17/01/23 Briefing

The S&P 500 futures are down 12 points and are trading 0.3% below fair value. The Nasdaq 100 futures are down 48 points and are trading 0.5% below fair value. The Dow Jones Industrial Average futures are down 125 points and are trading 0.4% below fair value.

There's a negative bias in the equity futures market after a big run recently. Entering today, the S&P 500, Nasdaq, and Dow are up 4.2%, 5.9%, and 3.5%, respectively, so far in 2023. In addition, earnings reports this morning are receiving mixed reactions from market participants. 

The IMF's Managing Director Kristalina Georgieva told CNBC in an interview "...we expect growth to bottom out this year and 2024 to be a year in which we finally see the world economy on an upside."

China's Q4 GDP came in better than feared at 0.0% quarter/quarter versus an expected 0.8% decline. 

Treasury yields are inching higher. The 2-yr note yield is up three basis points to 4.25%. The 10-yr note yield is up six basis points to 3.57%. The U.S. Dollar Index is down 0.1% to 102.12.

WTI crude oil futures are up 0.6% to $80.33/bbl and natural gas futures are up 5.9% to $3.83/mmbtu. 

In corporate news:

• Citizens Financial Group (CFG 41.47, -0.25, -0.6%): reports EPS in-line, misses on revs

• Morgan Stanley (MS 92.65, +0.99, +1.1%): misses by $0.05, beats on revs

• Goldman Sachs (GS 365.30, -8.70, -2.3%): misses by $2.45, misses on revs

• Silvergate Capital (SI 13.66, +0.46, +3.5%): misses by $0.21; to substantively reduce its workforce - to cut workforce by ~40%; also expects $196 mln impairment charge

• Mohawk (MHK 112.25, -6.40, -5.4%): provides litigation updates; sees Q4 EPS below consensus

• Natl Instruments (NATI 54.05, +7.08, +15.1%): Emerson (EMR) submitted a proposal to acquire NI for $53 per share in cash at an implied enterprise value of $7.6 bln

• Tesla (TSLA 125.07, +2.67, +2.2%): Indonesia nearing EV deal with Tesla, according to Reuters

• Pfizer (PFE 47.19, -0.66, -1.4%): downgraded to Equal Weight from Overweight

• Church & Dwight (CHD 82.99, +1.08, +1.3%): upgraded to Overweight from Equal Weight at Morgan Stanley

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Tuesday on a mostly lower note. Japan's Nikkei: +1.2%, Hong Kong's Hang Seng: -0.8%, China's Shanghai Composite: -0.1%, India's Sensex: +0.9%, South Korea's Kospi: -0.9%, Australia's ASX All Ordinaries: -0.1%.

  • In economic data:

    • China's Q4 GDP 0.0% qtr/qtr (expected -0.8%; last 3.9%); 2.9% yr/yr (expected 1.8%; last 3.9%). December Retail Sales -1.8% yr/yr (expected -8.6%; last -5.9%), December Industrial Production 1.3% yr/yr (expected 0.2%; last 2.2%), December Fixed Asset Investment 5.1% yr/yr (expected 5.0%; last 5.3%). December Unemployment Rate 5.5% (expected 6.0%; last 5.7%)

    • Japan's November Tertiary Industry Activity Index -0.2% m/m (expected 0.2%; last 0.5%)

    • Singapore's December trade surplus SGD5.367 bln (last SGD3.344 bln). December non-oil exports -3.3% m/m (expected 1.0%; last -9.2%); -20.6% yr/yr (expected -16.8%; last -14.7%)

    • Australia's January Westpac Consumer Sentiment 5.0% (last 3.0%)

    • New Zealand's Q4 NZIER Business Confidence -70% (last -42%)

  • In news:

    • Chinese equities underperformed even though most of the country's growth figures for December came in well ahead of expectations.

    • China's National Bureau of Statistics said that the Chinese economy has been stabilized in 2022 and an improvement is expected to take place in 2023.

    • Chinese press speculated that interest rates and the reserve requirement ratio could be cut in Q1.

    • Evergrande is reportedly considering two offshore restructuring options.

