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21/10/22 Briefing


The S&P 500 futures are down 13 points and are trading 0.3% below fair value. The Nasdaq 100 futures are down 75 points and are trading 0.7% below fair value. The Dow Jones Industrial Average futures are down 113 points and are trading 0.4% below fair value.

Equity futures are weak this morning as rates continue to rise. The 2-yr note yield is up one basis point to 4.61% and the 10-yr note yield is up five basis points to 4.27%. Market participants are also digesting a higher terminal fed funds rate than what was previously expected. The fed funds futures market is pricing in a 5.00% terminal rate by May 2023.

Snap's comments about a difficult advertising environment have created general growth concerns. Meta Platforms and Alphabet are trading down in sympathy with Snap's view.

In overseas news, the UK reported some disappointing retail sales for September and Japan's Core CPI grew at its fastest pace since late 2014 in the September reading.

The UK 10-yr gilt yield is climbing, up 12 basis points to 4.03%. The British pound is weakening (GBP/USD -1.2% to 1.1107). Continued weakness in the yen sent it to its lowest level against the dollar since mid-1990. The U.S. Dollar Index is climbing, up 0.6% to 113.53.

There is no U.S. economic data of note today.

In corporate news:

  • Twitter (TWTR 48.64, -3.80, -7.25%): Large job cuts are likely at Twitter when Elon Musk assumes control, according to the Washington Post

  • American Express (AXP 134.10, -8.32, -5.84%): beats by $0.05, reports revs in-line; reaffirms FY22 guidance

  • Schlumberger (SLB 46.65, +0.96, +2.10%): beats by $0.08, beats on revs

  • Snap (SNAP 7.78, -3.01, -27.90%): beats by $0.09, reports revs in-line, internal outlook for Q4 revs below consensus; ARPU declines to $3.11; also announces $500 mln stock buyback authorization

  • CSX 1.70% (CSX 28.24, +1.16, +4.28%): beats by $0.03, beats on revs

  • Verizon (VZ 36.75, -0.25, -0.68%): beats by $0.03, beats on revs; reaffirms FY22 EPS guidance

  • Whirlpool (WHR 124.99, -6.34, -4.83%): misses by $0.86, misses on revs; guides FY22 EPS below consensus, revs below consensus; strategic review of EMEA nears conclusion

  • Tenet Healthcare (THC 43.44, -10.88, -20.03%): beats by $0.22, reports revs in-line; guides Q4 EPS below consensus, revs below consensus; also authorizes a $1 bln share repurchase program

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the week on a mostly lower note. Japan's Nikkei: -0.4% (-0.7% for the week), Hong Kong's Hang Seng: -0.4% (-2.3% for the week), China's Shanghai Composite: +0.1% (-1.1% for the week), India's Sensex: +0.2% (+2.4% for the week), South Korea's Kospi: -0.2% (UNCH for the week), Australia's ASX All Ordinaries: -0.7% (-1.1% for the week).

  • In economic data:

  • Japan's September CPI 0.4% m/m (last 0.4%); 3.0% yr/yr (last 3.0%). September National Core CPI 3.0% yr/yr, as expected (last 2.8%) o Hong Kong's September CPI 4.4% yr/yr (expected 2.0%; last 1.9%)

  • South Korea's September PPI 0.2% m/m (last -0.4%); 8.0% yr/yr (last 8.2%)

  • New Zealand's September trade deficit NZD1.62 bln (last deficit of NZD2.63 bln). September Credit Card Spending 34.1% yr/yr (last 29.3%)


  • In news:

  • Japan's Core CPI grew at its fastest pace since late 2014 in the September reading while continued weakness in the yen sent it to its lowest level against the dollar since mid-1990.

  • The Bank of Japan conducted an emergency bond buying operation after the 20-yr JGB yield increased to a level not seen since mid-2015.

  • Press reports suggest that the Biden administration will expand the ban on sales of advanced technology to China to include quantum computing and artificial intelligence.



  • Major European indices trade on a sharply lower note while the pound and Gilts are also under pressure again. STOXX Europe 600: -1.4% (+0.4% week-to-date), Germany's DAX: -1.3% (+1.4% week-to-date), U.K.'s FTSE 100: -0.6% (-0.6% week-to-date), France's CAC 40: -1.5% (+1.1% week-to-date), Italy's FTSE MIB: -1.5% (+2.2% week-to-date), Spain's IBEX 35: -1.8% (+1.6% week-to-date).

  • In economic data:

  • U.K.'s September Retail Sales -1.4% m/m (expected -0.5%; last -1.7%); -6.9% yr/yr (expected -5.0%; last -5.6%). September Core Retail Sales -1.5% m/m (expected -0.3%; last -1.7%); -6.2% yr/yr (expected -4.1%; last -5.3%). September Public Sector Net Borrowing GBP19.25 bln (expected GBP12.30 bln; last GBP8.58 bln). October GfK Consumer Confidence -47 (expected -52; last -49)


  • In news:

  • Press reports from the U.K. suggest that Penny Mordaunt, Rishi Sunak, and former Prime Minister Johnson are the front runners to replace Liz Truss.

  • Germany's parliament voted in favor of suspending its constitutional debt brake. Adidas lowered its guidance for the fiscal year for the third time this year.

  • Germany dropped its opposition to an EU gas price cap.



U.S. equity futures:

  • S&P 500 Futures: -16 @ 3,650

  • DJIA Futures: -141 @ 30,193

  • Nasdaq 100 Futures: -86 @ 10,961

Overseas:

  • Europe: DAX -1.3%, FTSE -0.6%, CAC -1.5%

  • Asia: Nikkei -0.4%, Hang Seng -0.4%, Shanghai Composite +0.1%

Commodities:

  • Crude Oil +0.35 @ 84.86

  • Nat Gas -0.221 @ 5.137

  • Gold -9.05 @ 1627.75

  • Silver -0.392 @ 18.297

  • Copper -0.0335 @ 3.377

U.S. Summary:

  • Earnings/Guidance:

  • America Movil SA (AMX) reports Q3 net income of MXN 17.70 bln, +14% yr/yr; revs +2% yr/yr to MXN 214.5 bln vs MXN 217.3 bln Capital IQ consensus

  • American Express (AXP) beats by $0.05, reports revs in-line; reaffirms FY22 guidance

  • Assoc Banc-Corp (ASB) beats by $0.03, net interest income increased 44% yr/yr

  • Autoliv (ALV) misses by $0.02, misses on revs

  • AXIS Capital (AXS) expects to report a small operating income for Q3; pre-tax loss estimate for catastrophe events of $212 mln, including $160 mln for Hurricane Ian

  • Bank OZK (OZK) reports Q3 (Sep) results, beats on revs

  • BJ Restaurants (BJRI) beats by $0.03, beats on revs

  • Boston Beer Co (SAM) reports Q3 (Sep) results, beats on revs; guides FY22 EPS in-line, expects depletions and shipments of (7%)-(4%)

  • Brandywine Realty (BDN) beats by $0.02, reports revs in-line

  • CSX (CSX) beats by $0.03, beats on revs

  • Diamondrock Hospitality (DRH) reports September update: RevPAR increase of 43.5% yr/yr; comparable revenue increase of 12.5% compared to 2019 to $93.4 mln

  • Euronet (EEFT) beats by $0.20, reports revs in-line; guides FY22 EPS above consensus

  • First Financial (FFBC) misses by $0.01, reports revs in-line

  • Glacier Bancorp (GBCI) misses by $0.01, misses on revs

  • HCA (HCA) beats by $0.07, reports revs in-line

  • Hilltop Holdings (HTH) beats by $0.29; declares dividend

  • Huntington Banc (HBAN) beats by $0.01

  • Intercontinental Hotels Group (IHG) reports Q3 update; Q3 RevPAR up 28% yr/yr; CFO steps down

  • Interpublic (IPG) beats by $0.05, reports revs in-line

  • P3 Health Partners (PIII) CFO Eric Atkins to resign, effective November 1; appoints Chief Accounting Officer Erin Darakjian as interim CFO; releases Q2 (Jun) earnings: increases revs 86% yr/yr and raises its FY22 sales forecast to $1.025-1.075 bln from $1.00 bln

  • Pebblebrook Hotel Trust (PEB) Provides Operating Update

  • Regions Fincl (RF) misses by $0.16, beats on revs

  • Robert Half (RHI) misses by $0.12, misses on revs

  • Schlumberger (SLB) beats by $0.08, beats on revs

  • Simply Good Foods (SMPL) beats by $0.07, beats on revs; provides FY23 outlook

  • Snap (SNAP) beats by $0.09, reports revs in-line, internal outlook for Q4 revs below consensus; ARPU declines to $3.11; also announces $500 mln stock buyback authorization; not providing formal Q4 guidance, but has set internal forecasts that revenue growth will be approximately flat in Q4

  • Sterling Infrastructure's (STRL) E-Infrastructure Solutions segment reports new awards totaling $309 mln in Q3

  • SVB Financial Group (SIVB) beats by $0.20, misses on revs

  • Tenet Healthcare (THC) beats by $0.22, reports revs in-line; guides Q4 EPS below consensus, revs below consensus; also authorizes a $1 bln share repurchase program

  • UFP Industries (UFPI) beats by $0.24, beats on revs; outlook remains mostly unchanged from Q2

  • Verizon (VZ) beats by $0.03, beats on revs; reaffirms FY22 EPS guidance

  • Western Alliance Bancorp (WAL) reports Q3 (Sep) results, misses on revs

  • Whirlpool (WHR) misses by $0.86, misses on revs; guides FY22 EPS below consensus, revs below consensus; strategic review of EMEA nears conclusion


  • News:

  • Germany removes opposition to EU gas price cap, according to Financial Times

  • Supreme Court refused to block President Biden's student loan forgiveness plan, CNBC

  • Automakers will spend $1.2 trillion through 2030, according to Reuters

  • Air Lease (AL) announces delivery of tenth Airbus A320-200 aircraft to Allegiant

  • Alphabet (GOOG): India's CCI imposes INR 1337.76 fine on GOOG for allegedly abusing market position in Android market

  • Amazon (AMZN) closes Fabric.com, according to Verge

  • Bristol-Myers (BMY): FDA accepts supplemental new drug application for CAMZYOS (mavacamten) in symptomatic obstructive hypertrophic cardiomyopathy to reduce the need for septal reduction therapy

  • Castle Biosciences (CSTL): New Data from DECIDE Study Show the Significant Role of DecisionDx-Melanoma Test Results and Patient Preference in Decisions to Perform the Sentinel Lymph Node Biopsy Surgical Procedure

  • Central Pacific Financial (CPF) appoints Arnold Martines as CEO

  • Cincinnati Fincl (CINF) discloses preliminary Q3 catastrophe losses of $252 mln, including loss estimate of $220 mln from Hurricane Ian

  • Credit Suisse (CS) to settle French tax case, according to Bloomberg

  • GlaxoSmithKline (GSK) receives regulatory submission acceptance in Japan for respiratory syncytial virus older adult vaccine candidate

  • ICF International (ICFI) selected by The Substance Abuse and Mental Health Services Administration as an awardee to support its mission in a five-year IDIQ contract with a ceiling value of $1.2 bln across all awardees

  • Immunic (IMUX) Reports Pre-Planned Phase 1b Interim Analysis of IMU-935 in Psoriasis Patients Confounded by High Placebo Rate

  • Jounce Therapeutics (JNCE) to Present Multiple Posters at the Society for Immunotherapy of Cancer's (SITC) 37th Annual Meeting and the European Society of Medical Oncology Immuno-Oncology (ESMO-IO) Annual Congress

  • Lockheed Martin (LMT) under contract to deliver three Orion spacecraft to NASA for its Artemis VI-VIII missions

  • Micron (MU): WiLAN subsidiaries enter into license agreement with Micron

  • Microsoft (MSFT) is in advanced talks to provide more funding to OpenAI in bid to help it grow Azure usage, according to The Information

  • Murphy USA (MUSA) increases its quarterly dividend 9% to $0.35/share

  • NuScale Power (SMR): U.S. Nuclear Regulatory Commission's Advisory Committee on Reactor Safeguards issues letter stating that SMR's Emergency Planning Zone boundary is acceptable

  • Pfizer (PFE) targets coronavirus vaccine price of $110/dose, according to the Wall Street Journal

