17/10/23 Briefing

The S&P 500 futures are down 10 points and are trading 0.3% below fair value. The Nasdaq 100 futures are down 46 points and are trading 0.3% below fair value. The Dow Jones Industrial Average futures are down 59 points and are trading 0.2% below fair value.

Stock futures indicate a lower open, pressured by another jump in market rates and lingering uncertainty about the Israel-Hamas situation. The 2-yr note yield is up two basis points to 5.11% and the 10-yr note yield is up six basis points to 4.77%. President Biden will be headed to Israel on Wednesday, October 18, to show support for Israel and to consult on next steps.

Bank of America (BAC), Goldman Sachs (GS), and Johnson & Johnson (JNJ) reported better-than-expected earnings this morning, but that news has been overshadowed by the action in Treasuries. 

Rep. Jim Jordan won support of key Republicans ahead of the Speaker vote today at 12:00 ET, but it is still unclear if he has the required 217 votes, according to The New York Times.

China's troubled developer Country Garden is on course to miss its $15 million interest payment that is due today. A missed payment would trigger a default.

Today's economic calendar features the September Retail Sales report at 8:30 ETand the September Industrial Production report at 9:15 ET.

In corporate news:

• Johnson & Johnson (JNJ 159.73, +2.20, +1.4%): beats by $0.14, beats on revs; raises FY23 guidance

• Wyndham Hotels & Resorts (WH 79.25, +10.15, +14.7%): receives proposal to be acquired by Choice Hotels (CHH) for $90.00 per share

• Fortrea Holdings (FTRE 31.21, +1.10, +3.7%): Starboard aiming to take stake in Fortrea Holdings, according to WSJ

• Bank of America (BAC 27.26, +0.27, +1.0%): beats by $0.07, reports revs in-line

• NetScout Systems (NTCT 22.00, -5.59, -20.3%): guides Q2 earnings above consensus, revs below consensus; lowers FY24 outlook

• Dollar Tree (DLTR 112.50, +2.40, +2.2%): upgraded to Buy from Neutral at Goldman

• Goldman Sachs (GS 315.00, +0.61, +0.2%): beats by $0.05, beats on revs

• Lockheed Martin (LMT 434.00, -6.41, -1.5%): beats by $0.06, reports revs in-line; reaffirms FY23 EPS guidance, revs guidance

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Tuesday on a higher note. Japan's Nikkei: +1.2%, Hong Kong's Hang Seng: +0.8%, China's Shanghai Composite: +0.3%, India's Sensex: +0.4%, South Korea's Kospi: +1.0%, Australia's ASX All Ordinaries: +0.4%.

• In economic data:

• Japan's August Tertiary Industry Activity Index -1.6 (last 0.6)

• South Korea's September Import Price Index -9.6% yr/yr (last -9.2%) and Export Price Index -8.9% yr/yr (last -7.9%)

• Singapore's September trade surplus $4.93 bln (last surplus of $3.22 bln). September non-oil exports 11.1% m/m (expected 3.2%; last -6.6%); -13.2% yr/yr (expected -14.7%; last -22.5%)

• New Zealand's Q3 CPI 1.8% qtr/qtr (expected 2.0%; last 1.1%); 5.6% yr/yr (expected 5.9%; last 6.0%)

• In news:

• China is hosting its third Belt and Road forum in Beijing today and tomorrow.

• Developer Country Garden is on course to miss its $15 mln interest payment that is due today, triggering default.

• Separately, a unit of Evergrande is reportedly seeking restructuring on one of its yuan-denominated bonds.

• Toyota is dealing with some interruptions after a fire at a body factory in Aichi.

• New Zealand reported cooler than expected CPI for Q3, boosting expectations for the Reserve Bank of New Zealand to hold its official cash rate steady at the next meeting.

• Westpac and ANZ now expect that the next hike will come in February instead of later this month.

• Major European indices trade just below their flat lines while the U.K.'s FTSE (+0.3%) outperforms thanks to strength in consumer names. STOXX Europe 600: -0.3%, Germany's DAX: -0.5%, U.K.'s FTSE 100: +0.3%, France's CAC 40: -0.3%, Italy's FTSE MIB: -0.3%, Spain's IBEX 35: -0.3%.

• In economic data:

• Eurozone's October ZEW Economic Sentiment 2.3 (expected -8.0; last -8.9)

• Germany's October ZEW Economic Sentiment -1.1 (expected -9.3; last -11.4) and ZEW Current Conditions -79.9 (expected -80.8; last -79.4)

• U.K.'s August Average Earnings Index + Bonus 8.1% yr/yr (expected 8.3%; last 8.5%)

• In news:

• August earnings growth in the U.K. was shy of expectations, fueling speculation that the Bank of England has already reached its terminal rate.

• Regional sovereign debt is on the defensive despite the ongoing uncertainty related to tensions in the Middle East.

• European Central Bank policymaker Lane said that it would take some time before the governing council has confidence that inflation is slowing toward the 2.0% target.

U.S. equity futures:

• S&P 500 Futures -12 @ 4,362

• DJIA Futures: -64 @ 33,920

• Nasdaq 100 Futures: -49 @ 15,124

Overseas:

• Europe: DAX -0.5%, FTSE +0.3%, CAC -0.3%

• Asia: Nikkei +1.2%, Hang Seng +0.8%, Shanghai Composite +0.3%

Commodities:

• Crude Oil +0.19 @ 85.45

• Nat Gas -0.006 @ 3.103

• Gold +2.75 @ 1937.05

• Silver -0.093 @ 22.858

• Copper -0.0363 @ 3.5457

Earnings/Guidance:

• ADTRAN (ADTN) sees Q3 revs below expectations

• Bank of America (BAC) beats by $0.07, reports revs in-line

• BNY Mellon (BK) beats by $0.12, beats on revs

• CrossFirst Bankshares (CFB) beats by $0.05, reports revs in-line

• Enerpac Tool Group (EPAC) reports Q3 results

• Ericsson (ERIC) misses by SEK10.00, reports revs in-line

• Equity Lifestyle Properties (ELS) misses by $0.01, beats on revs; guides Q4 FFO in-line; guides FY23 FFO in-line

• Genmab (GMAB) reports net sales of DARZALEX in the third quarter of 2023 totaled $2,499 million

• Goldman Sachs (GS) beats by $0.05, beats on revs

• GOL Linhas Aereas Inteligentes S.A. (GOL) provides Q3 guidance update

• Johnson & Johnson (JNJ) beats by $0.14, beats on revs; raises FY23 guidance

• Lockheed Martin (LMT) beats by $0.06, reports revs in-line; reaffirms FY23 EPS guidance, revs guidance

• Main Street Capital (MAIN) sees Q3 earnings above expectations

• NetScout Systems (NTCT) guides Q2 earnings above consensus, revs below consensus; lowers FY24 outlook

• Petrobras (PBR) breaks monthly and quarterly records for operated oil and gas production

• Ramaco Resources (METC) provides Q3 and FY23 guidance; expects Q3 EPS above consensus, increases FY23 coal shipment forecast

• Rio Tinto (RIO) reports Q3 production

• ServisFirst Bancshares (SFBS) beats by $0.02

• Toronto-Dominion Bank (TD) comments on expected impact of the Charles Schwab Corporation's (SCHW) Third Quarter Earnings

• TotalEnergies (TTE) provides Q3 trading update

News:

• President Biden will travel to Israel on Wednesday

• Country Garden debt will be in default today if no payment is made, according to Reuters

• Rep. Jim Jordan wins support of key Republicans ahead of Speaker vote today at 12:00 ET. He is within striking distance of required 217 votes, but outcome is still uncertain, according to the New York Times

• Rep. Jim Jordan will allow floor vote on bill linking Israel and Ukraine aid if he wins Speaker of the House vote, according to Axios

• Detroit casino workers could strike today, according to Detroit Free Press

• AbbVie (ABBV) receives Health Canada authorization with conditions as the first and only subcutaneous bispecific antibody to treat adult patients with relapsed or refractory diffuse large B-cell lymphoma

• AbbVie (ABBV) RINVOQ receives health canada approval as the first and only oral therapy for the treatment of adults with moderately to severely active crohn's disease