    • Toyota aims to increase its annual production volume by 15.2% to 10.6 mln units but will allow itself to miss the target by up to 10.0%.

• Major European indices trade on a modestly lower note. STOXX Europe 600: -0.2%, Germany's DAX: -0.1%, U.K.'s FTSE 100: -0.3%, France's CAC 40: -0.1%, Italy's FTSE MIB: -0.3%, Spain's IBEX 35: -0.1%.

  • In economic data:

    • Eurozone's January ZEW Economic Sentiment 16.7 (expected -14.3; last -23.6)

    • Germany's January ZEW Economic Sentiment 16.9 (expected -15.0; last -23.3) and January ZEW Current Conditions -58.6 (expected -58.3; last -61.4). December CPI -0.8% m/m, as expected (last -0.5%); 8.6% yr/yr, as expected (last 10.0%)

    • U.K.'s November Average Earnings Index + Bonus 6.4% yr/yr (expected 6.2%; last 6.2%). November three-month employment change 27,000 (expected 5,000; last 27,000), November Unemployment Rate 3.7%, as expected (last 3.7%). December claimant count change 19,700 (expected 19,800; last 16,100)

    • Italy's December CPI 0.3% m/m, as expected (last 0.5%); 11.6% yr/yr, as expected (last 11.8%)

  • In news:

    • Germany's ZEW Economic Sentiment survey turned positive for the first time in nearly a year, reflecting a significant improvement in growth expectations.

    • European Central Bank Chief Economist Lane repeated that rates need to reach a restrictive level and that the current 2.00% rate is close to neutral.

    • Germany's Economy Minister Habeck said that his government aims to get inflation below 5.0% by the end of the year.

    • The Federation of German Industries expects that the German economy will contract 0.3% this year.

U.S. equity futures:

• S&P 500 Futures: -13 @ 3,986

• DJIA Futures: -124 @ 34,179

• Nasdaq 100 Futures: -13 @ 11,491

Overseas:

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

• Asia: Nikkei +1.2%, Hang Seng -0.8%, Shanghai Composite -0.1%

Commodities:

• Crude Oil +0.62 @ 80.73

• Nat Gas +0.317 @ 3.736

• Gold -10.95 @ 1910.75

• Silver -0.197 @ 24.175

• Copper -0.0632 @ 4.1528

Earnings/Guidance:

• ADMA Biologics (ADMA) sees Q4 and FY23 revs above consensus

• Barrick (GOLD) Reports Stronger Q4 Gold Production

• Centerra Gold (CGAU) reports Q4 gold production of 53,222 oz

• Citizens Financial Group (CFG) reports EPS in-line, misses on revs

• DMC Global (BOOM) CEO steps down; sees Q4 revs above expectations

• Eldorado Gold (EGO) reports Q4 gold production of 128,453 ounces

• Fortuna Silver Mines (FSM) reports record production for FY22

• Goldman Sachs (GS) misses by $2.45, misses on revs

• Grupo Aeroportuario del Pacifico (PAC) provides FY23 revs rising 12-14% yr/yr

• IAMGOLD (IAG) reports FY22 production results

• Lightspeed (LSPD) reaffirms Q3 guidance after it announced a reorganization to streamline the Company's operating model while continuing to focus on profitable growth

• Main Street Capital (MAIN) reports Q4 operating results

• Mohawk (MHK) provides litigation updates; sees Q4 EPS below consensus

• Morgan Stanley (MS) misses by $0.05, beats on revs

• New Oriental Education & Technology (EDU) beats by $0.01, beats on revs; guides Q3 revs above consensus

• Orla Mining (ORLA) achieves high end of increased 2022 production guidance and provides 2023 guidance

• Rio Tinto (RIO) reports FY22 production; Pilbara operations increased 1% yr/yr

• Signature Bank (SBNY) misses by $0.22

• Silvergate Capital (SI) misses by $0.21;  to cut workforce by ~40%; also expects $196 mln impairment charge

• Travelers (TRV) sees Q4 EPS below consensus; Q4 results include the company's estimate for catastrophe losses of $459 million pre-tax ($362 million after-tax), net of reinsurance

