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16/12/22 Briefing


The S&P 500 futures are down 39 points and are trading 1.1% below fair value. The Nasdaq 100 futures are down 67 points and are trading 0.7% below fair value. The Dow Jones Industrial Average futures are down points and are trading 1.0% below fair value.

The downside bias continues on this quadruple witching options expiration day amid ongoing growth concerns. Stock prices are being undercut by worries about earnings estimates being too high. There is also likely an element of disappointment in play connected to the poor performance thus far during a historically strong period for the market. 

The Treasury market trades in mixed fashion. The 2-yr note yield is down one basis point to 4.24% and the 10-yr note yield is up four basis points to 3.49%.

Energy complex futures are moving lower this morning. WTI crude oil futures are down 2.2% to $74.45/bbl and natural gas futures are down 5.8% to $6.57/mmbtu. 

Economic data today will be limited to the preliminary December IHS Markit Manufacturing PMI (prior 47.7) and Services PMI (prior 46.2) at 9:45 a.m. ET.

In corporate news:

  • Darden Restaurants (DRI 144.75, +1.89, +1.3%): beats by $0.08, beats on revs; Q2 comps +7.3%; raises FY23 EPS, revenue, and comp guidance

  • Accenture (ACN 273.85, -7.27, -2.6%): beats by $0.15, reports revs in-line; guides Q2 revs in-line; raises FY23 EPS in-line, reaffirms FY23 revs guidance

  • Maxar Technologies (MAXR 51.50, +28.40, +122.9%): confirms it will be acquired by Advent Int'l for $6.4 bln, or $53/share in cash 

  • Winnebago (WGO 57.08, +1.33, +2.4%): beats by $0.28, beats on revs

  • Novavax (NVAX 9.97, -1.35, -11.9%): priced public offering to sell 6,500,000 shares of its common stock at $10.00/share.

  • Adobe (ADBE 343.56, +14.85, +4.5%): beats by $0.10, reports revs in-line; guides FebQ EPS above consensus, revs in-line; reaffirms FY23 EPS guidance, revs guidance

  • Meta Platforms (META 118.28, +2.13, +1.8%): upgraded to Overweight from Neutral at JPMorgan

  • U.S. Steel (X 23.85, +0.21, +0.9%): guides Q4 EPS above consensus

  • Steel Dynamics (STLD 100.34, -1.58, -1.6%): guides Q4 adjusted EPS well above consensus; profitability from steel operations to be lower sequentially, metals recycling operations to moderately improve, steel fabrication operations to be steady

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the week on a mostly lower note. Japan's Nikkei: -1.9% (-1.3% for the week), Hong Kong's Hang Seng: +0.4% (-2.3% for the week), China's Shanghai Composite: UNCH (-1.2% for the week), India's Sensex: -1.4% (-0.6% for the week), South Korea's Kospi: UNCH (-1.2% for the week), Australia's ASX All Ordinaries: -0.7% (-0.9% for the week).

  • In economic data:

  • Japan's flash December Manufacturing PMI 48.8 (expected 49.0; last 49.0) and flash Services PMI 51.7 (expected 51.1; last 50.3)

  • South Korea's November trade deficit $6.99 bln (last deficit of $7.01 bln). November Imports 2.7% yr/yr (last 2.7%) and Exports -14.0% yr/yr (last -14.0%)

  • Singapore's November trade surplus $3.047 bln (last surplus of $4.024 bln). November non-oil exports -9.2% m/m (expected -3.0%; last -4.2%); -14.6% yr/yr (expected -7.4%; last -6.1%)

  • Hong Kong's November Unemployment Rate 3.7% (last 3.8%)

  • Australia's flash December Manufacturing PMI 50.4 (last 51.3) and flash Services PMI 46.9 (last 47.6)

  • New Zealand's November Business NZ PMI 47.4 (last 49.3)

  • In news:

  • Japan's Manufacturing PMI remained in contraction for the second consecutive month in the flash reading for December.

  • South Korean consumers are facing higher electricity and gas prices next year.

  • China's National Development and Reform Commission noted that the Chinese economy is facing a "more complex and grim external environment," but remains on a positive long-term trend.