• Amazon (AMZN), Booking.com, Expedia Group, Glassdoor, Tripadvisor, and Trustpilot Launch First Global Coalition for Trusted Reviews

• AMC Entertainment (AMC) issues settlement notice

• Amneal Pharmaceuticals (AMRX) agreed to reorganize and simplify the Company's corporate structure by eliminating the Company's Up-C structure

• Apellis Pharmaceuticals (APLS) and Sobi announce "positive" results from the Phase 2 NOBLE study investigating pegcetacoplan for the treatment of post-transplant recurrence of primary immune complex membranoproliferative glomerulonephritis and C3 glomerulopathy

• ATEC (ATEC) Advances Lateral Surgery With Launch of Expandable Technology

• Digital World Acquisition Corp (DWAC) to amend the 2021 10-K to correct misstatements; does not expect any changes will have impact on its cash position

• Fortrea Holdings (FTRE): Starboard aiming to take stake in Fortrea Holdings, according to the Wall Street Journal

• General Dynamics (GD) Electric Boat awarded $217 mln contract for long lead time material regarding the construction of Virginia-class submarines

• Gilead (GILD) and Assembly Biosciences (ASMB) establish partnership to develop next-generation therapeutics for serious viral diseases; GILD says deal is expected reduce GAAP and non-GAAP 2023 EPS by ~$0.05-$0.07

• Ginkgo Bioworks (DNA) and Persephone Biosciences announce the completion of their first collaboration together, a Bacteroides engineering toolkit

• Lantronix (LTRX) Chairman Paul Folino passed away on October 13; Jason W. Cohenour, a current member of the Board, has been named interim Chairman

• Marathon Oil (MRO) enters into five-year firm LNG sales agreement with Glencore Energy UK Ltd (GLCNF) for a portion of its equity natural gas produced from the Alba Field, effective January 1, 2024

• Merck (MRK) receives FDA approval of KEYTRUDA for treatment of patients with resectable NSCLC in combination with chemotherapy

• Merck (MRK) receives positive EU CHMP opinion for PREVYMIS for prophylaxis of cytomegalovirus disease in adult kidney transplant recipients at high risk

• Monte Rosa Therapeutics (GLUE) announces strategic collaboration with Roche (RHHBY) to discover novel molecular glue degraders targeting cancer and neurological diseases

• Monte Rosa Therapeutics (GLUE) announces interim PK/PD and clinical data for MRT-2359 in Phase 1/2 trial for myc-driven solid tumors

• Netflix (NFLX) considers price increase, according to Reuters

• Parsons (PSN) strengthens portfolio in vital Indo-Pacific region with two milestone awards from U.S. Army

• Taiwan Semiconductor Manufacturing (TSM) ends plans to build chip plant in Taoyuan after public opposition, according to Bloomberg

• Target (TGT) COO to retire

• Teva (TEVA) Phase IV UNITE Study Shows AJOVY (fremanezumab) Reduced Migraine Attacks and Depression Symptoms in Migraine Sufferers with Major Depressive Disorder

• Textron (TXT): flyExclusive named fleet launch customer for the Cessna Citation CJ3 Gen2

• Vigil Neuroscience (VIGL) Announces First Participant Dosed in Phase 1 Clinical Trial in Healthy Volunteers Evaluating VG-3927, a Small Molecule TREM2 Agonist, for Potential Treatment of Alzheimer's Disease

M&A:

• Abcam (ABCM): Leading Proxy Advisor, ISS, Recommends Shareholders Vote 'FOR' Danaher (DHR) Proposed Acquisition of Abcam

• Computer Programs (CPSI) acquires Viewgol for $36 mln in cash with additional earnout of up to approximately $31.5 mln

• eMagin (EMAN) has received all regulatory approvals required in connection with acquisition by Samsung Display (SSNLF); expects the Merger to close on October 18

• Sovos Brands (SOVO) shareholders approve previously announced acquisition of the Company by Campbell Soup (CPB)

• Wyndham Hotels & Resorts (WH) receives proposal to be acquired by Choice Hotels (CHH) for $90.00 per share

Syndicate:

• Nuvalent (NUVL) prices offering of 5,357,143 shares of Class A common stock at $56.00 per share

IPOs:

• No IPOs expected.

Gapping Up/Down

• Gapping up:

• METC +5.8%, CFB +4.6%, CLVT +2.4%, ADTN+1%, GD +0.5%

• Gapping down:

• NTCT -23.7%, SFBS -7.5%, ERIC -5.7%, LTRX -4.5%, TWKS -2.1%, EPAC -2%, NUVL-1.7%, TXT -1.4%, RIO -1.3%, TEVA -0.9%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

• Array Tech (ARRY) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt raised to $23

• Dollar Tree (DLTR) upgraded to Buy from Neutral at Goldman; tgt lowered to $137

• Hannon Armstrong Sust. Infr. (HASI) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt $23

• Nabors Industries (NBR) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt raised to $175

• Ollie's Bargain Outlet (OLLI) upgraded to Buy from Neutral at Goldman; tgt raised to $83

• Sensient (SXT) upgraded to Outperform from Neutral at Robert W. Baird; tgt $70

• Downgrades:

• APA Corp. (APA) downgraded to Mkt Perform from Outperform at Bernstein; tgt lowered to $50

• BJ's Wholesale (BJ) downgraded to Neutral from Buy at Goldman; tgt lowered to $73

• Devon Energy (DVN) downgraded to Mkt Perform from Outperform at Bernstein; tgt $48

• EOG Resources (EOG) downgraded to Mkt Perform from Outperform at Bernstein; tgt lowered to $146

• H.B. Fuller (FUL) downgraded to Neutral from Outperform at Robert W. Baird; tgt $80

• Kosmos Energy (KOS) downgraded to Mkt Perform from Outperform at Bernstein; tgt lowered to $9

• National Vision (EYE) downgraded to Neutral from Buy at Goldman; tgt lowered to $16

• Patterson-UTI (PTEN) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $17

• Pioneer Natural Resources (PXD) downgraded to Mkt Perform from Outperform at Bernstein; tgt lowered to $246

• ProFrac Holding (ACDC) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $14

• SunPower (SPWR) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt lowered to $5

• Others:

• Amgen (AMGN) resumed with an Equal-Weight at Morgan Stanley; tgt $300

• Apollo Medical (AMEH) initiated with a Buy at BTIG Research; tgt $45

• Chevron (CVX) initiated with a Mkt Perform at Bernstein; tgt $184

• Clear Secure (YOU) initiated with a Buy at Goldman; tgt $24

• Exxon Mobil (XOM) initiated with an Outperform at Bernstein; tgt $140

• TripAdvisor (TRIP) initiated with a Buy at Goldman; tgt $22

• Tyler Tech (TYL) initiated with an Outperform at Oppenheimer; tgt $450

• Vacasa (VCSA) assumed with a Neutral at Goldman; tgt lowered to $11

Econ Data:

• 08:30 ET: Retail Sales for Sep (Briefing.comConsensus 0.3%; Prior 0.6%)

• 08:30 ET: Retail Sales ex-auto for Sep (Briefing.comConsensus 0.2%; Prior 0.6%)

• 09:15 ET: Industrial Production for Sep (Briefing.comConsensus 0.0%; Prior 0.4%)

• 09:15 ET: Capacity Utilization for Sep (Briefing.comConsensus 79.5%; Prior 79.7%)

• 10:00 ET: Business Inventories for Aug (Briefing.comConsensus 0.3%; Prior 0.0%)

• 10:00 ET: NAHB Housing Market Index for Oct (Briefing.comConsensus 45.0; Prior 45)

• 16:00 ET: Net Long-Term TIC Flows for Aug (Briefing.comConsensus NA; Prior $8.8B)

Earnings:

• Monday (Oct 16)

• Morning:  SCHW

• Afternoon: ELS

• Tuesday (Oct 17)

• Morning: ACI BAC BK ERIC GS JNJ LMT PLD

• Afternoon:  FULT HWC IBKR JBHT OMC PNFP UAL WTFC

• Wednesday (Oct 18)

