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23/09/22 Briefing


The S&P 500 futures are down 53 points and are trading 1.4% below fair value. The Nasdaq 100 futures are down 178 points and are trading 1.6% below fair value. The Dow Jones Industrial Average futures are down 380 points and are trading 1.2% below fair value.

Equity futures are decidedly weak as market participants deal with concerns over a hard landing. Aggressive selling in the Treasury market is a major headwind for equities. It's not just the level yields have risen to, but how quickly they've moved up that's concerning.

The 2-yr note yield is up 10 basis points to 4.23% (but hit 4.26% earlier) and the 10-yr note yield is up eight basis points to 3.77% (but hit 3.82% earlier). 

Another factor weighing on investor sentiment this morning is Goldman Sachs cutting its year end price target for the S&P 500 to 3,600 from 4,300. Goldman, though, sees potential downside to 3,150 in the event of a hard landing. 

Overseas, gilt yields in the U.K. have surged after it was announced that some taxes will be rolled back while spending will increase. Flash Manufacturing and Services PMI readings for the eurozone weakened while the U.K.'s Manufacturing PMI improved slightly. Germany's readings stand out, not only for remaining in contractionary territory, but also for indicating an increased rate of deceleration.

WTI crude oil futures are below $81.00/bbl, down 3.5% to $80.55/bbl. Natural gas futures are up 0.5% to $7.12/mmbtu.

At 9:45 a.m. ET, market participants will receive the preliminary September IHS Markit Manufacturing PMI (prior 51.5) and IHS Markit Services PMI (prior 43.7) readings. 

In corporate news:

  • Costco (COST 471.39, -15.78, -3.24%): beats by $0.03, reports revs in-line, adjusted comparable sales increased by 10.4%

  • Boeing (BA 136.00, -2.71, -1.95%): To pay $200 mln to settle SEC charges that it misled investors about the 737 MAX, according to SEC

  • DocuSign (DOCU 52.70, -1.30, -2.41%): appoints Google exec Allan Thygesen as CEO, effective October 10

  • Domino's Pizza (DPZ 319.26, -0.88, -0.27%): upgraded to Outperform from Market Perform at BMO Capital Markets

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the week on a lower note while Japan's market was closed for a holiday. Japan's Nikkei: CLOSED (-1.5% for the week), Hong Kong's Hang Seng: -1.2% (-4.4% for the week), China's Shanghai Composite: -0.7% (-1.2% for the week), India's Sensex: -1.7% (-1.3% for the week), South Korea's Kospi: -1.8% (-3.9% for the week), Australia's ASX All Ordinaries: -1.9% (-2.7% for the week).

  • In economic data:

  • South Korea's August PPI -0.3% m/m (last 0.3%); 8.4% yr/yr (last 9.2%)

  • Singapore's August CPI 7.5% yr/yr (expected 7.2%; last 7.0%) and Core CPI 5.1% yr/yr (expected 5.0%; last 4.8%)

  • Australia's flash September Manufacturing PMI 53.9 (last 53.8) and flash Services PMI 50.4 (last 50.2)

  • New Zealand's Q3 Westpac Consumer Sentiment 87.6 (last 78.7)

  • In news:

  • There was some speculation that countries other than Japan could intervene in the currency market to slow the dollar's rise.

  • DigiTimes reported that chip foundries are being pressured by carmakers to renegotiate orders and quotes for next year.

  • Major European indices trade on a sharply lower note. STOXX Europe 600: -2.7% (-4.7% week-to-date), Germany's DAX: -2.8% (-4.3% week-to-date), U.K.'s FTSE 100: -2.4% (-3.5% week-to-date), France's CAC 40: -2.5% (-5.0% week-to-date), Italy's FTSE MIB: -3.3% (-4.6% week-to-date), Spain's IBEX 35: -3.0% (-5.5% week-to-date).

  • In economic data:

  • Eurozone's flash September Manufacturing PMI 48.5 (expected 48.7; last 49.6) and flash Services PMI 48.9 (expected 49.0; last 49.8)

  • Germany's flash September Manufacturing PMI 48.3, as expected (last 49.1) and flash Services PMI 45.4 (expected 47.2; last 47.7)

  • U.K.'s flash September Manufacturing PMI 48.5 (expected 47.5; last 47.3) and flash Services PMI 49.2 (expected 50.0; last 50.9). September GfK Consumer Confidence -49 (expected -42; last -44) and September CBI Distributive Trades Survey -20 (expected 10; last 37)

  • France's flash September Manufacturing PMI 47.8 (expected 49.8; last 50.6) and flash Services PMI 53.0 (expected 50.5; last 51.2)

  • Spain's Q2 GDP 1.5% qtr/qtr (expected 1.1%; last -0.2%); 6.8% yr/yr (expected 6.3%; last 6.7%)

  • In news:

  • Flash Manufacturing and Services PMI readings for the eurozone weakened while the U.K.'s Manufacturing PMI improved slightly but remained in contractionary territory.

  • Gilt yields in the U.K. have surged after it was announced that some taxes will be rolled back while spending will increase.

  • Credit Suisse is reportedly looking to raise capital and it denied speculation that it will exit the U.S. market. Right wing parties in Italy are expected to gain support in Sunday's general election.

 

U.S. equity futures:

  • S&P 500 Futures: -51 @ 3,707

  • DJIA Futures: -360 @ 29,716

  • Nasdaq 100 Futures: -166 @ 11,336

Overseas:

  • Europe: DAX -2.8%, FTSE -2.4%, CAC -2.5%

  • Asia: Nikkei CLOSED, Hang Seng -1.2%, Shanghai Composite -0.7%

Commodities:

  • Crude Oil -2.90 @ 80.56

  • Nat Gas  +0.034 @ 7.123

  • Gold -26.95 @ 1654.15

  • Silver -0.532  @ 19.085

  • Copper -0.1390 @ 3.3320

U.S. Summary:

  • Earnings/Guidance:

  • AAR Corp (AIR) beats by $0.04, misses on revs

  • American Public Education (APEI) guides FY22revenue inline

  • CalAmp (CAMP) beats by $0.02, beats on revs; maintains policy of not providing quarterly guidance, but does expect to achieve low-to-mid single digit percentage sequential revenue growth

  • Costco (COST) beats by $0.03, reports revs in-line, adjusted comparable sales increased by 10.4%

  • Daseke (DSKE) appoints Aaron Coley as CFO; reaffirms guidance

  • Mosaic (MOS) announces August 2022 revs and sales volumes; Potash volumes up 39% yr/yr, Phosphates up 5%, Mosaic Fertilizantes down 14%

  • Scholastic Corp (SCHL) reports Q1 (Aug) earnings of $(1.33) on sales growth of 1% yr/yr to $262.9 mln; Book Fairs well positioned to increase in-person fair counts to meet goal of 85% pre-pandemic levels

  • General News:

  • Senate will vote on continuing resolution to fund government through December 16on Tuesday. The bill will include money for Ukraine, but no money for coronavirus or monkeypox. It is still unclear if energy permitting reforms could be attached to the bill and still pass, according to Politico

  • UK Chancellor announces new growth plan with biggest package of tax cuts in generations

  • Storm developing in Caribbean could form Hurricane Hermine and impact the Gulf of Mexico coast next week, according to the Washington Post

  • White House announces new actions and funding to address the overdose epidemic and support recovery

  • House passes policing legislation, but it will require 60 votes to pass Senate and is currently opposed by most Republicans, according to CNN

  • Hong Kong ends quarantine policy for travelers, according to the Wall Street Journal

  • US regulators looking at Chinese audits, according to the Wall Street Journal

  • California wants to ban natural gas heaters by 2030, according to Bloomberg

  • 1stdibs.com(DIBS) announces an approximately 10% workforce reduction; substantially all restructuring charges to be incurred in Q3

  • Amazon (AMZN) contractors were twice as likely to receive unsafe driving scores, according to the Wall Street Journal

  • AMCI Acquisition Corp. II (AMCI): Givaudan and LanzaTech announce their collaboration on developing sustainable fragrance ingredients from renewable carbon

  • Apple (AAPL): Breaking Bad series creator Vince Gilligan signs a two-season deal with Apple TV+, according to Apple Insider

  • Apple (AAPL) Music will sponsor Superbowl Halftime Show, replacing Pepsi (PEP), according to CBS News

  • Artivion (AORT) follows recommendation to stop PROACT Xa Clinical Trial

  • AstraZeneca (AZN) reports Ultomiris approved in Europe for the treatment of adults with generalised myasthenia gravis

  • AXT (AXTI) provided update on IV Tramadol: FDA stated that the proposed study design appears reasonable and agreed on various study design aspects; will effect a previously announced 1-for-15 reverse split on September 23

  • Ballard Power (BLDP) receives order for 14 x 200 kW fuel cell modules from Siemens Mobility GmbH to power a fleet of seven Mireo Plus H passenger trains

  • Biohaven Pharmaceutical (BHVN) provides update regarding litigation related to the merger and spin-off

  • Boeing (BA) to pay $200 mln to settle SEC charges that it misled investors about the 737 MAX, according to SEC

  • CBTX (CBTX) authorizes new share repurchase program for up to $40 mln beginning after the close of business through September 30, 2023

  • ClearPoint Neuro (CLPT) receives FDA Clearance for ClearPoint Prism Neuro Laser Therapy System

  • Corcept Therapeutics (CORT) amends agreement with Optime Care to extend its term to March 31, 2024

  • Credit Suisse (CS) spokesperson denies report that is considering exiting US market, according to Bloomberg

  • Daseke (DSKE) CFO resigns

  • Dentsply Sirona (XRAY) appoints Glenn Coleman as Executive Vice President and Chief Financial Officer, effective September 26, 2022

  • DocuSign (DOCU) appoints Google exec Allan Thygesen as CEO, effective October 10

  • Dorchester Minerals (DMLP) CEO to step down; names Bradley Ehrman as CEO

  • Freshpet (FRPT): Jana Partners confirmed yesterday 9.6% active stake

  • Green Plains (GPRE) transitions Jim Stark to CFO role succeeding Patrich Simpkins who is transitioning to Chief Transformation Officer role, effective October 1

  • Guidewire Software (GWRE) approves $400 mln share repurchase program, effective immediately

  • Immutep (IMMP) received a 1,804,341 (~ A$2,693,046 ) research and development (R&D) tax incentive payment in cash from the French Government under its Crdit d'Impt Recherche scheme

  • Innate Pharma (IPHA) Presents Data From Ongoing Phase 2 TELLOMAK Trial Demonstrating Clinical Activity of Lacutamab in Advanced Mycosis Fungoides

  • Ionis Pharma (IONS) provides update on development program evaluating PCSK9 antisense medicine; ION449 will not advance into Phase 3 development based on pre-specified criteria

  • Kohl's (KSS): Activist investor Ancora Holdings favors Thomas Kingsbury, a board member of Kohl's, as replacement for current CEO -- Axios

  • LPL Financial (LPLA) reports monthly activity for August

  • Pfizer (PFE): US slashes target for vaccine donations abroad this year, according to Bloomberg

  • Qualcomm (QCOM) automotive design-win pipeline has grown to $30 bln, an over $10 bln expansion since its Q3 results and doubled since November 2021

  • Raytheon Technologies (RTX) awarded $985 mln U.S. Air Force contract for the Hypersonic Attack Cruise Missile

  • Riot Blockchain (RIOT) is supplementing its disclosures regarding the material weaknesses identified by management

  • Roku (ROKU) announces that three senior execs have been named as presidents of the company's media, devices, and consumer experience business areas

  • TechnipFMC (FTI) awarded a significant contract, defined between $75-250 mln, by Shell plc (SHEL) for the Jackdaw development in the UK

  • Transocean (RIG) receives contract for harsh environment semi-submersible Transocean Norge

  • Volkswagen (VWAGY) considering shifting production amid European energy prices, according to Bloomberg

  • M&A:

  • American Water Works (AWK) subsidiary acquires City of Villa Grove water and wastewater systems for $11 mln

  • Humana (HUM) is in the running to acquire Cano Health (CANO), according to the Wall Street Journal

  • IMAX (IMAX) acquires SSIMWAVE Inc. for $18.5 mln in cash and $2.5 mln in stock with additional earn-out consideration of $4 million