  • PureCycle Technologies (PCT) and SK geo centric sign joint venture agreement to operate the first Polypropylene recycling plant in Asia; each company will have 50/50 ownership; plant expected to be completed by 2Q25

  • Scorpio Tankers (STNG) exercises purchase options on eight ships and has given notice to repay a credit facility that has $17.5 mln of outstanding debt

  • Sensient (SXT) beats by $0.03, reports revs in-line; reaffirms FY22 EPS guidance

  • Silverback Therapeutics (SBTX) announces the FDA's acceptance of ARS Pharmaceuticals' NDA for neffy (epinephrine nasal spray) for the treatment of allergic reactions (type I) including Anaphylaxis

  • Summit Therapeutics (SMMT) Presents Ri-CoDIFy Trial Results for Microbiome-Sparing Ridinilazole at IDWeek 2022

  • Taiwan Semi (TSM): Biren Technology will continue to work with Taiwan Semi despite export controls, according to Bloomberg

  • Toyota Motor (TM) will likely soon lower full year production targets, according to Reuters

  • Tuanche (TC) and YangMing New Energy Technology establish strategic cooperation to develop battery and energy storage technologies

  • Twitter (TWTR): The Biden Administration is discussing if some of Elon Musk's ventures including Twitter should be subject of national security review, according to Bloomberg

  • Twitter (TWTR): Large job cuts are likely at Twitter, according to the Washington Post


  • M&A:

  • FleetCor (FLT) signs definitive agreement to acquire European workforce lodging provider Roomex

  • Kroger (KR): Antitrust review of Kroger deal to purchase Albertsons (ACI) to look at local store overlap, according to the Wall Street Journal

  • Newpark Res (NR) to sell its Excalibar mineral grinding business to Cimbar Resources; expects to generate net cash of approximately $66 mln at closing

  • Tastemaker Acquisition Corp. (TMKR): Quality Gold to become a publicly traded company via business combination with Tastemaker Acquisition Corp.

  • Veris Residential (VRE) confirmed receipt of unsolicited proposals from Kushner Companies to externally manage the Company or to acquire the Company for $16.00 per share


  • Syndicate:

  • Biohaven (BHVN) prices offering of 25 mln shares of common stock at $10.50 per share


  • IPOs:

  • Instacart is not likely to launch IPO this year, according to the Wall Street Journal

  • Expected to Price:

  • No IPOs expected.



Gapping Up/Down

  • Gapping up:

  • VRE +18%, BJRI +5.1%, ASB +4.5%, UFPI +4.1%, PCT +3.6%, CSX +3.2%, MUSA +2.6%, PIII +2.1%, CINF +1.6%, AXS +1.4%, NR +1.2%, BDN +0.8%


  • Gapping down:

  • IMUX -68.7%, SNAP -26.9%, SIVB -16.5%, THC -14.1%, SMMT -10.8%, RHI -10.4%, TWTR -8.3%, PINS -7.4%, TTD -6.5%, BHVN -5.4%, FFBC -4.7%, IHG -4.3%, WHR -4.1%, META -4%, ROKU -2.8%, GOOG -1.8%, SAM -1.8%, MSFT -0.8%, WAL -0.8%


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

  • Upgrades

  • Farmers and Merchants (FMAO) upgraded to Neutral from Underweight at Piper Sandler; tgt $27

  • HealthEquity (HQY) upgraded to Neutral from Sell at Goldman; tgt raised to $77

  • Qualys (QLYS) upgraded to Buy from Hold at Berenberg; tgt $168

  • Qualys (QLYS) upgraded to Buy from Hold at Needham; tgt $185


  • Downgrades:

  • Cognizant Tech (CTSH) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $68

  • Hain Celestial (HAIN) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $17

  • Rapid7 (RPD) downgraded to Hold from Buy at Berenberg; tgt $44

  • Rapid7 (RPD) downgraded to Hold from Buy at Needham


  • Others:

  • Air Transport Services Group (ATSG) initiated with a Hold at Truist; tgt $26

  • Amphastar Pharmaceuticals (AMPH) assumed with a Buy at Jefferies; tgt $36

  • Axalta Coating Systems (AXTA) initiated with an Underperform at Credit Suisse; tgt $20

  • Axonics Modulation (AXNX) initiated with an Outperform at RBC Capital Mkts; tgt $85

  • BlackLine (BL) initiated with a Sell at Goldman; tgt $57

  • E2open (ETWO) initiated with a Neutral at Goldman; tgt $5.50

  • NextGen Healthcare (NXGN) assumed with a Neutral at Piper Sandler; tgt $20

  • OptiNose (OPTN) assumed with a Buy at Jefferies; tgt $5

  • Vertex (VERX) initiated with a Buy at Goldman; tgt $20

  • Workiva (WK) initiated with a Buy at Goldman; tgt $101

  • Zuora (ZUO) initiated with a Neutral at Goldman; tgt $9


Upcoming Events:

  • Econ Data:

  • No economic data of note.


  • 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 -0.4%, Hang Seng -0.4%, Shanghai Composite +0.1%

Equity indices in the Asia-Pacific region ended the week on a mostly lower note. Japan's Core CPI grew at its fastest pace since late 2014 in the September reading while continued weakness in the yen sent it to its lowest level against the dollar since mid-1990. The Bank of Japan conducted an emergency bond buying operation after the 20-yr JGB yield increased to a level not seen since mid-2015. Press reports suggest that the Biden administration will expand the ban on sales of advanced technology to China to include quantum computing and artificial intelligence.

  • In economic data:

  • Japan's September CPI 0.4% m/m (last 0.4%); 3.0% yr/yr (last 3.0%). September National Core CPI 3.0% yr/yr, as expected (last 2.8%) o Hong Kong's September CPI 4.4% yr/yr (expected 2.0%; last 1.9%)

  • South Korea's September PPI 0.2% m/m (last -0.4%); 8.0% yr/yr (last 8.2%)

  • New Zealand's September trade deficit NZD1.62 bln (last deficit of NZD2.63 bln). September Credit Card Spending 34.1% yr/yr (last 29.3%)


---Equity Markets---

  • Japan's Nikkei: -0.4% (-0.7% for the week)

  • Hong Kong's Hang Seng: -0.4% (-2.3% for the week)

  • China's Shanghai Composite: +0.1% (-1.1% for the week)

  • India's Sensex: +0.2% (+2.4% for the week)

  • South Korea's Kospi: -0.2% (UNCH for the week)

  • Australia's ASX All Ordinaries: -0.7% (-1.1% for the week)

---FX---

  • USD/JPY: +0.8% to 151.30

  • USD/CNH: +0.2% to 7.2677

  • USD/INR: -0.1% to 82.68

Europe: DAX -1.3%, FTSE -0.6%, CAC -1.5%

Major European indices trade on a sharply lower note while the pound and Gilts are also under pressure again. Press reports from the U.K. suggest that Penny Mordaunt, Rishi Sunak, and former Prime Minister Johnson are the front runners to replace Liz Truss. Germany's parliament voted in favor of suspending its constitutional debt brake. Adidas lowered its guidance for the fiscal year for the third time this year. Germany dropped its opposition to an EU gas price cap.

  • In economic data:

  • U.K.'s September Retail Sales -1.4% m/m (expected -0.5%; last -1.7%); -6.9% yr/yr (expected -5.0%; last -5.6%). September Core Retail Sales -1.5% m/m (expected -0.3%; last -1.7%); -6.2% yr/yr (expected -4.1%; last -5.3%). September Public Sector Net Borrowing GBP19.25 bln (expected GBP12.30 bln; last GBP8.58 bln). October GfK Consumer Confidence -47 (expected -52; last -49)


---Equity Markets---

  • STOXX Europe 600: -1.4% (+0.4% week-to-date)

  • Germany's DAX: -1.3% (+1.4% week-to-date)

  • U.K.'s FTSE 100: -0.6% (-0.6% week-to-date)

  • France's CAC 40: -1.5% (+1.1% week-to-date)

  • Italy's FTSE MIB: -1.5% (+2.2% week-to-date)

  • Spain's IBEX 35: -1.8% (+1.6% week-to-date)

---FX---

  • EUR/USD: -0.3% to 0.9755

  • GBP/USD: -0.9% to 1.1134

  • USD/CHF: +0.8% to 1.0105

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