• Morning:  ABT ALLY ASML CFG CBSH ELV FHM MTB MS NDAQ NTRS PG STT SCL TRV USB UNF UCBI WGO

• Afternoon:  AA CNS COLB CCI DFS EFX FNB FR KMI LRCX LVS LBRT MRTN NFLX PPG REXR SAP SLG STLD SNV TSLA ZION

• Thursday (Oct 19)

• Morning: ALK AAL T AUB BMI BKU BX EWBC FITB FCX GPC HOMB IRDM KEY LNN MAN MMC NOK PM POOL SNA TSM TCBI TFC UNP WBS WNS

• Afternoon:  ASB OZK CSX GBCI ISRG KNX WDFC

• Friday (Oct 20) 

• Morning:  AXP ALV BHLB CMA EEFT FBP HBAN IPG RF SXT SLB

• Afternoon:  HTH

Asia & Europe detail:

Asia: Nikkei +1.2%, Hang Seng +0.8%, Shanghai Composite +0.3%

Equity indices in the Asia-Pacific region ended Tuesday on a higher note. China is hosting its third Belt and Road forum in Beijing today and tomorrow. Developer Country Garden is on course to miss its $15 mln interest payment that is due today, triggering default. Separately, a unit of Evergrande is reportedly seeking restructuring on one of its yuan-denominated bonds. Toyota is dealing with some interruptions after a fire at a body factory in Aichi. New Zealand reported cooler than expected CPI for Q3, boosting expectations for the Reserve Bank of New Zealand to hold its official cash rate steady at the next meeting. Westpac and ANZ now expect that the next hike will come in February instead of later this month.

• In economic data:

• Japan's August Tertiary Industry Activity Index -1.6 (last 0.6)

• South Korea's September Import Price Index -9.6% yr/yr (last -9.2%) and Export Price Index -8.9% yr/yr (last -7.9%)

• Singapore's September trade surplus $4.93 bln (last surplus of $3.22 bln). September non-oil exports 11.1% m/m (expected 3.2%; last -6.6%); -13.2% yr/yr (expected -14.7%; last -22.5%)

• New Zealand's Q3 CPI 1.8% qtr/qtr (expected 2.0%; last 1.1%); 5.6% yr/yr (expected 5.9%; last 6.0%)

---Equity Markets---

• Japan's Nikkei: +1.2%

• Hong Kong's Hang Seng: +0.8%

• China's Shanghai Composite: +0.3%

• India's Sensex: +0.4%

• South Korea's Kospi: +1.0%

• Australia's ASX All Ordinaries: +0.4%

---FX---

• USD/JPY: UNCH at 149.53

• USD/CNH: +0.2% to 7.3208

• USD/INR: UNCH at 83.19

Europe: DAX -0.5%, FTSE +0.3%, CAC -0.3%

Major European indices trade just below their flat lines while the U.K.'s FTSE (+0.3%) outperforms thanks to strength in consumer names. August earnings growth in the U.K. was shy of expectations, fueling speculation that the Bank of England has already reached its terminal rate. Regional sovereign debt is on the defensive despite the ongoing uncertainty related to tensions in the Middle East. European Central Bank policymaker Lane said that it would take some time before the governing council has confidence that inflation is slowing toward the 2.0% target.

• In economic data:

• Eurozone's October ZEW Economic Sentiment 2.3 (expected -8.0; last -8.9)

• Germany's October ZEW Economic Sentiment -1.1 (expected -9.3; last -11.4) and ZEW Current Conditions -79.9 (expected -80.8; last -79.4)

• U.K.'s August Average Earnings Index + Bonus 8.1% yr/yr (expected 8.3%; last 8.5%)

---Equity Markets---

• STOXX Europe 600: -0.3%

• Germany's DAX: -0.5%

• U.K.'s FTSE 100: +0.3%

• France's CAC 40: -0.3%

• Italy's FTSE MIB: -0.3%

• Spain's IBEX 35: -0.3%

---FX---

• EUR/USD: +0.1% to 1.0567

• GBP/USD: -0.3% to 1.2173

• USD/CHF: +0.1% to 0.9002