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18/05/22 Briefing


The S&P 500 futures trade 31 points, or 0.8%, below fair value as inflation concerns pressure risk sentiment following a big rally effort yesterday.

Target (TGT 166.80, -48.48, -22.5%) is setting the negative tone with a 22.5% decline in pre-market action after missing EPS estimates on above-consensus revenue, citing "unusually high costs" that impacted profitability.

The disappointing news mirrors Walmart (WMT 128.75, -2.60, -2.0%) yesterday and has overshadowed Lowe's (LOW 188.50, -5.53, -2.9%) earnings beat today. Interestingly, TJX Co. (TJX 57.00, +0.81, +1.8%) is trading higher despite missing revenue estimates and issuing downside Q2 EPS guidance.

Persistently high oil prices ($114.42/bbl, +2.01, +1.8%) have added to inflation concerns while an uptick in long-term interest rates has dovetailed with the inflation-expectations narrative.

The 10-yr yield is up three basis points to 3.00%. The 2-yr yield is up three basis points to 2.70%. The U.S. Dollar Index is up 0.3% to 103.63.

On the data front, investors will receive Housing Starts (Briefing.comconsensus 1.775 million) and Building Permits (Briefing.comconsensus 1.820 million) for April at 8:30 a.m. ET. Earlier, the weekly MBA Mortgage Applications Index dropped 11.0% following a 2.0% increase in the prior week.

In U.S. Corporate news:

  • Target (TGT 166.80, -48.48): -22.5% after missing EPS estimates on above-consensus revenue, citing "unusually high costs" that impacted profitability. Target guided FY23 revenue in-line with expectations.

  • Lowe's (LOW 188.50, -5.53): -2.9% despite beating EPS estimates and reaffirming its FY23 EPS and revenue guidance.

  • TJX Cos. (TJX 57.00, +0.81): +1.8% after beating EPS estimates on below-consensus revenue. The company guided Q2 EPS below consensus.

  • Analog Devices (ADI 167.00, +3.16): +1.9% after beating top and bottom-line estimates and guiding Q3 EPS and revenue above consensus.

  • Doximity (DOCS 29.35, -4.42): -13.1% after guiding JunQ revenue below consensus. The company topped earnings expectations, guided FY23 revenue above consensus, and authorized up to $70 million for share buybacks.

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the midweek session on a mostly higher note. Japan's Nikkei: +0.9% Hong Kong's Hang Seng: +0.2% China's Shanghai Composite: -0.3% India's Sensex: -0.2% South Korea's Kospi: +0.2% Australia's ASX All Ordinaries: +1.0%.

  • In economic data:

  • China's April House Prices 0.7% yr/yr (last 1.5%)

  • Japan's Q1 GDP -0.2% qtr/qtr (expected -0.4%; last 0.9%); -1.0% yr/yr (expected -1.8%; last 3.8%). Q1 GDP Capital Expenditure 0.5% qtr/qtr (expected 0.7%; last 0.4%) and Q1 GDP External Demand -0.4% qtr/qtr (expected -0.3%; last 0.1%). March Industrial Production 0.3% m/m, as expected (last 2.0%) and Capacity Utilization -1.6% m/m (last 1.5%)

  • Australia's Q1 Wage Price Index 0.7% qtr/qtr (expected 0.8%; last 0.7%); 2.4% yr/yr (expected 2.5%; last 2.3%). April MI Leading Index -0.2% m/m (last 0.3%)


  • In news:

  • Former Bank of Japan policymaker Sakurai said that there is a chance that the central bank will adjust its yield curve control policy in the fall, adding that the yen could weaken to 140 per dollar.

  • South Korean think tank KDI raised South Korea's forecast for 2022 CPI to 4.2% from 1.7% while the growth forecast was reduced to 2.8% from 3.0%.

  • The Chinese government will reportedly offer subsidies to some car buyers.



  • Major European indices trade near their flat lines. STOXX Europe 600: -0.2% Germany's DAX: -0.1% U.K.'s FTSE 100: -0.2% France's CAC 40: -0.2% Italy's FTSE MIB: UNCH Spain's IBEX 35: +0.4%.

  • In economic data:

  • Eurozone's April CPI 0.6% m/m, as expected (last 2.4%); 7.4% yr/yr (expected 7.5%; last 7.5%). April Core CPI 1.0% m/m (expected 1.1%; last 1.1%); 3.5% yr/yr, as expected (last 3.0%)

  • U.K.'s April CPI 2.5% m/m (expected 2.6%; last 1.1%); 9.0% yr/yr (expected 9.1%; last 7.0%). April Core CPI 0.7% m/m (expected 0.8%; last 0.9%); 6.2% yr/yr, as expected (last 5.7%). April Input PPI 1.1% m/m, as expected (last 4.6%) and Output PPI 2.3% m/m (expected 1.0%; last 1.9%)


  • In news:

  • The U.K. may bring forward the income tax cut that is being planned for next year.

  • European Central Bank policymaker Rehn cautioned against feeding a change to inflation expectations, repeating his expectations for an initial rate hike this summer.

  • The U.K.'s CPI remained above target for the ninth consecutive month in April.

  • Finland and Sweden officially applied for NATO accession.



U.S. equity futures:

  • S&P 500 Futures: -35 @ 4,054

  • DJIA Futures: -230 @ 32,424

  • Nasdaq 100 Futures: -152 @ 12,412

Overseas:

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

  • Asia: Nikkei +0.9%, Hang Seng +0.2%, Shanghai Composite -0.3%

Commodities:

  • Crude Oil +1.87 @ 114.28

  • Nat Gas +0.067 @ 8.461

  • Gold -7.30 @ 1811.60

  • Silver -0.140 @ 21.610

  • Copper -0.0410 @ 4.1980

U.S. Summary:

  • Earnings/Guidance (Full Earnings Calendar):

  • Agilysys (AGYS) beats by $0.07, beats on revs; guides FY23 revs above consensus

  • Analog Devices (ADI) beats by $0.29, beats on revs; guides Q3 EPS above consensus, revs above consensus

  • Appian (APPN) reaffirms guidance for Q2 and FY22; Chief Revenue Officer to leave by end of June

  • Container Store (TCS) beats by $0.20, beats on revs; guides JunQ EPS below consensus, revs above consensus; guides FY23 EPS in-line, revs above consensus

  • Digital Turbine (APPS) to restate results for JunQ, SepQ and DecQ following a review of revenue net of license fees and revenue share for the co's recently acquired businesses

  • dLocal Limited (DLO) misses by $0.01, beats on revs

  • Doximity (DOCS) beats by $0.06, beats on revs; guides JunQ revs below consensus; guides FY23 revs above consensus; authorizes up to $70 mln for share buybacks

  • Fluor (FLR) reaffirms FY22 guidance

  • Keysight (KEYS) beats by $0.15, beats on revs; guides JulQ EPS in-line, revs in-line; guides FY22 EPS above consensus, revs above consensus

  • Lowe's (LOW) beats by $0.29, reports revs in-line; reaffirms FY23 EPS guidance, revs guidance

  • NextGen Healthcare (NXGN) reports EPS in-line, revs in-line; reaffirms FY23 EPS guidance, revs guidance

  • Target (TGT) misses by $0.87, beats on revs; guides FY23 revs in-line

  • TJX (TJX) beats by $0.08, misses on revs; guides Q2 EPS below consensus; guides FY23 EPS in-line

  • Vaalco Energy (EGY) receives new five year, $50 mln reserve based lending facility providing additional financial flexibility


  • General News:

  • Finland and Sweden apply for NATO membership, but Turkey might block them, according to New York Times

  • Senator Joe Manchin (D-WV) will support Michael Barr to be Fed vice chair of supervision, according to Bloomberg

  • China in discussions with automakers on EV subsidy extension, according to Reuters

  • Aurora Cannabis (ACB) received EU-GMP certification for its state-of-the-art medical cannabis production facility in Germany

  • Booz Allen Hamilton (BAH) awarded a cybersecurity and privacy enterprise solutions contract from NASA with a total potential value of $622.5 mln, according to FedScoop

  • Digital World Acquisition Corp (DWAC) to delay 10-Q filing

  • DXC Technology (DXC) appoints CEO Mike Salvino to the additional position of board chairman, effective July 26

  • Extreme Networks (EXTR) announces $200 mln share repurchase authorization over three-year period

  • Laboratory Corp (LH) receives Emergency Use Authorization for first non-prescription at-home collection kit for combined COVID-19, flu and RSV detection

  • Lockheed Martin (LMT) awarded $630 mln Navy contract

  • Microsoft (MSFT) making concessions after cloud complaints from rivals, according to Bloomberg

  • Northrop Grumman (NOC) raises quarterly dividend by 10% to $1.73 per share

  • Petrobras (PBR) confirmed there was a diesel oil spill followed by a fire at the Presidente Bernardes Refinery

  • SiriusPoint (SPNT): Third Point (Dan Loeb) increased active stake to 9.35% (prior ~4.2%)

  • SiriusPoint's (SPNT) Chairman and CEO resigns to pursue other opportunities

  • Tesla (TSLA) CEO Elon Mus tweets "Tesla AI Day #2 on Aug 19"

  • Twitter (TWTR) spokesperson says Board will enforce Elon Musk's $44 bln agreement, according to Bloomberg

  • United Natural Foods (UNFI) announces retirement of COO from the company, effective October 29, 2022

  • Walt Disney (DIS): The Walt Disney Company, ESPN & XFL reach exclusive multi-year agreement

  • Wynn Resorts (WYNN): Justice Department sues to compel Steve Wynn to register under the foreign agents registration act


  • M&A:

  • Cushman & Wakefield (CWK) acquires Cresa Partners of Los Angeles; terms not disclosed

  • Envista (NVST) agrees to acquire Osteogenics Biomedical business; terms not disclosed

  • GXO Logistics (GXO): UK CMA is investigating the anticipated acquisition of Clipper Logistic Plc by GXO Logistics

  • MagnaChip Semi (MX) shares higher following report that private equity firms including Carlyle Group (CG) will bid for the company


  • Syndicate:

  • Ares Commercial Real Estate (ACRE) prices offering of 7 mln shares of common stock for gross proceeds of $104.7 mln

  • Casa Systems (CASA) files for 9.323 mln share common stock offering by selling shareholder

  • Equity Residential (EQR) files mixed securities shelf offering

  • European Wax Center (EWCZ) commences public offering of 4.5 mln shares of Class A common stock by selling stockholders

  • RenaissanceRe (RNR) files for $1 bln mixed securities shelf offering

  • Standard BioTools (LAB) files for 75,164,397 share common stock offering by selling shareholders


  • IPOs:

  • Priced to Trade:

  • No IPOs expected.



Gapping Up/Down

  • Gapping up:

  • NCMI +22.8%, DLO +14%, AGYS +10.8%, SPNT +8.2%, XAIR +6.4%, TCS +5.1%, CWK +5%, NVST +4.6%, ROOT +3%, TGI +2.8%, AMR +2.4%, EGY +2%, AMC +1.9%, LFLY +1.8%, TILE +1.8%, AMWL +1.6%, DXC +1.3%, INSM +1.3%, SONY +0.9%, APPN +0.9%, BAH +0.8%, FFIC +0.8%


  • Gapping down:

  • TGT -22.4%, DOCS -14.7%, NXGN -14.3%, EWCZ -7.8%, ACRE -6.6%, RES -6.1%, DOYU -4.6%, LAB -2.4%, LOW -2.4%, CASA -0.9%, APPS -0.8%, UNFI -0.7%, DWAC -0.5%


Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • AeroVironment (AVAV) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt raised to $100

  • Canadian Nat'l Rail (CNI) upgraded to Outperform from Market Perform at BMO Capital Markets

  • Cardinal Health (CAH) upgraded to Outperform from In-line at Evercore ISI; tgt raised to $68

  • Cellectis (CLLS) upgraded to Outperform from Neutral at Robert W. Baird; tgt $10

  • Endeavor Group (EDR) upgraded to Buy from Neutral at Goldman; tgt lowered to $29

  • Expedia Group (EXPE) upgraded to Buy from Neutral at Redburn

  • Great Ajax (AJX) upgraded to Buy from Neutral at Compass Point; tgt $16

  • InterCure (INCR) upgraded to Buy from Speculative Buy at Canaccord Genuity; tgt $13

  • Mercury (MRCY) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt raised to $72

  • Monster Beverage (MNST) upgraded to Outperform from Mkt Perform at Bernstein; tgt raised to $110

  • On (ONON) upgraded to Hold from Sell at Williams Trading; tgt $19

  • Penn Natl Gaming (PENN) upgraded to Buy from Hold at Jefferies; tgt $49

  • Ventas (VTR) upgraded to Outperform from Neutral at Credit Suisse; tgt raised to $63

  • Welltower (WELL) upgraded to Outperform from Neutral at Credit Suisse; tgt raised to $100

  • World Fuel Services (INT) upgraded to Buy from Hold at Stifel; tgt $35


  • Downgrades:

  • Carrier Global (CARR) downgraded to Neutral from Buy at BofA Securities

  • Century Aluminum (CENX) downgraded to Peer Perform from Outperform at Wolfe Research; tgt lowered to $14

  • Comstock (CRK) downgraded to Underweight from Neutral at Piper Sandler; tgt lowered to $16

  • Ginkgo Bioworks (DNA) downgraded to Underperform from Neutral at BofA Securities; tgt $3

  • Hanmi Financial (HAFC) downgraded to Neutral from Buy at DA Davidson; tgt $25

  • Hope Bancorp (HOPE) downgraded to Neutral from Buy at DA Davidson; tgt lowered to $16

  • Industrial Logistics Properties Trust (ILPT) downgraded to Mkt Perform from Mkt Outperform at JMP Securities

  • Plymouth Industrial REIT (PLYM) downgraded to Mkt Perform from Mkt Outperform at JMP Securities

  • Warby Parker (WRBY) downgraded to Neutral from Buy at Goldman; tgt lowered to $18


  • Others:

  • Amplitude (AMPL) initiated with an Overweight at Piper Sandler; tgt $25

  • Fidelity Nat'l Info (FIS) initiated with a Buy at Goldman; tgt $128

  • Fiserv (FISV) initiated with a Neutral at Goldman; tgt $108

  • Five9 (FIVN) resumed with a Buy at ROTH Capital; tgt $129

  • Global Payments (GPN) initiated with a Neutral at Goldman; tgt $151

  • Mastercard (MA) initiated with a Buy at Goldman; tgt $460

  • PAR Technology (PAR) initiated with a Neutral at Goldman; tgt $43

  • Performance Food Group (PFGC) initiated with a Buy at Berenberg; tgt $71

  • PerkinElmer (PKI) initiated with an Underweight at Barclays; tgt $125

  • Shift4 Payments (FOUR) initiated with a Neutral at Goldman; tgt $55

  • Terreno Realty (TRNO) initiated with a Mkt Outperform at JMP Securities; tgt $75

  • US Foods (USFD) initiated with a Buy at Berenberg; tgt $53

  • Visa (V) initiated with a Conviction Buy at Goldman; tgt $282

  • Vodafone PLC (VOD) resumed with a Buy at Citigroup

  • VSE Corp (VSEC) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $48

  • Waters (WAT) initiated with an Overweight at Barclays; tgt $375

  • Western Union (WU) initiated with a Sell at Goldman; tgt $18


Upcoming Events:

  • Econ Data:

  • 07:00 ET: Weekly MBA Mortgage Index (actual -11.0%; prior 2.0%)

  • 08:30 ET: April Housing Starts (Briefing.comconsensus 1.775 mln; prior 1.793 mln) and Building Permits (Briefing.comconsensus 1.820 mln; prior 1.873 mln)

  • 10:30 ET: Weekly crude oil inventories (prior +8.49 mln)


  • Earnings:

  • Monday (May 16)

  • Morning: YOU CGEN MNDY TSEM WRBY WEBR WIX

  • Afternoon: CCSI GAN GLBE SHLS SSYS TTWO TME


  • Tuesday (May 17)

  • Morning: AER HD HUYA IHS JD ONON RSKD SE WMT

  • Afternoon: AGYS DLO DOCS KEYS NXGN


  • Wednesday (May 18)

  • Morning: ADI DOYU DT LOW TGT TJX TGI

  • Afternoon: BBWI CSCO CPRT GDS SNPS


  • Thursday (May 19)

  • Morning: WMS BJ CAE GOOS EXP KSS LSPD MNRO VIPS

  • Afternoon: AINV AMAT DECK FLO GLOB PANW ROST VFC


  • Friday (May 20)

  • Morning: BAH DE FL



Asia & Europe detail:

Asia: Nikkei +0.9%, Hang Seng +0.2%, Shanghai Composite -0.3%

Equity indices in the Asia-Pacific region ended the midweek session on a mostly higher note. Former Bank of Japan policymaker Sakurai said that there is a chance that the central bank will adjust its yield curve control policy in the fall, adding that the yen could weaken to 140 per dollar. South Korean think tank KDI raised South Korea's forecast for 2022 CPI to 4.2% from 1.7% while the growth forecast was reduced to 2.8% from 3.0%. The Chinese government will reportedly offer subsidies to some car buyers.

  • In economic data:

  • China's April House Prices 0.7% yr/yr (last 1.5%)

  • Japan's Q1 GDP -0.2% qtr/qtr (expected -0.4%; last 0.9%); -1.0% yr/yr (expected -1.8%; last 3.8%). Q1 GDP Capital Expenditure 0.5% qtr/qtr (expected 0.7%; last 0.4%) and Q1 GDP External Demand -0.4% qtr/qtr (expected -0.3%; last 0.1%). March Industrial Production 0.3% m/m, as expected (last 2.0%) and Capacity Utilization -1.6% m/m (last 1.5%)

  • Australia's Q1 Wage Price Index 0.7% qtr/qtr (expected 0.8%; last 0.7%); 2.4% yr/yr (expected 2.5%; last 2.3%). April MI Leading Index -0.2% m/m (last 0.3%)


---Equity Markets---

  • Japan's Nikkei: +0.9%

  • Hong Kong's Hang Seng: +0.2%

  • China's Shanghai Composite: -0.3%

  • India's Sensex: -0.2%

  • South Korea's Kospi: +0.2%

  • Australia's ASX All Ordinaries: +1.0%

---FX---

  • USD/JPY: -0.2% to 129.15

  • USD/CNH: +0.1% to 6.7497

  • USD/INR: +0.2% to 77.57

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

Major European indices trade near their flat lines. The U.K. may bring forward the income tax cut that is being planned for next year. European Central Bank policymaker Rehn cautioned against feeding a change to inflation expectations, repeating his expectations for an initial rate hike this summer. The U.K.'s CPI remained above target for the ninth consecutive month in April. Finland and Sweden officially applied for NATO accession.

  • In economic data:

  • Eurozone's April CPI 0.6% m/m, as expected (last 2.4%); 7.4% yr/yr (expected 7.5%; last 7.5%). April Core CPI 1.0% m/m (expected 1.1%; last 1.1%); 3.5% yr/yr, as expected (last 3.0%)

  • U.K.'s April CPI 2.5% m/m (expected 2.6%; last 1.1%); 9.0% yr/yr (expected 9.1%; last 7.0%). April Core CPI 0.7% m/m (expected 0.8%; last 0.9%); 6.2% yr/yr, as expected (last 5.7%). April Input PPI 1.1% m/m, as expected (last 4.6%) and Output PPI 2.3% m/m (expected 1.0%; last 1.9%)


---Equity Markets---

  • STOXX Europe 600: -0.2%

  • Germany's DAX: -0.1%

  • U.K.'s FTSE 100: -0.2%

  • France's CAC 40: -0.2%

  • Italy's FTSE MIB: UNCH

  • Spain's IBEX 35: +0.4%

---FX---

  • EUR/USD: -0.3% to 1.0520

  • GBP/USD: -0.7% to 1.2402

  • USD/CHF: +0.3% to 0.9965

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The S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures