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14/07/23 Briefing


The S&P 500 futures are up five points and are trading 0.1% above fair value. The Nasdaq 100 futures are flat and are trading roughly in-line fair value. The Dow Jones Industrial Average futures are up 150 points and are trading 0.5% above fair value.

Positive responses to better-than-expected earnings results from JPMorgan Chase (JPM) and UnitedHealth (UNH) have the DJIA futures at the front of the equity futures pack this morning. Upside action in those stocks, along with Wells Fargo (WFC), has also lent a measure of support to the S&P 500 futures. The broader market, however, is looking more subdued this morning after a big run already this week.

Market participants are likely anticipating some profit-taking activity, but at the same time sellers aren't exhibiting much conviction, cognizant that there has been a steady desire to buy on weakness. Accordingly, one could rightfully say there is a bit of a wait-and-see attitude permeating pre-market trading.

Separately, Fed Governor Waller (FOMC voter) said his thinking is aligned with two more rate hikes over the next four FOMC meetings this year and sees no reason why the first of those two hikes should not happen at the July FOMC meeting.

Today's economic reports include the June Import-Export Price Index at 8:30 a.m. ETand the Preliminary July University of Michigan Consumer Sentiment Index at 10:00 a.m. ET.

The 2-yr note yield is up two basis points to 4.63% and the 10-yr note yield is up one basis point to 3.77%. The U.S. Dollar Index is up 0.1% to 99.83.

In corporate news:

  • JPMorgan Chase (JPM 152.67, +3.80, +2.6%): beats by $0.40, beats on revs; excluding First Republic, the provision was $1.7 billion, reflecting net charge-offs of $1.4 billion and a net reserve build of $326 million

  • UnitedHealth (UNH 462.20, +14.45, +3.2%): beats by $0.13, beats on revs; raises FY23 EPS in-line; the second quarter 2023 medical care ratio at 83.2% compared to 81.5% last year

  • Wells Fargo (WFC 45.07, +1.36, +3.1%): beats by $0.10, beats on revs; 2023 net interest income is expected to grow 14% yr/yr, up from prior guidance of +10%

  • Microsoft (MSFT 348.70, +6.04, +1.8%): UBS upgrades to Buy from Neutral; UK regulator extends probe of Activision (ATVI) deal by six weeks

  • Meta Platforms (META 311.20, -2.21, -0.7%): Threads engagement has dropped since debut, according to CNBC

  • AT&T (T 14.93, -0.19, -1.3%): JPMorgan downgrades to Neutral from Overweight

  • BlackRock (BLK 728.08, -11.72, -1.6%): beats by $0.76, reports revs in-line; $831 billion increase in AUM since year-end 2022

  • Leslie's, Inc. (LESL 6.50, -3.02, -31.7%): guides Q3 EPS and revs well below consensus; lowers FY23 outlook due to traffic declines in Residential and Pro businesses; CFO Steve Weddell stepping down, effective August 7; to be succeeded by Scott Bowman

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended ended the week on a mostly higher note. Japan's Nikkei: -0.1%, Hong Kong's Hang Seng: +0.3%, China's Shanghai Composite: UNCH, India's Sensex: +0.8%, South Korea's Kospi: +1.4%, Australia's ASX All Ordinaries: +0.8%.

  • In economic data:

  • Japan's May Industrial Production -2.2% m/m (expected -1.6%; last 0.7%) and Capacity Utilization -6.3% m/m (expected -2.5%; last 3.0%)

  • India's June trade deficit $20.13 bln (expected deficit of $20.10 bln; last deficit of $22.12 bln). June WPI Inflation -4.12% yr/yr (expected -3.60%; last -3.48%)

  • Singapore's Q2 GDP 0.3% qtr/qtr (last -0.4%); 0.7% yr/yr (expected 0.6%; last 0.4%)

  • In news:

  • Chinese officials pushed back against speculation that the Chinese economy is facing a deflationary risk in the second half.

  • The Bank of Japan is expected to increase its inflation forecast for FY23/24 above 2.0%. There was ongoing speculation that the Bank of Japan could alter its yield curve control policy later this month.

  • Reserve Bank of Australia Deputy Governor Bullock will replace Governor Lowe on September 18.

  • Major European indices trade near their flat lines. STOXX Europe 600: +0.1%, Germany's DAX: -0.2%, U.K.'s FTSE 100: +0.1%, France's CAC 40: +0.3%, Italy's FTSE MIB: -0.1%, Spain's IBEX 35: -0.1%.

  • In economic data:

  • Eurozone's May trade deficit EUR300 mln (expected deficit of EUR7.6 bln; last deficit of EUR12.0 bln)

  • Germany's June WPI -0.2% m/m (expected -1.2%; last -1.1%); -2.9% yr/yr (expected -1.2%; last -2.6%)

  • Italy's May trade surplus EUR4.711 bln (expected surplus of EUR1.450 bln; last surplus of EUR362 mln)

  • Swiss June PPI 0.0% m/m (expected 0.2%; last -0.3%); -0.6% yr/yr (expected -1.2%; last -0.3%) 

  • In news:

  • Workers at London's Gatwick Airport announced an eight-day strike.

  • The British government is forecast to need about GBP2-5 bln in 2023 and GBP3 bln in 2024 to fund the recently-implemented pay hike for public sector employees.

  • Ericsson released soft quarterly results and guidance while Nokia lowered its revenue forecast for the year.

 

U.S. equity futures:

  • S&P 500 Futures: +6 @ 4,516

  • DJIA Futures: +147 @ 34,542

  • Nasdaq 100 Futures: +7 @ 15,579

Overseas:

  • Europe: DAX -0.2%, FTSE +0.1%, CAC +0.3%

  • Asia: Nikkei -0.1%, Hang Seng +0.3%, Shanghai Composite UNCH

Commodities:

  • Crude Oil -0.08 @ 76.81

  • Nat Gas +0.035 @ 2.58

  • Gold -0.95 @ 1962.85

  • Silver +0.094 @ 25.043

  • Copper -0.0045 @ 3.9355


 

Earnings/Guidance:

  • Aehr Test Systems (AEHR) guides MayQ EPS and revs above dual est consensus; guides FY24 revs in-line

  • Arconic (ARNC) sees Q2 revs below consensus

  • BlackRock (BLK) beats by $0.76, reports revs in-line

  • Buenaventura (BVN) Announces Second Quarter 2023 Results for Production and Volume Sold per Metal

  • EQT Corp. (EQT) disclosed last night that it expects to report a total gain on derivatives for the three and six months ended June 30, 2023 of $164 million and $989 million, respectively

  • Ericsson (ERIC) beats on top and bottom lines

  • GOL Linhas Aereas Inteligentes S.A. (GOL) provides Q2 update

  • JinkoSolar (JKS) subsidiary provides H1 update

  • JPMorgan Chase (JPM) beats by $0.40, beats on revs

  • Leslie's (LESL) guides Q3 EPS and revs below consensus; lowers FY23 outlook due to traffic declines in Residential and Pro businesses; CFO Steve Weddell stepping down, effective August 7; to be succeeded by Scott Bowman

  • Nokia (NOK) lowers FY23 sales outlook

  • OrganiGram (OGI) misses on top and bottom lines

  • Silvercorp Metals (SVM) reports operational results for 1Q24; reiterates FY24 production guidance

  • State Street (STT) beats by $0.07, reports revs in-line

  • Telus (TU) lowers its FY23 consolidated operating revenue growth forecast to +9.5-11.5% from +11.0-14.0% due to global macroeconomic pressures; releases operating metrics

  • TELUS International (TIXT) guides Q2 EPS and revs below consensus; lowers FY23 guidance; announces staff reductions to address lower service volumes in the technology vertical

  • UnitedHealth (UNH) beats by $0.13, beats on revs; raises FY23 EPS in-line

  • Wells Fargo (WFC) beats by $0.10, beats on revs; raises NII guidance for FY23

News:

  • Fed will likely hike rates by 25 basis points in July, but also debate what would it take to prompt a September rate increase, according to the Wall Street Journal

  • Chinese President Xi wants to increase private sector investment, according to Bloomberg

  • House will vote today on National Defense Authorization Act, but controversial amendments could imperil its passage, according to CNN

  • White House launches $20 billion competition to catalyze investment in clean energy projects and tackle the climate crisis

  • World Health Organization releases aspartame hazard and risk assessment results

  • CMS releases CY 2024 hospital outpatient prospective payment system policy changes: hospital price transparency proposals

  • Acadia Pharmaceuticals (ACAD) Acquires Ex-North American Rights to Trofinetide and Global Rights to Neuren's NNZ-2591 in Rett Syndrome and Fragile X Syndrome

  • Ameresco (AMRC) announces completion of solar installation with Valmont Industries (VMI) in Bristol, IN

  • AptarGroup (ATR) increases quarterly dividend 7.9% to $0.41/share from $0.38/share

  • Barrick (GOLD) receives shares of Cascadia Minerals pursuant to previously announces spinout

  • Caribou Biosciences (CRBU) Reports Positive Clinical Data from Dose Escalation of CB-010 ANTLER Phase 1 Trial in r/r B-NHL

  • Casa Systems (CASA) announces appointment of Michael Glickman as new President and Chief Executive Officer effective August 1, 2023

  • CECO Environ (CECO). COO Ramesh Nuggihalli will cease serving as the Chief Operating Officer effective August 20and will be leaving CECO that same date

  • Citigroup (C): Mexico no longer interested in Citigroup local unit, according to Reuters

  • Coty (COTY) successfully completes refinancing of its revolving credit facility

  • CureVac (CVAC) Strengthens ongoing patent litigations bringing additional cases under new intellectual property rights

  • CVS (CVS) will carry Perrigo (PRGO) over the counter birth control pill at all 10,000 locations, according to Politico

  • Dell (DELL): Silver Lake amends 13D disclosing recent stake changes

  • Funko (FNKO) CEO Brian Mariotti to take a leave of absence and cease serving as CEO; Board of Directors appointed director Michael Lunsford as interim CEO

  • Green Plains (GPRE) announces technology collaboration with Equilon Enterprises LLC (SHEL)

  • Intuitive Machines (LUNR) successfully conducted a complete spacecraft test run of its Nova-C lunar lander

  • J.M. Smucker (SJM) approves an increase in the quarterly dividend from $1.02 to $1.06 per common share, an increase of 4%

  • KB Home (KBH) increases quarterly cash dividend to $0.20/share from $0.15/share, representing a yield of approximately 1.5%

  • Kosmos Energy (KOS) announces start up of the Jubilee South East Project

  • Meta Platforms (META): Threads engagement has dropped since debut, according to CNBC

  • Methode Electronics (MEI) initiates discontinuation of the Dabir Surfaces business

  • Microsoft (MSFT) and Activision (ATVI) might sell UK rights to push deal through, according to Bloomberg

  • Nissan (NSANY) will invest JPY 100 bln in Renault's EV unit Ampere, according to Reuters

  • Original BARK Co. (BARK) announced last night a cost reduction initiative; there will be a net reduction of 66 positions or approximately 8% of the co's total workforce

  • Rocket Lab USA (RKLB) signs multi-launch deal to further deploy Synspective Constellation

  • SelectQuote (SLQT) announces that SelectRx has been accredited for Patient-Centered Pharmacy Home by The Compliance Team, a Medicare-approved accreditation organization

  • Tesla (TSLA) to sell less expensive Model Y in South Korea, according to Reuters

  • The Beneficient Company (BENF) discloses in 10-K it received a "Wells Notice" from SEC relating to its association with GWG Holdings

  • Theseus Pharmaceuticals (THRX) to Discontinue Enrollment in Phase 1/2 Study and Terminate Development of THE-630 in Patients with GIST

  • UPS (UPS): Study that a strike at the company could be one of the costliest in a century, according to Reuters

M&A:

  • Activision Blizzard (ATVI): UK CMA extends deadline for Microsoft (MSFT)/ATVI investigation by 6 weeks

  • AG Mortgage Investment Trust (MITT): Terra Property Trust reaffirms intention to merge with Western Asset Mortgage

  • Commercial Metals (CMC) acquires EDSCO Fasteners LLC, a provider of anchoring solutions for the electrical transmission market; financial details not disclosed

  • Copart (CPRT): UK CMA has cleared the completed purchase of Hills Motors by Copart after an in-depth phase 2 investigation

  • Jamf Holding (JAMF) acquires dataJAR; financial details not disclosed

  • Roivant (ROIV) in discussions to sell stomach drug to Roche (RHHBY) for more than $7 bln, according to the Wall Street Journal

Syndicate:

  • BRF SA (BRFS) approved the pricing of a primary offering of 600,000,000 common shares issued by BRF at R$9.00 per common share following the conclusion of the bookbuilding process, totaling an aggregate offering price of R$5.4 bln

  • Caribou Biosciences (CRBU) prices offering of 19,230,769 shares of its common stock at $6.50 per share

  • Lilium GmbH (LILM) launches public offering of its Class A common shares

IPOs:

  • Priced to Trade:

  • Apogee Therapeutics (Nasdaq: APGE): The biotech company developing biologics for treatment of atopic dermatitis, COPD, and related inflammatory and immunology indications priced its upsized 17.65 M share IPO at $17, the high end of the $15-$17 expected range.

Gapping Up/Down

  • Gapping up:

  • ACAD +20.5%, LUNR +19%, ELAN +11.2%, AEHR+3.8%, UNH +3.3%, AMRC +3.2%, KOS +2.6%, RKLB+2.1%, BLK +1.6%, ATR +1.5%, KBH +1%

  • Gapping down:

  • THRX -65.6%, LESL -29.4%, OGI -15.5%, CRBU-10.6%, ERIC -9.1%, NOK -7.8%, LILM -7.6%, TIXT-6.1%, POOL -3.8%, SWIM -3.5%, FNKO -1.8%, SLQT-1.5%, GOL -1.1%, SVM -1%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Albany Intl (AIN) upgraded to Outperform from Neutral at Robert W. Baird; tgt raised to $120

  • BHP Group (BHP) upgraded to Overweight from Neutral at JP Morgan

  • Ouster (OUST) upgraded to Buy from Neutral at Chardan Capital Markets; tgt $10

  • Downgrades:

  • Alcoa (AA) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $36

  • AT&T (T) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $17

  • Welltower (WELL) downgraded to In-line from Outperform at Evercore ISI; tgt lowered to $81

  • Others:

  • AbbVie (ABBV) initiated with a Buy at HSBC Securities; tgt $167

  • AstraZeneca (AZN) initiated with a Buy at HSBC Securities

  • Bayer AG (BAYRY) initiated with a Reduce at HSBC Securities

  • BioNTech (BNTX) initiated with a Buy at HSBC Securities; tgt $124

  • Bristol-Myers (BMY) initiated with a Reduce at HSBC Securities; tgt $56

  • Eli Lilly (LLY) initiated with a Buy at HSBC Securities; tgt $560

  • Genmab (GMAB) initiated with a Buy at HSBC Securities

  • GlaxoSmithKline (GSK) initiated with a Reduce at HSBC Securities

  • Merck (MRK) initiated with a Hold at HSBC Securities; tgt $123

  • Moderna (MRNA) initiated with a Reduce at HSBC Securities; tgt $97

  • NET Power (NPWR) initiated with a Buy at Janney; tgt $36

  • Novartis AG (NVS) initiated with a Buy at HSBC Securities

  • Novo Nordisk A/S (NVO) initiated with a Buy at HSBC Securities

  • Pfizer (PFE) initiated with a Buy at HSBC Securities; tgt $50

  • Roche Hldg (RHHBY) initiated with a Buy at HSBC Securities

  • Sanofi (SNY) initiated with a Buy at HSBC Securities

Econ Data:

  • 08:30 ET: Export Price Index for June (Briefing.comConsensus NA; Prior -1.9%)

  • 08:30 ET: Export Prices ex-ag for June (Briefing.comConsensus NA; Prior -1.8%)

  • 08:30 ET: Import Prices Index for June (Briefing.comConsensus NA; Prior -0.6%)

  • 08:30 ET: Import Prices ex-oil for June (Briefing.comConsensus NA; Prior -0.1%)

  • 10:00 ET: Univ. of Michigan Consumer Sentiment - Prelim for July (Briefing.comConsensus 65.6; Prior 64.4)

 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 -0.1%, Hang Seng +0.3%, Shanghai Composite UNCH

Equity indices in the Asia-Pacific region ended the week on a mostly higher note. Chinese officials pushed back against speculation that the Chinese economy is facing a deflationary risk in the second half. The Bank of Japan is expected to increase its inflation forecast for FY23/24 above 2.0%. There was ongoing speculation that the Bank of Japan could alter its yield curve control policy later this month. Reserve Bank of Australia Deputy Governor Bullock will replace Governor Lowe on September 18.

  • In economic data:

  • Japan's May Industrial Production -2.2% m/m (expected -1.6%; last 0.7%) and Capacity Utilization -6.3% m/m (expected -2.5%; last 3.0%)

  • India's June trade deficit $20.13 bln (expected deficit of $20.10 bln; last deficit of $22.12 bln). June WPI Inflation -4.12% yr/yr (expected -3.60%; last -3.48%)

  • Singapore's Q2 GDP 0.3% qtr/qtr (last -0.4%); 0.7% yr/yr (expected 0.6%; last 0.4%)

---Equity Markets---

  • Japan's Nikkei: -0.1% (UNCH for the week)

  • Hong Kong's Hang Seng: +0.3% (+5.7% for the week)

  • China's Shanghai Composite: UNCH (+1.3% for the week)

  • India's Sensex: +0.8% (+1.2% for the week)

  • South Korea's Kospi: +1.4% (+4.0% for the week)

  • Australia's ASX All Ordinaries: +0.8% (+3.8% for the week)

---FX--- 

  • USD/JPY: +0.6% to 138.81

  • USD/CNH: -0.1% to 7.1432

  • USD/INR: +0.1% to 82.14

 

Europe: DAX -0.2%, FTSE +0.1%, CAC +0.3%

Major European indices trade near their flat lines. Workers at London's Gatwick Airport announced an eight-day strike. Meanwhile, the British government is forecast to need about GBP2-5 bln in 2023 and GBP3 bln in 2024 to fund the recently-implemented pay hike for public sector employees. Ericsson released soft quarterly results and guidance while Nokia lowered its revenue forecast for the year.

  • In economic data:

  • Eurozone's May trade deficit EUR300 mln (expected deficit of EUR7.6 bln; last deficit of EUR12.0 bln)

  • Germany's June WPI -0.2% m/m (expected -1.2%; last -1.1%); -2.9% yr/yr (expected -1.2%; last -2.6%)

  • Italy's May trade surplus EUR4.711 bln (expected surplus of EUR1.450 bln; last surplus of EUR362 mln)

  • Swiss June PPI 0.0% m/m (expected 0.2%; last -0.3%); -0.6% yr/yr (expected -1.2%; last -0.3%)

---Equity Markets---

  • STOXX Europe 600: +0.1% (+3.2% week-to-date)

  • Germany's DAX: -0.2% (+3.2% week-to-date)

  • U.K.'s FTSE 100: +0.1% (+2.6% week-to-date)

  • France's CAC 40: +0.3% (+3.9% week-to-date)

  • Italy's FTSE MIB: -0.1% (+3.5% week-to-date)

  • Spain's IBEX 35: -0.1% (+2.4% week-to-date)

---FX---

  • EUR/USD: +0.1% to 1.1229

  • GBP/USD: -0.1% to 1.3118

  • USD/CHF: UNCH at 0.8589

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