  • Newmont Goldcorp (NEM): Glencore (GLNCY) to acquire Newmont's stake in MARA project

  • Syndicate

  • Aadi Bioscience (AADI) announces $72.5 mln private placement equity financing

  • EDAP TMS SA (EDAP) prices offering of 2,666,667 ADSs at $7.50 per ADS

  • IPOs:

  • Expected to Price:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • CANO +6.4%, CORT +4.5%, LPLA +4.1%, IMAX +3%, XRAY +3%, FTI +2.6%, CBTX +1.5%, VXX +1.5%, CAMP +0.6%

  • Gapping down:

  • EDAP -5.8%, SCHL -4.4%, IONS -4.2%, BJ -4%, COST -3.4%, DIBS -2.9%, AZN -2.9%, USO -2.7%, MOS -2.3%, QCOM -2.2%, ROKU -2.1%, SLV -1.9%, DOCU -1.8%, TGT -1.3%, QQQ -1.3%, IWM -1.3%, APEI -1.3%, GPRE -1.2%, BLDP -1.2%, BA -1.1%, SPY -1.1%, GLD -1.1%, WMT -1%, DIA -1%, PVH-0.9%, PFE -0.8%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Apollo Global Management (APO) upgraded to Neutral from Underperform at BofA Securities

  • Avista (AVA) upgraded to Buy from Neutral at Mizuho; tgt $44

  • Domino's Pizza (DPZ) upgraded to Outperform from Market Perform at BMO Capital Markets; tgt $430

  • fuboTV (FUBO) upgraded to Outperform from Neutral at Wedbush; tgt $6

  • Downgrades:

  • Ally Financial (ALLY) downgraded to Equal Weight from Overweight at Wells Fargo; tgt $32

  • Digital Realty Trust (DLR) downgraded to Underweight from Equal Weight at Barclays; tgt lowered to $91

  • Equinix (EQIX) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $674

  • Others:

  • Appian (APPN) initiated with a Neutral at Credit Suisse; tgt $45

  • AppLovin (APP) resumed with an Overweight at Morgan Stanley; tgt $35

  • Asana (ASAN) initiated with a Neutral at Credit Suisse; tgt $23

  • BlackLine (BL) initiated with a Neutral at Credit Suisse; tgt $75

  • Boyd Gaming (BYD) initiated with a Mkt Outperform at JMP Securities; tgt $65

  • Cheesecake Factory (CAKE) initiated with an Overweight at Stephens; tgt $38

  • Chipotle Mexican Grill (CMG) initiated with an Overweight at Stephens; tgt $1900

  • Chuy's (CHUY) initiated with an Overweight at Stephens; tgt $27

  • Cincinnati Fincl (CINF) initiated with a Mkt Perform at Raymond James

  • Coupa Software (COUP) initiated with an Underperform at Credit Suisse; tgt $60

  • Cvent (CVT) initiated with an Outperform at Credit Suisse; tgt $8

  • Darden Restaurants (DRI) resumed with an Overweight at Stephens; tgt $140

  • Datadog (DDOG) resumed with an Outperform at Credit Suisse; tgt $145

  • Datadog (DDOG) resumed with a Neutral from Underweight at JP Morgan; tgt lowered to $105

  • Domino's Pizza (DPZ) initiated with an Equal-Weight at Stephens; tgt $368

  • Dynatrace (DT) initiated with a Neutral at Credit Suisse; tgt $38

  • E2open (ETWO) initiated with an Underperform at Credit Suisse; tgt $5.50

  • Five9 (FIVN) initiated with a Neutral at Credit Suisse; tgt $90

  • Flywire (FLYW) initiated with a Buy at Truist; tgt $36

  • Gaming and Leisure Properties (GLPI) initiated with a Mkt Outperform at JMP Securities; tgt $53

Upcoming Events:

  • Econ Data:

  • 09:45 ET: IHS Markit Manufacturing PMI - Prelim for Sep (Briefing.comConsensus NA; Prior 51.5)

  • 09:45 ET: IHS Markit Services PMI - Prelim for Sep (Briefing.comConsensus NA; Prior 43.7)

