22/07/22 Briefing

The S&P 500 futures are down 5 points and are trading 0.1% below fair value. The Nasdaq 100 futures are down 36 points and are trading 0.5% above/below fair value. The Dow Jones Industrial Average futures are up 49 points and are trading 0.2% above fair value.

Early action is mixed with better than expected earnings in Dow component American Express (AXP ) helping to offset some weakness seen after yesterday's close in the wake of earnings disappointments from several companies, namely Snap (SNAP ) and Seagate Tech (STX ). The former reported above-consensus earnings but did not provide Q3 guidance citing uncertainties related to the operating environment as the reason. The latter reported weaker-than-expected earnings and revenue while issuing downside guidance and also warned of weakening global economic conditions.

There was also economic data out overnight which points to the weakening global economic conditions. Preliminary July PMI data from Japan, Australia, France, and Germany all showed weaker-than-expected results. This comes ahead of the July preliminary IHS Markit PMI at 9:45 a.m. ET.

Sovereign bond markets rallied as the slowdown narrative picks up steam following the weaker-than-expected PMI reports.

CNN reported that the Senate is expected to pass the CHIPS semiconductor manufacturing bill as soon as next week.  

WTI crude oil futures are down 1.0% to $95.45/bbl. Natural gas futures are down 0.4% to $7.79/mmbtu. Unleaded gasoline futures are down 1.2% to $3.11/gal.

The 2-yr Treasury note yield is down nine basis points to 3.00% and the 10-yr note yield is down 11 basis points to 2.80%.  

In corporate news:

• Snap (SNAP 11.33, -5.02, -30.7%): beats by $0.01, misses on revs; doesn't provide Q3 guidance due to uncertainties related to operating environment; authorizes $500 mln stock repurchase progra

• Seagate Tech (STX 74.115, -9.46, -11.3%): misses by $0.30, misses on revs; guides SepQ EPS and revs below consensus; macro-related challenges continuing into SepQ; co is reducing its production plans...stock currently halted; downgraded to Hold from Buy at Summit Insights

• Schlumberger (SLB 34.50, +0.87, +2.6%): beats by $0.10, beats on revs; guides FY22 revs above consensus

• HCA (HCA 203.10, +21.79, +12.0%): beats by $0.50, reports revs in-line

• Boston Beer Co (SAM 306.79, -29.39, -8.7%): misses by $0.31, reports revs in-line; guides FY22 EPS below consensus; expects FY22 depletions and shipments decrease of between 2% and 8%

• American Express (AXP 157.00, +6.82, +4.5%): beats by $0.16, beats on revs

• Verizon (VZ 45.50, -2.16, -4.5%): misses by $0.01, reports revs in-line; lowers FY22 EPS guidance

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended the week on a mixed note. Japan's Nikkei: +0.4% (+4.2% for the week), Hong Kong's Hang Seng: +0.2% (+1.5% for the week), China's Shanghai Composite: -0.1% (+1.3% for the week), India's Sensex: +0.7% (+4.3% for the week), South Korea's Kospi: -0.7% (+2.7% for the week), Australia's ASX All Ordinaries: -0.1% (+3.2% for the week).

  • In economic data:

    • Japan's flash July Manufacturing PMI 52.2 (last 52.7) and flash Services PMI 51.2 (last 54.0). June National CPI 2.4% yr/yr (last 2.5%) and National Core CPI 2.2% yr/yr, as expected (last 2.1%)

    • South Korea's June PPI 0.5% m/m (last 0.7%); 9.9% yr/yr (last 9.9%)

    • Australia's flash July Manufacturing PMI 55.7 (last 56.2) and flash Services PMI 50.4 (last 52.6)

    • Singapore's Q2 URA Property Index 3.5% qtr/qtr (last 3.2%)

  • In news:

    • Japan's Core CPI increased at its fastest pace since March 2015 in the June reading.

    • Japan's Finance Minister Suzuki said that full attention needs to be paid to the risk that rising inflation poses to economic growth.

    • Westpac expects that the Reserve Bank of Australia will raise its cash rate to 3.35% by February.

• Major European indices trade on a modestly higher note despite the release of mostly weaker than expected flash Manufacturing and Services PMI readings from major economies. STOXX Europe 600: +0.5% (+3.1% week-to-date), Germany's DAX: +0.3% (+3.3% week-to-date), U.K.'s FTSE 100: +0.2% (+1.8% week-to-date), France's CAC 40: +0.2% (+3.0% week-to-date), Italy's FTSE MIB: +0.2% (+1.4% week-to-date), Spain's IBEX 35: +0.2% (+1.0% week-to-date).

  • In economic data:

    • Eurozone's flash July Manufacturing PMI 49.6 (expected 51.0; last 52.1) and flash Services PMI 50.6 (expected 52.0; last 53.0)

    • Germany's flash July Manufacturing PMI 49.2 (expected 50.6; last 52.0) and flash Services PMI 49.2 (expected 51.2; last 52.4)

    • U.K.'s flash July Manufacturing PMI 52.2 (expected 52.0; last 52.8) and flash Services PMI 53.3 (expected 53.0; last 54.3). June Retail Sales -0.1% m/m (expected -0.3%; last -0.8%); -5.8% yr/yr (expected -5.3%; last -4.7%). June Core Retail Sales 0.4% m/m (expected -0.4%; last -1.0%); -5.9% yr/yr (expected -6.3%; last -5.5%)

    • France's flash July Manufacturing PMI 49.6 (expected 50.8; last 51.4) and flash Services PMI 52.1 (expected 52.7; last 53.9)

  • In news:

    • The French finance ministry lowered its domestic growth forecast for 2022 to 1.4% from 2.5%.

    • The European Central Bank's survey of professional forecasters showed reduced expectations for growth in 2022 (to 2.8% from 2.9%) and 2023 (to 1.5% from 2.3%).

U.S. equity futures:

• S&P 500 Futures: -6 @ 3,993

• DJIA Futures: +50 @ 32,087

• Nasdaq 100 Futures: -42 @ 12,577

Overseas:

• Europe: DAX +0.3%, FTSE +0.2%, CAC +0.2%

• Asia: Nikkei +0.4%, Hang Seng +0.2%, Shanghai Composite -0.1%

Commodities:

• Crude Oil -0.84 @ 95.51

• Nat Gas  +0.024 @ 7.956

• Gold +14.25 @ 1727.65

• Silver +0.098  @ 18.817

• Copper +0.0585 @ 3.3570

U.S. Summary:

• Earnings/Guidance:

  • a.k.a. Brands (AKA) guides Q2 net sales below consensus

  • American Express (AXP) beats by $0.16, beats on revs

  • Assoc Banc-Corp (ASB) beats by $0.12, beats on revs; expects FY22 net interest income to exceed $890 and noninterest income of $290-300 mln

  • Autoliv (ALV) beats by $0.54, beats on revs

  • Bank OZK (OZK) beats by $0.08, total loans increased 2.6% yr/yr

  • BJ Restaurants (BJRI) misses by $0.15, reports revs in-line

  • Boston Beer Co (SAM) misses by $0.31, reports revs in-line; guides FY22 EPS below consensus; expects FY22 depletions and shipments decrease of between 2% and 8%

  • Capital One (COF) misses by $0.09, reports revs in-line

  • Cleveland-Cliffs (CLF) misses by $0.23, beats on revs

  • Corsair Gaming (CRSR) guides Q2 revs well below consensus due to macro-economic headwinds affecting consumer spending on gaming gear, especially in Europe

  • First Bancorp (FBP) beats by $0.02

  • First Financial (FFBC) reports Q2 (Jun) results, beats on revs

  • Glacier Bancorp (GBCI) reports EPS in-line, misses on revs

  • HCA (HCA) beats by $0.50, reports revs in-line

  • Hilltop Holdings (HTH) beats by $0.10, beats on revs

  • Intuitive Surgical (ISRG) misses by $0.06, misses on revs; increases share repurchase authorization to $3.5 bln; ncreases 2022 procedure growth guidance to 14-16.5% from 12-16%; narrows non-GAAP gross margin outlook to 69-70% from 69-70.5%, but expects to be towards lower end of range

  • Mattel (MAT) beats by $0.12, beats on revs; guides FY22 EPS in-line

  • NextEra Energy (NEE) beats by $0.05, misses on revs

  • NextEra Energy Partners (NEP) beats by $2.37, beats on revs

  • PPG Industries (PPG) beats by $0.09, reports revs in-line; guides Q3 EPS below consensus

  • Regions Fincl (RF) beats by $0.06

  • Robert Half (RHI) beats by $0.01, misses slightly on revs

  • Roper (ROP) beats by $0.10, misses on revs

  • Schlumberger (SLB) beats by $0.10, beats on revs; guides FY22 revs above consensus

  • Scholastic Corp (SCHL) posts Q4 earnings of $1.46, revenue growth of +28.2%; expects FY22 revs to growth +5.9% yr/yr at the midpoint of its guidance

  • Seagate Tech (STX) misses by $0.30, misses on revs; guides SepQ EPS and revs below consensus; macro-related challenges continuing into SepQ; co is reducing its production plans

  • Sensient (SXT) beats by $0.03, beats on revs; provides FY22 outlook

  • Snap (SNAP) beats by $0.01, misses on revs; doesn't provide Q3 guidance due to uncertainties related to operating environment; authorizes $500 mln stock repurchase program

  • SVB Financial Group (SIVB) misses on EPS

  • Tenet Healthcare (THC) reports Q2 (Jun) results, misses on revs; guides Q3 EPS in-line, revs below consensus; guides FY22 EPS in-line, revs below consensus

  • UFP Industries (UFPI) beats by $0.84, beats on revs

  • Verizon (VZ) misses by $0.01, reports revs in-line; lowers FY22 EPS guidance

  • Vicor (VICR) beats by $0.11, beats on revs

  • Volaris Aviation (VLRS) misses on top and bottom lines

  • Western Alliance Bancorp (WAL) beats by $0.09, beats on revs

  • W.R. Berkley (WRB) beats by $0.27, beats on net premiums earned

• General News:

  • Germany to spend $15 bln to bailout Uniper as Russia hurts natural gas supplies, CNBC

  • Nord Stream 1 pipeline gas flows remain stable, according to Reuters

  • Senate expected to hold final votes and pass bill to provide $52 bln in funding for semiconductor industry next week, according to CNN

  • Russia and Ukraine agree to deal to export millions of tons of stranded grain, according to Financial Times

  • China to extend anti dumping duties on steel from Japan and South Korea, according to Reuters

  • EMA releases Meeting highlights from the Committee for Medicinal Products for Human Use (CHMP) July Meeting

  • UK CMA says six high street banks broke CMA banking rules

  • 3D Systems (DDD) partners with Fleet Space Technologies to produce RF patch antennas for use on Fleet's Alpha satellite constellation

  • America Movil SA (AMX) confirmed labor union initiated a strike in Telmex

  • Aurinia Pharma (AUPH) announces positive CHMP opinion for LUPKYNIS or the treatment of adults with active lupus nephritis in Europe

  • Avadel Pharmaceuticals (AVDL) provides LUMRYZ litigation update

  • Bristol-Myers (BMY) receives positive CHMP opinion recommending approval for LAG-3-blocking antibody combination opdualag (nivolumab and relatlimab) for treatment of patients with unresectable or metastatic melanoma

  • DICE Therapeutics (DICE) Announces Completion of Enrollment in Phase 1 Clinical Trial of Lead Oral IL-17 Antagonist, DC-806, for the Treatment of Psoriasis

  • Dr. Reddy's (RDY) Announces the First-to-Market Launch of Over-the-Counter, Store-Brand Equivalent of Allegra-D 24 Hr in the U.S. Market

  • FedEx (FDX) aiming to suspend Sunday deliveries in some markets, according to the Wall Street Journal

  • Fox Corporation (FOXA) expands distribution of its direct-to-consumer subscription streaming service FOX Nation across FuboTV (FUBO)

  • Gilead Sciences (GILD): CHMP Adopts Positive Opinion Recommending Veklury (Remdesivir) Receive Full Marketing Authorization for the Treatment of Patients With COVID-19

  • GMS (GMS) promoted Travis Hendren to Chief Operating Officer for GMS, effective August 1, 2022

  • Johnson & Johnson's (JNJ) Janssen receives positive CHMP opinion for novel bispecific antibody TECVAYLI (teclistamab) for the treatment of patients with relapsed and refractory multiple myeloma

  • Meta Platforms (META): UK CMA reports provisional findings regarding merger between META and GIPHY

  • Open Text (OTEX) adds three new offerings on the Salesforce AppExchange

  • RLX Technology (RLX) obtains license for manufacturing enterprise in China

  • Textron (TXT) awarded $354 mln U.S. Army contract

  • Vera Bradley (VRA) announces planned retirement of President and CEO Robert Wallstrom

  • Vericel (VCEL) Announces Publication of Positive Results from Retrospective Study by the Burn and Reconstructive Centers of America (BRCA) of Patients with Large Posterior Trunk Burns Treated with Epicel

  • Verisk Analytics (VRSK) names Elizabeth Mann as Executive Vice President and CFO, effective September 15, 2022

  • Virgin Galactic (SPCE): Virtuoso adds SPCE to its global portfolio, making a limited number of seats for SPCE's spaceflight experience available to its global client base

  • Warner Bros. Discovery (WBD): CMA has cleared the anticipated joint venture between WBD and BT Group

• M&A:

  • Hanger (HNGR) to be acquired by Patient Square Capital for $18.75 Per Share in Cash

  • NexTier Oilfield (NEX) unit to sell the Coiled Tubing assets to Gladiator Energy

  • Silverback Therapeutics (SBTX) enters into agreement under which ARS will merge with Silverback in an all-stock transaction

  • Tandem Diabetes Care (TNDM) acquires infusion set developer Capillary Biomedical; financial details not disclosed

• Syndicate: 

  • Graphite Bio (GRPH) files for $300 mln mixed securities shelf offering

  • MidWestOne Financial Group (MOFG) files for $100 mln mixed securities shelf offering

  • Synchrony Financial (SYF) files mixed securities shelf offering

  • TeraWulf (WULF) files for 5,787,732 share common stock offering by selling shareholders

• IPOs:

  • Expected to Price:

    • No IPOs expected.

Gapping Up/Down

• Gapping up:

  • HNGR +23.9%, VICR +8.2%, AUPH +7.9%, THC+6.8%, NOVT +5.8%, OZK +5.1%, SIX +3.9%, FFBC+3.7%, WDS +3%, UFPI +2.7%, SCHL +1.8%, DEN+1.4%

• Gapping down:

  • SNAP -29.5%, STX -12.4%, ISRG -11.9%, CRSR-10.9%, SBTX -10.5%, SAM -9.6%, SIVB -9.4%, PINS-7.2%, TTD -6.8%, WDC -6.8%, APPS -6.3%, BJRI-5.3%, MGNI -5%, GRPH -4.9%, META -4.7%, MU-4.7%, VLRS -4.3%, PUBM -3.9%, RHI -3.9%, ROKU-3.5%, COF -3.4%, DICE -3.3%, TNDM -3%, TWTR-2.6%, GOOG -2.5%, FUBO -2.5%, MAT -1.7%, WULF-1.2%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

  • Altice USA (ATUS) upgraded to Buy from Neutral at New Street; tgt $15

  • CBRE Group (CBRE) upgraded to Strong Buy from Outperform at Raymond James; tgt lowered to $110

  • Comstock (CRK) upgraded to Neutral from Underweight at Piper Sandler; tgt raised to $17

• Downgrades:

  • American Equity Investment Life (AEL) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $38

  • Apartment Income REIT Corp. (AIRC) downgraded to Hold from Buy at Jefferies; tgt $44

  • Aveanna (AVAH) downgraded to Hold from Buy at Jefferies; tgt $2.50

  • Continental Resources (CLR) downgraded to Underweight from Neutral at Piper Sandler; tgt lowered to $70

  • Discover Financial Services (DFS) downgraded to Neutral from Buy at Citigroup; tgt lowered to $115

  • Global Payments (GPN) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $145

  • ironSource (IS) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets

  • Lulu's Fashion Lounge (LVLU) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $14

  • Seagate Tech (STX) downgraded to Hold from Buy at Summit Insights

  • thredUP (TDUP) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $3.50

  • UNITIL Corporation (UTL) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $50

• Others:

  • Allbirds (BIRD) initiated with an Overweight at Piper Sandler; tgt $10

  • Autodesk (ADSK) resumed with a Neutral at BofA Securities; tgt $220

  • Etsy (ETSY) initiated with a Neutral at Piper Sandler; tgt $95

  • Farfetch (FTCH) initiated with a Neutral at Piper Sandler; tgt $9

  • G-III Apparel (GIII) assumed with an Overweight at Piper Sandler; tgt $28

  • Inspirato (ISPO) assumed with a Neutral at Cantor Fitzgerald; tgt $6

  • Latch (LTCH) assumed with a Neutral at Cantor Fitzgerald; tgt $5

  • Nordstrom (JWN) initiated with an Overweight at Piper Sandler; tgt $28

  • Offerpad Solutions (OPAD) assumed with an Overweight at Cantor Fitzgerald; tgt $10

  • Oxford Industries (OXM) initiated with an Overweight at Piper Sandler; tgt $110

  • Peloton (PTON) initiated with a Neutral at Piper Sandler; tgt $12

  • PVH (PVH) assumed with a Neutral at Piper Sandler; tgt $68

  • Revolve Group (RVLV) assumed with an Overweight at Piper Sandler; tgt $42

  • SmartRent (SMRT) assumed with an Overweight at Cantor Fitzgerald; tgt $6

  • Stitch Fix (SFIX) assumed with an Underweight at Piper Sandler; tgt $3

  • Target (TGT) initiated with a Neutral at Piper Sandler; tgt $190

  • The RealReal (REAL) assumed with a Neutral at Piper Sandler; tgt $4

  • Walmart (WMT) initiated with a Neutral at Piper Sandler; tgt $135

  • Warby Parker (WRBY) initiated with an Overweight at Piper Sandler; tgt $20

Upcoming Events:

• Econ Data:

  • 09:45 ET: IHS Markit Manufacturing PMI - Prelim for July (Briefing.comConsensus NA; Prior 52.7)

  • 09:45 ET: IHS Markit Services PMI - Prelim for July (Briefing.comConsensus NA; Prior 52.7)

• Earnings:

  • Monday (Jul 18)

    • Morning:  BAC SCHW GS PLD SYF

    • Afternoon: ELS IBM MRTN

  • Tuesday (Jul 19)

    • Morning: ALLY CFG HAL HAS JNJ LMT MAN NVS SBNY SI TFC

    • Afternoon: CALM FULT HWC HOPE IBKR JBHT NBHC NFLX OMC PNFP UCBI

  • Wednesday (Jul 20)

    • Morning:  ABT ASML BMI BKR BIIB CMA ELV FHN HCSG LAD MTB MKTX NDAQ NTRS

    • Afternoon:  AA CNS CCK CCI CSX CVBF DFS EFX FNB FR KMI KNX LSTR LVS PACW XM REXR RLI SEIC SLG STLD TSLA UMPQ UAL VMI WTFC

  • Thursday (Jul 21)

    • Morning: AIR ABB ALK AAL T AUB AN BANC BKU BX COLB DHI DHR DPZ DOV DOW EWBC FITB FCX GATX HRI HOMB HBAN IPG IQV KEY MMC NOK NUE PPBI PM POOL DGX SASR SAP SFNC SNA SON SNV TCBI TSCO TRV TPH UNP WBS WNS

