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19/05/22 Briefing


The S&P 500 futures trade 31 points, or 0.8%, below fair value as the market remains pressured by downside momentum, concerns about inflation, profit margins and growth prospects, and expectations for a more hawkish Fed.

After hearing disappointing earnings news from high-profile consumer companies this week, technology giant Cisco (

CSCO 4.43%

42.90, -5.46, -11.3%) has followed a similar path with a miss on revenue estimates and downside guidance for its fiscal Q4. CSCO shares are down 11% in pre-market action.


Cisco's fiscal quarter ended in April, and the company said it expects the supply challenges that it experienced in that quarter to continue into its July quarter.

Other negative-sounding headlines include news that COVID-19 cases continue to rise in the U.S. with 32% of Americans in areas with medium to high transmission, a report from CNBC indicating that gasoline could reach an average of $5/gallon in the U.S. this summer, and Sri Lanka defaulting on its debt for the first time ever.

Demand for Treasuries and gold ($1829.70/ozt, +13.80, +0.8%) has increased amid the disappointing price action in equity futures. The 2-yr yield is down five basis points to 2.63%, and the 10-yr yield is down five basis points to 2.84%. The U.S. Dollar Index is down 0.5% to 103.34. WTI crude is down 1.6% to $107.88/bbl.

On the data front, investors will receive weekly Initial Claims (Briefing.com consensus 200,000) and the Philadelphia Fed Index for May (Briefing.com consensus 16.5) at 8:30 a.m. ET, followed by Existing Home Sales for April (Briefing.com consensus 5.65 mln) and the Conference Board's Leading Economic Index for April (Briefing.com consensus 0.0%) at 10:00 a.m. ET.

In U.S. Corporate news:

  • Cisco (CSCO 42.90, -5.46): -11.3% after missing revenue estimates, guiding fiscal Q4 EPS and revenue below consensus, and expecting supply challenges experienced in AprQ to continue into JulQ. CSCO beat EPS estimates.

  • BJ's Wholesale (BJ 56.20, +2.78): +5.2% after beating top and bottom-line estimates and reaffirming its FY23 EPS guidance.

  • Kohl's (KSS 40.91, -2.22): -5.2% after missing EPS estimates and lowering its FY23 guidance.

  • The Children's Place (PLCE 37.51, -5.71): -13.2% after missing top and bottom-line estimates and guiding FY23 revenue below consensus.

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Thursday on a mostly lower note. Japan's Nikkei: -1.9% Hong Kong's Hang Seng: -2.5% China's Shanghai Composite: +0.4% India's Sensex: -2.6% South Korea's Kospi: -1.3% Australia's ASX All Ordinaries: -1.7%.In economic data:

  • Japan's April trade deficit JPY839.20 bln (expected deficit of JPY1.15 trln; last deficit of JPY414.10 bln). April Imports 28.2% yr/yr (expected 35.0%; last 31.2%) and April Exports 12.5% yr/yr (expected 13.8%; last 14.7%). March Core Machinery Orders 7.1% m/m (expected 3.7%; last -9.8%); 7.6% yr/yr (expected 3.7%; last 4.3%)

  • Australia's April Employment Change 4,000 (expected 30,000; last 17,900) and full employment change 92,400 (last 20,000). April Unemployment Rate 3.9%, as expected (last 3.9%) and Participation Rate 66.3% (expected 66.4%; last 66.4%)

  • New Zealand's Q1 Input PPI 3.6% qtr/qtr (last 1.2%) and Output PPI 2.6% qtr/qtr (last 1.4%)

  • Hong Kong's April Unemployment Rate 5.4% (last 5.0%)

  • In news:

  • Japan's ruling coalition is reportedly considering a higher corporate tax rate.

  • There is speculation that North Korea will conduct another missile test when President Biden visits South Korea and Japan in the coming days.

  • Shanghai's vice mayor said that the city's port has resumed most work. New Zealand raised its debt issuance forecast for the year.



  • Major European indices trade on a firmly lower note. STOXX Europe 600: -2.2% Germany's DAX: -1.7% U.K.'s FTSE 100: -2.2% France's CAC 40: -1.8% Italy's FTSE MIB: -0.9% Spain's IBEX 35: -1.1%.In economic data:

  • Eurozone's March Current Account deficit EUR1.60 bln (last surplus of EUR20.80 bln). March Construction Output 0.00% m/m (last 1.06%)

  • U.K.'s May CBI Industrial Trends Orders 26 (last 14)

  • In news:

  • British Prime Minister Johnson is reportedly blocking efforts to impose a windfall tax on energy companies.

  • British Chancellor of the Exchequer Sunak acknowledged that inflation is weighing on growth.

  • There was speculation that the ECB is preparing for three 25-bps hikes before the end of the year.

  • German Chancellor Scholz said that his country will strengthen its defense capabilities.



U.S. equity futures:

  • S&P 500 Futures: -30 @ 3,894

  • DJIA Futures: -255 @ 31,234

  • Nasdaq 100 Futures: -93 @ 11,835

Overseas:

  • Europe: DAX -1.7%, FTSE -2.2%, CAC -1.8%

  • Asia: Nikkei -1.9%, Hang Seng -2.5%, Shanghai Composite +0.4%

Commodities:

  • Crude Oil -1.25 @ 108.34

  • Nat Gas -0.262 @ 8.193

  • Gold +13.50 @ 1829.40

  • Silver +0.221 @ 21.765

  • Copper +0.0270 @ 4.2055

U.S. Summary:

  • Earnings/Guidance (Full Earnings Calendar):Advanced Drainage Systems (WMS) misses by $0.10, beats on revs; guides FY23 revs above consensusBath & Body Works (BBWI) beats by $0.12, reports revs in-line; guides JulQ EPS below consensus; guides FY23 EPS below consensusBlackBerry (BB) provides its long-term financial goals; expects 5-yr revenue CAGR of 13% bringing its FY27 sales target to $1.213 blnBJ's Wholesale (BJ) beats by $0.15, beats on revs; reaffirms FY23 EPS guidance

  • Canada Goose ( GOOS 8.65% ) beats by CAD0.05, reports revs in-line; guides Q1 EPS below consensus, revs below consensus; guides FY23 EPS above consensus, revs above consensus

  • Cisco ( CSCO 4.43% ) beats by $0.01, misses on revs; guides JulQ EPS below consensus, revs below consensus; cites Covid lockdowns in China and war in Ukraine for impacting revs

  • Eagle Materials ( EXP 3.16% ) beats by $0.07, beats on revs; increases share repurchase authorization

  • Kohl's ( KSS 11.02% ) misses by $0.59, reports revs in-line; lowers FY23 guidance

  • Monro Muffler ( MNRO 6.49% ) misses by $0.26, reports revs in-line; authorizes $150 mln share repurchase program; approves $0.02/share dividend increase

  • Synopsys ( SNPS 3.62% ) beats by $0.13, beats on revs; guides JulQ EPS above consensus, revs above consensus; guides FY22 EPS above consensus, revs above consensus

  • The Children's Place ( PLCE 10.42% ) misses by $0.41, misses on revs; guides FY23 revs below consensus

  • Vipshop ( VIPS 0.47% ) beats by RMB0.19, misses on revs; guides Q2 revs below consensus


  • General News:Shanghai reopening subways as lockdown restrictions ease, according to ABC NewsPresident Biden invokes Defense Production Act to address infant formula shortageChina in discussions with Russia to purchase oil for its strategic reserves, according to Bloomberg Department of Homeland Security preparing for violence after Supreme Court official ruling on Roe V Wade. Law enforcement investigating threats to "burn down or storm" the Supreme Court building, according to AxiosCOVID-19 cases continue to rise in the US with 32% of Americans in areas with medium to high transmission. Local officials are resisting mask mandates, but urging voluntarily measures and vaccine boosters, according to New York TimesDemocrats are demanding that President Biden forgive $50,000 in student debt, according to BloombergRussia's total control of Mariupol is raising fears of potential grain shortages, according to New York TimesResearch suggests that average national gas prices could reach $5/galloon this summer, according to CNBCRepublican Senators want to pass legislation to limit power of asset managers over public companies due to their views on social and environmental issues, according to The Wall Street JournalAdvanced Drainage Systems (WMS) approved a quarterly cash dividend to its shareholders in the amount of $0.12/share, a 9% increase over the prior year dividend amountAT&T (

T 1.60%

) and Dish Network announce Internet Distribution Agreement

  • Boeing ( BA 4.95% ) finalizes deal with International Airlines Group for up to 150 737 Jets

  • Credit Suisse ( CS 2.21% ): Fitch downgrades Credit Suisse Group to 'BBB+'; Stable Outlook

  • Google ( GOOG 3.69% ) Russia unit will file for bankruptcy, according to Reuters

  • Group 1 Auto ( GPI 6.76% ) board of directors increased the Company's common stock repurchase authorization by $175 million to $250 million, and also declared an increase to the quarterly cash dividend

  • Kohl's ( KSS 11.02% ) discloses departures of Greg Revelle, Chief Marketing Officer, and Doug Howe, Chief Merchandising Officer

  • Microstrategy ( MSTR 12.20% ) is not changing bitcoin plans, according to The Wall Street Journal

  • Reliance Steel ( RS 4.93% ) promotes Stephen P. Koch to Executive Vice President and Chief Operating Officer

  • Robinhood Markets ( HOOD 3.28% ): Crypto exchange FTX will allow customers to trade stocks and ETFs, according to The Wall Street Journal

  • Tesla ( TSLA 6.80% ): US investigating California Tesla crash, according to Reuters

  • Under Armour ( UAA 7.63% ) CEO Patrik Frisk will step down, effective June 1


  • M&A:Centennial Resource Development (CDEV) and Colgate Energy Partners III to combine in merger of equalsCURO Group (CURO) agrees to sell legacy U.S. direct lending business for $345 mln; acquires First Heritage Credit for $140 mln

  • Joby Aviation ( JOBY 3.02% ) aiming to acquire Avionyx, according to Tech Crunch

  • Rio Tinto ( RIO 3.32% ): Skyharbour to acquire up to 100% of the Russell Lake Uranium Project

  • Spirit Airlines ( SAVE 5.91% ) Board of Directors urges stockholders to reject JetBlue ( JBLU 2.94% ) tender offer for $30 per share in cash


  • Syndicate: Arch Coal (ARCH) announces exchanges with holders of approximately $125.2 million principal amount of convertible notes

  • HCI Group ( HCI 2.92% ) announces private placement of $150 mln aggregate principal amount of convertible senior notes due 2042


  • IPOs:Priced to Trade:

  • No IPOs expected.


Gapping Up/Down

  • Gapping up:GOOS +10.8%, DMTK +10.1%, SQM +5.3%, RCKT +4.9%, BJ +4.6%, SNPS +3.8%, KBR +3.5%, HWKN +3.5%, KDNY +1.7%, FYBR +1.7%, SMR +1.5%, NTR +1.4%, AUR +1.4%, CURO +1.4%, CPRT +1.4%, GDS +1.3%, PKG +0.8%

  • Gapping down:PLCE -17.3%, ENTA -15.1%, CSCO -12.6%, BBWI -7.9%, ANET -7.3%, JNPR -6.7%, VIPS -6.6%, CIEN -6.2%, UAA -5.6%, VUZI -5.6%, GMED -5%, TRQ -4.5%, KSS -3.2%, AVGO -4%, BB -2.4%, TSLA -2.4%, HCI -2.2%, NOK -2.1%, CS -2%, EXTR -1.4%, LITE -1.3%, DISH -1%

Analyst Research (see Upgrades/Downgrades calendar for full list):

  • Upgrades

  • Cisco ( CSCO 4.43% ) upgraded to Outperform from Neutral at KGI Securities; tgt $56

  • Public Storage ( PSA 3.02% ) upgraded to Outperform from Market Perform at BMO Capital Markets; tgt lowered to $370

  • Reinsurance Group of America ( RGA 3.17% ) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt raised to $132

Downgrades:

  • BNY Mellon ( BK 2.92% ) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $45

  • CSX ( CSX 4.27% ) downgraded to Neutral from Buy at Citigroup; tgt lowered to $35

  • Healthpeak ( PEAK 2.65% ) downgraded to Neutral from Buy at BofA Securities; tgt $32

  • Life Storage ( LSI 3.41% ) downgraded to Market Perform from Outperform at BMO Capital Markets; tgt lowered to $130

  • Norfolk Southern ( NSC 5.61% ) downgraded to Neutral from Buy at Citigroup; tgt lowered to $260

  • NTT Data ( NTDTY ) downgraded to Sell from Neutral at Citigroup

  • Physicians Realty Trust DOC 2.24% downgraded to Underperform from Neutral at BofA Securities; tgt $18

  • Primerica ( PRI 1.55% ) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $148

  • Schnitzer Steel ( SCHN 4.06% ) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets

  • Target ( TGT 24.93% ) downgraded to Hold from Buy at Stifel; tgt lowered to $185

  • Thor Industries ( THO 6.48% ) downgraded to Underperform from Neutral at DA Davidson; tgt $60

  • Under Armour ( UAA 7.63% ) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $11

  • Union Pacific ( UNP 3.10% ) downgraded to Neutral from Buy at Citigroup; tgt lowered to $235

  • UWM Holdings ( UWMC 0.99% ) downgraded to Underweight from Neutral at Piper Sandler; tgt lowered to $3

  • Winnebago ( WGO 5.92% ) downgraded to Neutral from Buy at DA Davidson; tgt $52

  • Wipro ( WIT 4.30% ) downgraded to Underweight from Neutral at JP Morgan

  • Others:

  • Ardagh Metal Packaging S.A. ( AMBP 8.01% ) initiated with an Equal-Weight at Morgan Stanley; tgt $7.20

  • Dorman Products ( DORM 4.19% ) initiated with a Buy at MKM Partners; tgt $129

  • Futu Holdings ( FUTU 1.15% ) assumed with a Buy at China Renaissance; tgt lowered to $51.80


Upcoming Events:

  • Econ Data:

  • 08:30 ET: Weekly Initial Claims (Briefing.com consensus 200,000; prior 203,000), Continuing Claims (prior 1.343 mln), and May Philadelphia Fed Survey (Briefing.com consensus 16.5; prior 17.6)

  • 10:00 ET: April Existing Home Sales (Briefing.com consensus 5.65 mln; prior 5.77 mln) and April Leading Indicators (Briefing.com consensus 0.0%; prior 0.3%)

  • 10:30 ET: Weekly natural gas inventories (prior +76 bcf)

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 -1.9%, Hang Seng -2.5%, Shanghai Composite +0.4%

Equity indices in the Asia-Pacific region ended Thursday on a mostly lower note. Japan's ruling coalition is reportedly considering a higher corporate tax rate. There is speculation that North Korea will conduct another missile test when President Biden visits South Korea and Japan in the coming days. Shanghai's vice mayor said that the city's port has resumed most work. New Zealand raised its debt issuance forecast for the year.

  • In economic data:

  • Japan's April trade deficit JPY839.20 bln (expected deficit of JPY1.15 trln; last deficit of JPY414.10 bln). April Imports 28.2% yr/yr (expected 35.0%; last 31.2%) and April Exports 12.5% yr/yr (expected 13.8%; last 14.7%). March Core Machinery Orders 7.1% m/m (expected 3.7%; last -9.8%); 7.6% yr/yr (expected 3.7%; last 4.3%)

  • Australia's April Employment Change 4,000 (expected 30,000; last 17,900) and full employment change 92,400 (last 20,000). April Unemployment Rate 3.9%, as expected (last 3.9%) and Participation Rate 66.3% (expected 66.4%; last 66.4%)

  • New Zealand's Q1 Input PPI 3.6% qtr/qtr (last 1.2%) and Output PPI 2.6% qtr/qtr (last 1.4%)

  • Hong Kong's April Unemployment Rate 5.4% (last 5.0%)

---Equity Markets---

  • Japan's Nikkei: -1.9%

Hong Kong's Hang Seng: -2.5% China's Shanghai Composite: +0.4%

  • India's Sensex: -2.6%

  • South Korea's Kospi: -1.3%

  • Australia's ASX All Ordinaries: -1.7%

---FX---

  • USD/JPY: -0.5% to 127.69

USD/CNH: -0.2% to 6.7636 USD/INR: -0.3% to 77.62

Europe: DAX -1.7%, FTSE -2.2%, CAC -1.8%

Major European indices trade on a firmly lower note. British Prime Minister Johnson is reportedly blocking efforts to impose a windfall tax on energy companies. Meanwhile, British Chancellor of the Exchequer Sunak acknowledged that inflation is weighing on growth. There was speculation that the ECB is preparing for three 25-bps hikes before the end of the year. German Chancellor Scholz said that his country will strengthen its defense capabilities.

  • In economic data:

  • Eurozone's March Current Account deficit EUR1.60 bln (last surplus of EUR20.80 bln). March Construction Output 0.00% m/m (last 1.06%)

  • U.K.'s May CBI Industrial Trends Orders 26 (last 14)

---Equity Markets---

  • STOXX Europe 600: -2.2%

Germany's DAX: -1.7% U.K.'s FTSE 100: -2.2%

  • France's CAC 40: -1.8%

  • Italy's FTSE MIB: -0.9%

  • Spain's IBEX 35: -1.1%

---FX---

  • EUR/USD: +0.6% to 1.0522

GBP/USD: +0.6% to 1.2412 USD/CHF: -1.2% to 0.9763

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