  • Earnings

  • Monday (Sep 19)

  • Morning:  AZO

  • Tuesday (Sep 20)

  • Morning: APOG

  • Afternoon:  SFIX

  • Wednesday (Sep 21)

  • Morning:  GIS

  • Afternoon:  FUL KBH LEN

  • Thursday (Sep 22)

  • Morning: CAN DRI FDS

  • Afternoon:  AIR CAMP COST

  • Friday (Sep 23)  

  • None


Asia & Europe detail:

Asia: Nikkei CLOSED, Hang Seng -1.2%, Shanghai Composite -0.7%

Equity indices in the Asia-Pacific region ended the week on a lower note while Japan's market was closed for a holiday. There was some speculation that countries other than Japan could intervene in the currency market to slow the dollar's rise. DigiTimes reported that chip foundries are being pressured by carmakers to renegotiate orders and quotes for next year.

  • In economic data:

  • South Korea's August PPI -0.3% m/m (last 0.3%); 8.4% yr/yr (last 9.2%)

  • Singapore's August CPI 7.5% yr/yr (expected 7.2%; last 7.0%) and Core CPI 5.1% yr/yr (expected 5.0%; last 4.8%)

  • Australia's flash September Manufacturing PMI 53.9 (last 53.8) and flash Services PMI 50.4 (last 50.2)

  • New Zealand's Q3 Westpac Consumer Sentiment 87.6 (last 78.7)

---Equity Markets---

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

  • Hong Kong's Hang Seng: -1.2% (-4.4% for the week)

  • China's Shanghai Composite: -0.7% (-1.2% for the week)

  • India's Sensex: -1.7% (-1.3% for the week)

  • South Korea's Kospi: -1.8% (-3.9% for the week)

  • Australia's ASX All Ordinaries: -1.9% (-2.7% for the week)

---FX---

  • USD/JPY: +0.5% to 143.06

  • USD/CNH: +0.7% to 7.1326

  • USD/INR: -0.1% to 80.99

Europe: DAX -2.8%, FTSE -2.4%, CAC -2.5%

Major European indices trade on a sharply lower note. Flash Manufacturing and Services PMI readings for the eurozone weakened while the U.K.'s Manufacturing PMI improved slightly but remained in contractionary territory. Gilt yields in the U.K. have surged after it was announced that some taxes will be rolled back while spending will increase. Credit Suisse is reportedly looking to raise capital and it denied speculation that it will exit the U.S. market. Right wing parties in Italy are expected to gain support in Sunday's general election.

  • In economic data:

  • Eurozone's flash September Manufacturing PMI 48.5 (expected 48.7; last 49.6) and flash Services PMI 48.9 (expected 49.0; last 49.8)

  • Germany's flash September Manufacturing PMI 48.3, as expected (last 49.1) and flash Services PMI 45.4 (expected 47.2; last 47.7)

  • U.K.'s flash September Manufacturing PMI 48.5 (expected 47.5; last 47.3) and flash Services PMI 49.2 (expected 50.0; last 50.9). September GfK Consumer Confidence -49 (expected -42; last -44) and September CBI Distributive Trades Survey -20 (expected 10; last 37)

  • France's flash September Manufacturing PMI 47.8 (expected 49.8; last 50.6) and flash Services PMI 53.0 (expected 50.5; last 51.2)

  • Spain's Q2 GDP 1.5% qtr/qtr (expected 1.1%; last -0.2%); 6.8% yr/yr (expected 6.3%; last 6.7%)

---Equity Markets---

  • STOXX Europe 600: -2.7% (-4.7% week-to-date)

  • Germany's DAX: -2.8% (-4.3% week-to-date)

  • U.K.'s FTSE 100: -2.4% (-3.5% week-to-date)

  • France's CAC 40: -2.5% (-5.0% week-to-date)

  • Italy's FTSE MIB: -3.3% (-4.6% week-to-date)

  • Spain's IBEX 35: -3.0% (-5.5% week-to-date)

---FX---

  • EUR/USD: -0.8% to 0.9752 

  • GBP/USD: -2.0% to 1.1032

  • USD/CHF: +0.4% to 0.9813


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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