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23/05/22 Briefing


The S&P 500 futures are up 36 points and are trading 1.0% above fair value as the late-day rally effort on Friday, which helped the S&P 500 escape from bear market territory, has carried over this morning. In the same vein, the Nasdaq 100 futures are up 76 points and are 0.6% above fair value while the Dow Jones Industrial Average futures are up 293 points and are trading 1.1% above fair value.

The positive leaning this morning will be deemed a "risk-on trade," as most stocks are expected to benefit from the improved sentiment. In effect, this is more of a relief trade on the idea that things didn't unravel Friday after the S&P 500 fell more than 20% from its January high. Instead, buyers stepped up to defend prices, fostering some hope that the market could be poised for an overdue, and meaningful, rebound bid.

Reports that Broadcom (AVGO) is talking about a possible acquisition of VMWare (VMW), and that Electronic Arts (EA) is looking for a sale or merger, has helped contribute to the positive bias. Additionally, some weakening in the dollar, which stems from ECB President Lagarde teasing the prospect of exiting negative rates by the end of Q3, and an acknowledgment from President Biden that he is considering lifting some Chinese tariffs to help ease inflation pressures, have also aided the buying interest.

The 10-yr note yield is up four basis points to 2.83%. The U.S. Dollar Index is down 0.9% to 102.20. WTI crude futures are 0.7% to $111.08/bbl.

In U.S. Corporate news:

  • VMWare (VMW 117.40, +21.69, +22.7%): rallying on Bloomberg report that Broadcom (AVGO) is in talks to acquire the company

  • Electronic Arts (EA 135.10, +4.34, +3.3%): According to news site Puck, company is looking for a merger partner or possible sale

  • Eli Lilly (LLY 303.66, +4.81, +1.6%): SVB Securities initiates coverage with Outperform rating

  • Autodesk (ADSK 184.36, -7.05, -3.7%): Deutsche bank downgrades to Hold from Buy

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region began the week on a mixed note. South China Morning Post reported that large tech companies in China are cutting staff. India lowered duties on coal imports. South Korea and the U.S. may expand joint military exercises. South Korea's exports through the first 20 days of May were up 24.1% yr/yr with chip exports increasing 13.5% yr/yr. Australia's Labour coalition won parliamentary majority and Anthony Albanese was sworn in as prime minister today.

  • In economic data:

  • Hong Kong's April CPI 1.3% yr/yr (expected 1.8%; last 1.7%)

  • Singapore's April CPI 5.4% yr/yr (expected 5.5%; last 5.4%)



  • Major European indices trade in the green while Italy's MIB (-0.8%) underperforms. European Central Bank President Lagarde indicated that the central bank expects to be in a position to exit negative rates by the end of Q3. Bundesbank expects Germany's economy to grow modestly in Q2. The European Commission confirmed that EU's debt rules will remain suspended through 2023. Germany's Finance Minister Lindner said that the EU's expansive fiscal policy must end.

  • In economic data:

  • Germany's May ifo Business Climate Index 93.0 (expected 91.4; last 91.9). May Current Assessment 99.5 (expected 95.8; last 97.3) and Business Expectations 86.9 (expected 83.5; last 86.8)



U.S. equity futures:

  • S&P 500 Futures: +36 @ 3,938

  • DJIA Futures: +297 @ 31,559

  • Nasdaq 100 Futures: +71 @ 11,910

Overseas:

  • Europe: DAX +0.7%, FTSE +1.0%, CAC +0.2%

  • Asia: Nikkei +1.0%, Hang Seng -1.2%, Shanghai Composite UNCH

Commodities:

  • Crude Oil +0.80 @ 111.08

  • Nat Gas -0.197 @ 7.981

  • Gold +18.91 @ 1861.01

  • Silver +0.444 @ 22.118

  • Copper +0.0425 @ 4.3175

U.S. Summary:

  • Earnings/Guidance (Full Earnings Calendar):