• Tritium DCFC (DCFC) provides 2022 and 2023 calendar year guidance (no comparable ests because fiscal year ends in June)

• United Micro (UMC) misses by NT$0.09, reports revs in-line

• Vertex Energy (VTNR) provides operational update for Q4 2022; Throughput volumes exceeded prior forecast

• Whirlpool (WHR) announces the completion of the strategic review of its Europe, Middle East and Africa business and entered into a definitive contribution agreement with Arelik; raises FY22 EPS guidance; lowers FY22 revenue guidance

News:

• China's population has declined, according to the New York Times

• China had 60,000 deaths from coronavirus since removing restrictions, according to the New York Times

• Chinese Vice Premier Liu He at World Economic Forum says trade and domestic consumption will return to normal this year - CNBC

• Treasury Secretary Janet Yellen will meet with Chinese Vice Premier Liu He tomorrow, according to Bloomberg

• House Republicans are preparing contingency plan in case debt ceiling is breached later this year, according to the Washington Post

• EU Commission disburses first 3 billion to Ukraine of the up to 18 billion Macro-financial Assistance+ package

• Electric vehicles were 10% of global sales last year, according to the Wall Street Journal

• Bitcoin increased above $20,000

• Consumer Financial Protection Bureau mulling new rules for overseas money transfers, according to the Wall Street Journal

• Over 60 people killed in Nepal plane crash, according to CNN

• Alibaba (BABA): Ryan Cohen has built a stake in Alibaba, according to the Wall Street Journal

• Alkermes' (ALKS) nemvaleukin alfa (nemvaleukin) granted an Innovation Passport for the treatment of mucosal melanoma under the Innovative Licensing and Access Pathway by the UK Medicines and Healthcare products Regulatory Agency

• America Movil SA's (AMX) Telmex reaches an agreement with its labor union

• Arcutis (ARQT) Presents New Phase 2 Long-Term Data Showing Sustained Efficacy and Clearance for a Median of 10 Months with Roflumilast Cream in Adults with Chronic Plaque Psoriasis

• Biogen (BIIB) and Eisai file Marketing Authorization Application for anti-amyloid-beta protofibril antibody Lecanemab for early Alzheimer's disease in Japan

• CI Financial Corp (CIXX) reports total assets of $375.8 bln for December 2022

• Cleveland-Cliffs (CLF) is increasing current spot market base prices for all carbon hot rolled, cold rolled and coated steel products by a minimum of $50 per net ton, effective immediately with all new orders

• Delta Air Lines (DAL): US will investigate near runway collision by Delta & American (AAL), according to Bloomberg

• Didi (DIDAY): China removes ban on new Didi users, according to Reuters

• Embraer SA (ERJ) wins order for 15 new E195-E2 aircraft valued at $1.17 bln

• Eni S.p.A. (E) announces a new gas discovery in the Eastern Mediterranean Sea, offshore Egypt

• ESS (GWH) Responds to Short Seller Report-Driven Class Action Filing

• Innate Pharma (IPHA) Announces Publication of Preclinical Data with a Trifunctional NK Cell Engager in Acute Myeloid Leukemia in Nature Biotechnology

• JPMorgan Chase (JPM) reports December card metrics

• Lilium GmbH (LILM) appoints Oliver Vogelgesang as CFO

• Limbach (LMB) announces Michael McCann as CEO effective March 29, 2023

• LiveVox (LVOX) authorized a new cost reduction plan

• Microsoft (MSFT) will allow more customers to access OpenAI products, according to the Wall Street Journal

• NorthWestern Energy (NWE) enters into strategic agreement to secure reliable, cost effective energy service for Montana

• Partner Communications (PTNR) announces receiving a letter from the Ministry of Communications stating it is satisfied that the agreement with BEZEQ, for the purchase of an indefeasible right of use of fiber-optic infrastructure lines, has no risk of creating significant damage to the competition

• Petrobras (PBR) received the devolution of ~R$456 mln, recovered through a leniency agreement with UOP - a subsidiary of Honeywell International (HON)

• PureCycle Technologies (PCT) to build its first polypropylene recycling facility in Europe

• Siemens AG's (SIEGY) Mobility awarded a EUR 3 billion project in India - largest locomotive order in company history

• SIGA Technologies (SIGA) announces that Phil Gomez, Chief Executive Officer of SIGA, has announced his intention to retire as CEO in 2023

• Stellantis & Vulcan Energy Resources (STLA) explore geothermal energy to supply rsselsheim plant

• Suncor Energy (SU) amends agreement with Elliott Investment Management

• Tesla (TSLA): Indonesia nearing EV deal with Tesla, according to Reuters

M&A:

• Cellectis (CLLS): Calyxt and Cibus announce the signing of a definitive merger agreement

• Diageo plc (DEO) to acquire Don Papa Rum

• Jefferies (JEF) completes spin-off of Vitesse (VTS)

• Microsoft (MSFT) will likely receive warning from EU about Activision (ATVI) purchase, according to Reuters

• Natl Instruments (NATI): Emerson (EMR) submitted a proposal to acquire NI for $53 per share in cash at an implied enterprise value of $7.6 bln

• NI Corp (NATI) received interest from Emerson Electric (EMR) following Friday's announcement that it was considering options, according to Reuters

Syndicate:

• iQIYI (IQ) proposes offering of 76,500,000 American Depositary Shares, each representing seven Class A ordinary shares

IPOs:

• Expected to Price:

  • No IPOs expected.

Gapping Up/Down

• Gapping up:

  • IPHA +10.1%, ARBE +5.9%, ARQT +4.8%, SBNY+3.9%, DUOL +3%, STR +2.4%, LILM +1.4%, DEO+1.4%, CGAU +1.1%, ERJ +0.9%, PAC +0.7%

• Gapping down:

  • IQ -8.1%, FSM -4.3%, PTNR -3.4%, WHR -3.1%, RIO-2.2%, HDSN -1.1%, LUV -0.8%, EGO -0.7%, SI -0.5%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

  • AvalonBay (AVB) upgraded to Buy from Hold at Truist; tgt raised to $190

  • Cadence Design (CDNS) upgraded to Overweight from Neutral at Atlantic Equities; tgt $200

  • Church & Dwight (CHD) upgraded to Outperform from Neutral at Credit Suisse; tgt raised to $95

  • Church & Dwight (CHD) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt raised to $91

  • Dun & Bradstreet (DNB) upgraded to Buy from Neutral at BofA Securities; tgt $15.50

  • Equity Residential (EQR) upgraded to Buy from Hold at Truist; tgt $68

• Downgrades:

  • A.O. Smith (AOS) downgraded to Hold from Buy at Loop Capital; tgt lowered to $65

  • Americold Realty Trust (COLD) downgraded to Hold from Buy at Truist; tgt $34

  • Extra Space Storage (EXR) downgraded to Hold from Buy at Truist; tgt lowered to $160

  • Kimco Realty (KIM) downgraded to Hold from Buy at Truist; tgt lowered to $24

  • Lions Gate Entertainment (LGF.A) downgraded to Hold from Buy at Truist; tgt lowered to $8

  • Mid-America Aptmt (MAA) downgraded to Hold from Buy at Truist; tgt lowered to $167

• Others:

  • Boyd Gaming (BYD) initiated with an Outperform at Credit Suisse; tgt $82

Upcoming Events:

• Econ Data:

  • 08:30 ET: Empire State Manufacturing for Jan (Briefing.comConsensus -8.5; Prior -11.2)

• Earnings:

  • Monday (Jan 16)

    • Morning:  UMC

  • Tuesday (Jan 17)

    • Morning: CFG GS MS EDU SBNY SI

    • Afternoon:  FULT HWC IBKR PNFP PRGS UAL UCBI

  • Wednesday (Jan 18)

    • Morning:  SCHW PNC PLD

    • Afternoon:  AA DFS FHN FUL KMI TCBI WTFC

  • Thursday (Jan 19)

    • Morning: BANC BKU CMA CBSH FAST FITB HOMB KEY MTB NTRS PG SNV TFC WNS

    • Afternoon:  OZK CNXC FFIN NFLX PPG SIVB

  • Friday (Jan 20) 

