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23/06/22 Briefing




The S&P 500 futures are up 28 points and are trading 0.6% above fair value. The Nasdaq 100 futures are up 114 points and are trading 0.7% above fair value. The Dow Jones Industrial Average futures are up 163 points and are trading 0.6% above fair value.

There isn't any specific news to account for the upward bias in the futures market. To be fair, there has been good news. Darden Restaurants (DRI) and KB Home (KBH)posted better-than-expected earnings results, yet they don't have the market-cap weight to move the market.

Accordingly, there is a prevailing sense that the market is still entertaining the prospect of rebounding from deeply oversold conditions as we move closer to quarter end. The drop in long-term rates seems to be helping the effort. The 10-yr note yield, which scraped 3.50% on June 14, moved to 3.09% overnight. It is currently down two basis points at 3.13%.

The downshift there has been linked to concerns about growth slowing appreciably due to aggressive rate hikes by central banks. The Norges Bank is part of that contingent, having raised its key lending rate by 50 basis points to 1.25%, versus an expectation for 25 basis points.

That move followed Fed Chair Powell's contention yesterday that it will be challenging to achieve a soft landing, and it has been joined by reports this morning highlighting weaker-than-expected flash PMI readings for the eurozone, Germany triggering the alert level of its emergency gas plan, and Russia making inroads in taking over the Luhansk Province.

Fed Chair Powell will be back on Capitol Hill, appearing at 10:00 a.m. ETbefore the House Financial Services Committee for day two of his Semiannual Monetary Policy Report.

In corporate news:

  • Accenture (ACN 276.00, -10.40, -3.6%): misses by $0.04, beats on revs; lowers FY22 EPS below consensus Apogee Enterprises (APOG): beats by $0.44, beats on revs; raises FY23 EPS above consensus; increased the existing share repurchase authorization by 1 mln shares

  • Darden Restaurants (DRI 121.35, +6.23, +5.4%): beats by $0.03, beats on revs; guides FY23 EPS below consensus, revs in-line; Q4 comps +11.7%; increases dividend 10%; authorized a new $1 bln share repurchase program

  • KB Home (KBH 27.01, +0.78, +3.0%): beats by $0.29, beats on revs; homes delivered essentially flat; tightens FY22 housing revenue guidance, raises average selling price guidance

  • Occidental Petroleum (OXY 57.44, +1.67, +3.0%): 10% owner Warren Buffett's Berkshire Hathaway (BRK.A) disclosed the purchase of ~9.55 mln shares worth ~$528.8 mln (transaction dates 6/17-6/22)

  • Snowflake (SNOW 134.39, +7.03, +5.5%): JPMorgan upgrades to Overweight from Neutral

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Thursday on a mostly higher note. Japan's Nikkei +0.1%; Hong Kong's Hang Seng +1.3%; China's Shanghai Composite +1.6%; India's Sensex +0.9%; South Korea's Kospi -1.2%; and Australia's All Ordinaries +0.1%. 

  • In economic data:

  • Japan's flash June Manufacturing PMI 52.7 (last 53.3) and flash Services PMI 54.2 (last 52.6)

  • South Korea's May PPI 0.5% m/m (last 1.6%); 9.7% yr/yr (last 9.7%)

  • Australia's flash June Manufacturing PMI 55.8 (last 55.7) and flash June Services PMI 52.6 (last 53.2)

  • Singapore's May CPI 5.6% yr/yr (expected 5.5%; last 5.4%)

  • In news:

  • A summit of BRICS leaders began in Beijing today.

  • A former Bank of Japan official said that the BoJ's pledge to keep borrowing costs low is leading to a problematic feedback loop of yen depreciation.

  • There was growing speculation that the Bank of Japan will abandon its yield curve control policy.

  • Bank of Korea Senior Deputy Governor Lee said that inflation needs to be tamed through pre-emptive policy and that rate hikes will only have a limited impact on growth.

  • Major European indices trade on a modestly higher note while Germany's DAX (-0.3%) underperforms. STOXX Europe 600 -0.1%; UK's FTSE 100 +0.3%; France's CAC 40 +0.5%; Italy's FTSE MIB +0.6%; and Spain's IBEX 35 +0.1%. 

