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20/12/22 Briefing

Updated: Dec 21, 2022


The S&P 500 futures are down 6 points and are trading 0.2% below fair value. The Nasdaq 100 futures are down 49 points and are trading 0.4% below fair value. The Dow Jones Industrial Average futures are up 1 point and are trading slightly above fair value. 

Equity futures are mixed this morning, but moves are modest in scope. Bigger moves since yesterday's close have been more concentrated in the bond market after a surprise move by the Bank of Japan. 

The Bank of Japan modified its yield curve control policy, announcing that the 10-yr yield will be allowed to rise to 0.50%, up from the old cap of 0.25%, but left its benchmark rate unchanged at -0.1%, as expected. On a related note, Japan's Finance Minister Suzuki said that a decision has not been made to revise the joint mission statement with the Bank of Japan.

Treasury yields moved noticeably higher while the yen surged against the dollar (USD/JPY -3.2% to 132.58). The U.S. Dollar Index is down 0.6% to 104.05. The 2-yr note yield, which hit 4.30% overnight, is up three basis points to 4.27% and the 10-yr note yield, which hit 3.71% overnight, is up seven basis points to 3.66%. 

In other news, lawmakers introduced a $1.7 trillion government funding bill ahead of Friday's deadline. The bill will also reform the Electoral Count Act (which makes it more difficult for Congress to object to election results). Congress is expected to vote this week, according to theWashington Post.

Economic data today is limited to the November Housing Starts (Briefing.comconsensus 1.395K; prior 1.425K) and Building Permits (Briefing.comconsensus 1.480K; prior 1.526K) at 8:30 a.m. ET.

In corporate news:

  • Home Depot (HD 316.59, -0.74, -0.2%): downgraded to Neutral from Outperform at Credit Suisse

  • Lucid Group (LCID 7.60, +0.37, +5.1%): completes previously announced at-the-market equity offering; sold over 56.2 mln shares for gross proceeds of approximately $600 mln

  • Steel Dynamics (STLD 102.02, +0.48, +0.5%): to be added to S&P 500 prior to the opening bell on December 22.

  • 3M (MMM 122.59, +0.46, +0.4%): will exit per- and polyfluoroalkyl substance (PFAS) manufacturing and work to discontinue the use of PFAS across its product portfolio by the end of 2025

  • General Mills (GIS 85.88, -1.24, -1.4%): beats by $0.04, reports revs in-line; raises FY23 organic net sales and adjusted EPS guidance in constant currency

  • Entrada Therapeutics (TRDA 13.50, -6.39, -32.1%): FDA places clinical hold on IND for ENTR-601-44

  • Verona Pharma (VRNA 17.91, +4.42, +32.8%): announces ensifentrine meets primary and key secondary endpoints in Phase 3 ENHANCE-1 trial for COPD

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Tuesday on a lower note. Japan's Nikkei: -2.5%, Hong Kong's Hang Seng: -1.3%, China's Shanghai Composite: -1.1%, India's Sensex: -0.2%, South Korea's Kospi: -0.8%, Australia's ASX All Ordinaries: -1.7%.

  • In economic data:

  • Hong Kong's November CPI 1.8% yr/yr (expected 1.9%; last 1.8%)

  • New Zealand's December ANZ Business Confidence -70.2 (last -57.1)

  • In news:

  • Equities in Japan underperformed and the yen surged after the Bank of Japan modified its yield curve control policy, announcing that the 10-yr yield will be allowed to rise to 0.50%, up from the old cap of 0.25%. On a related note, Japan's Finance Minister Suzuki said that a decision has not been made to revise the joint mission statement with the Bank of Japan.

  • The People's Bank of China made no changed to its one- and five-year loan prime rates, but China Securities Journal still speculated that the rates could be cut, along with the reserve requirement ratio.

  • The latest policy Minutes from the Reserve Bank of Australia showed a desire to be consistent and an acknowledgement that there has been no clear impetus for a 50-bps rate hike or a pause in tightening.

  • Major European indices trade near their flat lines while Spain's IBEX (+0.6%) outperforms. STOXX Europe 600: -0.3%, Germany's DAX: -0.2%, U.K.'s FTSE 100: UNCH, France's CAC 40: -0.2%, Italy's FTSE MIB: +0.2%, Spain's IBEX 35: +0.6%.

  • In economic data:

  • Eurozone's October Current Account deficit EUR400 mln (last deficit of EUR8.10 bln)

  • Germany's November PPI -3.9% m/m (expected -2.5%; last -4.2%); 28.2% yr/yr (expected 30.6%; last 34.5%)

  • Swiss November trade surplus CHF2.31 bln (last surplus of CHF4.27 bln)

  • In news:

  • Germany's PPI decreased for the second consecutive month in November, which slowed the yr/yr growth rate to 28.2% from 34.5%.

  • European Central Bank policymaker Nagel repeated that additional robust steps on rates need to be taken while policymaker Kazimir said that policy should tighten at a stable pace.

 

U.S. equity futures:

  • S&P 500 Futures: -6 @ 3,812

  • DJIA Futures: +12 @ 32,769

  • Nasdaq 100 Futures: -39 @ 11,045

Overseas:

  • Europe: DAX -0.2%, FTSE UNCH, CAC -0.2%

  • Asia: Nikkei -2.5%, Hang Seng -1.3%, Shanghai Composite -1.1%

Commodities:

  • Crude Oil +0.34 @ 75.72

  • Nat Gas -0.254 @ 5.597

  • Gold +13.65 @ 1811.35

  • Silver +0.638 @ 23.837

  • Copper -0.0090 @ 3.774

 

Earnings/Guidance:

  • FactSet (FDS) beats by $0.36, misses on revs; reaffirms FY23 EPS guidance, revs guidance

  • FuelCell Energy (FCEL) misses by $0.04, misses on revs

  • General Mills (GIS) beats by $0.04, reports revs in-line; raises FY23 organic net sales and adjusted EPS guidance in constant currency

  • HEICO (HEI) beats by $0.01, reports revs in-line; expects growth in FSG and ETG segments in FY23; increases semi-annual dividend 11% to $0.10/share

  • Imperial Oil (IMO) provides 2023 corporate guidance outlook

  • Rocket Lab USA (RKLB) lowers Q4 revenue guidance after it announced the launch window for its first Electron mission from U.S. soil has been rescheduled to January 2023

  • Schnitzer Steel (SCHN) provides preliminary Q1 numbers; notes that demand weakened throughout the quarter; expects average selling prices and volumes to be down sequentially

  • Steelcase (SCS) beats by $0.02, misses on revs; guides FebQ EPS in-line, revs below consensus

News:

  • Lawmakers introduced a $1.7 trillion government funding bill ahead of Friday's deadline. Bill will also reform the Electoral Count Act. Congress is expected to vote this week, according to the Washington Post

  • Government funding bill includes $45 bln for Ukraine, according to the Wall Street Journal

  • Supreme Court temporarily blocks ending Title 42 border policy, according to the Wall Street Journal

  • Phone carriers are for now shielded from paying by FCC partisan deadlock, according to the Wall Street Journal

  • Carmakers to have chip shortages through end of next year, according to Financial Times

  • White House delays rules for EV incentives following criticism from overseas, according to the Wall Street Journal

  • UAE could re-examine relationship with OPEC because it wants to pump more oil, among other factors, according to Reuters

  • FTX founder agrees to be extradited to US, according to the Wall Street Journal

  • 3M (MMM) will exit per- and polyfluoroalkyl substance (PFAS) manufacturing and work to discontinue the use of PFAS across its product portfolio by the end of 2025

  • Altimmune (ALT) Announces Positive Topline Results from 24-Week (12-Week Extension) Trial of Pemvidutide in Subjects with Non-Alcoholic Fatty Liver Disease

  • Amazon (AMZN) AWS awarded $724 mln five-year U.S. Navy contract

  • Amazon (AMZN) introduced Prime Gaming in India, according to Tech Crunch

  • ANI Pharma (ANIP) announces the FDA approval and launch of levocarnitine tablets USP

  • Arch Capital (ACGL) increases its share repurchase authorization to $1 bln; new program replaces existing share repurchase authorization

  • Arrowhead (ARWR) announces $25 mln milestone payment from Amgen (AMGN)

  • Avista (AVA) provides liquidity update

  • Banc of California (BANC) promotes John Sotoodeh to COO of the Company and the Bank; previously was COO of the Bank

