19/05/23 Briefing

The S&P 500 futures are up 11 points and are trading 0.3% above fair value. The Nasdaq 100 futures are up 9 points and are trading 0.1% above fair value. The Dow Jones Industrial Average futures are up 92 points and are trading 0.3% above fair value.

Stock futures sport gains, albeit somewhat modest, fueled by carryover momentum from yesterday's rally and ongoing optimism about debt ceiling discussions. Positive price action in several mega cap stocks on this options expiration day has been a supportive factor this morning. There's some emerging hope, too, that the S&P 500 will break out above the 4,200 level. 

Market participants will be watching that key level, as well as the 11:00 a.m. ETpanel discussion with Fed Chair Powell, and former Fed Chair Bernanke, regarding perspectives on monetary policy. 

Japan's Nikkei reached its highest level since 1990 despite the country reporting hotter-than-expected Consumer Price Index data for April.

The 2-yr Treasury note yield is unchanged at 4.27% and the 10-yr note yield is up one basis point to 3.66%. The U.S. Dollar Index is down 0.3% to 103.25.

Energy complex futures trade in mixed fashion. WTI crude oil futures are up 1.3% to $72.29/bbl and natural gas futures are down 0.1% to $2.71/mmbtu. 

In corporate news:

• Deere (DE 384.00, +13.48, +3.6%): beats by $1.18, beats on revs; provides FY23 net income outlook

• Foot Locker (FL 31.59, -9.92, -23.9%): misses by $0.08, misses on revs; guides FY24 EPS below consensus, revs below consensus; appoints new CFO

• Applied Materials (AMAT 128.10, -1.82, -1.4%): beats by $0.17, beats on revs; guides JulQ EPS in-line, revs in-line

• Ross Stores (ROST 104.67, -0.71, -0.7%): beats by $0.04, reports revs in-line, comps +1%; guides Q2 EPS below consensus; raises lower end of FY24 EPS guidance; reaffirms FY24 comp guidance of relatively flat

• DXC Technology (DXC 23.75, -0.09, -0.4%): misses by $0.02, reports revs in-line; guides JunQ EPS below consensus, revs below consensus; guides FY24 EPS in-line, revs in-line; announces new $1.0 bln repurchase program; appoints Rob Del Bene as CFO, effective June 15; succeeds Ken Sharp who is leaving for personal reasons

• Catalent (CTLT 30.28, -1.86, -5.8%): lowers FY23 revenue and net income guidance

• Bloom Energy (BE 14.41, +0.76, +5.6%): upgraded to Overweight from Neutral at JP Morgan

• Alphabet (GOOG 124.49, +0.97, +0.8%): Samsung (SSNLF) will not switch default search engine from Google to Microsoft (MSFT). The company will keep Google, according to WSJ

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended the week on a mixed note, though Japan's Nikkei (+0.8%) reached its highest level since 1990. Japan's Nikkei: +0.8% (+4.8% for the week), Hong Kong's Hang Seng: -0.9% (-2.2% for the week), China's Shanghai Composite: -0.4% (+0.3% for the week), India's Sensex: +0.5% (-0.5% for the week), South Korea's Kospi: +0.9% (+2.5% for the week), Australia's ASX All Ordinaries: +0.6% (+0.3% for the week).

  • In economic data:

    • Japan's April National CPI 0.6% m/m (last 0.4%); 3.5% yr/yr (expected 2.5%; last 3.2%). April National Core CPI 3.4% yr/yr, as expected (last 3.1%). March Tertiary Industry Activity Index -1.7% m/m (expected 0.3%; last 1.7%)

    • New Zealand's April trade surplus NZD427 mln (expected deficit of NZD235 mln; last deficit of NZD1.586 bln). April Credit Card Spending 11.4% yr/yr (expected 12.5%; last 19.7%)

  • In news:

    • India's Prime Minister Modi will meet with Australia's Prime Minister Albanese in Australia.

    • Ministers of commerce and trade representatives from the U.S. and China will meet in Washington in the middle of next week.

    • ASB Bank expects the Reserve Bank of New Zealand to announce a 50-bps rate hike next week.

• Major European indices trade in positive territory with Germany's DAX (+0.7%) approaching its record high from November 2021. STOXX Europe 600: +0.7% (+0.7% week-to-date), Germany's DAX: +0.7% (+2.3% week-to-date), U.K.'s FTSE 100: +0.4% (+0.2% week-to-date), France's CAC 40: +0.7% (+1.1% week-to-date), Italy's FTSE MIB: +1.4% (+0.9% week-to-date), Spain's IBEX 35: +0.5% (+0.2% week-to-date).

  • In economic data:

    • Germany's April PPI 0.3% m/m (expected -0.5%; last -1.4%); 4.1% yr/yr (expected 4.0%; last 6.7%)

    • Spain's April Consumer Confidence 73.0 (expected 78.9; last 67.4)

  • In news:

    • The European Central Bank's latest economic bulletin reiterated that inflation has remained too high for too long and that future policy decisions will ensure that inflation returns to its 2.0% target. Meanwhile, ECB President Lagarde said that the council will be making "more delicate" decisions going forward.

U.S. equity futures:

• S&P 500 Futures: +8 @ 4,206

• DJIA Futures: +86 @ 33,621

• Nasdaq 100 Futures: +1 @ 13,866

Overseas:

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

• Asia: Nikkei +0.8%, Hang Seng -0.9%, Shanghai Composite -0.4%

Commodities:

• Crude Oil +0.94 @ 72.80

• Nat Gas -0.009 @ 2.583

• Gold +5.65 @ 1965.45

• Silver +0.097 @ 23.73

• Copper +0.0575 @ 3.7467

Earnings/Guidance:

• Applied Materials (AMAT) beats by $0.17, beats on revs; guides JulQ EPS in-line, revs in-line

• Catalent (CTLT) lowers FY23 revenue and net income guidance

• Cavco Industries (CVCO) beats by $0.29, misses on revs

• Deere (DE) beats by $1.18, beats on revs; provides FY23 net income outlook

• DXC Technology (DXC) misses by $0.02, reports revs in-line; guides JunQ EPS below consensus, revs below consensus; guides FY24 EPS in-line, revs in-line; announces new $1.0 bln repurchase program

• Farfetch (FTCH) beats by $0.13, beats on revs; guides for FY23 Group GMV of approximately $4.9 billion

• Flowers Foods (FLO) reports EPS in-line, revs in-line; lowers FY23 EPS and revenue guidance

• Foot Locker (FL) misses by $0.08, misses on revs; guides FY24 EPS below consensus, revs below consensus; appoints new CFO

• Globant (GLOB) beats by $0.01, reports revs in-line; guides Q2 EPS in-line, revs in-line; guides FY23 EPS above consensus, revs above consensus

• Plexus (PLXS) reiterates its Q3 (Jun) outlook; updates its GAAP EPS guidance

• Ross Stores (ROSS) beats by $0.04, reports revs in-line, comps +1%; guides Q2 EPS below consensus; raises lower end of FY24 EPS guidance; reaffirms FY24 comp guidance of relatively flat

News:

• President Biden held call with debt ceiling negotiators and urged them to keep pursuing a deal and he is confident Congress will act in time, according to Bloomberg

• White House and G7 announce new sanctions against Russia

• ECB is stepping up scrutiny of bank liquidity reserves, according to Bloomberg

• US will not block allies export of F-16 jets to Ukraine, according to CNN

• Dozens of cars have ties to explosive air bag part, according to the Wall Street Journal

• 2seventy bio (TSVT) presents late-breaking results for SC-DARIC33, an investigational CD33-targeting CAR t in pediatric and young adults with relapsed or refractory acute myeloid leukemia

• Alcoa (AA): members of United Steelworkers ratify new collective bargaining agreement covering employees at Warrick Operations and Massena Operations in IN and NY

• Analog Devices (ADI) announces that its CFO will be stepping down from his position to explore other opportunities; company also reaffirms its Q2 guidance

• AVANGRID (AGR) releases statement from Sy Oytan on U.S. District Court Ruling related to Vineyard Wind 1 Project

• BioSig Technologies (BSGM): New Data at Heart Rhythm 2023 Suggests that Unipolar Signals May be Used for a More Precise, Accurate Approach to Treating Arrhythmias

• Callon Petroleum (CPE) expects that Russel Parker will join as SVP and COO in late June, succeeding Jeff Balmer who plans to retire upon his successor's appointment

• Check Point Software (CHKP) extends availability of its cloud firewall with Microsoft (MSFT) Azure Virtual WAN

• DXC Technology (DXC) appoints Rob Del Bene as CFO, effective June 15; succeeds Ken Sharp who is leaving for personal reasons

• Exxon (XOM) believes it's "highly unlikely" world will reach net zero emissions by 2050, according toBloomberg

• General Dynamics (GD) awarded $490 mln U.S. Army contract

• Intercept Pharma (ICPT) halted with news pending; FDA Advisory Committee to review obeticholic acid as a treatment for pre-cirrhotic fibrosis due to NASH

• Kadant (KAI) authorizes the repurchase of up to $50 mln of equities securities effective May 18, 2023 through May 18, 2024

• Kelly Services (KELYA) board appointed Terrence B. Larkin to the position of chairman

• Korea Electric Power Corp (KEP) President & Chief Executive Officer Cheong, Seung-Il resigned from all his positions

• Lazard (LAZ) CEO Ken Jacobs is preparing to step down, leaving job for financial-advisory unit chief Peter Orszag, according to the Wall Street Journal

• Lockheed Martin (LMT) awarded $750 mln U.S. Air Force contract for Joint Air-to-Surface Standoff Missile B-2 missiles; awarded $444 mln U.S. Air Force contract for Long-Range Anti-Ship Missile, spares, Dummy Air Training Missiles and tooling and test equipment

• LyondellBasell (LYB) increases quarterly dividend to $1.25 per share from $1.19 per share

• Micron (MU) to be the first semiconductor firm to bring extreme ultraviolet (EUV) tech to Japan for production; to invest up to 500 bln yen (~$3.6 bln)

• Microsoft (MSFT) mostly unchanged after Twitter accuses it of improperly using its data, according to the New York Times

• Mirum Pharmaceuticals (MIRM): Data from Mirum's LIVMARLI Studies Presented at ESPGHAN Annual Meeting

• Moderna (MRNA) Spikevax Bivalent COVID-19 vaccine approved by the Health Canada as a booster dose in individuals 6 years and older

• Moderna (MRNA): Phase 1/2 interim data on MRNA's mrna-3927, an investigational MRNA therapy for propionic acidemia, presented at the 2023 ASGCT annual meeting

• ModivCare (MODV) Resolves dispute with former CEO

• Newmont Goldcorp (NEM) appoints Karyn Ovelmen as CFO

• NIO (NIO) and Autoliv (ALV) to develop safety technology for future electric vehicles

• Noodles & Co (NDLS) announces resignation of CFO, effective June 9, 2023, due to acceptance of similar role at company in the retail industry

• Norfolk Southern (NSC) reaches deal with The Brotherhood of Locomotive Engineers and Trainmen regarding paid sick leave

• Pfizer (PFE): FDA advisor panel recommends full approval of PFE's RSV vaccine

• Pfizer (PFE) confirms FDA advisory committee votes in support of approval of its vaccine candidate to prevent RSV in infants through maternal immunization; FDA decision expected in August

• Radian Group (RDN) names Sumita Pandit as CFO, effective immediately

• Roche Hldg (RHHBY): KaliVir Immunotherapeutics announces new in vivo data demonstrating superior therapeutic efficacy of VET3-TGI

• Rocket Pharmaceuticals (RCKT) Presents Positive Data from LV Hematology and AAV Cardiovascular Gene Therapy Programs at the 26th Annual Meeting of the American Society of Gene and Cell Therapy

• Samsung (SSNLF) will not switch default search engine from Google (GOOG) to Microsoft (MSFT). The company will keep Google, according to the Wall Street Journal

• Science Applications (SAIC) announces CEO transition; Toni Townes-Whitley will succeed Nazzic Keene, who has decided to retire, effective October 2, 2023

• TechnipFMC (FTI) awarded significant contract (between $75-250 mln) by Equinor (EQNR) to provide riserless light well intervention services

• Tesla (TSLA) did not agree to manufacture cars in India, according to Bloomberg

• Texas Roadhouse (TXRH) appoints Chris Monroe as its CFO, effective June 28; recently served as Senior VP of Finance and Treasurer at Southwest Airlines (LUV)

• Thermo Fisher Scientific (TMO) blood test will soon be approved by the FDA, according to the Wall Street Journal

• Vicarious Surgical (RBOT) promotes John Mazzola to COO

• Zillow (ZG) promotes Jeremy Hofmann to CFO; succeeds Allen Parker, who will transition to an advisory role

M&A:

• Activision Blizzard (ATVI): UK CMA publishes notice of intention to make a final order related to Microsoft (MSFT) acquisition of ATVI

• Baytex Energy Trust (BTE) provides update with respect to closing of Ranger acquisition

• nVent Electric (NVT) to acquire ECM Industries; terms of deal not disclosed

Syndicate:

• Thomson Reuters (TRI) sold 33 mln shares of London Stock Exchange (LDNXF) at price of 80.50/share

• UMH Properties (UMH) files mixed securities shelf offering

IPOs:

• No IPOs expected to price.

Gapping Up/Down

• Gapping up:

  • FTCH +21.4%, DE +5.3%, RCKT +5.1%, TXRH +2.7%, LAZ +2.2%, MODV +2%, NIO +1.5%, GLOB +0.9%, KAI+0.8%, AGR +0.8%, AA +0.7%, MU +0.5%

• Gapping down:

  • RBOT -4.9%, FLO -4.9%, DXC -4.6%, NDLS -4.2%, TSVT -2.3%, CVCO -1.8%, RDN -1.7%, AMAT -1.6%, ROST -0.8%, MRNA -0.7%, UMH -0.6%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

  • Bloom Energy (BE) upgraded to Overweight from Neutral at JP Morgan; tgt lowered to $20

  • TE Connectivity (TEL) upgraded to Outperform from Neutral at Credit Suisse; tgt raised to $138

• Downgrades:

  • Amphenol (APH) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $77

• Others:

  • Ambrx Biopharma (AMAM) initiated with an Overweight at Cantor Fitzgerald; tgt $25

  • Bitfarms (BITF) initiated with an Overweight at Cantor Fitzgerald; tgt $2

  • BlackRock (BLK) initiated with a Buy at Citigroup; tgt $750

  • Blackstone (BX) initiated with a Buy at Citigroup; tgt $98

  • Blue Owl Capital (OWL) initiated with a Buy at Citigroup; tgt $14

  • Carlyle Group (CG) initiated with a Buy at Citigroup; tgt $40

  • Gap (GPS) upgraded to Neutral from Sell at Citigroup; tgt lowered to $8

  • Intuitive Machines (LUNR) initiated with an Overweight at Cantor Fitzgerald; tgt $11

  • Invesco (IVZ) initiated with a Neutral at Citigroup; tgt $16

  • KKR (KKR) initiated with a Buy at Citigroup; tgt $69

  • Planet Fitness (PLNT) initiated with an Outperform at RBC Capital Mkts; tgt $86

  • T. Rowe Price (TROW) initiated with a Sell at Citigroup; tgt $98

  • TPG Inc. (TPG) initiated with a Buy at Citigroup; tgt $32

Econ Data:

• No economic data.

Earnings:

• Monday (May 15)

  • Morning:  AZUL CTLT MNDY SFL TSEM TPG

  • Afternoon: NVTS

• Tuesday (May 16)

  • Morning: BIDU HD HUYA ONON PSFE SE SSYS TME

  • Afternoon:  AGYS CPRT DOCS KEYS KD NXGN

• Wednesday (May 17)

  • Morning:  DT JACK RSKD TGT TJX TGI WKME WIX

  • Afternoon:  BOOT CSCO DLO SQM STNE SNPS TTWO VSAT ZTO

• Thursday (May 18)

  • Morning: WMS BABA BBWI BRC GOOS CSIQ DOLE EXP GRAB BEKE MNRO WMT

  • Afternoon:  AMAT DXC FTCH FLO GLOB ROST

• Friday (May 19)  

  • Morning:  DE FL RBC

Asia & Europe detail:

Asia: Nikkei +0.8%, Hang Seng -0.9%, Shanghai Composite -0.4%

Equity indices in the Asia-Pacific region ended the week on a mixed note, though Japan's Nikkei (+0.8%) reached its highest level since 1990. India's Prime Minister Modi will meet with Australia's Prime Minister Albanese in Australia. Ministers of commerce and trade representatives from the U.S. and China will meet in Washington in the middle of next week. ASB Bank expects the Reserve Bank of New Zealand to announce a 50-bps rate hike next week.

• In economic data:

  • Japan's April National CPI 0.6% m/m (last 0.4%); 3.5% yr/yr (expected 2.5%; last 3.2%). April National Core CPI 3.4% yr/yr, as expected (last 3.1%). March Tertiary Industry Activity Index -1.7% m/m (expected 0.3%; last 1.7%)

  • New Zealand's April trade surplus NZD427 mln (expected deficit of NZD235 mln; last deficit of NZD1.586 bln). April Credit Card Spending 11.4% yr/yr (expected 12.5%; last 19.7%)

---Equity Markets---

• Japan's Nikkei: +0.8% (+4.8% for the week)

• Hong Kong's Hang Seng: -0.9% (-2.2% for the week)

• China's Shanghai Composite: -0.4% (+0.3% for the week)

• India's Sensex: +0.5% (-0.5% for the week)

• South Korea's Kospi: +0.9% (+2.5% for the week)

• Australia's ASX All Ordinaries: +0.6% (+0.3% for the week)

---FX---

• USD/JPY: -0.3% to 138.23

• USD/CNH: -0.4% to 7.0219

• USD/INR: UNCH at 82.67

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

Major European indices trade in positive territory with Germany's DAX (+0.7%) approaching its record high from November 2021. The European Central Bank's latest economic bulletin reiterated that inflation has remained too high for too long and that future policy decisions will ensure that inflation returns to its 2.0% target. Meanwhile, ECB President Lagarde said that the council will be making "more delicate" decisions going forward.

• In economic data:

  • Germany's April PPI 0.3% m/m (expected -0.5%; last -1.4%); 4.1% yr/yr (expected 4.0%; last 6.7%)

  • Spain's April Consumer Confidence 73.0 (expected 78.9; last 67.4)

---Equity Markets---

• STOXX Europe 600: +0.7% (+0.7% week-to-date)

• Germany's DAX: +0.7% (+2.3% week-to-date)

• U.K.'s FTSE 100: +0.4% (+0.2% week-to-date)

• France's CAC 40: +0.7% (+1.1% week-to-date)

• Italy's FTSE MIB: +1.4% (+0.9% week-to-date)

• Spain's IBEX 35: +0.5% (+0.2% week-to-date)

---FX---

• EUR/USD: +0.2% to 1.0794

• GBP/USD: +0.2% to 1.2428

• USD/CHF: -0.2% to 0.9025