  • In economic data:

  • Eurozone's flash June Manufacturing PMI 52.0 (expected 53.9; last 54.6) and flash Services PMI 52.8 (expected 55.5; last 56.1)

  • Germany's flash June Manufacturing PMI 52.0 (expected 54.0; last 54.8) and flash Services PMI 52.4 (expected 54.5; last 55.0)

  • U.K.'s flash June Manufacturing PMI 53.4 (expected 53.7; last 54.6) and flash Services PMI 53.4 (expected 53.0; last 53.4). June CBI Distributive Trades Survey -5 (expected -3; last -1). May Public Sector Net Borrowing GBP13.23 bln (expected GBP13.20 bln; last GBP21.13 bln)

  • France's flash June Manufacturing PMI 51.0 (expected 54.0; last 54.6) and flash Services PMI 54.4 (expected 57.6; last 58.3). June Business Survey 108 (expected 105; last 106

  • In news:

  • Germany and France saw their Manufacturing and Services PMIs weaken in flash readings for June while the U.K.'s Manufacturing PMI also decreased from last month's level.

  • Germany reportedly triggered a second stage of its three-stage gas emergency plan due to reduced supply from Russia.

 

U.S. equity futures:

  • S&P 500 Futures: +28 @ 3,788

  • DJIA Futures: +163 @ 30,648

  • Nasdaq 100 Futures: +114 @ 11,641

Overseas:

  • Europe: DAX -0.3%, FTSE +0.3%, CAC +0.5%

  • Asia: Nikkei +0.1%, Hang Seng +1.3%, Shanghai Composite +1.6%

Commodities:

  • Crude Oil +0.05 @ 106.31

  • Nat Gas -0.06 @ 6.80

  • Gold -9.00 @ 1829.40

  • Silver -0.31  @ 21.11

  • Copper -0.09 @ 3.86

U.S. Summary:

  • Earnings:

  • Accenture (ACN) misses by $0.04, beats on revs; lowers FY22 EPS below consensus

  • Apogee Enterprises (APOG) beats by $0.44, beats on revs; raises FY23 EPS above consensus

  • Darden Restaurants (DRI) beats by $0.03, beats on revs; guides FY23 EPS below consensus, revs in-line; Q4 comps +11.7%; increases dividend 10%; authorized a new $1 bln share repurchase program

  • FactSet (FDS) beats by $0.54, beats on revs; reaffirms FY22 EPS guidance, revs guidance

  • GMS (GMS) beats by $0.21, beats on revs; expands share repurchase authorization

  • H.B. Fuller (FUL) beats by $0.04, beats on revs; reaffirms FY22 EPS guidance

  • KB Home (KBH) beats by $0.29, beats on revs; homes delivered essentially flat; tightens FY22 housing revenue guidance, raises average selling price guidance

  • Plug Power (PLUG) provides 2025 growth targets in slide presentation; gross margin >30%; operating margin approx. 17%; co sees 50% CAGR of hydrogen investments between 2021-2025

  • Rite Aid (RAD) beats by $0.10, beats on revs; guides FY23 EPS above consensus, revs above consensus

  • Steelcase (SCS) beats by $0.13, beats on revs; guides AugQ EPS below consensus, revs above consensus

  • Worthington (WOR) beats dual est by $0.75, beats single est on revs

  • General News:

  • Germany will move to stage two of emergency gas plan, according to CNBC

  • Additional villages in eastern Ukraine have fallen as Russia is close to complete takeover of Luhansk Province, according to New York Times

  • Oil executives will have meeting at Energy Department today, according to The Hill

  • SEC planning new rules later this year on gaming features of online brokerages, according to Bloomberg

  • CFPB initiates review of credit card company penalty policies costing consumers $12 billion each year

  • Vapers are rushing to purchase Juul e-cigarettes ahead of possible FDA ban, according to Bloomberg

  • US to expand monkeypox testing, according to Bloomberg

  • Albertsons (ACI): five largest shareholders agree to extend lock-up to Sep 10from June 30as co continues its previously-announced review of strategic alternatives

  • Century Aluminum (CENX) will temporarily idle its smelter in KY due to soaring energy costs; expected to begin the idling process on June 27

  • Coinbase Global (COIN) ends Coinbase Pro

  • GlaxoSmithKline (GSK) announces 1 billion R&D investment over 10 years to get ahead of infectious diseases in lower income countries

  • Melco Resorts & Entertainment (MLCO) announces extension of Macau Gaming Subconcession to December 31, 2022

  • Merck (MRK) receives unanimous votes from CDC's ACIP to provisionally recommend use of VAXNEUVANCE

  • Meta (FB) CEO Mark Zuckerberg believes there will be billions of spending in the MetaVerse, according to CNBC

  • Occidental Petro (OXY): 10% owner Warren Buffett's Berkshire Hathaway (BRK.A) disclosed the purchase of ~9.55 mln shares worth ~$528.8 mln (transaction dates 6/17-6/22)

  • Petrobras (PBR) clarifies that the information that there is a reserve of R$ 200 billion for distribution of profits by the company is not true

  • Radius Health (RDUS) submits NDA to the FDA for elacestrant in patients with ER+/HER2- advanced or metastatic breast cancer

  • Red Robin Gourmet (RRGB) CEO Paul Murphy intends to retire at the end of 2022

  • Tesla (TSLA): CEO Musk says two factories in TX and Berlin "losing billions of dollars," according to Automotive News

  • Wheels Up Experience (UP) names Todd Smith as CFO effective June 30, 2022

  • M&A:

  • Atkore International (ATKR) acquires United Poly Systems; financial details not disclosed

  • Gores Guggenheim (GGPI) shareholders approve combination with Polestar Performance AB

  • Syndicate

  • Ormat Tech (ORA) prices offering of $375.0 mln of 2.50% Green Convertible Senior Notes due 2027

  • Xenon Pharmaceuticals (XENE) prices $250.0 million public offering

  • IPOs:

  • Priced to Trade:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • AURA +10.2%, APOG +5.6%, KBH +5.1%, SPIR +4.2%, SCS +3.1%, OXY +2.7%, TIL +2.5%, GMS +2.5%, WOR +2.2%, COIN +1.9%, PLUG +1.4%, AMD +1.2%, ENPH +1%

  • Gapping down:

  • XENE -10%, RRGB -5%, DRTS -1.4%, LDOS -1.1%, FUL -0.8%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Funko (FNKO) upgraded to Overweight from Neutral at JP Morgan; tgt raised to $28

  • Southwest Air (LUV) upgraded to Strong Buy from Outperform at Raymond James; tgt lowered to $55

  • Downgrades:

  • Acuity Brands (AYI) downgraded to Mkt Perform from Outperform at William Blair

  • AGCO Corp (AGCO) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $129

  • Alaska Air (ALK) downgraded to Outperform from Strong Buy at Raymond James; tgt lowered to $58

  • Benefitfocus (BNFT) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $9

  • Boise Cascade (BCC) downgraded to Neutral from Buy at BofA Securities; tgt $71

  • Coinbase Global (COIN) downgraded to Neutral from Buy at Redburn

  • CRISPR Therapeutics (CRSP) downgraded to In-line from Outperform at Evercore ISI; tgt lowered to $60

  • Interpublic (IPG) downgraded to Neutral from Outperform at Macquarie

  • Leslie's (LESL) downgraded to Hold from Buy at Loop Capital; tgt lowered to $16

  • Lincoln National (LNC) downgraded to Peer Perform from Outperform at Wolfe Research; tgt lowered to $53

  • Louisiana-Pacific (LPX) downgraded to Neutral from Buy at BofA Securities; tgt $67

  • Mizuho Financial (MFG) downgraded to Neutral from Buy at BofA Securities

  • Resolute Forest Products (RFP) downgraded to Hold from Buy at TD Securities; tgt $16

  • Travelers (TRV) downgraded to Peer Perform from Outperform at Wolfe Research; tgt lowered to $156

  • W.P. Carey (WPC) downgraded to In-line from Outperform at Evercore ISI

  • Others:

  • Accuray (ARAY) initiated with a Buy at B. Riley Securities; tgt $7.50

  • Advance Auto (AAP) initiated with a Buy at MKM Partners; tgt $195

  • Advanced Energy (AEIS) initiated with a Hold at Loop Capital; tgt $78

  • Agree Realty (ADC) initiated with an Outperform at Credit Suisse; tgt $78

  • Alexandria RE (ARE) initiated with a Neutral at Credit Suisse; tgt $140

  • Anavex (AVXl) initiated with a Buy at Berenberg; tgt $40

  • AutoZone (AZO) initiated with a Buy at MKM Partners; tgt $2350

  • AvalonBay (AVB) initiated with a Neutral at Credit Suisse; tgt $208

  • Boston Properties (BXP) initiated with an Outperform at Credit Suisse; tgt $108

  • Brandywine Realty (BDN) initiated with a Neutral at Credit Suisse

  • Brixmor Property (BRX) initiated with an Outperform at Credit Suisse; tgt $23

  • Cummins (CMI) resumed with an Equal-Weight at Morgan Stanley; tgt $205

  • Denali Therapeutics (DNLI) initiated with a Buy at Berenberg; tgt $39

  • Douglas Emmett (DEI) initiated with an Outperform at Credit Suisse; tgt $27

  • DraftKings (DKNG) assumed with an Overweight at Morgan Stanley; tgt $31

  • Equity Residential (EQR) initiated with an Outperform at Credit Suisse; tgt $80

  • Essential Properties Realty Trust (EPRT) assumed with a Neutral at Credit Suisse; tgt $22

  • Essex Property (ESS) initiated with an Underperform at Credit Suisse; tgt $247

  • Evolus (EOLS) initiated with a Buy at Needham; tgt $18

  • Federal Realty (FRT) initiated with a Neutral at Credit Suisse; tgt $104

  • Floor & Decor (FND) initiated with a Neutral at MKM Partners; tgt $65

  • Four Corners Property Trust (FCPT) initiated with a Neutral at Credit Suisse; tgt $26

  • Highwoods Prop (HIW) initiated with a Neutral at Credit Suisse; tgt $34

  • Home Depot (HD) initiated with a Neutral at MKM Partners; tgt $285

  • Hudson Pacific Properties (HPP) initiated with an Underperform at Credit Suisse; tgt $16

  • Kilroy Realty (KRC) initiated with an Underperform at Credit Suisse; tgt $48

  • Kimco Realty (KIM) initiated with an Outperform at Credit Suisse; tgt $22

  • Lightning eMotors (ZEV) initiated with an Overweight at Cantor Fitzgerald; tgt $7

  • Mid-America Aptmt (MAA) initiated with an Outperform at Credit Suisse; tgt $195

  • National Retail Properties (NNN) initiated with an Outperform at Credit Suisse; tgt $46

  • NexPoint Residential (NXRT) initiated with an Outperform at Credit Suisse; tgt $72

  • Palantir Technologies (PLTR) initiated with a Neutral at Goldman; tgt $10

  • Phillips Edison & Company (PECO) initiated with a Neutral at Credit Suisse; tgt $34

  • Realty Income (O) initiated with an Outperform at Credit Suisse; tgt $75

  • Regency Centers (REG) initiated with a Neutral at Credit Suisse; tgt $56

  • RPT Realty (RPT) initiated with an Outperform at Credit Suisse; tgt $13

  • SL Green Realty (SLG) initiated with a Neutral at Credit Suisse; tgt $51

  • UDR (UDR) initiated with an Outperform at Credit Suisse; tgt $50

  • Veeva Systems (VEEV) initiated with a Buy at Goldman; tgt $253

  • WeWork (WE) initiated with an Outperform at Credit Suisse; tgt $11

Upcoming Events:

  • Econ Data:

  • 08:30 ET: Weekly Initial Claims (Briefing.comconsensus 230,000; prior 229,000), Continuing Claims (prior 1.312 mln)

  • 08:30 ET: Q1 Current Account Balance (Briefing.comconsensus -$279.00 bln; prior -$217.90 bln)

