23/06/23 Briefing

The S&P 500 futures are down 20 points and are trading 0.5% below fair value. The Nasdaq 100 futures are down 89 points and are trading 0.6% below fair value. The Dow Jones Industrial Average futures are down 103 points and are trading 0.3% below fair value.

The stock market is poised for a lower open, pressured by ongoing concerns about global growth and by weak mega cap stocks. Following yesterday's slate of central bank policy rate hikes, market participants are digesting a batch of disappointing global Manufacturing PMIs.

Specifically, flash June Manufacturing PMI readings from Germany, France, and the U.K. showed a deepening contraction while France's Services PMI also fell into contractionary territory (i.e. sub-50 readings). Australia's Manufacturing PMI contracted for the fourth consecutive month, albeit showing some improvement from last month, while Japan's Manufacturing PMI fell back into contraction after expanding slightly in May.

Those reports have fed into a general sense that global manufacturing activity is weakening amid ongoing rate hikes.

Treasury yields are moving lower. The 2-yr note yield is down four basis points to 4.75% and the 10-yr note yield is down six basis points to 3.74%. 

As a reminder, the Russell Reconstitution is final after the close of the US equity markets.

In corporate news:

• CarMax (KMX 82.80, +4.48, +5.7%): beats by $0.65, beats on revs

• 3M (MMM 104.27, +.384, +3.8%): enters into broad class resolution to support PFAS remediation for public water suppliers that detect PFAS at any level; agreement includes commitment of up to $10.3 bln payable over 13 yrs

• Ford (F 14.13, -0.06, -0.4%): preparing new round of layoffs for U.S. salaried workers, according to WSJ

• Lululemon (LULU 376.84, -1.12, -0.3%): unable to find a buyer for fitness product Mirror, according to NY Post

• Under Armour (UAA 7.16, -0.19, -2.6%): downgraded to Equal Weight from Overweight at Wells Fargo

• C3.ai (AI 37.13, -0.31, -0.8%): Deutsche Bank reiterated its Sell rating with a $16 price target

• Virgin Galactic (SPCE 4.77, -0.55, -10.3%): entered into a distribution agency agreement for the offer and sale of up to $400,000,000 of shares of common stock

• Starbucks (SBUX 99.56, -1.29, -1.3%): union says workers at 150 stores will strike over "treatment of LGBTQIA+ workers"

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended the week on a lower note while markets in China remained closed for Dragon Boat Festival. Japan's Nikkei: -1.5% (-2.7% for the week), Hong Kong's Hang Seng: -1.7% (-5.7% for the week), China's Shanghai Composite: CLOSED (-2.3% for the week), India's Sensex: -0.4% (-0.6% for the week), South Korea's Kospi: -0.9% (-2.1% for the week), Australia's ASX All Ordinaries: -1.3% (-2.2% for the week).

• In economic data:

• Japan's flash June Manufacturing PMI 49.8 (expected 50.7; last 50.6) and flash Services PMI 54.9 (expected 56.2; last 55.9). May National CPI 3.2% yr/yr (expected 4.1%; last 3.5%) and National Core CPI 3.2% (expected 3.1%; last 3.4%)

• Singapore's May CPI 0.3% m/m (last 0.1%); 5.1% yr/yr (expected 5.5%; last 5.7%). May Core CPI 4.7%, as expected (last 5.0%)

• Australia's flash June Manufacturing PMI 48.6 (expected 48.1; last 48.4) and flash Services PMI 50.7 (expected 50.1; last 52.1)

• In news:

• Hong Kong's Hang Seng reopened after a one-day holiday with tech and property names leading the index lower.

• Australia's Manufacturing PMI contracted for the fourth consecutive month in the flash reading for June while Japan's Manufacturing PMI fell back into contraction after expanding slightly in May.

• Major European indices trade in the red. STOXX Europe 600: -0.1% (-2.6% week-to-date), Germany's DAX: -0.7% (-3.0% week-to-date), U.K.'s FTSE 100: -0.3% (-2.1% week-to-date), France's CAC 40: -0.2% (-2.7% week-to-date), Italy's FTSE MIB: -0.4% (-2.0% week-to-date), Spain's IBEX 35: -0.7% (-2.1% week-to-date).

• In economic data:

• Eurozone's flash June Manufacturing PMI 43.6 (expected 44.8; last 44.8) and flash Services PMI 52.4 (expected 54.5; last 55.1)

• Germany's flash June Manufacturing PMI 41.0 (expected 43.5; last 43.2) and flash Services PMI 54.1 (expected 56.2; last 57.2)

• U.K.'s flash June Manufacturing PMI 46.2 (expected 46.8; last 47.1) and flash Services PMI 53.7 (expected 54.8; last 55.2). May Retail Sales 0.3% m/m (expected -0.2%; last 0.5%); -2.1% yr/yr (expected -2.6%; last -3.4%) and Core Retail Sales 0.1% m/m (expected -0.3%; last 0.7%); -1.7% yr/yr (expected -2.1%; last -3.0%)

• France's flash June Manufacturing PMI 45.5 (expected 45.4; last 45.7) and flash Services PMI 48.0 (expected 52.0; last 52.5)

• Spain's Q1 GDP 0.6% qtr/qtr (expected 0.5%; last 0.5%); 4.2% yr/yr (expected 3.8%; last 3.1%)

• In news:

• Flash June Manufacturing PMI readings from Germany, France, and the U.K. showed a deepening contraction while France's Services PMI also fell into contractionary territory.

• British homebuilders are among the laggards after yesterday's 50-bps hike from the Bank of England.

• Siemens Energy is down more than 33.0% in Frankfurt after withdrawing its guidance due to a substantial increase in failure rates of wind turbine components at Siemens Gamesa.

U.S. equity futures:

• S&P 500 Futures: -20 @ 4,403

• DJIA Futures: -103 @ 34,107

• Nasdaq 100 Futures: -89 @ 15,125

Overseas:

• Europe: DAX -0.7%, FTSE -0.3%, CAC -0.2%

• Asia: Nikkei -1.5%, Hang Seng -1.7%, Shanghai Composite closed for holiday

Commodities:

• Crude Oil -0.80 @ 68.71

• Nat Gas +0.026 @ 2.634

• Gold +5.00 @ 1928.70

• Silver -0.097 @ 22.370

• Copper -0.0570 @ 3.8330

Earnings/Guidance:

• Apogee Enterprises (APOG) beats by $0.15, beats on revs; raises FY24 EPS above consensus

• CarMax (KMX) beats by $0.65, beats on revs

• IonQ (IONQ) increases its 2023 bookings expectations by 25% to $45-55 mln

• Ouster (OUST) reaffirms Q2 revenue guidance; announces further cost reductions

• Smith & Wesson Brands (SWBI) beats by $0.03, beats on revs; also increases quarterly dividend by 20%

News:

• EU adopts 11th package of sanctions against Russia for its continued illegal war against Ukraine

• President Biden will issue an executive order on strengthening access to affordable, high-quality contraception

• Flash June Manufacturing PMI readings from Germany, France, and the U.K. showed a deepening contraction while France's Services PMI also fell into contractionary territory

• 3M (MMM) enters into broad class resolution to support PFAS remediation for public water suppliers that detect PFAS at any level; agreement includes commitment of up to $10.3 bln payable over 13 yrs

• Amgen (AMGN): CA, MN, and WI join FTC lawsuit to stop its $27.8 bln deal to buy Horizon Therapeutics (HZNP), according to Reuters

• Apartment Investment & Mgmt (AIV) closes on partial sale of Parkmerced mezzanine loan and announces amended agreement for sale of remaining investment

• Apple (AAPL) aiming to launch credit card in India, according to Mint

• Eagle Bulk Shipping (EGLE) agrees with Oaktree Capital Management to repurchase 3.8 mln shares, representing Oaktree's entire ownership of approximately 28% for $219.3 mln

• Ford (F) preparing another round of layoffs for salaried workers in U.S., according to The Wall Street Journal

• Intercept Pharma (ICPT) to restructure to focus on rare and serious liver diseases; significantly reduces operating expenses

• Jazz Pharma (JAZZ) seeks court action to declare FDA's approval of Lumryz as unlawful

• Leggett & Platt (LEG) appoints Benjamin M. Burns as CFO, effective June 21; succeeds Jeffrey L. Tate, who departed from his position

• lululemon athletica (LULU) having difficulty finding a buyer for Mirror, according to NY Post

• Meta Platforms (META) will restrict news access in Canada amid new law, according to BBC

• Microsoft (MSFT) agrees to FTC demand for lower revenue splits for video games, according to Verge

• Moderna (MRNA) completes submission to FDA for its updated COVID-19 vaccine for the XBB.1.5 variant

• Realty Income (O) CFO Christie Kelly to retire; names Jonathan Pong as new CFO

• Sonic Automotive (SAH) implementing plans to align EchoPark brand with current unfavorable market conditions; suspends operations at eight EchoPark locations and Delivery/Buy Centers; maintains goal of EBITDA breakeven for EchoPark by 1Q24

• Starbucks (SBUX) union says workers at 150 stores will strike over "treatment of LGBTQIA+ workers"

• Tenet Healthcare () announced the appointment of Sun Park as Executive Vice President & Chief Financial Officer of the Company, effective January 1THC, 2024

• Thomson Reuters (TRI) announces share consolidation ratio for return of capital transaction; Shares to begin trading today on the TSX and NYSE on a post-consolidated basis

• Warner Bros. Discovery (WBD) negotiating to sell around half of Warner studio's film and TV music-publishing assets for $500 mln, according to Variety

• Wynn Resorts (WYNN) launches WynnBET online casino and sports betting app in West Virginia; becomes its 11th operational online state

M&A:

• Celanese (CE) and Mitsui sign definitive agreement to form Nutrinova, a food ingredients joint venture

• H.B. Fuller (FUL) completes strategic acquisition of Adhezion Biomedical and XCHEM International; financial details not disclosed

• Tilray (TLRY) completes accretive acquisition of HEXO Corp; accelerates realization of operating and cost synergies in excess of $27 million

Syndicate:

• Carrols Restaurant Group (TAST) files for 14,814,815 shares of common stock by selling shareholder

• Madison Square Garden Entertainment (MSGE) prices secondary offering of and concurrent share repurchase

• Starwood Property Trust (STWD) prices offering of $350 mln of its 6.750% Convertible Senior Notes due 2027

• Tigo Energy (TYGO) files for 5,768,750 shares of common stock issuable upon exercise of warrants; also files for 49,734,570 shares of common stock by selling shareholders

• Virgin Galactic (SPCE) entered into a distribution agency agreement for the offer and sale of up to $400,000,000 of shares of common stock

IPOs:

• No IPOs expected.

Gapping Up/Down

• Gapping up:

• TRUP +13.3%, MGTX +9.3%, SWBI +8.2%, IONQ +7.6%, GSK +6.1%, MMM +3.7%, CE +3%, HRT +3%, APOG +2.8%, MATX +2.2%, BC +2.1%, OUST +1.9%, EGLE +1.8%

• Gapping down:

• SPCE -18.2%, XAIR -8%, ICPT -3.8%, ERAS -3%, TAST -2.7%, AVDL -2.7%, GNW -2.4%, MSGE -1.7%, MRNA -1.5%, JAZZ -1%, LULU -0.6%, WBD -0.5%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

• Evotec SE (EVO) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt raised to $16

• Principal Fincl (PFG) upgraded to Hold from Underperform at Jefferies; tgt raised to $65

• Ventas (VTR) upgraded to Strong Buy from Outperform at Raymond James; tgt $55

• Wayfair (W) upgraded to Market Perform from Underperform at MoffettNathanson; tgt $44

• Downgrades:

• Accenture (ACN) downgraded to Market Perform from Outperform at TD Cowen; tgt lowered to $300

• Intercontinental Hotels Group (IHG) downgraded to Hold from Buy at Kepler

• Planet Fitness (PLNT) downgraded to Underperform from Neutral at Exane BNP Paribas; tgt $57

• Reinsurance Group of America (RGA) downgraded to Hold from Buy at Jefferies; tgt lowered to $160

• Sarepta Therapeutics (SRPT) downgraded to In-line from Outperform at Evercore ISI; tgt $139

• Tesla (TSLA) downgraded to Sell from Buy at DZ Bank; tgt $210

• Ultrapar Participacoes (UGP) downgraded to Hold from Buy at HSBC Securities; tgt raised to $3.80

• Under Armour (UAA) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $8

• Viatris (VTRS) downgraded to Underweight from Equal Weight at Barclays; tgt $11

• Welltower (WELL) downgraded to Outperform from Strong Buy at Raymond James; tgt raised to $90

• Others:

• Affirm (AFRM) initiated with a Neutral at Compass Point; tgt $14.50

• Celsius (CELH) initiated with an Overweight at Stephens; tgt $180

• Floor & Decor (FND) initiated with a Buy at Truist; tgt $120

• Fluence (FLNC) initiated with a Neutral at Piper Sandler; tgt $24

• Gambling.comGroup Ltd. (GAMB) initiated with a Buy at BTIG Research; tgt $13

• Hain Celestial (HAIN) initiated with an Overweight at Stephens; tgt $17

• Knightscope (KSCP) initiated with a Buy at Ascendiant Capital Markets

• Lancaster Colony (LANC) initiated with a Buy at Loop Capital; tgt $237

• SoFi Technologies (SOFI) initiated with a Sell at Compass Point; tgt $5

• Sovos Brands (SOVO) initiated with an Overweight at Stephens; tgt $23

• Stem (STEM) initiated with a Neutral at Piper Sandler; tgt $6

• SunOpta (STKL) initiated with an Overweight at Stephens; tgt $10

• The Vita Coco Company (COCO) initiated with an Equal-Weight at Stephens; tgt $30

• Valvoline (VVV) initiated with an Overweight at Stephens; tgt $43

Econ Data:

• 09:45 ET: June Preliminary IHS Markit Manufacturing (Prior 48.4)

• 09:45 ET: June Preliminary IHS Markit Services PMI (Prior 54.9)

Earnings:

• Tuesday (Jun 20)

• Afternoon:  FDX LZB

• Wednesday (Jun 21)

• Morning:  PDCO WGO

• Afternoon:  KBH SCS

• Thursday (Jun 22)

• Morning: ACN CMC DRI FDS GMS

• Afternoon:  SWBI

• Friday (Jun 23)  

• Morning:  APOG KMX

Asia & Europe detail:

Asia: Nikkei -1.5%, Hang Seng -1.7%, Shanghai Composite CLOSED

Equity indices in the Asia-Pacific region ended the week on a lower note while markets in China remained closed for Dragon Boat Festival. Hong Kong's Hang Seng reopened after a one-day holiday with tech and property names leading the index lower. Australia's Manufacturing PMI contracted for the fourth consecutive month in the flash reading for June while Japan's Manufacturing PMI fell back into contraction after expanding slightly in May.

• In economic data:

• Japan's flash June Manufacturing PMI 49.8 (expected 50.7; last 50.6) and flash Services PMI 54.9 (expected 56.2; last 55.9). May National CPI 3.2% yr/yr (expected 4.1%; last 3.5%) and National Core CPI 3.2% (expected 3.1%; last 3.4%)

• Singapore's May CPI 0.3% m/m (last 0.1%); 5.1% yr/yr (expected 5.5%; last 5.7%). May Core CPI 4.7%, as expected (last 5.0%)

• Australia's flash June Manufacturing PMI 48.6 (expected 48.1; last 48.4) and flash Services PMI 50.7 (expected 50.1; last 52.1)

---Equity Markets---

• Japan's Nikkei: -1.5% (-2.7% for the week)

• Hong Kong's Hang Seng: -1.7% (-5.7% for the week)

• China's Shanghai Composite: CLOSED (-2.3% for the week)

• India's Sensex: -0.4% (-0.6% for the week)

• South Korea's Kospi: -0.9% (-2.1% for the week)

• Australia's ASX All Ordinaries: -1.3% (-2.2% for the week)

---FX---

• USD/JPY: +0.2% to 143.31

• USD/CNH: +0.4% to 7.2199

• USD/INR: +0.1% to 84.35

Europe: DAX -0.7%, FTSE -0.3%, CAC -0.2%

Major European indices trade in the red. Flash June Manufacturing PMI readings from Germany, France, and the U.K. showed a deepening contraction while France's Services PMI also fell into contractionary territory. British homebuilders are among the laggards after yesterday's 50-bps hike from the Bank of England. Siemens Energy is down more than 33.0% in Frankfurt after withdrawing its guidance due to a substantial increase in failure rates of wind turbine components at Siemens Gamesa.

• In economic data:

• Eurozone's flash June Manufacturing PMI 43.6 (expected 44.8; last 44.8) and flash Services PMI 52.4 (expected 54.5; last 55.1)

• Germany's flash June Manufacturing PMI 41.0 (expected 43.5; last 43.2) and flash Services PMI 54.1 (expected 56.2; last 57.2)

• U.K.'s flash June Manufacturing PMI 46.2 (expected 46.8; last 47.1) and flash Services PMI 53.7 (expected 54.8; last 55.2). May Retail Sales 0.3% m/m (expected -0.2%; last 0.5%); -2.1% yr/yr (expected -2.6%; last -3.4%) and Core Retail Sales 0.1% m/m (expected -0.3%; last 0.7%); -1.7% yr/yr (expected -2.1%; last -3.0%)

• France's flash June Manufacturing PMI 45.5 (expected 45.4; last 45.7) and flash Services PMI 48.0 (expected 52.0; last 52.5)

• Spain's Q1 GDP 0.6% qtr/qtr (expected 0.5%; last 0.5%); 4.2% yr/yr (expected 3.8%; last 3.1%)

---Equity Markets---

• STOXX Europe 600: -0.1% (-2.6% week-to-date)

• Germany's DAX: -0.7% (-3.0% week-to-date)

• U.K.'s FTSE 100: -0.3% (-2.1% week-to-date)

• France's CAC 40: -0.2% (-2.7% week-to-date)

• Italy's FTSE MIB: -0.4% (-2.0% week-to-date)

• Spain's IBEX 35: -0.7% (-2.1% week-to-date)

---FX---

• EUR/USD: -0.8% to 1.0871

• GBP/USD: -0.1% to 1.2721

• USD/CHF: +0.5% to 0.8967