    • Morning:  ALLY ERIC HBAN RF SLB STT

Asia & Europe detail:

Asia: Nikkei +1.2%, Hang Seng -0.8%, Shanghai Composite -0.1%

Equity indices in the Asia-Pacific region ended Tuesday on a mostly lower note. Chinese equities underperformed even though most of the country's growth figures for December came in well ahead of expectations. China's National Bureau of Statistics said that the Chinese economy has been stabilized in 2022 and an improvement is expected to take place in 2023. Chinese press speculated that interest rates and the reserve requirement ratio could be cut in Q1. Evergrande is reportedly considering two offshore restructuring options. Toyota aims to increase its annual production volume by 15.2% to 10.6 mln units but will allow itself to miss the target by up to 10.0%.

• In economic data:

  • China's Q4 GDP 0.0% qtr/qtr (expected -0.8%; last 3.9%); 2.9% yr/yr (expected 1.8%; last 3.9%). December Retail Sales -1.8% yr/yr (expected -8.6%; last -5.9%), December Industrial Production 1.3% yr/yr (expected 0.2%; last 2.2%), December Fixed Asset Investment 5.1% yr/yr (expected 5.0%; last 5.3%). December Unemployment Rate 5.5% (expected 6.0%; last 5.7%)

  • Japan's November Tertiary Industry Activity Index -0.2% m/m (expected 0.2%; last 0.5%)

  • Singapore's December trade surplus SGD5.367 bln (last SGD3.344 bln). December non-oil exports -3.3% m/m (expected 1.0%; last -9.2%); -20.6% yr/yr (expected -16.8%; last -14.7%)

  • Australia's January Westpac Consumer Sentiment 5.0% (last 3.0%)

  • New Zealand's Q4 NZIER Business Confidence -70% (last -42%)

---Equity Markets---

• Japan's Nikkei: +1.2%

• Hong Kong's Hang Seng: -0.8%

• China's Shanghai Composite: -0.1%

• India's Sensex: +0.9%

• South Korea's Kospi: -0.9%

• Australia's ASX All Ordinaries: -0.1%

---FX---

• USD/JPY: +0.2% to 128.82

• USD/CNH: +0.7% to 6.7829

• USD/INR: +0.2% to 81.76

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

Major European indices trade on a modestly lower note. Germany's ZEW Economic Sentiment survey turned positive for the first time in nearly a year, reflecting a significant improvement in growth expectations. European Central Bank Chief Economist Lane repeated that rates need to reach a restrictive level and that the current 2.00% rate is close to neutral. Germany's Economy Minister Habeck said that his government aims to get inflation below 5.0% by the end of the year. The Federation of German Industries expects that the German economy will contract 0.3% this year.

• In economic data:

  • Eurozone's January ZEW Economic Sentiment 16.7 (expected -14.3; last -23.6)

  • Germany's January ZEW Economic Sentiment 16.9 (expected -15.0; last -23.3) and January ZEW Current Conditions -58.6 (expected -58.3; last -61.4). December CPI -0.8% m/m, as expected (last -0.5%); 8.6% yr/yr, as expected (last 10.0%)

  • U.K.'s November Average Earnings Index + Bonus 6.4% yr/yr (expected 6.2%; last 6.2%). November three-month employment change 27,000 (expected 5,000; last 27,000), November Unemployment Rate 3.7%, as expected (last 3.7%). December claimant count change 19,700 (expected 19,800; last 16,100)

  • Italy's December CPI 0.3% m/m, as expected (last 0.5%); 11.6% yr/yr, as expected (last 11.8%)

---Equity Markets---

• STOXX Europe 600: -0.2%

• Germany's DAX: -0.1%

• U.K.'s FTSE 100: -0.3%

• France's CAC 40: -0.1%

• Italy's FTSE MIB: -0.3%

• Spain's IBEX 35: -0.1%

---FX---

• EUR/USD: +0.2% to 1.0836

• GBP/USD: +0.6% to 1.2260

• USD/CHF: -0.5% to 0.9219