placebo treated participants during the long-term open-label extension of its RESCUE-ALS trial

  • ConocoPhillips (COP) and Sempra (SRE) Infrastructure sign heads of agreement for large-scale LNG projects and carbon capture activities

  • ContraFect (CFRX) Announces Independent DSMB Recommends Exebacase Phase 3 DISRUPT Study Be Stopped for Futility Following Interim Analysis

  • Credit Suisse (CS) chairman pushes back against takeover speculation, according to Bloomberg

  • Deutsche Bank's (DB) IT restructuring behind schedule, according to Financial Times

  • Elastic (ESTC) announces enhancements to its cross-cluster search and cross-cluster replication capabilities

  • Fluence (FLNC) and Nine Additional Energy Market Organisations Issue Open Letter to European Policy Makers and the Media regarding the REPowerEU Plan

  • Ford Motor (F) and SK Battery America closed the creation of BlueOval SK jv

  • GOL Linhas Aereas Inteligentes S.A. (GOL) reports traffic increased 54% yr/yr

  • Hannon Armstrong Sust. Infr. (HASI) responds to allegations in a short report by Muddy Waters Capital

  • Intel (INTC) has informed customers that it plans to raise prices on a majority of microprocessors and chip products later this year, according to Nikkei

  • Manning & Napier Advisors (MN) announces that preliminary June AUM were $18.5 bln

  • Morgan Stanley (MS) misses by $0.17, misses on revs

  • Novavax (NVAX): FDA authorizes NVAX's COVID-19 vaccine for adults, according to CNBC

  • Novavax (NVAX) confirms that its COVID-19 vaccine has received EUA from the FDA

  • Raytheon Technologies (RTX) awarded $350 mln Army contract

  • Ready Capital (RC) forms new joint venture with Starz Real Estate to originate circa 300m of new commercial real estate loans over the next two years

  • Regeneron Pharma (REGN) reports Dupixent (dupilumab) Phase 3 Trial Shows Positive Results in Children 1 to 11 Years of Age with Eosinophilic Esophagitis

  • Sinovac Biotech (SVA) receives Emergency Use authorization for its COVID-19 vaccine in Brazil for children aged 3-5

  • Sonoco Products (SON) ThermoSafe and Turkish Airlines announce a global partnership agreement for leasing the new Pegasus ULD temperature-controlled bulk shipping container

  • Tesla (TSLA): Andrej Karpathy, Director of AI where he leads computer vision team of Tesla Autopilot, to step down

  • Theratechnologies (THTX) provides update on the dose escalation portion of Fast Track Designated TH1902

  • Tradeweb Markets (TW) names Thomas Pluta as its next President; reaffirms FY22 guidance

  • Twitter (TWTR) CEO send email to employees re Musk litigation; also says current environment - macroeconomic, geopolitical, societal - presents additional complexities and challenges for us and our industry

  • United Airlines (UAL) to renegotiate contracts with pilots, according to CNBC

  • Veracyte (VCYT) says new data show that its Genomic Sequencing Classifier is highly accurate in re-classifying lung cancer risk

  • Victory Capital (VCTR) reports June AUM of $154.9 bln as of June 30; long-term net flows in Q2 were -$0.6 bln

  • Walgreens Boots Alliance (WBA) increases quarterly dividend 0.5% to $0.48/share

  • Workday (WDAY) achieves FedRAMP authorized status at the Moderate security impact level for Workday Government Cloud, marking the company's official entry into the U.S. federal government market

  • M&A:

  • Bayer (BAYRY) sells Nebido to Grnenthal

  • Citizens Financial Group (CFG) announces a definitive agreement to purchase select assets and liabilities of Paladin Advisors; financial terms were not disclosed

  • Citrix Systems (CTXS): EC clears acquisition of joint control of Citrix and TIBCO by Vista and Elliott

  • DigitalBridge (DBRG) acquires majority stake in GD Towers in partnership with Brookfield (BIP)

  • Flywire (FLYW) acquires Cohort Go to build on its existing education business; financial details not disclosed

  • Innoviva (INVA) sells its 15% economic stake in Theravance to Royalty Pharma (RPRX) for approximately $282 mln and a potential $50 mln contingent sales-based milestone payment

  • Marinus Pharmaceuticals (MRNS) has entered into a definitive agreement to sell its Rare Pediatric Disease Priority Review Voucher for $110 mln

  • Molina Healthcare (MOH) to acquire My Choice Wisconsin for approximately $150 mln, net of expected tax benefits and required regulatory capital

  • Nielsen (NLSN): EC clears acquisition of joint control of Nielsen by Elliott Investment and Brookfield Private Equity Holdings

  • Theravance Biopharma (TBPH) agrees to sell all of its units in Theravance Respiratory Company to Royalty Pharma (RPRX) for over $1.5 bln in potential total value

  • Transglobe Energy (TGA) to be acquired by VALLCO Energy (EGY) in stock-for-stock strategic business combination

  • Syndicate

  • BELLUS Health (BLU) prices offering of 16,540,541 common shares at $9.25 per common share

  • Comtech Telecom (CMTL) files for 1,377,422 share common stock offering by selling shareholder

  • IPOs:

  • Priced to Trade:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • TBPH +18.1%, GRBK +8.2%, TGA +6.3%, INVA +6%, ANGI +5.6%, VCYT +4.2%, WAFD +2.9%, VCTR +2.8%, DBRG +1.8%, HASI +1.6%, TSM +1.5%, RC +1.1%, FLNC +1.1%

  • Gapping down:

  • CFRX -75.7%, EGY -14.6%, ERIC -8.3%, AZTA -6.2%, BLU -6.1%, GFI -3.4%, AU -3.4%, COKE -3.3%, TTE-3.1%, GOL -3%, SHEL -2.7%, HTA -2.3%, OIH -2.1%, BP -2.1%, GDX -2.1%, IAG -2.1%, HAL -1.9%, PSX-1.9%, FLYW -1.8%, USO -1.8%, RTX -1.7%, XLE-1.7%, NVAX -1.5%, SLV -1.5%, SLB -1.3%, COP-1.3%, GOLD -1.3%, TSLA -1.2%, BTG -1.2%, GLD-1.1%, MOH -0.8%, ESTC -0.8%, CMTL -0.7%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Centene (CNC) upgraded to Buy from Hold at Jefferies; tgt raised to $115

  • Costco (COST) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $579

  • Empire State Realty Trust (ESRT) upgraded to Market Perform from Underperform at BMO Capital Markets; tgt raised to $8

  • Flywire (FLYW) upgraded to Buy from Neutral at Goldman; tgt raised to $30

  • IDEX Corp (IEX) upgraded to Outperform from Perform at Oppenheimer; tgt $215

  • Downgrades:

  • A.O. Smith (AOS) downgraded to Neutral from Outperform at Robert W. Baird; tgt $60

  • American Assets Trust (AAT) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets

  • Cardlytics (CDLX) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $15

  • Cigna (CI) downgraded to Hold from Buy at Jefferies; tgt lowered to $271

  • ContraFect (CFRX) downgraded to Mkt Perform from Outperform at SVB Leerink; tgt $1

  • ContraFect (CFRX) downgraded to Neutral from Overweight at Cantor Fitzgerald; tgt lowered to $1

  • Dollar General (DG) downgraded to Neutral from Buy at Citigroup; tgt $258

  • Edison (EIX) downgraded to Underperform from Neutral at BofA Securities

  • Fastenal (FAST) downgraded to Neutral from Outperform at Robert W. Baird; tgt $48

  • Fidelity Nat'l Info (FIS) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $101

  • Fiserv (FISV) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $97

  • Franklin Electric (FELE) downgraded to Neutral from Outperform at Robert W. Baird; tgt $75

  • Graco (GGG) downgraded to Neutral from Outperform at Robert W. Baird; tgt $61

  • Hayward Holdings (HAYW) downgraded to Neutral from Outperform at Robert W. Baird; tgt $16

  • JELD-WEN (JELD) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $17

  • Others:

  • Albemarle (ALB) named Catalyst Call: Buy Idea at Deutsche Bank

  • Avnet (AVT) initiated with an Underweight at JP Morgan; tgt $46

  • CF Industries (CF) initiated with an Underperform at Credit Suisse; tgt $73

  • Corteva (CTVA) initiated with an Outperform at Credit Suisse; tgt $68

Upcoming Events:

  • Econ Data:

  • 08:30 ET: Initial Claims for July 9 (Briefing.comConsensus 239K; Prior 235K)

  • 08:30 ET: Continuing Claims for July 2 (Briefing.comConsensus NA; Prior 1375K)

  • 08:30 ET: PPI for June (Briefing.comConsensus 0.9%; Prior 0.8%)

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

  • 10:30 ET: EIA Natural Gas Inventories for July 9 (Briefing.comConsensus NA; Prior +60 bcf)

  • Earnings:

  • Monday (Jul 11)

  • Morning:  AZZ GBX

  • Afternoon: PEP PSMT

  • Tuesday (Jul 12)

  • Morning: ANGO

  • Wednesday (Jul 13)

  • Morning:  DAL FAST

  • Afternoon:  WAFD

  • Thursday (Jul 14)

  • Morning: CTAS CAG ERIC FRC JPM MS TSM

  • Afternoon:  AOUT

  • Friday (Jul 15) 

  • Morning:  BLK BK C PNC PGR STT USB UNH WFC

Asia & Europe detail:

Asia: Nikkei +0.6%, Hang Seng -0.2%, Shanghai Composite -0.1%

Equity indices in the Asia-Pacific region ended Thursday on a mostly lower note. Japan's chief cabinet secretary expressed concern about the rapid weakening of the yen, which fell to its lowest level against the dollar since 1998. Tokyo is expected to raise its coronavirus alert level. China's National Development and Reform Commission said that the 2022 CPI target of about 3.0% remains within reach. Australia's unemployment rate fell to its lowest level since 1974, boosting expectations for a 75-bps rate hike from the Reserve Bank of Australia.

  • In economic data:

  • Japan's May Industrial Production -7.5% m/m (last -4.9%) and Capacity Utilization -9.2% m/m (last 0.0%)

  • India's June WPI Inflation 15.18% yr/yr (expected 15.50%; last 15.88%)

  • Australia's June employment change 88,400 (expected 30,000; last 60,600) and full employment change 52,900 (last 69,400). June Unemployment Rate 3.5% (expected 3.8%; last 3.9%) and Participation Rate 66.8% (expected 66.7%; last 66.7%). MI Inflation Expectations 6.3% (last 6.7%)

  • Singapore's Q2 GDP 0.1% qtr/qtr (last 1.4%); 4.8% yr/yr (expected 5.2%; last 4.0%)

---Equity Markets---

  • Japan's Nikkei: +0.6%

  • Hong Kong's Hang Seng: -0.2%

  • China's Shanghai Composite: -0.1%

  • India's Sensex: -0.2%

  • South Korea's Kospi: -0.3% 

  • Australia's ASX All Ordinaries: +0.6%

---FX---

  • USD/JPY: +1.2% to 139.11

  • USD/CNH: +0.6% to 6.7607

  • USD/INR: +0.4% to 79.98

Europe: DAX -1.1%, FTSE -0.8%, CAC -1.2%

Major European indices trade in the red with Italy's MIB (-2.6%) showing relative weakness. Italy's Prime Minister Draghi will face a confidence vote and there is speculation that M5S will boycott the vote, which could lead to a collapse of the current government. Shell's CEO warned that Europe may be headed for energy rationing in the winter. The European Commission will reportedly lower the EU's 2022 growth forecast to 2.6% from 2.8% and cut the outlook for 2023 to 1.4% from 2.3%. The inflation forecast for this year was raised to 7.6% from 6.1% while the outlook for 2023 was increased to 4.0% from 2.7%.

  • In economic data:

  • Germany's June WPI 0.1% m/m (last 1.0%); 21.2% yr/yr (last 22.9%)

  • Swiss June PPI 0.3% m/m (expected 0.9%; last 0.9%)

---Equity Markets---

  • STOXX Europe 600: -1.0%

  • Germany's DAX: -1.1%

  • U.K.'s FTSE 100: -0.8%

  • France's CAC 40: -1.2%

  • Italy's FTSE MIB: -2.6%

  • Spain's IBEX 35: -1.6%

---FX---

  • EUR/USD: -0.4% to 1.0012

  • GBP/USD: -0.6% to 1.1824

  • USD/CHF: +0.6% to 0.9838


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