    • Afternoon:  ASB OZK BJRI SAM COF FFBC GBCI HTH ISRG MAT PPG RHI STX SNAP SIVB THC UFPI VICR WRB WAL

  • Friday (Jul 22)  

    • Morning:  AXP ALV CLF FBP GNTX HCA NEE NEP RF ROP SLB SXT TWTR VZ

    • Afternoon: None

Asia & Europe detail:

Asia: Nikkei +0.4%, Hang Seng +0.2%, Shanghai Composite -0.1%

Equity indices in the Asia-Pacific region ended the week on a mixed note. Japan's Core CPI increased at its fastest pace since March 2015 in the June reading. Japan's Finance Minister Suzuki said that full attention needs to be paid to the risk that rising inflation poses to economic growth. Westpac expects that the Reserve Bank of Australia will raise its cash rate to 3.35% by February.

• In economic data:

  • Japan's flash July Manufacturing PMI 52.2 (last 52.7) and flash Services PMI 51.2 (last 54.0). June National CPI 2.4% yr/yr (last 2.5%) and National Core CPI 2.2% yr/yr, as expected (last 2.1%)

  • South Korea's June PPI 0.5% m/m (last 0.7%); 9.9% yr/yr (last 9.9%)

  • Australia's flash July Manufacturing PMI 55.7 (last 56.2) and flash Services PMI 50.4 (last 52.6)

  • Singapore's Q2 URA Property Index 3.5% qtr/qtr (last 3.2%)

---Equity Markets---

• Japan's Nikkei: +0.4% (+4.2% for the week)

• Hong Kong's Hang Seng: +0.2% (+1.5% for the week)

• China's Shanghai Composite: -0.1% (+1.3% for the week)

• India's Sensex: +0.7% (+4.3% for the week)

• South Korea's Kospi: -0.7% (+2.7% for the week)

• Australia's ASX All Ordinaries: -0.1% (+3.2% for the week)

---FX---

• USD/JPY: UNCH at 137.34

• USD/CNH: +0.1% to 6.7714

• USD/INR: UNCH at 79.87

Europe: DAX +0.3%, FTSE +0.2%, CAC +0.2%

Major European indices trade on a modestly higher note despite the release of mostly weaker than expected flash Manufacturing and Services PMI readings from major economies. The French finance ministry lowered its domestic growth forecast for 2022 to 1.4% from 2.5%. The European Central Bank's survey of professional forecasters showed reduced expectations for growth in 2022 (to 2.8% from 2.9%) and 2023 (to 1.5% from 2.3%).

• In economic data:

  • Eurozone's flash July Manufacturing PMI 49.6 (expected 51.0; last 52.1) and flash Services PMI 50.6 (expected 52.0; last 53.0)

  • Germany's flash July Manufacturing PMI 49.2 (expected 50.6; last 52.0) and flash Services PMI 49.2 (expected 51.2; last 52.4)

  • U.K.'s flash July Manufacturing PMI 52.2 (expected 52.0; last 52.8) and flash Services PMI 53.3 (expected 53.0; last 54.3). June Retail Sales -0.1% m/m (expected -0.3%; last -0.8%); -5.8% yr/yr (expected -5.3%; last -4.7%). June Core Retail Sales 0.4% m/m (expected -0.4%; last -1.0%); -5.9% yr/yr (expected -6.3%; last -5.5%)

  • France's flash July Manufacturing PMI 49.6 (expected 50.8; last 51.4) and flash Services PMI 52.1 (expected 52.7; last 53.9)

---Equity Markets---

• STOXX Europe 600: +0.5% (+3.1% week-to-date)

• Germany's DAX: +0.3% (+3.3% week-to-date)

• U.K.'s FTSE 100: +0.2% (+1.8% week-to-date)

• France's CAC 40: +0.2% (+3.0% week-to-date)

• Italy's FTSE MIB: +0.2% (+1.4% week-to-date)

• Spain's IBEX 35: +0.2% (+1.0% week-to-date)

---FX---

• EUR/USD: -0.6% to 1.0161

• GBP/USD: -0.3% to 1.1952

• USD/CHF: -0.1% to 0.9657