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20/05/22 Briefing

Updated: May 24

The S&P 500 futures are up 47 points and trade 1.2% above fair value at the end of a tough week in which the benchmark index is down 3.1%. Risk sentiment has been aided by a strong showing in foreign markets, including Chinese markets following an unexpected move by China's central bank.

Specifically, the People's Bank of China unexpectedly cut its five-year prime rate by 15 basis points to 4.45% while leaving its key one-year lending rate steady at 3.7%. China's Shanghai Composite rose 1.6% on Friday. The Europe Stoxx 600 is currently up 1.6%.

The futures market is overlooking disappointing earnings results and guidance from another retailer, Ross Stores (ROST 67.05, -25.65, -27.7%), which is down 28% in pre-market action, as well as disappointing results and guidance from semiconductor company Applied Materials (AMAT 109.50, -1.24, -1.1%).

The Treasury market, meanwhile, is a bit more reserved right now. The 2-yr yield is up two basis points to 2.63%, and the 10-yr yield is unchanged at 2.86%. The U.S. Dollar Index is up 0.2% to 102.95. WTI crude is up 0.1% to $110.00/bbl.

Separately, Russia is preparing to annex portions of southeast Ukraine, according to The New York Times.


In U.S. Corporate news:

  • Ross Stores (ROST 67.05, -25.65): -27.7% after missing top and bottom-line estimates, guiding Q2 EPS below consensus, and guiding FY23 EPS below consensus.

  • Deere (DE 347.00, -17.62): -4.8% after missing revenue estimates. Deere beat EPS estimate and raised its FY22 net income guidance.

  • Palo Alto Networks (PANW 489.90, +53.53): +12.3% after beating top and bottom-line estimates and guiding Q4 EPS and revenue above consensus.

  • Foot Locker (FL 30.90, +0.60): +2.0% after beating EPS estimates and reaffirming its full-year guidance.

  • Applied Materials (AMAT 109.50, -1.24): -1.1% after missing top and bottom-line estimates and guiding JulQ EPS and revenue below consensus.

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the week on a higher note. Japan's Nikkei: +1.3% (+1.2% for the week) Hong Kong's Hang Seng: +3.0% (+4.1% for the week) China's Shanghai Composite: +1.6% (+2.0% for the week) India's Sensex: +2.9% (+2.9% for the week) South Korea's Kospi: +1.8% (+1.4% for the week) Australia's ASX All Ordinaries: +1.2% (+1.1% for the week).

  • In economic data:

  • Japan's April CPI 0.4% m/m (last 0.4%). National CPI 2.5% yr/yr (last 1.2%) and National Core CPI 2.1% yr/yr, as expected (last 0.8%)

  • South Korea's April PPI 1.1% m/m (last 1.5%); 9.2% yr/yr (last 9.0%)

  • New Zealand's April trade surplus NZD584 mln (last deficit of NZD581 mln)


  • In news:

  • A former top Japanese currency official said that the yen could weaken to 150 per dollar due to a deepening divergence in monetary policy.

  • Japan's National CPI and Core CPI were above the Bank of Japan's 2.0% target in April with the core reading increasing at the fastest pace since early 2015.

  • The People's Bank of China lowered its five-year loan prime rate by 15 bps to 4.45%.



  • Major European indices are looking for a higher finish to the week. STOXX Europe 600: +1.6% (+0.3% week-to-date) Germany's DAX: +1.8% (+0.8% week-to-date) U.K.'s FTSE 100: +1.9% (+0.3% week-to-date) France's CAC 40: +1.4% (UNCH week-to-date) Italy's FTSE MIB: +1.9% (+1.9% week-to-date) Spain's IBEX 35: +1.5% (+2.3% week-to-date).

  • In economic data:

  • Germany's April PPI 2.8% m/m (expected 1.4%; last 4.9%); 33.5% yr/yr (expected 31.5%; last 30.9%)

  • U.K.'s April Retail Sales 1.4% m/m (expected -0.2%; last -1.2%); -4.9% yr/yr (expected -7.2%; last 1.3%). April Core Retail Sales 1.4% m/m (expected -0.2%; last -0.9%); -6.1% yr/yr (expected -8.4%; last -0.2%). May GfK Consumer Confidence -40 (expected -39; last -38)


  • In news:

  • The U.K.'s GfK Consumer Confidence for May fell past its low from 2008, reaching an all-time low of -40.

  • Bank of England Chief Economist Pill said that tightening efforts in the U.K. have room to continue and that policymakers have yet to decide about the timing of bond sales.

  • German Finance Minister Lindner said that G7 central banks must lead the fight to lower inflation back to 2.0%, but also said that the G7 agreed to raise over EUR18 bln for Ukraine.



U.S. equity futures:

  • S&P 500 Futures: +47 @ 3,948

  • DJIA Futures: +278 @ 31,532

  • Nasdaq 100 Futures: +189 @ 12,064

Overseas:

  • Europe: DAX +1.8%, FTSE +1.9%, CAC +1.4%

  • Asia: Nikkei +1.3%, Hang Seng +3.0%, Shanghai Composite +1.6%

Commodities:

  • Crude Oil +0.46 @ 112.67

  • Nat Gas -0.368 @ 8.032

  • Gold +0.10 @ 1841.30

  • Silver +0.052 @ 21.960

  • Copper +0.0270 @ 4.3100

U.S. Summary:

  • Earnings/Guidance (Full Earnings Calendar):

  • Apollo Investment (AINV) beats by $0.08; declares distribution

  • Applied Materials (AMAT) misses by $0.05, misses on revs; guides JulQ EPS below consensus, revs below consensus

  • Booz Allen Hamilton (BAH) beats by $0.01, beats on revs; guides FY23 EPS below consensus, revs in-line

  • Deckers Outdoor (DECK) beats by $1.19, beats on revs; guides FY23 EPS in-line, revs above consensus

  • Deere (DE) beats by $0.12, misses on revs; raises FY22 net income guidance

  • Flowers Foods (FLO) beats by $0.05, beats on revs; lowers FY22 EPS in-line, raises revs above consensus

  • Foot Locker (FL) beats by $0.05, misses on revs; reaffirms FY23 EPS guidance, revs guidance

  • Globant (GLOB) beats by $0.03, reports revs in-line; guides Q2 EPS above consensus, revs above consensus; guides FY22 EPS below consensus, revs in-line

  • Palo Alto Networks (PANW) beats by $0.11, beats on revs; guides Q4 EPS above consensus, revs above consensus

  • Ross Stores (ROST) misses by $0.03, misses on revs, comps -7%; guides Q2 EPS below consensus; guides FY23 EPS below consensus

  • Teleflex (TFX) reaffirms FY22 outlook at Investor Day

  • V.F. Corp (VFC) misses by $0.02, reports revs in-line; guides FY23 revs in-line


  • General News:

  • Russia preparing to annex portions of southeast Ukraine, according to New York Times

  • People's Bank of China cuts five-year loan prime rate by 15 basis points to 4.45%

  • Subprime consumer borrowers are falling behind on car, credit cards, and other loan payments, according to The Wall Street Journal

  • CDC is expanding eligibility of COVID-19 vaccine booster doses to everyone 5 years of age and older

  • UK Trade Remedies Authority recommended new measures to protect the UK's aluminium extrusion industry from dumped products from China; initiated an investigation

  • Anika Therapeutics (ANIK) receives FDA 510(k) clearance for the X-Twist knotless fixation system, expanding its sports medicine soft tissue portfolio

  • Apollo Global Management (APO): Air France-KLM (AFLYY) enters into exclusive discussions with Apollo for a EUR 500 mln capital injection into an affiliate owning spare engines

  • Arconic (ARNC) plans to pursue the sale of its Russian operations, may record charge of up to $500 mln

  • Atara Biotherapeutics (ATRA) receives notification from Bayer (BAYRY) of intention to end licensing agreement for next-generation mesothelin-directed CAR T-cell therapies

  • Blackrock (BLK) aiming to close MSCI Russia funds, according to Reuters

  • Boeing (BA) Starliner has launched into space

  • DoorDash (DASH) in filing announces authorization of $400 mln common stock repurchase program

  • Foghorn Therapeutics (FHTX) provides update on Phase 1 study of FHD-286 in relapsed and/or refractory AML and MDS; FDA initiates partial clinical hold

  • Huntsman (HUN): Starboard lowered active stake to 4.97% (prior ~7%)

  • Kinetik (KNTK) approves two-for-one split of its common stock

  • Kohl's (KSS) financial results could negatively impact its sale process, according to New York Post

  • LCI Industries (LCII) increases quarterly cash dividend to $1.05/share from $0.90/share; authorizes new $200 mln stock repurchase program

  • Lordstown Motors (RIDE) combines roles of Chairman and CEO; current CEO, Daniel Ninivaggi, will serve in this capacity

  • Match Group (MTCH) withdraws temporary restraining order in response to (GOOG / GOOGL) concessions

  • SolarEdge Technologies (SEDG) and Huawei agree on a global patent license agreement

  • Sotera Health (SHC) announces upcoming departure of CFO Scott Leffler

  • UnitedHealth (UNH) using TeleHealth services to reduce costs, according to The Wall Street Journal


  • M&A:

  • Meritor (MTOR) acquires Siemens Commercial Vehicles Electric Propulsion Business for EUR190 mln


  • Syndicate:

  • Allakos (ALLK) files for $250 mln common stock offering

  • Certara (CERT) files for 43,664,168 share common stock offering by selling shareholders

  • European Wax Center (EWCZ) prices offering of 4.5 mln shares of common stock at $21.50 per share


  • IPOs:

  • Priced to Trade:

  • No IPOs expected.



Gapping Up/Down

  • Gapping up:

  • DECK +13.7%, CDXC +13.1%, RDUS +11.3%, PANW +11.2%, CRWD +5.5%, ALLK +5.3%, ZS +5.3%, FTNT +4.3%, NIO +4.1%, MAXN +3.8%, FLO +3.7%, DASH +3.6%, AINV +3.5%, FL +3.1%, LPLA +2.9%, CVLG +2.9%, DVN +2.8%, ARNC +2.5%, VFC +2.5%, OKTA +1.8%, SEDG +1.5%, MPLX +1.1%


  • Gapping down:

  • ROST -27.7%, FHTX -24.9%, BURL -8.3%, DE -4.6%, ATRA -3.5%, TJX -3.3%, AMAT -1.8%, EVLV -0.5%


Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Comerica (CMA) upgraded to Outperform from Neutral at Robert W. Baird; tgt $85

  • Mirati Therapeutics (MRTX) upgraded to Buy from Neutral at Guggenheim; tgt $115

  • Ollie's Bargain Outlet (OLLI) upgraded to Buy from Underperform at BofA Securities; tgt raised to $75

  • Trex (TREX) upgraded to Neutral from Underperform at Exane BNP Paribas; tgt $75


  • Downgrades:

  • Freshpet (FRPT) downgraded to Neutral from Overweight at Atlantic Equities; tgt lowered to $70

  • Hewlett Packard Enterprise (HPE) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $16

  • PPG Industries (PPG) downgraded to Hold from Buy at Berenberg; tgt lowered to $140

  • Pure Storage (PSTG) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $27

  • Ross Stores (ROST) downgraded to Market Perform from Outperform at Telsey Advisory Group; tgt lowered to $80

  • Vipshop (VIPS) downgraded to Sell from Neutral at Citigroup; tgt lowered to $7.80

  • Wix.com(WIX) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt $85


  • Others:

  • Air Products (APD) assumed with an Outperform at Credit Suisse; tgt lowered to $290

  • Bentley Systems (BSY) initiated with an Outperform at Oppenheimer; tgt $40

  • Coupa Software (COUP) initiated with a Neutral at DA Davidson; tgt $75

  • Diversey Holdings (DSEY) assumed with an Outperform at Credit Suisse; tgt raised to $12

  • Dow (DOW) assumed with a Neutral at Credit Suisse; tgt raised to $67

  • Ecolab (ECL) assumed with a Neutral at Credit Suisse; tgt lowered to $180

  • ESAB Corp. (ESAB) initiated with a Buy at Stifel; tgt $56

  • Inspirato (ISPO) initiated with an In-line at Evercore ISI; tgt $6

  • Leafly (LFLY) initiated with an Outperform at Cowen; tgt $12

  • Revolution Medicines (RVMD) initiated with a Neutral at BofA Securities; tgt $24

  • TG Therapeutics (TGTX) initiated with an Underperform at BofA Securities; tgt $5

  • Turning Point Therapeutics (TPTX) initiated with a Buy at BofA Securities; tgt $58


Upcoming Events:

  • Econ Data:

  • Nothing of note


  • 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 +1.3%, Hang Seng +3.0%, Shanghai Composite +1.6%

Equity indices in the Asia-Pacific region ended the week on a higher note. A former top Japanese currency official said that the yen could weaken to 150 per dollar due to a deepening divergence in monetary policy. Japan's National CPI and Core CPI were above the Bank of Japan's 2.0% target in April with the core reading increasing at the fastest pace since early 2015. The People's Bank of China lowered its five-year loan prime rate by 15 bps to 4.45%.

  • In economic data:

  • Japan's April CPI 0.4% m/m (last 0.4%). National CPI 2.5% yr/yr (last 1.2%) and National Core CPI 2.1% yr/yr, as expected (last 0.8%)

  • South Korea's April PPI 1.1% m/m (last 1.5%); 9.2% yr/yr (last 9.0%)

  • New Zealand's April trade surplus NZD584 mln (last deficit of NZD581 mln)


---Equity Markets---

  • Japan's Nikkei: +1.3% (+1.2% for the week)

  • Hong Kong's Hang Seng: +3.0% (+4.1% for the week)

  • China's Shanghai Composite: +1.6% (+2.0% for the week)

  • India's Sensex: +2.9% (+2.9% for the week)

  • South Korea's Kospi: +1.8% (+1.4% for the week)

  • Australia's ASX All Ordinaries: +1.2% (+1.1% for the week)

---FX---

  • USD/JPY: +0.3% to 128.04

  • USD/CNH: -0.6% to 6.6837

  • USD/INR: +0.3% to 77.62

Europe: DAX +1.8%, FTSE +1.9%, CAC +1.4%

Major European indices are looking for a higher finish to the week. The U.K.'s GfK Consumer Confidence for May fell past its low from 2008, reaching an all-time low of -40. Bank of England Chief Economist Pill said that tightening efforts in the U.K. have room to continue and that policymakers have yet to decide about the timing of bond sales. German Finance Minister Lindner said that G7 central banks must lead the fight to lower inflation back to 2.0%, but also said that the G7 agreed to raise over EUR18 bln for Ukraine.

  • In economic data:

  • Germany's April PPI 2.8% m/m (expected 1.4%; last 4.9%); 33.5% yr/yr (expected 31.5%; last 30.9%)

  • U.K.'s April Retail Sales 1.4% m/m (expected -0.2%; last -1.2%); -4.9% yr/yr (expected -7.2%; last 1.3%). April Core Retail Sales 1.4% m/m (expected -0.2%; last -0.9%); -6.1% yr/yr (expected -8.4%; last -0.2%). May GfK Consumer Confidence -40 (expected -39; last -38)


---Equity Markets---

  • STOXX Europe 600: +1.6% (+0.3% week-to-date)

  • Germany's DAX: +1.8% (+0.8% week-to-date)

  • U.K.'s FTSE 100: +1.9% (+0.3% week-to-date)

  • France's CAC 40: +1.4% (UNCH week-to-date)

  • Italy's FTSE MIB: +1.9% (+1.9% week-to-date)

  • Spain's IBEX 35: +1.5% (+2.3% week-to-date)

---FX---

  • EUR/USD: -0.1% to 1.0578

  • GBP/USD: UNCH at 1.2472

  • USD/CHF: -0.2% to 0.9713


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