  • JPMorgan Chase (JPM) provides guidance at investor day

  • Niu Technologies (NIU) reports Q1 results; provides Q2 outlook

  • XPeng (XPEV) reports Q1 results; misses single estimate; beats on revs


  • General News:

  • President Biden says US would intervene militarily if China invaded Taiwan and will review China tariffs. China says it will take "action to safeguard its sovereignty", according to the Wall Street Journal

  • White House official "walks back" President Biden's comments that US will defend Taiwan militarily; White House official says US policy toward Taiwan had not changed

  • Pentagon considering sending US special forces to Kyiv to guard embassy, according to the Wall Street Journal

  • Ukraine has ruled out any ceasefire or concessions to Russia, according to Reuters

  • White House medical advisor Dr. Ashish Jha is confident US will "get arms around" monkeypox cases because US has vaccines and treatments available and its not as contiguous as coronavirus, according to ABC News

  • Beijing has record coronavirus cases amid renewed lockdown fears, according to Bloomberg

  • President Biden signs $40 bln Ukraine aid bill

  • Federal judge blocks Biden administration's plan to end restrictions at southern border. The ruling could reduce political pressure on Democrats on immigration issue ahead of the midterm elections, according to the Washington Post

  • South Korean President Yoon and President Biden reiterate their common goal of the complete denuclearization of the Korean Peninsula

  • President Biden signs congressional bill 'Access to Baby Formula Act of 2022"

  • President Biden announces launch the Indo-Pacific economic framework

  • Japan and US announce climate partnership

  • Australian Labor Party wins election

  • Abbott (ABT) CEO Robert Ford expects baby formula plant to reopen in early June, according to the Washington Post

  • AbbVie (ABBV) receives CHMP recommendation for approval of Upadacitinib

  • Airbus (EADSY) is more optimistic on corporate jet market, according to Bloomberg

  • Align Tech (ALGN) announces strategic partnership with Asana (ASAN) to offer Invisalign trained doctors in the US a new workflow platform, Asana Smiles for Align

  • Apple (AAPL) considering increasing production outside of China, according to the Wall Street Journal

  • AstraZeneca (AZN) receives EU approval for Vaxzevria as third dose booster against COVID-19

  • Bakkt (BKKT) CFO to step down

  • Biohaven (BHVN) Provides Update on Phase 3 Clinical Trial Evaluating Troriluzole for Spinocerebellar Ataxia

  • Biohaven Pharmaceutical (BHVN): FDA accepts for review BHVN's NDA for intranasal zavegepant for the acute treatment of migraine

  • BMW (BMWYY) mulling ways to reduce dependence on oil and natural gas, according to Reuters

  • Boeing (BA) Starliner Spacecraft completes successful docking to space station

  • Cable ONE (CABO) authorizes additional repurchases of up to $450 million of Cable One's common stock

  • Canadian Nat'l Rail (CNI) appoints Shauneen Bruder as Chairperson

  • Concert Pharmaceuticals (CNCE) reports "positive" topline results for first CTP-543 Phase 3 Clinical trial in alopecia areata

  • Didi (DIDI) shareholders expected to vote on delisting today, according to Bloomberg

  • Entergy (ETR) shuts down Palisades Power Plant

  • Greenwich LifeSciences (GLSI) Provides Updates on Upcoming Phase III Clinical Trial & ASCO Meeting; to resume stock repurchase program

  • Guardant Health (GH) Presents New Data Showing Blood Test Accuracy in Detecting Colorectal Cancer in First-of-its Kind Prospective Study at Digestive Disease Week 2022

  • Hyundai Motor (HYMTF) to build its first dedicated full EV and battery manufacturing facility in US

  • ImmunoGen (IMGN) announces acceptance of Biologics License Application for mirvetuximab soravtansine in ovarian cancer with Priority Review; PDUFA date is November 28, 2022

  • Inotiv (NOTV): US Dept of Justice executed a search and seizure warrant at its Cumberland facility; DOJ also files civil action alleging violations of the Animal Welfare Act at the Cumberland facility

  • Latch (LTCH) completes workforce reduction

  • Lockheed Martin (LMT): CT Governor Ned Lamont signs legislation ratifying agreement with Sikorsky to grow jobs

  • NAC Re Corp (NRC) approves a new stock repurchase authorization of up to 2.5 mln shares

  • NextEra Energy (NEE) appoints John Ketchum as Chairman

  • Ocugen (OCGN) announces FDA removes clinical hold on phase 2/3 clinical trial for COVAXIN

  • Ocwen (OCN) Fincl Board of Directors authorizes $50 million share repurchase program

  • Pebblebrook Hotel Trust (PEB) provides occupancy operating data

  • Pfizer (PFE)/BioNTech (BNTX) COVID-19 vaccine demonstrates strong immune response, high efficacy and favorable safety in children 6 months to under 5 years of age following third dose

  • Regeneron Pharma (REGN) reports Evkeeza (evinacumab) Phase 3 Trial Demonstrates 48% LDL-C Reduction in Children with Ultra-rare Form of High Cholesterol

  • Sempra Energy (SRE) unit signed a participation agreement with TotalEnergies (TTE), Mitsui (MITSY), and Mitsubishi Corporation (MMTOF) for the development of the proposed Hackberry Carbon Sequestration project in Southwest Louisiana

  • Twitter (TWTR): Elon Musk tweets that Twitter "has still refuse to explain how they calculate that 5% of daily users are fake/spam! Very suspicious"

  • Vera Therapeutics (VERA) Announces New Atacicept Phase 2 Clinical Data in Two Oral Presentations at the 59th European Renal Association Congress

  • Vir Biotechnology (VIR) terminates collaboration agreement with WuXi Bio; other existing agreements between co and WuXi Bio remain in effect


  • M&A:

  • Alcon (ALC): Kala (KALA) announces entry into definitive agreement to sell EYSUVIS and INVELTYS to Alcon Inc.

  • Alnylam (ALNY) Presents New 18-Month Results from Exploratory Cardiac Endpoints in HELIOS-A Phase 3 Study of Investigational Vutrisiran

  • American Axle (AXL) provides statement on company sale speculation

  • Blackstone (BX) Credit has acquired EIG's 49% ownership interest in Elba Liquefaction Co

  • Broadcom (AVGO) in discussions to purchase VMWare (VMW), according to the Wall Street Journal

  • Daimler Truck (DDAIF) acquires stake in German high-tech machinery manufacturer Manz - both companies agree on strategic partnership

  • EVO Payments (EVOP) has acquired North49 Business Solutions; financial terms were not disclosed

  • Parsons (PSN) has entered into a definitive agreement to acquire Xator Corporation in a transaction valued at $400 mln

  • Siemens AG (SIEGY) announces a voluntary cash tender offer for all outstanding shares in Siemens Gamesa Renewable Energy, S.A. with intention to delist and integrate the business

  • Spirit Airlines (SAVE) to discuss Board's decision to reject JetBlue (JBLU) tender offer

  • Twitter (TWTR): Elon Musk is likely Twitter's only hope for deal due to decline in other financing, according to the New York Post

  • Vonage (VG) announces that termination date of previously announced deal for ERIC to acquire VG has been extended to August 22


  • Syndicate:

  • Canoo (GOEV) files for 48,043,111 share common stock offering by selling shareholder

  • Century Aluminum (CENX) files mixed securities shelf offering

  • Kroger (KR) files mixed securities shelf offering

  • NextDecade (NEXT) files for 4,618,226 share common stock offering by selling shareholder

  • Stoke Therapeutics (STOK) files for $400 mln mixed securities shelf offering


  • IPOs:

  • Priced to Trade:

  • No IPOs expected.



Gapping Up/Down

  • Gapping up:

  • AXL +12.6%, GOEV +7.4%, ALGN +2.2%, GNK +1.5%, POSH +1.4%, CVX +1.2%, EA +1.1%, VG +1%, RIVN+1%, BURL +0.9%, ABBV +0.8%, TJX +0.8%, BA+0.7%, MCRB +0.6%, GH +0.6%, CNI +0.6%, WRBY+0.5%, QCOM +0.5%


  • Gapping down:

  • LTCH -4.1%, NIU -3.1%, XPEV -2.2%, VIR -2.1%, NEXT -1.7%


Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Con Edison (ED) upgraded to Neutral from Sell at Guggenheim; tgt $94

  • CubeSmart (CUBE) upgraded to Strong Buy from Outperform at Raymond James; tgt lowered to $52

  • DTE Energy (DTE) upgraded to Outperform from Neutral at Credit Suisse; tgt lowered to $140

  • Motorola Solutions (MSI) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt $240

  • Saia (SAIA) upgraded to Buy from Neutral at UBS; tgt raised to $240

  • TreeHouse Foods (THS) upgraded to Buy from Hold at Truist

  • Trimble (TRMB) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt lowered to $67

  • Zebra Tech (ZBRA) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt lowered to $335


  • Downgrades:

  • Autodesk (ADSK) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $225

  • Axon (AXON) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt $120

  • Corning (GLW) downgraded to Neutral from Buy at Citigroup; tgt lowered to $37

  • Covetrus (CVET) downgraded to Mkt Perform from Outperform at Raymond James

  • Dow (DOW) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $78

  • HP (HPQ) downgraded to Neutral from Buy at Citigroup; tgt lowered to $38

  • JBG SMITH Properties (JBGS) downgraded to Peer Perform from Outperform at Wolfe Research; tgt lowered to $26

  • LyondellBasell (LYB) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $115

  • Pactiv Evergreen (PTVE) downgraded to Neutral from Buy at Citigroup; tgt lowered to $10

  • Realty Income (O) downgraded to Peer Perform from Outperform at Wolfe Research; tgt $73

  • Skillz (SKLZ) downgraded to Neutral from Buy at Citigroup; tgt lowered to $2.10

  • WPP plc (WPP) downgraded to Underweight from Equal-Weight at Morgan Stanley


  • Others:

  • AbbVie (ABBV) initiated with an Underperform at SVB Leerink; tgt $140

  • Alteryx (AYX) initiated with an Outperform at FBN Securities; tgt $80

  • Amgen (AMGN) initiated with a Mkt Perform at SVB Leerink; tgt $256

  • Century Therapeutics (IPSC) initiated with a Buy at H.C. Wainwright; tgt $27

  • Compass Therapeutics (CMPX) assumed with a Buy at H.C. Wainwright; tgt $12

  • Eli Lilly (LLY) initiated with an Outperform at SVB Leerink; tgt $341

  • Gilead Sciences (GILD) initiated with a Mkt Perform at SVB Leerink; tgt $68

  • Hain Celestial (HAIN) initiated with an Outperform at Cowen; tgt $34

  • Halozyme Therapeutics (HALO) initiated with an Outperform at SVB Leerink; tgt $52

  • Horizon Pharma (HZNP) initiated with a Mkt Perform at SVB Leerink; tgt $95

  • Johnson & Johnson (JNJ) assumed with an Outperform at SVB Leerink; tgt $200

  • Lancaster Colony (LANC) initiated with a Market Perform at Cowen; tgt $140

  • Ouster (OUST) initiated with an Overweight at Cantor Fitzgerald; tgt $8

  • Pfizer (PFE) initiated with a Mkt Perform at SVB Leerink; tgt $55

  • Porch Group (PRCH) initiated with an Overweight at JP Morgan; tgt $8

  • Radius Health (RDUS) initiated with a Mkt Perform at SVB Leerink; tgt $7

  • Regeneron Pharma (REGN) initiated with an Outperform at SVB Leerink; tgt $738

  • Roivant Sciences (ROIV) initiated with an Outperform; tgt $6

  • Sanofi (SNY) initiated with an Outperform at SVB Leerink

  • Theravance Biopharma (TBPH) initiated with an Outperform at SVB Leerink; tgt $12

  • Upwork (UPWK) initiated with a Sector Perform at RBC Capital Mkts; tgt $21

  • Vertex Pharma (VRTX) initiated with a Mkt Perform at SVB Leerink; tgt $265

  • Wabtec (WAB) initiated with an Overweight at Atlantic Equities; tgt $101


Upcoming Events:

  • Econ Data:

  • No economic data of note.


  • Earnings:

  • Monday (May 23)

  • Afternoon: AAP HEI NDSN SKY WKME ZM


  • Tuesday (May 24)

  • Morning: ANF ATHM AZO BBY CSIQ DOLE FRO NTES WOOF RL

  • Afternoon: A CAL INTU RAMP JWM TOL URBN


  • Wednesday (May 25)

  • Morning: BMO BNS CMCO DKS DY PLAB

  • Afternoon: BOX CHNG DXC ELF ENS GES NTNX NVDA SNOW SPLK VSAT WSM ZUO


  • Thursday (May 26)

  • Morning: BABA AMWD BIDU BZUN BRC BURL CM DG DLTR GCO HLNE JACK M MANU MDT ROLL RY SAFM TITN TD

  • Afternoon: ME AEO ADSK COST DELL DOMO FTCH GPS LGF.A MRVL RRGB STEP SUMO ULTA VMW WDAY ZS


  • Friday (May 27)

  • Morning: BIG CGC HIBB



Asia & Europe detail:

Asia: Nikkei +1.0%, Hang Seng -1.2%, Shanghai Composite UNCH

Equity indices in the Asia-Pacific region began the week on a mixed note. South China Morning Post reported that large tech companies in China are cutting staff. India lowered duties on coal imports. South Korea and the U.S. may expand joint military exercises. South Korea's exports through the first 20 days of May were up 24.1% yr/yr with chip exports increasing 13.5% yr/yr. Australia's Labour coalition won parliamentary majority and Anthony Albanese was sworn in as prime minister today.

  • In economic data:

  • Hong Kong's April CPI 1.3% yr/yr (expected 1.8%; last 1.7%)

  • Singapore's April CPI 5.4% yr/yr (expected 5.5%; last 5.4%)


---Equity Markets---

  • Japan's Nikkei: +1.0%

  • Hong Kong's Hang Seng: -1.2%

  • China's Shanghai Composite: UNCH

  • India's Sensex: -0.1%

  • South Korea's Kospi: +0.3%

  • Australia's ASX All Ordinaries: +0.1%

---FX---

  • USD/JPY: -0.3% to 127.51

  • USD/CNH: -0.5% to 6.6567

  • USD/INR: -0.4% to 77.51

Europe: DAX +0.7%, FTSE +1.0%, CAC +0.2%

Major European indices trade in the green while Italy's MIB (-0.8%) underperforms. European Central Bank President Lagarde indicated that the central bank expects to be in a position to exit negative rates by the end of Q3. Bundesbank expects Germany's economy to grow modestly in Q2. The European Commission confirmed that EU's debt rules will remain suspended through 2023. Germany's Finance Minister Lindner said that the EU's expansive fiscal policy must end.

  • In economic data:

  • Germany's May ifo Business Climate Index 93.0 (expected 91.4; last 91.9). May Current Assessment 99.5 (expected 95.8; last 97.3) and Business Expectations 86.9 (expected 83.5; last 86.8)


---Equity Markets---

  • STOXX Europe 600: +0.7%

  • Germany's DAX: +0.7%

  • U.K.'s FTSE 100: +1.0%

  • France's CAC 40: +0.2%

  • Italy's FTSE MIB: -0.8%

  • Spain's IBEX 35: +0.7%

---FX---

  • EUR/USD: +1.1% to 1.0679

  • GBP/USD: +0.9% to 1.2596

  • USD/CHF: -0.8% to 0.9661

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