  • South China Morning Post reported that Chinese officials are eager to fully reopen the border with Hong Kong in January.

  • Major European indices trade in the red despite the release of better than expected, though still contractionary, flash Manufacturing and Services PMI readings for December. STOXX Europe 600: -1.2% (-3.2% week-to-date), Germany's DAX: -0.4% (-3.1% week-to-date), U.K.'s FTSE 100: -1.3% (-1.9% week-to-date), France's CAC 40: -1.2% (-3.5% week-to-date), Italy's FTSE MIB: -0.3% (-2.6% week-to-date), Spain's IBEX 35: -1.0% (-1.9% week-to-date).

  • In economic data:

  • Eurozone's November CPI -0.1% m/m, as expected (last 1.5%); 10.1% yr/yr (expected 10.0%; last 10.6%). November Core CPI 0.0% m/m (expected 0.6%; last 0.6%); 5.0% yr/yr, as expected (last 5.0%). October trade deficit EUR26.50 bln (expected deficit of EUR44.50 bln; last deficit of EUR34.50 bln). Flash December Manufacturing PMI 47.8 (expected 47.1; last 47.1) and flash Services PMI 49.1 (expected 48.5; last 48.5)

  • Germany's flash December Manufacturing PMI 47.4 (expected 46.3; last 46.2) and flash Services PMI 49.0 (expected 46.3; last 46.1)

  • U.K.'s November Retail Sales -0.4% m/m (expected 0.3%; last 0.9%); -5.9% yr/yr (expected -5.6%; last -5.9%). November Core Retail Sales -0.3% m/m (expected 0.3%; last 0.7%); -5.9% yr/yr (expected -5.8%; last -6.4%)

  • France's flash December Manufacturing PMI 48.9 (expected 48.2; last 48.3) and flash Services PMI 48.1 (expected 49.1; last 49.3)

  • Italy's October trade deficit EUR2.12 bln (last deficit of EUR6.51 bln). November CPI 0.5% m/m, as expected (last 0.5%); 11.8% yr/yr, as expected (last 11.8%)

  • In news:

  • Several European Central Bank policymakers have repeated that more rate hikes are on the way.

  • Germany's Bundesbank raised its 2023 CPI forecast for Germany to 7.2% from 4.5% while the GDP forecast was cut to -0.5% from +2.4%. The growth outlook for 2024 was trimmed to 1.7% from 1.8% while the CPI forecast was raised to 4.1% from 2.6%.

 

U.S. equity futures:

  • S&P 500 Futures: -36 @ 3,860

  • DJIA Futures: -318 @ 32,885

  • Nasdaq 100 Futures: -54 @ 11,291

Overseas:

  • Europe: DAX -0.4%, FTSE -1.3%, CAC -1.2%

  • Asia: Nikkei -1.9%, Hang Seng +0.4%, Shanghai Composite UNCH

Commodities:

  • Crude Oil -1.69 @ 74.42

  • Nat Gas -0.407 @ 6.563

  • Gold +6.00 @ 1793.80

  • Silver -0.218 @ 23.087

  • Copper -0.001 @ 3.766

 

Earnings/Guidance:

  • Accenture (ACN) beats by $0.15, reports revs in-line; guides Q2 revs in-line; raises FY23 EPS in-line, reaffirms FY23 revs guidance

  • Adobe (ADBE) beats by $0.10, reports revs in-line; guides FebQ EPS above consensus, revs in-line; reaffirms FY23 EPS guidance, revs guidance

  • Centene (CNC) reaffirms FY22 guidance; sees FY23 EPS in line; sees FY23 revs below consensus; authorizes $2 billion increase to stock repurchase program

  • Darden Restaurants (DRI) beats by $0.08, beats on revs; Q2 comps +7.3%; raises FY23 EPS, revenue, and comp guidance

  • Krispy Kreme, Inc. (KKD) reiterates FY22 guidance; provides FY23 guidance in constant currency; offers FY26 financial goals

  • Quanex (NX) beats by $0.15, beats on revs

  • Steel Dynamics (STLD) guides Q4 adjusted EPS well above consensus; profitability from steel operations to be lower sequentially, metals recycling operations to moderately improve, steel fabrication operations to be steady

  • U.S. Steel (X) guides Q4 EPS above consensus

  • Winnebago (WGO) beats by $0.28, beats on revs

News:

  • Senate passes bill to fund government through December 23to give Congress more time to work on full omnibus spending package; President Biden will sign it

  • Senate passes $858 billion defense bill which includes repeal of the military coronavirus vaccination mandate. President Biden will sign it

  • Senate fails to pass Senator Joe Manchin's (D-WV) energy permitting reform legislation by a vote of 47-47

  • Evidence of deaths from coronavirus in Beijing is increasing despite official counts, according to Financial Times

  • California's CPUC modernizes solar tariff to support reliability and decarbonization

  • PCAOB secures complete access to inspect, investigate chinese firms for first time in history

  • EU issues statement by commissioner Gentiloni on the adoption of the directive on minimum effective taxation for multinationals

  • AAR Corp (AIR) expands its partnership with Ontic by signing a military customer support distribution contract extension and a new long-term global commercial distribution agreement

  • AbbVie (ABBV) submits sNDA for linaclotide (LINZESS) for treatment of functional constipation

  • Amazon (AMZN) aiming to bring fantasy game onto screens, according to Reuters

  • Apellis Pharmaceuticals (APLS) has submitted a Marketing Authorization Application to the European Medicines Agency for intravitreal pegcetacoplan

  • Apollo Medical (AMEH) announces share repurchase program of up to $50 mln

  • AST SpaceMobile (ASTS) and NASA signed an agreement that formalizes cooperation to protect assets in low Earth orbit

  • Bright Horizons (BFAM) discloses ransomware cyber-incident; does not believe that client, customer, family or employee data have been compromised

  • Cerevel Therapeutics (CERE) announces publication in The Lancet of emraclidine data from Phase 1b clinical trial in people living with schizophrenia

  • China Yuchai (CYD) subsidiary Guangxi Yuchai Machinery Company Limited ("GYMCL"), has been removed from the Unverified List by the U.S. Department of Commerce

  • Digital World Acquisition Corp (DWAC) received a letter of resignation from Luiz Philippe Braganza, resigning as Chief Financial Officer, effective on December 9, 2022

  • Energy Fuels (UUUU) awarded a contract to sell $18.5 mln of natural uranium concentrates to the U.S. government for the establishment of a strategic uranium reserve

  • Equinor (EQNR): Krafla to be developed using ground-breaking concept

  • General Electric (GE): French officials raid GE site on tax fraud allegations, according to Reuters

  • Guardant Health (GH) announces positive results from pivotal ECLIPSE study evaluating a blood test for the detection of colorectal cancer

  • Hersha Hospitality Trust (HT) announces special dividend of $0.50/share and continuation of quarterly cash dividend, both payable on Jan 18, 2023

  • JAKKS Pacific (JAKK) learned of a cybersecurity threat to its information technology system on Dec 8

  • LPL Financial (LPLA) releases monthly activity report for November 2022; total advisory and brokerage assets increased 4.5% to $1.14 trillion

  • Manchester United (MANU) reaches mutually-beneficial agreement with TeamViewer AG under which MANU shall have option to buy back the rights to the club's shirt front sponsorship

  • MDU Resources (MDU) submits confidential draft registration statement in connection with planned spinoff of Knife River Corporation

  • Melco Resorts & Entertainment (MLCO) announces final award of gaming concession

  • MGM Resorts (MGM): MGM Grand Paradise and Macao SAR government signed gaming concession contract

  • Nurix Therapeutics (NRIX) Announces Clearance of Investigational New Drug Application for NX-5948 Supporting Plans to Expand Enrollment to U.S. Clinical Sites

  • Ocugen (OCGN) Announces OCU400 Receives Orphan Drug Designations for Retinitis Pigmentosa and Leber Congenital Amaurosis

