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15/03/23 Briefing

The S&P 500 futures are down 74 points and are trading 1.9% below fair value. The Nasdaq 100 futures are down 188 points and are trading 1.4% below fair value. The Dow Jones Industrial Average futures are down 581 points and are trading 1.8% below fair value.

A sentiment-driven retreat has taken root in the equity futures market as issues at Credit Suisse (CS) reignite selling efforts in the financial sector. Notably, Credit Suisse's largest shareholder, Saudi National Bank, said it cannot offer further help. That revelation has stoked large losses in European bank stocks and has stirred renewed angst in the banking sector here in the U.S.

Other limiting factors this morning include reports that the Fed is mulling tougher capital requirements for midsize banks, BlackRock CEO Larry Fink highlighting in his annual letter the potential for a liquidity crunch, and weakness in the mega cap stocks.

China reported mixed industrial production, retail sales, and fixed asset investment data for February in front of the retail sales and Producer Price Index reports from the U.S. at 8:30 a.m. ET.

Treasuries and the dollar reflect this morning's risk-off mentality. The 2-yr note yield is down 14 basis points to 4.06% and the 10-yr note yield is down 10 basis points to 3.53%. The U.S. Dollar Index is up 1.0% to 104.66.

In corporate news:

  • Credit Suisse (CS 1.97, -0.54, -21.5%): top shareholder rules out additional investments, according to Bloomberg

  • Lennar (LEN 103.30, +2.53, +2.5%): beats by $0.57, beats on revs; guides for FY23 deliveries of 62,000-66,000

  • SentinelOne (S 14.57, +0.10, +0.7%): beats by $0.03, beats on revs; guides AprQ revs above consensus; guides FY24 revs below consensus

  • Smartsheet (SMAR 42.60, +4.28, +11.2%): beats by $0.08, beats on revs; guides AprQ EPS above consensus, revs below consensus; guides FY24 EPS above consensus, revs below consensus

  • Freshpet (FRPT 49.00, -6.67, -12.0%): to offer $350 mln in convertible notes in a private offering

  • Guess? (GES 19.99, -1.28, -6.0%): beats by $0.44, beats on revs; guides Q1 EPS below two analyst estimate, revs below two analyst estimate; guides FY24 EPS below two analyst estimate, revs in-line

  • SPDR S&P Bank ETF (KBE 36.50, -1.02, -2.7%): many banks trading lower in wake of Credit Suisse developments

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the midweek session on a mostly higher note. Japan's Nikkei: UNCH, Hong Kong's Hang Seng: +1.5%, China's Shanghai Composite: +0.6%, India's Sensex: -0.6%, South Korea's Kospi: +1.3%, Australia's ASX All Ordinaries: +0.9%.

  • In economic data:

  • China's February Industrial Production 2.4% yr/yr (expected 2.6%; last 1.3%), February Retail Sales 3.5% yr/yr, as expected (last -1.8%), February Fixed Asset Investment 5.5% yr/yr (expected 4.4%; last 5.1%), and February Unemployment Rate 5.6% (last 5.5%)

  • South Korea's February Unemployment Rate 2.6% (last 2.9%). February trade deficit $5.27 bln (last deficit of $5.30 bln). February Imports 3.5% yr/yr (last 3.6%) and Exports -7.5% yr/yr (last -7.5%)

  • India's February trade deficit $17.43 bln (expected deficit of $19.00 bln; last deficit of $17.75 bln)

  • Singapore's Q4 Unemployment Rate 2.0% (last 2.1%)

  • New Zealand's Q4 Current Account deficit 8.9% of GDP (expected 8.3%; last 8.5%)


  • In news:

  • China reported decent growth figures for February. Japan's chief cabinet secretary said that solid wage increases are being seen among large companies.

  • There was speculation that New Zealand's sovereign rating could be revised lower after the country reported its largest current account deficit to GDP ratio on record.

  • A U.S. Congressional delegation is visiting Taiwan today and tomorrow.



  • Major European indices trade lower across the board with concerns about banks continuing to weigh on sentiment. STOXX Europe 600: -2.6%, Germany's DAX: -2.7%, U.K.'s FTSE 100: -2.2%, France's CAC 40: -3.0%, Italy's FTSE MIB: -3.4%, Spain's IBEX 35: -3.6%.

  • In economic data:

  • Eurozone's January Industrial Production 0.7% m/m (expected 0.4%; last -1.3%); 0.9% yr/yr (expected 0.2%; last -2.0%)

  • Germany's February WPI 0.1% m/m (last 0.2%); 8.9% yr/yr (last 10.6%)

  • France's February CPI 1.1% m/m (expected 0.9%; last 0.4%); 6.3% yr/yr (expected 6.2%; last 6.0%)


  • In news:

  • Credit Suisse has fallen more than 20.0% to a fresh record low in Zurich while names like BNP Paribas and Societe Generale are also facing pressure.

  • The European Central Bank is reportedly still leaning toward announcing a 50-bps rate hike tomorrow.

  • Germany's ifo Institute continues expecting the domestic economy to contract 0.1% in 2023, followed by 1.7% growth in 2024.



U.S. equity futures:

  • S&P 500 Futures: -71 @ 3,850

  • DJIA Futures: -555 @ 31,601

  • Nasdaq 100 Futures: -71 @ 12,019

Overseas:

  • Europe: DAX -2.7%, FTSE -2.2%, CAC -3.0%

  • Asia: Nikkei UNCH, Hang Seng +1.5%, Shanghai Composite +0.6%

Commodities:

  • Crude Oil -1.11 @ 70.22

  • Nat Gas -0.057 @ 2.517

  • Gold +10.45 @ 1921.35

  • Silver +0.130 @ 22.17

  • Copper -0.1185 @ 3.8845


Earnings/Guidance:

  • Arcos Dorados ( ARCO 3.24% ) beats by $0.02; beats on revs

  • Custom Truck One Source ( CTOS 10.94% ) beats by $0.01, beats on revs; guides FY23 revs in-line

  • GDS Holdings ( GDS 0.83% ) reports Q4 (Dec) results, beats on revs; guides FY23 revs below consensus

  • Guess? ( GES 8.09% ) beats by $0.44, beats on revs; guides Q1 EPS below two analyst estimate, revs below two analyst estimate; guides FY24 EPS below two analyst estimate, revs in-line

  • Lennar ( LEN 0.85% ) beats by $0.57, beats on revs; guides for FY23 deliveries of 62,000-66,000

  • Oatly Group AB ( OTLY 2.18% ) misses by $0.07, beats on revs

  • Ranpak ( PACK 7.23% ) reports Q4 (Dec) results, misses on revs

  • SentinelOne ( S 8.09% ) beats by $0.03, beats on revs; guides AprQ revs above consensus; guides FY24 revs below consensus

  • Smartsheet ( SMAR 13.96% ) beats by $0.08, beats on revs; guides AprQ EPS above consensus, revs below consensus; guides FY24 EPS above consensus, revs below consensus

  • StoneCo ( STNE 2.09% ) beats by $0.10, beats on revs; issues Q1 revenue guidance

  • Westrock Coffee Company ( WEST 6.51% ) reports Q4 (Dec) results; misses on earnings, misses on sales; expects +10-25% adjusted EBITDA growth in FY23

News:

  • Fed considering tougher capital requirements and restrictions for medium sized banks, according to the Wall Street Journal

  • BlackRock CEO Larry Fink in annual letter says that inflation is likely to stay closer to 3.5-4.0% (double Fed target); says "there could yet be a third domino to fall. In addition to duration mismatches, we may now also see liquidity mismatches"

  • Democrats want more banking regulation, but Republicans disagree which makes legislation unlikely, according to the Wall Street Journal

  • Republicans could gain 5 House seats in 2024 if they win court cases in North Carolina and Ohio regarding legislative maps, according to Politico

  • Alcoa ( AA 6.77% ) announced that the Portland Aluminium smelter in the state of Victoria in Australia will begin to immediately reduce its overall production due to operational instability

  • AMC Entertainment ( AMC 0.97% ) announces results of special meeting of stockholders

  • Annaly Capital Mgmt ( NLY 2.59% ) lowers its quarterly dividend 26.1% to $0.65/share; lowered to a level in-line with historical yield on book value, as indicated during the company's Q4 earnings call

  • Arbor Realty Trust ( ABR 7.26% ) reacts to Ningi Research Report

  • Arcosa ( ACA 2.61% ) receives wind tower orders of approximately $750 mln for delivery beginning in 2024 and continuing through 2028

  • Ashford Hospitality Trust ( AHT 3.49% ) issues statement regarding cash holdings

  • BioXcel Therapeutics ( BTAI 4.33% ) completed enrollment in Part 1 of the Company's pivotal Phase 3 SERENITY III trial investigating at-home use of BXCL501

  • Braemar Hotels & Resorts ( BHR 3.46% ) issues statement regarding cash holdings

  • Bread Financial ( BFH 4.82% ) provides February End-of-period credit card and other loans of $18.11 bln vs. $16.8 bln last year

  • Broadstone Net Lease ( BNL 0.21% ) authorizes the repurchase of up to $150 million of its outstanding common stock under a stock repurchase program

  • Capital One ( COF 5.53% ) reports February card metrics

  • Cardlytics ( CDLX 6.61% ) borrows $30 mln under its available $60 mln line of credit with Pacific Western Bank in response to uncertainty in financial sector

  • Casa Systems ( CASA 6.88% ) announces that Jerry Guo will be retiring as CEO effective March 17; also reports earnings

  • Central Pacific Financial ( CPF 4.67% ) highlights it has no exposure to crypto or venture-capital industries in balance sheet update

  • Chicago Atlantic Real Estate Finance ( REFI 1.07% ) has assessed the portfolio companies it invests in and has found that they have no exposure to Silicon Valley Bank (SIVB), Signature Bank New York (SBNY) or First Republic Bank (FRC)

  • Credit Suisse ( CS 26.10% ) top shareholder rules out additional investments, according to Bloomberg

  • Crescent Capital BDC ( CCAP 0.51% ) says company has no direct exposure to SVB or Signature

  • Deciphera Pharmaceuticals ( DCPH 1.04% ): FDA grants Breakthrough Therapy Designation for QINLOCK

  • Disney ( DIS 1.77% ): Some media executives are suggesting that Disney should spinoff Hulu or ESPN, according to Financial Times

  • DXC Technology ( DXC 4.35% ) charged by SEC with making misleading disclosures about its non-GAAP financials in multiple reporting periods from 2018 until early 2020

  • EnLink Midstream ( ENLC 3.35% ) announces that Matthew C. Harris, a Founding Partner of Global Infrastructure Partners, will be appointed as Chairman of its Board of Directors

  • Essent Group ( ESNT 3.10% ) announces the promotion of David Weinstock to CFO

  • Eversource Energy ( ES 0.32% ) COO Werner Schweiger to retire effective July 1

  • FinVolution Group ( FINV 8.46% ) increases dividend payout ratio to 18.5% for Fiscal Year 2022

  • First Republic ( FRC 22.96% ) spoke to some private equity firms prior to financing, according to Reuters

  • General Dynamics ( GD 1.31% ) awarded $1.48 bln U.S. Army contract modification

  • Halozyme Therapeutics ( HALO 2.88% ): EPO decision on DARZALEX (daratumumab) SC has no impact on current full year 2023 revenue guidance; reiterates FY23 rev guidance

  • JPMorgan Chase ( JPM 3.55% ) reports February card metrics

  • loanDepot ( LDI 3.49% ) details impact from recent closures of certain regional banks

  • MorphoSys ( MOR 1.01% ) names Lucinda Crabtree, Ph.D. as CFO, succeeding Sung Lee; new CFO will start in Q3 at the latest

  • Pembina Pipeline ( PBA 3.55% ) and The Haisla Nation announce that Cedar LNG received its Environmental Assessment Certificate and signed a MOU with ARC Resources for a long-term liquefaction services agreement

  • Petrobras ( PBR 2.49% ) obtained an unfavorable decision by the Third Panel of the Superior Chamber of Tax Appeals

  • Pfizer ( PFE 0.88% ): FDA authorizes bivalent Pfizer-BioNTech COVID-19 vaccine as booster for children six months to four years old

  • Photronics ( PLAB 2.20% ) does not any cash or other assets on deposit with, holds any debt or equity issued by or has any credit facilities or, swaps or other derivatives with Silicon Valley Bank (SIVB), First Republic Bank (FRC) or Signature Bank (SBNY)

  • Riot Platforms ( RIOT 1.74% ) maintained certain operating accounts with Signature Bank (SBNY) prior to its closure; suffered no losses with respect to its deposits at SBNY

  • Roivant Sciences ( ROIV 6.66% ): Dermavant Sciences announces "positive" results from ADORING 2, one of two double-blind, randomized, vehicle-controlled Phase 3 studies to evaluate the efficacy and safety of topical VTAMA cream, 1% in pediatric subjects down to 2 years old and adult subjects with atopic dermatitis

  • Signature Bank ( SBNY 0.54% ): US was investigating Signature Bank's work with cryptocurrency clients ahead of collapse, according to Bloomberg

  • Silicon Valley Bank ( SIVB 62.76% ): Fed examines why Silicon Valley Bank did not have a risk manager, according to Bloomberg

  • Silicon Valley Bank ( SIVB 62.76% ) creditors are anticipating bankruptcy filing, according to the Wall Street Journal

  • Smartsheet ( SMAR 13.96% ) named Mike Gregoire as Board Chair, effective on March 9

  • Stoke Therapeutics ( STOK 3.36% ) reports that FDA will allow the administration of a higher single dose of STK-001 (70mg) in the ongoing Phase 1/2a MONARCH Study

  • SVB Financial Group ( SIVB 62.76% ) discloses it completed the sale of a portfolio of available for sale securities; The portfolio was sold to Goldman Sachs (GS) at negotiated prices

  • TikTok mulling splitting away from ByteDance, according to Bloomberg

  • Tremor ( TRMR 9.46% ) response to press speculation; confirms that it is not currently in a sale process

  • UGI Corp ( UGI 2.06% ) announces that Sean O'Brien will succeed Ted Jastrzebski as CFO, effective April 11; Jastrzebski has announced his intent to retire

  • United Natural Foods ( UNFI 2.49% ) advancing initiatives to improve the effectiveness and efficiency of its supply chain

  • Warner Music Group ( WMG 1.21% ) planning for the succession of CFO Eric Levin; expects to appoint successor by the end of 2023

M&A:

  • Arthur J. Gallagher ( AJG 3.14% ) announced the acquisition of UK-based AT Squared Holdings Limited; Terms of the transaction were not disclosed

  • Atlas Air Worldwide ( AAWW 3.14% ): All regulatory conditions to closing previously announced merger with Rand Parent, LLC were satisfied; expects to consummate merger on or about March 17

  • Fluor ( FLR 3.14% ) sold its AMECO South America business to STRACON Group; financial terms not disclosed

Syndicate:

  • Freshpet ( FPRT ) to offer $350 mln in convertible notes in a private offering

  • Newmark Group ( NMRK 0.86% ) raises $500 mln for a programmatic joint venture between a global real estate firm and Castle Park Investments focusing on manufactured housing communities, RV resorts, and campground assets across the U.S.

  • Oatly Group AB ( OTLY 2.18% ) to sell $300 mln in aggregate principal amount of 9.25% Convertible Senior PIK Notes due 2028, enters $125 mln commitment letter to amend Sustainable Revolving Credit Facility Agreement

  • Opendoor Technologies ( OPEN 1.81% ) entered into separate, privately negotiated repurchase agreements with a limited number of holders of its 0.25% Convertible Senior Notes due 2026 to repurchase approximately $186 million aggregate principal amount of the Notes at approximately a 46.5% discount to par value

  • Ormat Tech ( ORA 7.82% ) prices offering of 3.6 mln shares of common stock

  • Wells Fargo ( WFC 4.46% ) files $9.5 bln mixed securities shelf offering

IPOs:

  • Expected to Price:

  • No IPOs expected.


Gapping Up/Down

  • Gapping up:

  • SMAR +11.2%, CTOS +10.9%, DCPH +8.3%, LDI +5.2%, AAWW +3.1%, LEN +3.1%, ES +2.6%, S +2.6%, GBDC +2.1%, PLAB +1.2%, CASA +0.9%, ABUS +0.7%, ADV +0.5%


  • Gapping down:

  • FRPT -9.5%, GES -6.8%, ORA -5.3%, WFC -3.3%, WEST -3%, PRTA -2.8%, STNE -1.9%, ABR -1.8%, WMG -1.4%, AHT -1.2%, DXC -0.9%, NLY -0.9%, FLR -0.8%, PFE -0.8%, BNTX -0.8%


Analyst Research (see Upgrades/Downgrades calendar for full list:

  • Upgrades

  • Apartment Income REIT Corp. (AIRC) upgraded to Market Perform from Underperform at BMO Capital Markets; tgt $39

  • Azul S.A. (AZUL) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt raised to $8.60

  • Baker Hughes (BKR) upgraded to Overweight from Neutral at JP Morgan; tgt $32

  • Canadian Pacific (CP) upgraded to Sector Outperform from Sector Perform at Scotiabank

  • Charles Schwab (SCHW) upgraded to Outperform from Neutral at Credit Suisse; tgt lowered to $67.50

  • ExlService (EXLS) upgraded to Neutral from Sell at Citigroup; tgt $160

  • FTC Solar (FTCI) upgraded to Buy from Underperform at BofA Securities; tgt raised to $3.50

  • Hamilton Lane (HLNE) upgraded to Overweight from Neutral at JP Morgan; tgt $85

  • Harley-Davidson (HOG) upgraded to Hold from Underperform at Jefferies; tgt $39

  • Jack Henry (JKHY) upgraded to Buy from Neutral at UBS; tgt $184

  • Reinsurance Group of America (RGA) upgraded to Buy from Sell at Citigroup; tgt raised to $158

  • Truist (TFC) upgraded to Buy from Neutral at Citigroup; tgt $52

  • United Micro (UMC) upgraded to Buy from Outperform at Daiwa Securities

  • Unum Group (UNM) upgraded to Buy from Neutral at Citigroup; tgt raised to $53

  • Varonis Systems (VRNS) upgraded to Equal Weight from Underweight at Wells Fargo; tgt $26

  • W.R. Berkley (WRB) upgraded to Buy from Neutral at BofA Securities; tgt lowered to $76


  • Downgrades:

  • Decibel Therapeutics (DBTX) downgraded to Market Perform from Outperform at SVB Securities; tgt lowered to $2

  • Porch Group (PRCH) downgraded to Hold from Buy at Loop Capital; tgt lowered to $2

  • Q2 Holdings (QTWO) downgraded to Hold from Buy at Canaccord Genuity; tgt lowered to $25

  • Traeger (COOK) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $4

  • Vacasa (VCSA) downgraded to Perform from Outperform at Oppenheimer


  • Others:

  • Amplitude (AMPL) initiated with a Neutral at DA Davidson; tgt $13

  • Clarivate (CLVT) resumed with a Neutral at BofA Securities

  • Enfusion (ENFN) initiated with a Neutral at JP Morgan; tgt $12

  • Intuit (INTU) initiated with an Outperform at Daiwa Securities; tgt $444

  • ShockWave Medical (SWAV) initiated with a Buy at Needham; tgt $240

  • SS&C Techs (SSNC) initiated with an Overweight at JP Morgan; tgt $68


  • Econ Data:

  • 07:00 ET: MBA Mortgage Applications Index for Mar 11 (Briefing.com Consensus NA; Prior 7.4%)

  • 08:30 ET: Empire State Manufacturing for Mar (Briefing.com Consensus -8.0; Prior -5.8)

  • 08:30 ET: Retail Sales for Feb (Briefing.com Consensus 0.2%; Prior 3.0%)

  • 08:30 ET: Retail Sales ex-auto for Feb (Briefing.com Consensus -0.1%; Prior 2.3%)

  • 08:30 ET: PPI for Feb (Briefing.com Consensus 0.3%; Prior 0.7%)

  • 08:30 ET: Core PPI for Feb (Briefing.com Consensus 0.4%; Prior 0.5%)

  • 10:00 ET: Business Inventories for Jan (Briefing.com Consensus 0.0%; Prior 0.3%)

  • 10:00 ET: NAHB Housing Market Index for Mar (Briefing.com Consensus 42; Prior 42)

  • 10:30 ET: EIA Crude Oil Inventories for Mar 11 (Briefing.com Consensus NA; Prior -1.69M)

  • 16:00 ET: Net Long-Term TIC Flows for Jan (Briefing.com Consensus NA; Prior $152.8B)


  • Earnings:

  • Monday (Mar 13)

  • Afternoon: GTLB


  • Tuesday (Mar 14)

  • Morning: CAL IHS SGHC

  • Afternoon: CTOS GES LEN S SMAR STNE


  • Wednesday (Mar 15)

  • Morning: EBIX GDS OTLY PACK

  • Afternoon: ADBE AMRS ARRY CDRE FIVE FNV PD TPC PATH ZTO


  • Thursday (Mar 16)

  • Morning: ASO DBI DG GIII MOMO HNST JBL BEKE SIG TITN WSM

  • Afternoon: BLND FDX PLBY PRPL COOK


  • Friday (Mar 17)

  • Morning: AQN BLDP



Asia & Europe detail:

Asia: Nikkei UNCH, Hang Seng +1.5%, Shanghai Composite +0.6%

Equity indices in the Asia-Pacific region ended the midweek session on a mostly higher note. China reported decent growth figures for February. Japan's chief cabinet secretary said that solid wage increases are being seen among large companies. There was speculation that New Zealand's sovereign rating could be revised lower after the country reported its largest current account deficit to GDP ratio on record. A U.S. Congressional delegation is visiting Taiwan today and tomorrow.

  • In economic data:

  • China's February Industrial Production 2.4% yr/yr (expected 2.6%; last 1.3%), February Retail Sales 3.5% yr/yr, as expected (last -1.8%), February Fixed Asset Investment 5.5% yr/yr (expected 4.4%; last 5.1%), and February Unemployment Rate 5.6% (last 5.5%)

  • South Korea's February Unemployment Rate 2.6% (last 2.9%). February trade deficit $5.27 bln (last deficit of $5.30 bln). February Imports 3.5% yr/yr (last 3.6%) and Exports -7.5% yr/yr (last -7.5%)

  • India's February trade deficit $17.43 bln (expected deficit of $19.00 bln; last deficit of $17.75 bln)

  • Singapore's Q4 Unemployment Rate 2.0% (last 2.1%)

  • New Zealand's Q4 Current Account deficit 8.9% of GDP (expected 8.3%; last 8.5%)


---Equity Markets---

  • Japan's Nikkei: UNCH

  • Hong Kong's Hang Seng: +1.5%

  • China's Shanghai Composite: +0.6%

  • India's Sensex: -0.6%

  • South Korea's Kospi: +1.3%

  • Australia's ASX All Ordinaries: +0.9%

---FX---

  • USD/JPY: -0.6% to 133.45

  • USD/CNH: +0.3% to 6.9047

  • USD/INR: +0.5% to 82.60

Europe: DAX -2.7%, FTSE -2.2%, CAC -3.0%

Major European indices trade lower across the board with concerns about banks continuing to weigh on sentiment. Credit Suisse has fallen more than 20.0% to a fresh record low in Zurich while names like BNP Paribas and Societe Generale are also facing pressure. The European Central Bank is reportedly still leaning toward announcing a 50-bps rate hike tomorrow. Germany's ifo Institute continues expecting the domestic economy to contract 0.1% in 2023, followed by 1.7% growth in 2024.

  • In economic data:

  • Eurozone's January Industrial Production 0.7% m/m (expected 0.4%; last -1.3%); 0.9% yr/yr (expected 0.2%; last -2.0%)

  • Germany's February WPI 0.1% m/m (last 0.2%); 8.9% yr/yr (last 10.6%)

  • France's February CPI 1.1% m/m (expected 0.9%; last 0.4%); 6.3% yr/yr (expected 6.2%; last 6.0%)


---Equity Markets---

  • STOXX Europe 600: -2.6%

  • Germany's DAX: -2.7%

  • U.K.'s FTSE 100: -2.2%

  • France's CAC 40: -3.0%

  • Italy's FTSE MIB: -3.4%

  • Spain's IBEX 35: -3.6%

---FX---

  • EUR/USD: -1.1% to 1.0615

  • GBP/USD: -0.6% to 1.2072

  • USD/CHF: +1.2% to 0.9246


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