18/10/22 Briefing

The S&P 500 futures are up 67 points and are trading 1.8% above fair value. The Nasdaq 100 futures are up 228 points and are trading 2.1% above fair value. The Dow Jones Industrial Average futures are up 475 points and are trading 1.6% above fair value.

Equity futures are higher this morning thanks to carryover upside momentum from yesterday's rebound. There's some relief that bank earnings have been better-than-feared and a feeling the market was oversold on a short term basis, which adds fuel to the rally effort. 

The BoA Fund Manager Survey showed cash allocation is at the highest level since 2001, acting as a contrarian rebound factor.  

UK Prime Minister Truss has apologized for recent market volatility but indicated she does not plan to step down. Meanwhile, the Bank of England refuted an FT report about a plan to delay quantitative tightening until the Gilt market calms. 

Secretary of State Anthony Blinken believes China will move to annex Taiwan on a "much faster timeline" than previously expected, according to Axios. 

White House will likely release 10-15 million barrels from the strategic petroleum reserve this week, but an export ban is not likely before November elections, according to Bloomberg. 

The 10-yr Treasury note yield reached 4.04% overnight, it's now at 4.00%. The 2-yr note yield is down one basis point to 4.43%.

In corporate news:

• Johnson & Johnson (JNJ 169.49 +2.90 (+1.74%): beats by $0.06, beats on revs; narrows FY22 EPS guidance; lowers FY22 revenue guidance

• Hasbro (HAS 65.35 -2.36 (-3.49%): misses by $0.18, reports revs in-line; Reiterates full-year guidance

• Truist (TFC 44.78 +0.35 (+0.79%): beats by $0.01, reports revs in-line

• Goldman Sachs (GS 313.49 +6.78 (+2.21%): beats by $0.74, beats on revs

• Lockheed Martin (LMT 400.10 +2.79 (+0.70%):  beats by $0.15, reports revs in-line; guides FY22 revs in-line

• Target (TGT 153.49 +4.24 (+2.84%): upgraded to Buy from Hold at Jefferies

• Matson (MATX 70.25 -0.05 (-0.07%) : guides Q3 earnings below consensus; provides additional Q3 metrics, cites lower volume in China service as a factor in a yr/yr decline in consolidated operation income

• Microsoft (MSFT 242.00 +4.47 (+1.88%): aiming to eliminate more jobs this week, according to The Wall Street Journal 

• Nordstrom (JWN 19.55 +0.32 (+1.66%): CFO to step down; reaffirms guidance

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Tuesday on a mostly higher note. Japan's Nikkei: +1.4%, Hong Kong's Hang Seng: +1.8%, China's Shanghai Composite: -0.1%, India's Sensex: +0.9%, South Korea's Kospi: +1.4%, Australia's ASX All Ordinaries: +1.8%.

  • In economic data:

    • South Korea's August M2 Money Supply 6.8% yr/yr (last 7.1%)

    • New Zealand's Q3 CPI 2.2% qtr/qtr (expected 1.6%; last 1.7%); 7.2% yr/yr (expected 6.6%; last 7.3%)

  • In news:

    • Chinese authorities have not announced a new release date for Q3 growth figures yet. Japan's Ministry of Economy, Trade, and Industry pledged to support exports, domestic investment, and a restart of nuclear power plants.

    • There is growing speculation that the Bank of Japan will increase its CPI forecast for FY22/23 from the current 2.3%.

    • The Minutes from the Reserve Bank of Australia's October meeting showed that arguments for 25- and 50-bps rate hikes are balanced and that the impact of past hikes has yet to be seen.

• Major European indices trade in the green. STOXX Europe 600: +0.7%, Germany's DAX: +1.3%, U.K.'s FTSE 100: +0.9%, France's CAC 40: +0.8%, Italy's FTSE MIB: +1.6%, Spain's IBEX 35: +1.1%.

  • In economic data:

    • Eurozone's October ZEW Economic Sentiment -59.7 (expected -61.2; last -60.7)

    • Germany's October ZEW Economic Sentiment -59.2 (expected -65.7; last -61.9) and ZEW Current Conditions -72.2 (expected -68.0; last -60.5)

    • Italy's August trade deficit EUR9.569 bln (expected deficit of EUR500 mln; last deficit of EUR460 mln)

    • Spain's August trade deficit EUR7.94 bln (last deficit of EUR6.56 bln)

  • In news:

    • The Bank of England refuted an FT report about a plan to delay quantitative tightening until the Gilt market calms.

    • Bank of France Governor Villeroy de Galhau said that the European Central Bank should slow its hiking pace once the deposit rate reaches 2.00%.

    • Germany's ZEW Current Situation survey decreased for the eighth consecutive month, reaching an all-time low.

    • The European Commission will reportedly release the details of its gas price cap plan later today.

U.S. equity futures:

• S&P 500 Futures: +70 @ 3,748

• DJIA Futures: +514 @ 30,700

• Nasdaq 100 Futures: +231 @ 11.294

Overseas:

• Europe: DAX +1.3%, FTSE +0.9%, CAC +0.8%

• Asia: Nikkei +1.4%, Hang Seng +1.8%, Shanghai Composite -0.1%

Commodities:

• Crude Oil -0.17 @ 84.36

• Nat Gas  +0.026 @ 6.025

• Gold -5.65 @ 1658.35

• Silver +0.004  @ 18.723

• Copper -0.0242 @ 3.3913

U.S. Summary:

• Earnings/Guidance:

  • B2Gold (BTG) reports Total Gold Production for Q3 2022 of 227,016 oz; Re-affirms Annual Guidance of 990,000 to 1,050,000 oz of Total Gold Production

  • Commerce Bancshares (CBSH) misses by $0.01, reports revs in-line

  • Conn's (CONN) announces leadership change; Chandra Holt has stepped down as President and CEO; Norman Miller, appointed as Interim President and CEO; sees Q3 revenue below consensus; withdraws FY23 guidance

  • Equity Lifestyle Properties (ELS) beats by $0.01, beats on revs

  • fuboTV (FUBO) announces preliminary Q3 results; expects to exceed prior North America revenue guidance

  • Genmab (GMAB) reports Q3 net sales of DARZALEX totaled USD 2,052 mln

  • Goldman Sachs (GS) beats by $0.74, beats on revs

  • Hasbro (HAS) misses by $0.18, reports revs in-line; Reiterates full-year guidance

  • Johnson & Johnson (JNJ) beats by $0.06, beats on revs; narrows FY22 EPS guidance; lowers FY22 revenue guidance

  • Lockheed Martin (LMT) beats by $0.15, reports revs in-line; guides FY22 revs in-line

  • Main Street Capital (MAIN) provides Q3 guidance update

  • Marten Transport (MRTN) misses by $0.01, beats on revs; increases drivers by 22.6% since June 2021

  • Matson (MATX) guides Q3 earnings below consensus; provides additional Q3 metrics, cites lower volume in China service as a factor in a yr/yr decline in consolidated operation income

  • MFA Financial (MFA) reports certain financial measures

  • Mueller Industries (MLI) beats bottom line single estimate; misses on top

  • Nordstrom (JWN) CFO to step down; reaffirms guidance

  • Ranger Energy Services (RNGR) raises FY22 revenue guidance, expects EBITDA margin at high end of prior guidance

  • Rio Tinto (RIO) reports Q3 production results

  • Roche Hldg (RHHBY) reports nine-month revs increased 2% yr/yr; confirms FY22 outlook

  • RVL Pharmaceuticals (RVLP) sees Q3 UPNEEQ net product sales of ~$10 mln

  • ServisFirst Bancshares (SFBS) misses by $0.06, beats on revs

  • Signature Bank (SBNY) beats by $0.11

  • Silk Road Medical (SILK) sees Q3 revs above consensus

  • Silvergate Capital (SI) misses by $0.13

  • State Street (STT) beats by $0.02, reports revs in-line

  • Truist (TFC) beats by $0.01, reports revs in-line

  • Turquoise Hill Resources (TRQ) reports Q3 copper production decreased 13% yr/yr

  • Vale S.A. (VALE) reports iron ore production increased 21% qtr/qtr

  • Vishay (VSH) raises Q3 revenue guidance

  • XPO Logistics (XPO) guides Q3 revs below consensus; reiterates FY22 North American LTL segment adjusted EBITDA of at least $1.0 bln; provides long-term targets for North American LTL and RXO spin-off

• News:

  • Bank of England is expected to delay sales of government bonds until markets stabilize, according to Financial Times

  • Secretary of State Anthony Blinken believes China will move to annex Taiwan on a "much faster timeline" than previously expected, according to Axios

  • White House will likely release 10-15 million barrels from the strategic petroleum reserve this week, but export ban is not likely before November elections, according to Bloomberg

  • EU will no longer propose energy price cap amid political divisions, according to Bloomberg

  • Dozens of ships carrying liquified natural gas are unable to unload off coast of Spain, according to Reuters

  • Amryt Pharma plc (AMYT): COMP adopts positive opinion on Orphan Disease Designation for Mycapssa for the treatment of Acromegaly

  • Azenta (AZTA) COO Matthew McManus resigned, effective October 14

  • Beyond Air (XAIR) Announces Positive Data from At-Home Pilot Study in Patients with Refractory NTM Lung Infection Treated with (NO) using the LungFit GO at the CHEST Annual Meeting 2022

  • Bio-Techne (TECH): New Publication from Exosome Diagnostics Demonstrates Proof-of-Concept for Monitoring Astronaut Health in Space

  • Boeing (BA) is offering 737 Max jets once slated for Chinese customers to Air India, according to Bloomberg

  • Boeing (BA): FAA wants Boeing to review 737 Max safety documents, according to the Wall Street Journal

  • El Pollo Loco (LOCO) names Maria Hollandsworth as COO, effective October 31

  • Exelon (EXC) names Jeanne Jones as its new CFO

  • HighPeak Energy (HPK) announces increase to the company's borrowing base

  • IDEAYA (IDYA) Announces Phase 2 MAT2A Inhibitor, IDE397, Achieves First-Patient-In for Multiple Combination Cohorts in MTAP-Deletion Tumors

  • Ikena Oncology (IKNA) provides a research & development update on the Company's lead targeted oncology program in TEAD inhibition

  • Instil Bio (TIL) announces that the first patient has been dosed in a Phase 1 dose escalation study of ITIL-306 for the treatment of multiple solid tumors

  • JPMorgan Chase's (JPM) investment banking chief Carlos Hernandez will retire at the end of 1Q23, according to Reuters

  • Merck (MRK) and the Bill & Melinda Gates Medical Research Institute announce licensing agreement for novel tuberculosis antibiotic candidates

  • Mereo BioPharma (MREO) announces updated operating plan to maximize shareholder value; targets 40% reduction in headcount and significant expense reductions as company continues to guide lead programs through upcoming value creating milestones

  • Meta Platforms (META): UK CMA orders Meta to sell Giphy - finds that Meta's purchase of Giphy would limit choice for UK social media users and reduce innovation in UK display advertising

  • Microsoft (MSFT) aiming to eliminate more jobs this week, according to the Wall Street Journal

  • Natura &Co (NTCO) to initiate a comparative study for either an IPO of Aesop or a spin-off to separate Aesop from Natura

  • New Found Gold Corp. (NFGC) Intercepts 68.19 g/t Au Over 2.05m & 45.05 g/t Au Over 2.25m, Extends Keats Main Zone to Over 1km Along Strike

  • SomaLogic (SLGC) appoints current board member Troy Cox as Executive Chair; current Chair Chuck Lillis to remain on the board; changes effective as of today

  • Stewart Info (STC) extends CEO contract

  • Textron (TXT) entered into a purchase agreement with Exclusive Jets, LLC, operating as flyExclusive, for up to 14 additional Cessna Citation business jets

  • Tiptree Financial (TIPT) CFO to retire, names new CFO

  • U.S. Physical Therapy (USPH) provides update on Hurricane Ian impact

  • ViewRay (VRAY) Launches Phase III Pancreatic Cancer Study to Demonstrate Superior Overall Survival for Patients Receiving MRI-guided Ablative Radiation Therapy

• M&A:

  • Activision Blizzard (ATVI): UK CMA publishes Microsoft's (MSFT) response to phase 1 decision

  • Akouos (AKUS): Lilly (LLY) to acquire Akouos in transaction valued at ~$487 mln plus a contingent value right for an aggregate amount up to ~ $610 mln

  • Alta Equipment Group (ALTG) to acquire Ecoverse Industries LTD - a full line distributor of environmental processing equipment headquartered in Avon, Ohio

  • AVEO Oncology (AVEO) to be acquired by LG Chem for $15.00 per share in cash

  • IAMGOLD (IAG) sells interest in Rosebel Gold Mines to Zijin Mining for cash consideration of $360 mln

  • Ping Identity (PING) shareholders approve pending acquisition by Thoma Bravo, which is expected to close on October 18

• Syndicate: 

  • Silk Road Medical (SILK) commences $100 mln share offering

• IPOs:

  • Intel (INTC) is eyeing a significantly lower valuation for Mobileye IPO, according to the Wall Street Journal

  • Expected to Price:

    • No IPOs expected.

Gapping Up/Down

• Gapping up:

  • AVEO +37.3%, FUBO +9.9%, XAIR +5%, NTCO +4.7%, AR +4.1%, MFA +3.9%, VALE +3.1%, IAG +2.8%, TRQ+2.1%, BTG +1.7%, NFLX +1.6%, JWN +1.6%, BA+1.5%, KIND +1.4%, BBWI +1.4%, JNJ +1.4%, JPM+1.3%, INTC +1%, RNGR +1%, EXC +0.9%, ELS +0.8%

• Gapping down:

  • IDYA -5%, SILK -2.5%, MRTN -2.5%, HPK -2.3%, MATX -1.8%, AZTA -1.5%, HA -1.1%, SFBS -1%, CWT-0.7%, GILD -0.6%, RIO -0.6%, CBSH -0.6%, LOCO-0.5%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

  • Diamondrock Hospitality (DRH) upgraded to Outperform from In-line at Evercore ISI

  • Jamf Holding (JAMF) upgraded to Overweight from Equal Weight at Barclays; tgt raised to $28

• Downgrades:

  • ACM Research (ACMR) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $9

  • Hayward Holdings (HAYW) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $8

  • Int'l Paper (IP) downgraded to Sell from Hold at Deutsche Bank; tgt lowered to $29

  • Packaging Corp (PKG) downgraded to Sell from Hold at Deutsche Bank; tgt lowered to $104

  • Pegasystems (PEGA) downgraded to Underweight from Equal Weight at Barclays; tgt lowered to $25

  • RingCentral (RNG) downgraded to Neutral from Buy at BTIG Research

  • Sunstone Hotel (SHO) downgraded to In-line from Outperform at Evercore ISI

  • UiPath (PATH) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $15

• Others:

  • Abbott Labs (ABT) initiated with an Overweight at Barclays; tgt $118

  • Baxter (BAX) initiated with an Overweight at Barclays; tgt $64

  • Boston Scientific (BSX) initiated with an Overweight at Barclays; tgt $49

  • Church & Dwight (CHD) initiated with an In-line at Evercore ISI

  • Clorox (CLX) initiated with an Underperform at Evercore ISI

  • Globus Medical (GMED) initiated with an Overweight at Barclays; tgt $69

  • Insulet (PODD) initiated with an Equal Weight at Barclays; tgt $238

  • Intuitive Surgical (ISRG) initiated with an Overweight at Barclays; tgt $235

  • Johnson & Johnson (JNJ) initiated with an Equal Weight at Barclays; tgt $175

  • Kimberly-Clark (KMB) initiated with an In-line at Evercore ISI

  • Medtronic (MDT) initiated with an Equal Weight at Barclays; tgt $90

  • NuVasive (NUVA) initiated with an Overweight at Barclays; tgt $53

  • Stryker (SYK) initiated with an Overweight at Barclays; tgt $239

Upcoming Events:

• Econ Data:

  • 09:15 ET: Industrial Production for Sep (Briefing.comConsensus 0.1%; Prior -0.2%)

  • 09:15 ET: Capacity Utilization for Sep (Briefing.comConsensus 79.9%; Prior 80.0%)

  • 10:00 ET: NAHB Housing Market Index for Oct (Briefing.comConsensus 44; Prior 46)

  • 16:00 ET: Net Long-Term TIC Flows for Aug (Briefing.comConsensus NA; Prior $21.4B)

• Earnings

  • Monday (Oct 17)

    • Morning: BAC BK SCHW

    • Afternoon:  ELS MRTN

  • Tuesday (Oct 18)

    • Morning: ACI CBSH GS HAS JNJ LMT SBNY SI STT TFC

    • Afternoon:  FNB FHN FULT HWC IBKR ISRG JBHT NFLX OMC PNFP UAL UCBI WTFC

  • Wednesday (Oct 19)

    • Morning: ABT ALLY ASML BMI BKR CFG CMA ELV HCSG LAD MTB MKTX NDAQ NTRS PG PLD SCL TRV UNF WGO

    • Afternoon: AA CNS CCI CVBF EFX FR IBM KALU KMI KNX LRCX LSTR LBRT PACW PPG REXR RLI SLG STLD TSLA TCBI UMPQ WDFC

  • Thursday (Oct 20) 

    • Morning:  ABB ALK AAL T AUB BANC BKU BHLB BX COLB DHR DOV DOW EWBC ERIC FITB FCX GPC HRI HOMB IRDM KEY LNN MAN MMC MSM NOK NUE PPBI PM POOL DGX SASR SNA SNV TSCO UNP WSO WBS WNS

    • Afternoon: ASB OZK BJRI SAM BDN CSX EEFT FFBC GBCI HTH RHI SNAP SIVB THC UFPI WAL WHR

  • Friday (Oct 21)

    • Morning: AXP ALV HCA HBAN IPG RF SLB SXT SMPL VZ

    • Afternoon: None

Asia & Europe detail:

Asia: Nikkei +1.4%, Hang Seng +1.8%, Shanghai Composite -0.1%

Equity indices in the Asia-Pacific region ended Tuesday on a mostly higher note. Chinese authorities have not announced a new release date for Q3 growth figures yet. Japan's Ministry of Economy, Trade, and Industry pledged to support exports, domestic investment, and a restart of nuclear power plants. There is growing speculation that the Bank of Japan will increase its CPI forecast for FY22/23 from the current 2.3%. The Minutes from the Reserve Bank of Australia's October meeting showed that arguments for 25- and 50-bps rate hikes are balanced and that the impact of past hikes has yet to be seen. 

• In economic data:

  • South Korea's August M2 Money Supply 6.8% yr/yr (last 7.1%)

  • New Zealand's Q3 CPI 2.2% qtr/qtr (expected 1.6%; last 1.7%); 7.2% yr/yr (expected 6.6%; last 7.3%)

---Equity Markets---

• Japan's Nikkei: +1.4%

• Hong Kong's Hang Seng: +1.8%

• China's Shanghai Composite: -0.1%

• India's Sensex: +0.9%

• South Korea's Kospi: +1.4%

• Australia's ASX All Ordinaries: +1.8%

---FX---

• USD/JPY: +0.1% to 149.17

• USD/CNH: +0.1% to 7.2144

• USD/INR: +0.3% to 82.38

Europe: DAX +1.3%, FTSE +0.9%, CAC +0.8%

Major European indices trade in the green. The Bank of England refuted an FT report about a plan to delay quantitative tightening until the Gilt market calms. Bank of France Governor Villeroy de Galhau said that the European Central Bank should slow its hiking pace once the deposit rate reaches 2.00%. Germany's ZEW Current Situation survey decreased for the eighth consecutive month, reaching an all-time low. The European Commission will reportedly release the details of its gas price cap plan later today.

• In economic data:

  • Eurozone's October ZEW Economic Sentiment -59.7 (expected -61.2; last -60.7)

  • Germany's October ZEW Economic Sentiment -59.2 (expected -65.7; last -61.9) and ZEW Current Conditions -72.2 (expected -68.0; last -60.5)

  • Italy's August trade deficit EUR9.569 bln (expected deficit of EUR500 mln; last deficit of EUR460 mln)

  • Spain's August trade deficit EUR7.94 bln (last deficit of EUR6.56 bln)

---Equity Markets---

• STOXX Europe 600: +0.7%

• Germany's DAX: +1.3%

• U.K.'s FTSE 100: +0.9%

• France's CAC 40: +0.8%

• Italy's FTSE MIB: +1.6%

• Spain's IBEX 35: +1.1%

---FX---

• EUR/USD: -0.1% to 0.9829

• GBP/USD: -0.6% to 1.1294

• USD/CHF: +0.1% to 0.9961