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18/08/22 Briefing

The S&P 500 futures are up 8 points and are trading 0.1% above fair value. The Nasdaq 100 futures are up 34 points and are 0.1% above fair value. The Dow Jones Industrial Average futures are up 39 points and are trading 0.2% above fair value.

Futures for the major indices are modestly higher with market participants waiting to see if yesterday's rally will fuel a buy-the-dip trade or a longer phase of consolidation. 

More central bank news is in play today. Norges Bank raised its key rate by 50 basis points to 1.75% and said it expects to raise the rate further in September. Also, European Central Bank policymaker Schnabel said that she expects another big interest rate hike in September despite the growing risk of recession.

On a related note, Eurozone CPI was up 8.9% year-over-year versus 8.6% in June.

The U.S. and Taiwan will hold trade and investment talks this fall, according to the Wall Street Journal.

Energy complex futures are higher this morning. WTI crude oil futures are up 1.2% to $89.16/bbl. Natural gas futures are up 0.8% to $9.32/mmbtu. Unleaded gasoline futures are up 1.1% to $2.96.gal.

Treasury yields are lower with the 2-yr note yield down five basis points to 3.23% while the 10-yr note yield is down two basis points to 2.87%.

In corporate news:

  • Tapestry (TPR 36.70, -0.41, -1.10%): beats by $0.01, reports revs in-line; guides FY23 EPS below consensus, revs above consensus

  • Estee Lauder (EL 271.55, -4.97, -1.80%): beats by $0.06, beats on revs; guides FY23 revs below consensus

  • BJ's Wholesale (BJ 73.15, +4.02, +5.82%): beats by $0.25, beats on revs; Q2 total comps +19.8% or +7.6% ex-gas; raises FY23 EPS and comp guidance

  • Kohl's (KSS 31.00, -2.95, -8.69%): misses by $0.01, beats on revs; guides FY23 EPS below consensus, revs below consensus

  • Bath & Body Works (BBWI 40.52, +0.33, +0.82%):  beats by $0.11, reports revs in-line; guides Q3 EPS below consensus, sales down mid-to-high-single digits; guides FY23 EPS in-line, sales down mid-to-high-single digits

  • Cisco (CSCO 49.20, +2.54, +5.44%): beats by $0.01, beats on revs; guides OctQ EPS in-line, revs above consensus; guides FY23 EPS in-line, revs above consensus

  • Wolfspeed (WOLF 104.60, +18.95, +22.12%): beats by $0.08, beats on revs; guides Q1 (Sep) EPS in-line, revs above consensus; expects FY26 revs +30-40% higher than previous forecast

  • Synopsys (SNPS 387.78, +6.78, +1.78%): beats by $0.11, beats on revs; guides Q4 (Oct) EPS above consensus, revs above consensus; guides FY22EPS above consensus, revs above consensus

  • Keysight (KEYS 176.72, +7.43, +4.39%): beats by $0.22, beats on revs; guides Q4 EPS above consensus, revs in-line

Reviewing overnight developments:    

  • Equity indices in the Asia-Pacific region ended Thursday on a mostly lower note. Japan's Nikkei: -1.0%, Hong Kong's Hang Seng: -0.8%, China's Shanghai Composite: -0.5%, India's Sensex: +0.1%, South Korea's Kospi: -0.3%, Australia's ASX All Ordinaries: -0.3%.

  • In economic data:

  • China's July FDI 17.3% YTD (last 17.4%)

  • Australia's July Employment Change -40,900 (expected 25,000; last 88,400) and full employment change -86,900 (last 52,900). July Unemployment Rate 3.4% (expected 3.5%; last 3.5%) and Participation Rate 66.4% (expected 66.8%; last 66.8%)

  • In news:

  • Chinese press reported that up to CNY1.5 trln of extra local debt could be issued.

  • China's top developer, Country Garden, issued a warning that its core profit for the first half of 2022 could be down up to 70%.

  • July air passenger traffic in China was down 30.8% yr/yr.

  • Australia's employment decreased for the first time since October 2021 in the July reading, but the unemployment rate still fell to its lowest level since 1974 amid falling labor force participation rate.

  • Major European indices trade on a mostly higher note. STOXX Europe 600: +0.3%, Germany's DAX: +0.7%, U.K.'s FTSE 100: -0.1%, France's CAC 40: +0.4%, Italy's FTSE MIB: +0.6%, Spain's IBEX 35: UNCH.

  • In economic data:

  • Eurozone's July CPI 0.1% m/m, as expected (last 0.8%); 8.9% yr/yr, as expected (last 8.6%). July Core CPI -0.2% m/m, as expected (last 0.2%); 4.0% yr/yr, as expected (last 3.7%). June Construction Output -1.25% m/m (last -0.27%)

  • Spain's June trade deficit EUR5.39 bln (last deficit of EUR4.76 bln)

  • In news:

  • Eurozone's CPI accelerated to a fresh record or 8.9% yr/yr in the July reading.

  • A poll conducted by YouGov saw Liz Truss holding a 66-34 lead over Rishi Sunak in the race to lead the Conservative party.

  • European Central Bank policymaker Schnabel said that she expects another big interest rate hike in September despite the growing risk of recession.

U.S. equity futures:

  • S&P 500 Futures: +8 @ 4,282

  • DJIA Futures: +41 @ 34,022

  • Nasdaq 100 Futures: +29 @ 13,499

Overseas:

  • Europe: DAX +0.7%, FTSE -0.1%, CAC +0.4%

  • Asia: Nikkei -1.0%, Hang Seng -0.8%, Shanghai Composite -0.5%

Commodities:

  • Crude Oil +0.94 @ 89.05

  • Nat Gas  +0.177 @ 9.421

  • Gold +8.15 @ 1784.85

  • Silver +0.109  @ 19.840

  • Copper +0.0545 @ 3.6380

U.S. Summary:

  • Earnings/Guidance:

  • Bath & Body Works (BBWI) beats by $0.11, reports revs in-line; guides Q3 EPS below consensus, sales down mid-to-high-single digits; guides FY23 EPS in-line, sales down mid-to-high-single digits

  • BJ's Wholesale (BJ) beats by $0.25, beats on revs; Q2 total comps +19.8% or +7.6% ex-gas; raises FY23 EPS and comp guidance

  • Canadian Solar (CSIQ) beats by $0.74, beats on revs; guides Q3 revs above consensus; raises FY22 revs above consensus

  • Cisco (CSCO) beats by $0.01, beats on revs; guides OctQ EPS in-line, revs above consensus; guides FY23 EPS in-line, revs above consensus

  • Estee Lauder (EL) beats by $0.06, beats on revs; guides FY23 revs below consensus

  • Keysight (KEYS) beats by $0.22, beats on revs; guides Q4 EPS above consensus, revs in-line

  • Kohl's (KSS) misses by $0.01, beats on revs; guides FY23 EPS below consensus, revs below consensus

  • Melco Resorts & Entertainment (MLCO) misses by $0.09, misses on revs

  • NetEase (NTES) beats by CNY1.08, reports revs in-line

  • NICE (NICE) beats by $0.06, beats on revs; guides Q3 EPS in-line, revs in-line; raises FY22 EPS in-line, revs above consensus

  • Sociedad Quimica y Minera (SQM) reports Q2 results; beats on revs

  • SpartanNash (SPTN) beats by $0.12, beats on revs; reaffirms FY22 EPS guidance, guides FY22 revs above consensus

  • Synopsys (SNPS) beats by $0.11, beats on revs; guides Q4 (Oct) EPS above consensus, revs above consensus; guides FY22 EPS above consensus, revs above consensus

  • Tapestry (TPR) beats by $0.01, reports revs in-line; guides FY23 EPS below consensus, revs above consensus

  • Wolfspeed (WOLF) beats by $0.08, beats on revs; guides Q1 (Sep) EPS in-line, revs above consensus; expects FY26 revs +30-40% higher than previous forecast

  • General News:

  • US and Taiwan will hold trade and investment talks this fall, according to Financial Times

  • Iran's demands for guarantees have stalled nuclear talks, according to the Wall Street Journal

  • Oil companies will face climate change lawsuits from various states, according to the Wall Street Journal

  • Ethanol could benefit from carbon capture tax credits in climate law, according to Reuters

  • Germany to lower taxes on natural gas to 7%, according to Reuters

  • Amazon (AMZN) is looking for a senior movie studio executive, according to the Wall Street Journal

  • American Fincl (AFG) increases its annual dividend 12.5% to $2.52

  • Babcock & Wilcox Enterprises (BW) receives $42 mln contract for installation of environmental equipment for U.S. power plant

  • Bed Bath & Beyond (BBBY): SEC filing from RC Ventures regarding potential sale of 7.78 mln shares

  • BioCryst Pharma (BCRX) announces that the Saudi Food and Drug Authority has approved oral, once-daily ORLADEYO to prevent attacks of hereditary angioedema in adults and pediatric patients 12 years of age and older in Saudi Arabia

  • Ceragon (CRNT) urges shareholders to vote against Aviat's attempt to take control of the board on the white proxy card today

  • Continental Resources (CLR) announced Doug Lawler is being promoted to President and Chief Operating Officer

  • Cue Health (HLTH): clinical study demonstrates that its point of care molecular COVID-19 test is as accurate as a centralized lab-based RT-PCR

  • Eargo (EAR) supports new regulation on OTC hearing aids; co believes its hearing aids are within the FDA's requirements

  • Henry Schein (HSIC) announces that its Board of Directors has authorized the repurchase of up to $400 million of shares of the Company's common stock

  • Hut 8 Mining (HUT) establishes at-the-market equity program

  • HYZON Motors (HYZN) appoints Parker Meeks as President and Interim Chief Executive Officer

  • Middlesex Water (MSEX) has been awarded a 10-yr management contract with Avalon, New Jersey for day to day operations of the Borough's water and sewer utility

  • Pebblebrook Hotel Trust (PEB) provides update on operating trends; Business travel demand, both group and transient, saw further improvement in July

  • PENN Entertainment (PENN) discloses it has exercised call options related to all outstanding shares of common stock of Barstool Sports not already owned by PENN; ownership of Barstool is now 100%

  • Perrigo (PRGO) issues statement responding to news story regarding ranitidine (Zantac) litigation

  • Personalis (PSNL) files amended complaint against Foresight Diagnostics to include newly-issued patent

  • Philips (PHG) to convene Extraordinary General Meeting of Shareholders to appoint Roy Jakobs as new President and CEO

  • Phillips 66 (PSX) increases its economic interest in DCP Midstream from 28.26% to 43.31%; also realigns its economic and governance interest in DCP and Gray Oak Pipeline through the merger of existing joint ventures owned with Enbridge

  • QuidelOrtho (QDEL) authorizes the repurchase of up to $300 mln of shares of common stock over next two years

  • Rolls Royce PLC (RYCEY) awarded $1.01 bln U.S. Navy firm-fixed-price, indefinite-delivery, requirements contract

  • Schrodinger (SDGR) appoints Geoffrey Porges as CFO

  • Tesla (TSLA) lowers delivery waiting times in China for Model Y, according to Reuters

  • Winnebago (WGO) approves 50% increase to quarterly cash dividend to $0.27/share (equates to new annualized yield of 1.7%); also approves new share repurchase program of up to $350 mln of common stock

  • M&A:

  • AeroVironment (AVAV) acquires Planck Aerosystems; terms of deal not disclosed

  • Blackstone (BX): EU Commission clears acquisition of Advarra by Blackstone and CPP Investments

  • Brooge Holdings (BROG) says majority shareholder, BPGIC Holdings, would like to take company private

  • Manchester United (MANU): British billionaire Jim Ratcliffe is interested in buying the company, according to Reuters

  • Manchester United (MANU): Glazer family has entered discussions to sell minority stake in Manchester United to Apollo (APO), according to Daily Mail

  • Phillips 66 (PSX) offers to acquire all publicy held common units of DCP Midstream (DCP) for cash for $34.75/common unit

  • Pixelworks (PXLW) announces strategic investment in Shanghai subsidiary

  • Syndicate

  • Accelerate Diagnostics (AXDX) commences public offering of shares

  • Rigetti Computing (RGTI) files for 23,648,889 share common stock offering by selling shareholder

  • UMB Financial Corporation (UMBF) files mixed securities shelf offering

  • IPOs:

  • Expected to Price:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • WOLF +22.9%, CSCO +5%, KIND +4.9%, INNV +4.9%, KEYS +3.5%, NICE +3.3%, CSIQ +3%, QDEL +2.5%, NTES +2.5%, WGO +2.4%, RCEL +1.5%, FUBO +1.1%, AMCR +0.8%, APRN +0.7%

  • Gapping down:

  • BBBY -14.3%, EAR -8.6%, HUT -4.7%, GME -3.9%, SQM -3.8%, PHG -1.1%, AVAV -1%, HYZN -0.9%, MANU -0.8%, PRGO -0.8%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Calumet Specialty Products (CLMT) upgraded to Buy from Neutral at Goldman; tgt raised to $23

  • Essential Utilities (WTRG) upgraded to Buy from Hold at HSBC Securities; tgt raised to $57

  • First Bancorp (FBNC) upgraded to Overweight from Neutral at Piper Sandler; tgt lowered to $47

  • First Solar (FSLR) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt raised to $136

  • MGIC Investment (MTG) upgraded to Buy from Neutral at BofA Securities; tgt $18

  • Radian Group (RDN) upgraded to Neutral from Underperform at BofA Securities; tgt raised to $24

  • Downgrades:

  • 10x Genomics (TXG) downgraded to Sell from Neutral at Goldman; tgt lowered to $35

  • Analog Devices (ADI) downgraded to Hold from Buy at Needham

  • Array Tech (ARRY) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt lowered to $15

  • Bed Bath & Beyond (BBBY) downgraded to Underperform from Neutral at Wedbush; tgt $5

  • Brinker (EAT) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets

  • Clarus Corporation (CLAR) downgraded to Mkt Perform from Outperform at Raymond James

  • DCP Midstream (DCP) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $38

  • Elanco Animal Health (ELAN) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $22

  • Enact Holdings (ACT) downgraded to Underperform from Neutral at BofA Securities; tgt $25

  • Franklin BSP Realty Trust (FBRT) downgraded to Mkt Perform from Mkt Outperform at JMP Securities

  • Hawaiian Electric (HE) downgraded to Underperform from Neutral at BofA Securities; tgt $43

  • Jack Henry (JKHY) downgraded to Neutral from Buy at DA Davidson; tgt $210

  • Krispy Kreme, Inc. (DNUT) downgraded to In-line from Outperform at Evercore ISI; tgt lowered to $15

  • Par Pacific (PARR) downgraded to Neutral from Buy at Goldman; tgt raised to $20

  • PerkinElmer (PKI) downgraded to Hold from Buy at Stifel; tgt lowered to $170

  • Principal Fincl (PFG) downgraded to Neutral from Outperform at Credit Suisse; tgt raised to $86

  • Stronghold Digital Mining (SDIG) downgraded to Market Perform from Outperform at Cowen; tgt lowered to $2.25

  • Verizon (VZ) downgraded to Underperform from Market Perform at MoffettNathanson; tgt $41

  • World Wrestling (WWE) downgraded to Neutral from Buy at Northcoast

  • Others:

  • Advanced Drainage Systems (WMS) initiated with a Buy at Deutsche Bank; tgt $182

  • American Woodmark (AMWD) initiated with a Sell at Deutsche Bank; tgt $45

  • Armstrong World Industries (AWI) initiated with a Buy at Deutsche Bank; tgt $125

  • AZEK (AZEK) initiated with a Buy at Deutsche Bank; tgt $29

  • Beacon Roofing Supply (BECN) initiated with a Buy at Deutsche Bank; tgt $90

  • Builders FirstSource (BLDR) initiated with a Buy at Deutsche Bank; tgt $93

  • Casey's General (CASY) initiated with an Outperform at Wolfe Research; tgt $228

  • Core & Main (CNM) initiated with a Buy at Deutsche Bank; tgt $40

  • Enhabit Inc. (EHAB) initiated with a Neutral at Citigroup; tgt $17

  • ESAB Corp. (ESAB) initiated with an Overweight at JP Morgan; tgt $55

  • Fortune Brands Home & Security (FBHS) initiated with a Buy at Deutsche Bank; tgt $100

  • Freshpet (FRPT) initiated with an Overweight at Piper Sandler; tgt $69

  • Installed Building Products (IBP) initiated with a Hold at Deutsche Bank; tgt $108

  • Ivanhoe Electric (IE) initiated with a Neutral at JP Morgan; tgt $12

  • JELD-WEN (JELD) initiated with a Hold at Deutsche Bank; tgt $15

  • Masco (MAS) initiated with a Hold at Deutsche Bank; tgt $61

  • Masonite International (DOOR) initiated with a Buy at Deutsche Bank; tgt $135

  • Mohawk (MHK) initiated with a Hold at Deutsche Bank; tgt $122

  • Mueller Water (MWA) initiated with a Hold at Deutsche Bank; tgt $12

  • NuScale Power (SMR) initiated with a Buy at Guggenheim; tgt $18

  • OneConnect Financial (OCFT) resumed with a Hold at HSBC Securities

  • Owens Corning (OC) initiated with a Hold at Deutsche Bank; tgt $103

  • PGT Inc. (PGTI) initiated with a Buy at Deutsche Bank; tgt $38

  • Pool (POOL) initiated with a Hold at Deutsche Bank; tgt $431

  • SiteOne Landscape Supply (SITE) initiated with a Buy at Deutsche Bank; tgt $189

  • TopBuild (BLD) initiated with a Hold at Deutsche Bank; tgt $236

  • Trex (TREX) initiated with a Buy at Deutsche Bank; tgt $87

  • Wabtec (WAB) initiated with an Outperform at Raymond James; tgt $103

  • Watsco (WSO) initiated with a Hold at Deutsche Bank; tgt $311

  • Watts Water Tech. (WTS) initiated with a Buy at Deutsche Bank; tgt $192

Upcoming Events:

  • Econ Data:

  • 08:30 ET: Initial Claims for Aug 13 (Briefing.comConsensus 266K; Prior 262K)

  • 08:30 ET: Continuing Claims for Aug 6 (Briefing.comConsensus NA; Prior 1428K)

  • 08:30 ET: Philadelphia Fed Index for Aug (Briefing.comConsensus -4.0; Prior -12.3)

  • 10:00 ET: Existing Home Sales for Jul (Briefing.comConsensus 4.85M; Prior 5.12M)

  • 10:00 ET: Leading Economic Index for Jul (Briefing.comConsensus NA; Prior -0.8%)

  • 10:30 ET: EIA Natural Gas Inventories for Aug 13 (Briefing.comConsensus NA; Prior +44 bcf)

  • Earnings:

  • Monday (Aug 15)

  • Morning:  YOU DOYU LI TWKS WEBR

  • Afternoon: LFG BLND COMP FN FLNC GLBE NVTS SHLS TME TDUP ZIP

  • Tuesday (Aug 16)

  • Morning: GENI HD HUYA IHS LITE ONON PINC SE WMT

  • Afternoon:  A JKHY

  • Wednesday (Aug 17)

  • Morning:  ADI DNUT LOW PFGC SFL TGT TJX

  • Afternoon:  AMCR BBWI CSCO KEYS SNPS WOLF

  • Thursday (Aug 18)

  • Morning: BJ CSIQ EL KSS NTES NICE SLQT SPTN TPR

  • Afternoon:  AMAT BILL GLOB OSIS ROST

  • Friday (Aug 19) 

  • Morning:  BKE DE FL VIPS

Asia & Europe detail:

Asia: Nikkei -1.0%, Hang Seng -0.8%, Shanghai Composite -0.5%

Equity indices in the Asia-Pacific region ended Thursday on a mostly lower note. Chinese press reported that up to CNY1.5 trln of extra local debt could be issued. China's top developer, Country Garden, issued a warning that its core profit for the first half of 2022 could be down up to 70%. July air passenger traffic in China was down 30.8% yr/yr. Australia's employment decreased for the first time since October 2021 in the July reading, but the unemployment rate still fell to its lowest level since 1974 amid falling labor force participation rate.

  • In economic data:

  • China's July FDI 17.3% YTD (last 17.4%)

  • Australia's July Employment Change -40,900 (expected 25,000; last 88,400) and full employment change -86,900 (last 52,900). July Unemployment Rate 3.4% (expected 3.5%; last 3.5%) and Participation Rate 66.4% (expected 66.8%; last 66.8%)

---Equity Markets---

  • Japan's Nikkei: -1.0%

  • Hong Kong's Hang Seng: -0.8%

  • China's Shanghai Composite: -0.5%

  • India's Sensex: +0.1%

  • South Korea's Kospi: -0.3%

  • Australia's ASX All Ordinaries: -0.3%

---FX---

  • USD/JPY: +0.1% to 135.21

  • USD/CNH: +0.2% to 6.8031

  • USD/INR: +0.3% to 79.58

Europe: DAX +0.7%, FTSE -0.1%, CAC +0.4%

Major European indices trade on a mostly higher note. Eurozone's CPI accelerated to a fresh record or 8.9% yr/yr in the July reading. A poll conducted by YouGov saw Liz Truss holding a 66-34 lead over Rishi Sunak in the race to lead the Conservative party. European Central Bank policymaker Schnabel said that she expects another big interest rate hike in September despite the growing risk of recession.

  • In economic data:

  • Eurozone's July CPI 0.1% m/m, as expected (last 0.8%); 8.9% yr/yr, as expected (last 8.6%). July Core CPI -0.2% m/m, as expected (last 0.2%); 4.0% yr/yr, as expected (last 3.7%). June Construction Output -1.25% m/m (last -0.27%)

  • Spain's June trade deficit EUR5.39 bln (last deficit of EUR4.76 bln)

---Equity Markets---

  • STOXX Europe 600: +0.3%

  • Germany's DAX: +0.7%

  • U.K.'s FTSE 100: -0.1%

  • France's CAC 40: +0.4%

  • Italy's FTSE MIB: +0.6%

  • Spain's IBEX 35: UNCH

---FX---

  • EUR/USD: UNCH at 1.0175

  • GBP/USD: +0.1% to 1.2059

  • USD/CHF: +0.2% to 0.9530


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