  • Blucora (BCOR) completes previously announced sale of TaxAct for $720 mln in cash; authorizes repurchase up to $250 mln through modified Dutch Auction in 1Q23; authorizes repurchase up to $200 mln of common stock

  • Comtech Telecom (CMTL) awarded 5G location services contract for a tier-1 mobile network operator in Canada

  • CVS (CVS) and Walgreens (WBA) aiming to limit purchases of children's pain medications, according to the New York Post

  • Eneti (NETI) signs contract to transport and install turbines for a project commencing in the first half of 2025; expected to generate net revenue of approximately EUR 60 -73 mln

  • Enfusion (ENFN) appoints Brad Herring as CFO

  • Entrada Therapeutics (TRDA): FDA places clinical hold on IND for ENTR-601-44

  • fuboTV (FUBO) announces multi-year distribution partnership with Scripps Networks

  • GasLog Partners (GLOP): U.S. Treasury and IRS regulations effective January 1will not affect unitholders

  • Gilat Satellite (GILT) and Intelsat are expanding their strategic partnership with multimillion-dollar agreements to increase in-flight connectivity in the Americas

  • Gilead (GILD): Anti-TIGIT Domvanalimab-Containing Study Arms Improve Progression-Free Survival Compared to Anti-PD1Alone in Phase 2 Non-Small Cell Lung Cancer Study

  • Ginkgo Bioworks (DNA) have entered into Memorandum of Understanding with the intent of developing and implementing new biosecurity capabilities in Botswana

  • IAMGOLD (IAG) announces transaction with Sumitomo Metal Mining to provide up to $340 million in additional funding for the construction of the Cote Gold Project

  • Lazydays Holdings (LAZY) authorizes $50 mln share repurchase plan

  • Loews Corp (L) confirms court reversed November 2021 decision that awarded former unitholders in its Boardwalk Pipelines subsidiary ~$690 mln plus interest

  • NewAmsterdam Pharma (NAMS) appoints David Topper as CFO, effective January 1, 2023

  • Nucor (NUE) to build galvanizing line in Fontana, CA; cost will be approx $370 mln

  • Nuvation Bio (NUVB) Doses First Patient in Phase 1b Combination Study of NUV-868

  • Orange (ORAN) announces the departure of Ramon Fernandez, Deputy Chief Executive Officer in charge of Finance, Performance and Development, at the end of the first quarter of 2023

  • Par Pacific (PARR) appoints William Monteleone as President effective January 1, 2023

  • Progress Software (PRGS) reports cyber incident, including unauthorized access to co's corporate network

  • Seagen (SGEN), Astellas (ALPMY) and Merck (MRK) announce FDA acceptance of sBLAs for PADCEV with KEYTRUDA for the first-line treatment of certain patients with locally advanced or metastatic urothelial cancer

  • ServisFirst Bancshares (SFBS) increases quarterly cash dividend 22% to $0.28/share from $0.23/share

  • Simmons First National (SFNC) Chairman and CEO George Makris, Jr. will assume role of full-time Executive Chairman; COO Robert Fehlman will assume role of CEO, effective January 1, 2023

  • SS&C Techs (SSNC) secures administration service agreement with Mine Superannuation Fund, which manages AUD 12 billion of funds

  • Treace Medical Concepts (TMCI) granted two new U.S. patents related to novel methods of performing bunion surgery utilizing a bone positioning device

  • Trinseo (TSE) provides update on asset restructuring actions, which are expected to result in about $60 mln of annual profitability improvement

  • Uranium Energy (UEC) has won a $17.85 mln award to supply 300,000 pounds of U.S. origin uranium concentrates at $59.50/lb. to the U.S. Department of Energy

  • Verona Pharma (VRNA) announces ensifentrine meets primary and key secondary endpoints in Phase 3 ENHANCE-1 trial for COPD

  • VICI Properties (VICI) enters into lease agreement with Hard Rock with respect to the real property associated with the Mirage

  • Xylem (XYL) announced the appointment of Matthew Pine as COO, effective January 1, 2023

M&A:

  • BHP Group (BHP) and Oz Minerals extend exclusivity period

  • Catalyst Pharma (CPRX) to acquire US rights for FYCOMPA from Eisai

  • Churchill Downs (CHDN) to acquire Exacta Systems for total consideration of $250 mln in cash; expected to close in 2023

  • Digital World Acquisition Corp (DWAC) extended the date by which the Company has to complete its initial business combination to March 8

  • Installed Building Products (IBP) acquires ABS Insulating Company, ABS Sprayfoam Insulation, and ABS Coastal Insulating Company; adds approximately $21 mln of annual revenue; financial details not disclosed

  • Intl Flavors (IFF) announces the sale of its Savory Solutions Group to PAI Partners

  • KKR (KKR) to acquire Bushu Pharmaceuticals

  • Lithium Americas (LAC) to acquire Arena Minerals to consolidate the highly prospective Pastos Grandes Basin

  • Magna (MGA) to acquire Veoneer Active safety business for $1.525 bln in cash

  • MGM Resorts (MGM) closes on the sale of the operations of The Mirage to Hard Rock for $1.075 bln in cash

  • Stewart Info (STC) acquires BCHH; financial terms not disclosed

Syndicate:

  • Lucid Group (LCID) completes previously announced at-the-market equity offering; sold over 56.2 mln shares for gross proceeds of approximately $600 mln

  • Terns Pharmaceuticals (TERN) announces proposed public offering of $75 mln

IPOs:

  • Expect to Price:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up: VRNA +37.2%, BCOR +17.5%, ALT +12.1%, IAG +6%, SMCI +5.9%, LCID +4%, NETI +3.7%, CPRX +3.6%, TITN +3.5%, GILT +2.9%, LAZY +2.6%, GLOP +2.1%, NDAQ +1.6%, NUVB +1.5%, SFBS +1.5%, SCS +1.5%, HEI +1.5%, ACGL +1.2%

  • Gapping down: TRDA -32.1%, RCUS -21.4%, TERN -5.6%, GILD -2.8%, TECK -2.3%, AIR -1.6%

 


Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Beam Therapeutics (BEAM) upgraded to Outperform from Market Perform at BMO Capital Markets; tgt raised to $66

  • Conagra (CAG) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt raised to $45

  • Kinsale Capital (KNSL) upgraded to Buy from Neutral at Compass Point; tgt $330

  • MKS Instruments (MKSI) upgraded to Overweight from Sector Weight at KeyBanc Capital Markets; tgt $100

  • Zymeworks (ZYME) upgraded to Buy from Hold at Jefferies; tgt raised to $11

  • Downgrades:

  • BJ's Wholesale (BJ) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $75

  • Hostess Brands (TWNK) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $25

  • Merit Medical (MMSI) downgraded to Hold from Buy at Canaccord Genuity; tgt lowered to $72

  • Owens Corning (OC) downgraded to Underweight from Neutral at JP Morgan; tgt lowered to $79

  • Zurn Elkay Water Solutions (ZWS) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $26

  • Others:

  • Best Buy (BBY) initiated with a Neutral at Credit Suisse; tgt $90

  • Big Lots (BIG) initiated with an Underperform at Credit Suisse; tgt $15

  • BJ Restaurants (BJRI) resumed with a Buy at CL King; tgt $36

  • Capri Holdings (CPRI) initiated with an Outperform at Raymond James; tgt $65

  • Casey's General (CASY) initiated with a Neutral at Credit Suisse; tgt $254

  • Chuy's (CHUY) resumed with a Neutral at CL King

  • CNH Industrial (CNHI) initiated with an Outperform at Credit Suisse; tgt $21

  • Costco (COST) resumed with a Neutral at Credit Suisse; tgt lowered to $520

  • Cracker Barrel (CBRL) resumed with a Buy at CL King; tgt $116

  • Credit Suisse (CS) resumed with an Underperform at Exane BNP Paribas

  • Dollar General (DG) initiated with a Neutral at Credit Suisse; tgt $260

  • Dollar Tree (DLTR) initiated with a Neutral at Credit Suisse; tgt $150

  • Driven Brands (DRVN) initiated with a Neutral at Credit Suisse; tgt $31

  • Five Below (FIVE) initiated with a Neutral at Credit Suisse; tgt $185

  • Floor & Decor (FND) initiated with a Neutral at Credit Suisse; tgt $80

  • Grocery Outlet (GO) initiated with a Neutral at Credit Suisse; tgt $30

  • Home Depot (HD) assumed with a Neutral at Credit Suisse; tgt lowered to $335

  • Lowe's (LOW) initiated with a Neutral at Credit Suisse; tgt $210

  • NewAmsterdam Pharma (NAMS) initiated with an Outperform at SVB Leerink; tgt $19

  • Red Robin Gourmet (RRGB) resumed with a Neutral at CL King

  • Sprouts Farmers Market (SFM) assumed with a Neutral at Credit Suisse; tgt raised to $35

  • The Trade Desk (TTD) initiated with an Overweight at Piper Sandler; tgt $60

  • Tractor Supply (TSCO) initiated with an Outperform at Credit Suisse; tgt $260

  • Walmart (WMT) assumed with an Outperform at Credit Suisse; tgt raised to $170

Upcoming Events:

  • Econ Data:

  • 08:30 ET: Housing Starts for Nov (Briefing.comConsensus 1395K; Prior 1425K)

  • 08:30 ET: Building Permits for Nov (Briefing.comConsensus 1480K; Prior 1526K)

  • Earnings:

  • Monday (Dec 19)

  • Afternoon: HEI SCS

  • Tuesday (Dec 20)

  • Morning: FDS FCEL GIS

  • Afternoon:  AIR BB CVGW EPAC NKE WOR

  • Wednesday (Dec 21)

  • Morning:  CCL CTAS RAD TTC

  • Afternoon:  MU MLKN

  • Thursday (Dec 22)

  • Morning: APOG KMX PAYX

  • Afternoon:  AVO

Asia & Europe detail:

Asia: Nikkei -2.5%, Hang Seng -1.3%, Shanghai Composite -1.1%

Equity indices in the Asia-Pacific region ended Tuesday on a lower note. Equities in Japan underperformed and the yen surged after the Bank of Japan modified its yield curve control policy, announcing that the 10-yr yield will be allowed to rise to 0.50%, up from the old cap of 0.25%. On a related note, Japan's Finance Minister Suzuki said that a decision has not been made to revise the joint mission statement with the Bank of Japan. The People's Bank of China made no changed to its one- and five-year loan prime rates, but China Securities Journal still speculated that the rates could be cut, along with the reserve requirement ratio. The latest policy Minutes from the Reserve Bank of Australia showed a desire to be consistent and an acknowledgement that there has been no clear impetus for a 50-bps rate hike or a pause in tightening.

  • In economic data:

  • Hong Kong's November CPI 1.8% yr/yr (expected 1.9%; last 1.8%)

  • New Zealand's December ANZ Business Confidence -70.2 (last -57.1)

---Equity Markets---

  • Japan's Nikkei: -2.5%

  • Hong Kong's Hang Seng: -1.3%

  • China's Shanghai Composite: -1.1%

  • India's Sensex: -0.2%

  • South Korea's Kospi: -0.8%

  • Australia's ASX All Ordinaries: -1.7%

---FX---

  • USD/JPY: -3.3% to 132.33

  • USD/CNH: -0.2% to 6.9713

  • USD/INR: UNCH at 82.66

 

Europe: DAX -0.2%, FTSE UNCH, CAC -0.2%

Major European indices trade near their flat lines while Spain's IBEX (+0.6%) outperforms. Germany's PPI decreased for the second consecutive month in November, which slowed the yr/yr growth rate to 28.2% from 34.5%. European Central Bank policymaker Nagel repeated that additional robust steps on rates need to be taken while policymaker Kazimir said that policy should tighten at a stable pace.

  • In economic data:

  • Eurozone's October Current Account deficit EUR400 mln (last deficit of EUR8.10 bln)

  • Germany's November PPI -3.9% m/m (expected -2.5%; last -4.2%); 28.2% yr/yr (expected 30.6%; last 34.5%)

  • Swiss November trade surplus CHF2.31 bln (last surplus of CHF4.27 bln)

---Equity Markets---

  • STOXX Europe 600: -0.3%

  • Germany's DAX: -0.2%

  • U.K.'s FTSE 100: UNCH

  • France's CAC 40: -0.2%

  • Italy's FTSE MIB: +0.2%

  • Spain's IBEX 35: +0.6%

---FX---

  • EUR/USD: +0.2% to 1.0630

  • GBP/USD: UNCH at 1.2146

  • USD/CHF: -0.1% to 0.9269

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