  • Oshkosh (OSK) awarded $543 mln U.S. Army contract modification

  • Pediatrix Medical Group (MD) appoints James D. Swift, M.D. as CEO, succeeding Mark S. Ordan, who has been named executive chair of the board of directors

  • PG&E (PCG) files application with CPUC requesting cost recovery of approximately $1.36 bln related to wildfire mitigation, certain catastrophic events, and a number of other activities

  • Raytheon Technologies (RTX) awarded $619 mln U.S. Navy contract modification

  • Regeneron Pharma (REGN) and Sanofi (SNY)'s Dupixent (dupilumab) recommended for EU approval by the CHMP for the treatment of eosinophilic esophagitis

  • ReNew Energy Global (RNW) signed a renewable energy agreement of 150 MW with Microsoft India, in one of the largest such deals in the country

  • Rithm Capital (RITM) authorizes a new stock repurchase program of up to $200 mln of common stock and up to $100 mln of preferred stock; replaces previous authorization for the same amounts

  • Sands China (SCHYY) signs 10-year gaming concession contract

  • Seacoast Banking (SBCF) announces renewal of share repurchase program

  • Shoe Carnival (SCVL) announces new share repurchase program for up to $50 mln of common stock

  • Synchrony Financial (SYF) Executive Chair Margaret Keane to retire, effective April 3, 2023; Jeffrey Naylor, a member of SYF's Board since 2014, will succeed Margaret Keane as Chair

  • Synovus (SNV) appoints CEO Kevin Blair to Chairman, effective January 1, 2023; succeeds Kessel D. Stelling, who is retiring as Chairman on December 31

  • TuSimple Holdings (TSP) appoints interim CFO Eric Tapia as Chief Financial Officer

  • uniQure (QURE) announces that its partner, CSL, has received a positive opinion recommending conditional marketing authorization for etranacogene dezaparvovec from the CHMP

  • Wynn Resorts Macau (WYNN) signs 10-year gaming concession agreement

  • Zai Lab (ZLAB) Presents Interim Overall Survival Data for ZEJULA (niraparib) from the NORA Phase 3 Study at the ESMO Virtual Plenary

M&A:

  • American Electric (AEP): The Federal Energy Regulatory Commission denies proposed transaction where Liberty Utilities Co. (AQN) sought to acquire AEP Kentucky Transmission Company

  • B&G Foods (BGS) to sell the Back to Nature brand to Barilla America; terms not disclosed

  • Chevron (CVX) announces that it has invested in Svante, a carbon capture and removal technology company

  • D.R. Horton (DHI) acquires Riggins Custom Homes, a homebuilder in Northwest Arkansas, for $107 mln in cash

  • Henry Schein (HSIC) makes investment to form strategic partnership with biotech Dental Group

  • Hormel Foods (HRL) announced it has acquired a minority stake in PT Garudafood Putra Putri Jaya Tbk

  • Instructure (INST) acquires LearnPlatform; financial details not disclosed

  • Maxar Technologies (MAXR) confirms it will be acquired by Advent Int'l for $6.4 bln, or $53/share in cash

  • Prenetics (PRE) is acquiring a majority stake in ACT Genomics Holdings Company Limited; Expects ACT to contribute $25-30 mln in revenues in 2023

  • Robert Half (RHI) subsidiary Protiviti acquires digital experience agency R2integrated to grow its digital transformation and customer experience offering to clients; financial details not disclosed

Syndicate:

  • Avidity Biosciences (RNA) prices underwritten public offering of 12 mln shares of its common stock at $17.25/share

  • Equitable Holdings (EQH) files for $600 mln mixed securities shelf offering

  • MasTec (MTZ) files mixed securities shelf offering

  • Novavax (NVAX) priced public offering to sell 6,500,000 shares of its common stock at $10.00/share

  • PennantPark Floating Rate Capital (PFLT) files for $500 mln mixed securities shelf offering

IPOs:

  • Expect to Price:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up: EXAS +16.6%, OCGN +10.3%, OB +7.1%, ADBE +5%, ASTS +2.6%, X +2.6%, AMEH +2.1%, NX +1.9%, INST +1.7%, RITM +1.4%, SCVL +1.2%, VMEO +1.1%,

  • Gapping down: GH -33%, DHI -1.7%, CVX -1.2%,

 


Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Agilysys (AGYS) upgraded to Buy from Neutral at BTIG Research; tgt $83

  • Cadence Design (CDNS) upgraded to Buy from Neutral at BofA Securities

  • EPR Properties (EPR) upgraded to Neutral from Underweight at JP Morgan; tgt $52

  • First Industrial Realty (FR) upgraded to Overweight from Neutral at JP Morgan; tgt raised to $56

  • Downgrades:

  • Acuity Brands (AYI) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $190

  • Agiliti (AGTI) downgraded to Neutral from Buy at BofA Securities; tgt $19

  • American Homes 4 Rent (AMH) downgraded to Neutral from Overweight at JP Morgan; tgt $36

  • Aris Water Solutions (ARIS) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $17

  • AXIS Capital (AXS) downgraded to Underweight from Equal Weight at Wells Fargo; tgt $55

  • AvalonBay (AVB) downgraded to Underweight from Neutral at JP Morgan; tgt lowered to $197

  • DBV Technologies (DBVT) downgraded to Sell from Neutral at Goldman

  • DT Midstream (DTM) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $62

  • Easterly Government Properties (DEA) downgraded to Underperform from Market Perform at BMO Capital Markets; tgt lowered to $14

  • Equitrans Midstream (ETRN) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $8

  • Equity Residential (EQR) downgraded to Underperform from Market Perform at BMO Capital Markets; tgt lowered to $61

  • Essex Property (ESS) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $267

  • Extra Space Storage (EXR) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $167

  • Others:

  • A-Mark Precious Metals (AMRK) initiated with a Buy at B. Riley Securities; tgt $50

  • Alaska Air (ALK) resumed with a Buy at Goldman; tgt $60

  • Allegiant Travel (ALGT) resumed with a Buy at Goldman; tgt $96

  • American Airlines (AAL) resumed with a Neutral at Goldman; tgt $13

  • atai Life Sciences N.V. (ATAI) initiated with a Buy at EF Hutton; tgt $23

  • COMPASS Pathways (CMPS) initiated with a Buy at EF Hutton; tgt $38

  • Compass Therapeutics (CMPX) initiated with a Buy at EF Hutton; tgt $10.30

  • CoStar Group (CSGP) initiated with an Overweight at JP Morgan; tgt $100

  • CyberArk (CYBR) initiated with a Buy at DA Davidson; tgt $175

  • Delta Air Lines (DAL) resumed with a Buy at Goldman; tgt $40

  • E2open (ETWO) initiated with a Buy at Redburn

Upcoming Events:

  • Econ Data:

  • 09:45 ET: IHS Markit Manufacturing PMI - Prelim for Dec (Briefing.comConsensus NA; Prior 47.7)

  • 09:45 ET: IHS Markit Services PMI - Prelim for Dec (Briefing.comConsensus NA; Prior 46.2)

  • Earnings:

  • Monday (Dec 12)

  • Afternoon: COUP FLNC ORCL

  • Tuesday (Dec 13)

  • Morning: CNM PLAB

  • Afternoon:  ABM BRZE

  • Wednesday (Dec 14)

  • Morning:  REVG WEBR

  • Afternoon:  LEN NDSN TCOM

  • Thursday (Dec 15)

  • Morning: JBL

  • Friday (Dec 16)  

  • Morning:  ACN DRI WGO

Asia & Europe detail:

Asia: Nikkei -1.9%, Hang Seng +0.4%, Shanghai Composite UNCH

Equity indices in the Asia-Pacific region ended the week on a mostly lower note. Japan's Manufacturing PMI remained in contraction for the second consecutive month in the flash reading for December. South Korean consumers are facing higher electricity and gas prices next year. China's National Development and Reform Commission noted that the Chinese economy is facing a "more complex and grim external environment," but remains on a positive long-term trend. South China Morning Post reported that Chinese officials are eager to fully reopen the border with Hong Kong in January.

  • In economic data:

  • Japan's flash December Manufacturing PMI 48.8 (expected 49.0; last 49.0) and flash Services PMI 51.7 (expected 51.1; last 50.3)

  • South Korea's November trade deficit $6.99 bln (last deficit of $7.01 bln). November Imports 2.7% yr/yr (last 2.7%) and Exports -14.0% yr/yr (last -14.0%)

  • Singapore's November trade surplus $3.047 bln (last surplus of $4.024 bln). November non-oil exports -9.2% m/m (expected -3.0%; last -4.2%); -14.6% yr/yr (expected -7.4%; last -6.1%)

  • Hong Kong's November Unemployment Rate 3.7% (last 3.8%)

  • Australia's flash December Manufacturing PMI 50.4 (last 51.3) and flash Services PMI 46.9 (last 47.6)

  • New Zealand's November Business NZ PMI 47.4 (last 49.3)

---Equity Markets---

  • Japan's Nikkei: -1.9% (-1.3% for the week)

  • Hong Kong's Hang Seng: +0.4% (-2.3% for the week)

  • China's Shanghai Composite: UNCH (-1.2% for the week)

  • India's Sensex: -1.4% (-0.6% for the week)

  • South Korea's Kospi: UNCH (-1.2% for the week)

  • Australia's ASX All Ordinaries: -0.7% (-0.9% for the week)

---FX---

  • USD/JPY: -0.5% to 137.06

  • USD/CNH: -0.2% to 6.9766

  • USD/INR: -0.2% to 82.63

Europe: DAX -0.4%, FTSE -1.3%, CAC -1.2%

Major European indices trade in the red despite the release of better than expected, though still contractionary, flash Manufacturing and Services PMI readings for December. Several European Central Bank policymakers have repeated that more rate hikes are on the way. Germany's Bundesbank raised its 2023 CPI forecast for Germany to 7.2% from 4.5% while the GDP forecast was cut to -0.5% from +2.4%. The growth outlook for 2024 was trimmed to 1.7% from 1.8% while the CPI forecast was raised to 4.1% from 2.6%.

  • In economic data:

  • Eurozone's November CPI -0.1% m/m, as expected (last 1.5%); 10.1% yr/yr (expected 10.0%; last 10.6%). November Core CPI 0.0% m/m (expected 0.6%; last 0.6%); 5.0% yr/yr, as expected (last 5.0%). October trade deficit EUR26.50 bln (expected deficit of EUR44.50 bln; last deficit of EUR34.50 bln). Flash December Manufacturing PMI 47.8 (expected 47.1; last 47.1) and flash Services PMI 49.1 (expected 48.5; last 48.5)

  • Germany's flash December Manufacturing PMI 47.4 (expected 46.3; last 46.2) and flash Services PMI 49.0 (expected 46.3; last 46.1)

  • U.K.'s November Retail Sales -0.4% m/m (expected 0.3%; last 0.9%); -5.9% yr/yr (expected -5.6%; last -5.9%). November Core Retail Sales -0.3% m/m (expected 0.3%; last 0.7%); -5.9% yr/yr (expected -5.8%; last -6.4%)

  • France's flash December Manufacturing PMI 48.9 (expected 48.2; last 48.3) and flash Services PMI 48.1 (expected 49.1; last 49.3)

  • Italy's October trade deficit EUR2.12 bln (last deficit of EUR6.51 bln). November CPI 0.5% m/m, as expected (last 0.5%); 11.8% yr/yr, as expected (last 11.8%)

---Equity Markets---

  • STOXX Europe 600: -1.2% (-3.2% week-to-date)

  • Germany's DAX: -0.4% (-3.1% week-to-date)

  • U.K.'s FTSE 100: -1.3% (-1.9% week-to-date)

  • France's CAC 40: -1.2% (-3.5% week-to-date)

  • Italy's FTSE MIB: -0.3% (-2.6% week-to-date)

  • Spain's IBEX 35: -1.0% (-1.9% week-to-date)

---FX---

  • EUR/USD: +0.1% to 1.0633

  • GBP/USD: +0.1% to 1.2191

  • USD/CHF: +0.2% to 0.9297

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