  • 09:45 ET: Preliminary June IHS Markit Manufacturing (Prior 57.0) and Services PMI (Prior 53.4)

  • 10:30 ET: Weekly natural gas inventories (prior +92 bcf)

  • 11:00 ET: Weekly crude oil inventories (prior +1.96 mln)

  • Earnings:

  • Tuesday (Jun 21)

  • Morning: LEN

  • Afternoon: LZB

  • Wednesday (Jun 22)

  • Morning: KFY WGO

  • Afternoon:  FUL KBH SCS WOR

  • Thursday (Jun 23)

  • Morning: ACN APOG DRI FDS GMS RAD

  • Afternoon: BB CAMP FDX SWBI

  • Friday (Jun 24)

  • Morning: KMX CCL

  • Afternoon: None

Asia & Europe detail:

Asia: Nikkei +0.1%, Hang Seng +1.3%, Shanghai Composite +1.6%

Equity indices in the Asia-Pacific region ended Thursday on a mostly higher note. A summit of BRICS leaders began in Beijing today. A former Bank of Japan official said that the BoJ's pledge to keep borrowing costs low is leading to a problematic feedback loop of yen depreciation. There was growing speculation that the Bank of Japan will abandon its yield curve control policy. Bank of Korea Senior Deputy Governor Lee said that inflation needs to be tamed through pre-emptive policy and that rate hikes will only have a limited impact on growth.

  • In economic data:

  • Japan's flash June Manufacturing PMI 52.7 (last 53.3) and flash Services PMI 54.2 (last 52.6)

  • South Korea's May PPI 0.5% m/m (last 1.6%); 9.7% yr/yr (last 9.7%)

  • Australia's flash June Manufacturing PMI 55.8 (last 55.7) and flash June Services PMI 52.6 (last 53.2)

  • Singapore's May CPI 5.6% yr/yr (expected 5.5%; last 5.4%)

---Equity Markets---

  • Japan's Nikkei: +0.1%

  • Hong Kong's Hang Seng: +1.3%

  • China's Shanghai Composite: +1.6%

  • India's Sensex: +0.9%

  • South Korea's Kospi: -1.2%

  • Australia's ASX All Ordinaries: +0.1%

---FX---

  • USD/JPY: -0.6% to 135.38

  • USD/CNH: -0.1% to 6.7045

  • USD/INR: +0.1% to 78.28

Europe: DAX -0.3%, FTSE +0.3%, CAC +0.5%

Major European indices trade on a modestly higher note while Germany's DAX (-0.3%) underperforms. Germany and France saw their Manufacturing and Services PMIs weaken in flash readings for June while the U.K.'s Manufacturing PMI also decreased from last month's level. Germany reportedly triggered a second stage of its three-stage gas emergency plan due to reduced supply from Russia.

  • In economic data:

  • Eurozone's flash June Manufacturing PMI 52.0 (expected 53.9; last 54.6) and flash Services PMI 52.8 (expected 55.5; last 56.1)

  • Germany's flash June Manufacturing PMI 52.0 (expected 54.0; last 54.8) and flash Services PMI 52.4 (expected 54.5; last 55.0)

  • U.K.'s flash June Manufacturing PMI 53.4 (expected 53.7; last 54.6) and flash Services PMI 53.4 (expected 53.0; last 53.4). June CBI Distributive Trades Survey -5 (expected -3; last -1). May Public Sector Net Borrowing GBP13.23 bln (expected GBP13.20 bln; last GBP21.13 bln)

  • France's flash June Manufacturing PMI 51.0 (expected 54.0; last 54.6) and flash Services PMI 54.4 (expected 57.6; last 58.3). June Business Survey 108 (expected 105; last 106)

---Equity Markets---

  • STOXX Europe 600: -0.1%

  • Germany's DAX: -0.3%

  • U.K.'s FTSE 100: +0.3%

  • France's CAC 40: +0.5%

  • Italy's FTSE MIB: +0.6%

  • Spain's IBEX 35: +0.1%

---FX---

  • EUR/USD: -0.6% to 1.0502

  • GBP/USD: -0.5% to 1.2207

  • USD/CHF: +0.5% to 0.9657

 

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The S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures