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24/06/22 Briefing




The S&P 500 futures are up 28 points and are trading 0.7% above fair value. The Nasdaq 100 futures are up 91 points and are trading 0.5% above fair value. The Dow Jones Industrial Average futures are up 223 points and are trading 0.8% above fair value.

The positive bias is a function of carryover momentum in a week that has ben laced with growth concerns but positive price action. The latter has won out as an index driver, with assertions that the trade has been technically rooted.

There has been a good show of resilience to selling efforts this week, which has fueled the belief that the market is intent on rebounding from a deeply oversold position into quarter end.

Better-than-feared earnings results and positive guidance from FedEx (FDX), the Fed's report that banks would still be in a position to lend under a severe recession scenario, and a continuation of relative strength in the mega-cap stocks have been underpinning factors this morning.

The 2-yr note yield is up seven basis points to 3.08% and the 10-yr note yield is up five basis points to 3.12%. WTI crude futures are up 1.7% to $106.00/bbl.

As a reminder, the FTSE Russell reconstituted indexes will take effect after the close today.

In corporate news:

  • FedEx (FDX 234.54, +6.41, +2.8%): misses by $0.01, reports revs in-line; guides FY23 EPS above consensus; says its FY23 volume forecast has low single digit growth; expects margin expansion at all of its transportation segments on an adjusted basis

  • CarMax (KMX 92.25, +0.49, +0.5%): beats by $0.01, beats on revs

  • LendingTree (TREE 51.58, -3.29, -6.0%): lowers Q2 revenue guidance due to a challenging interest rate environment impacting its Home segment; annual guidance is under review

  • Zendesk (ZEN 91.01, +33.06, +57.1%): getting very close to being acquired by buyout firms, according to The Wall Street Journal

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the week on a higher note. Japan's Nikkei +1.2%; Hong Kong's Hang Seng +2.1%; China's Shanghai Composite +0.9%; India's Sensex +0.9%; South Korea's Kospi +2.3%; and Australia's All Ordinaries +1.1%. 

  • In economic data:

  • Japan's May CPI 0.3% m/m (last 0.4%); 2.5% yr/yr (last 2.5%). May National Core CPI 2.1% yr/yr, as expected (last 2.1%). April Corporate Services Price Index 1.8% yr/yr (last 1.7%)

  • Singapore's May Industrial Production 10.9% m/m (expected 2.8%; last 2.1%); 13.8% yr/yr (expected 5.8%; last 6.4%)

  • In news:

  • South Korea's vice finance minister said that the trade deficit is expected to widen in June due to a temporary slowdown in exports.

  • Australia's Prime Minister Albanese called on China to remove sanctions on AUD 20 bln worth of exports to China.

  • Election polls from Japan suggest that the country's ruling party will maintain majority after the upper house election on July 10.

  • Major European indices are looking for a higher finish to the week. STOXX EUROPE 600 +1.6%; Germany's DAX +0.9%; UK's FTSE 100 +1.4%; France's CAC 40 +2.0%; Italy's FTSE MIB +1.2%; and Spain's IBEX 35 +0.9%. 

  • In economic data:

  • Germany's June ifo Business Climate Index 92.3 (expected 92.9; last 93.0). June Current Assessment 99.3 (expected 99.1; last 99.6) and Business Expectations 85.8 (expected 87.4; last 86.9)

  • U.K.'s May Retail Sales -0.5% m/m (expected -0.7%; last 0.4%); -4.7% yr/yr (expected -4.5%; last -5.7%). May Core Retail Sales -0.7% m/m (expected -1.0%; last 0.2%); -5.7% yr/yr (expected -5.1%; last -6.9%)

  • Italy's June Business Confidence 110.0 (expected 108.5; last 109.4) and Consumer Confidence 98.3 (expected 102.5; last 102.7)

  • Spain's Q1 GDP 0.2% qtr/qtr (expected 0.3%; last 2.2%); 6.3% yr/yr (expected 6.4%; last 5.5%)

  • In news:

  • Belgium's Prime Minister De Croo said that EU members need to buy energy collectively to avert a crisis in the winter while German Chancellor Scholz claimed that his country is well prepared for energy-related challenges.

  • European Central Bank policymaker Kazimir said that the ECB is likely to hike by 25 bps in July, followed by a 50-bps hike in September. He added that the ECB's key rate could be between 1.50% and 2.00% in a year.

  • Ukraine received EU candidate status, though full accession, which isn't guaranteed, is likely to take at least several years.

U.S. equity futures:

  • S&P 500 Futures: +28 @ 3,824

  • DJIA Futures: +223 @ 30,900

  • Nasdaq 100 Futures: +91 @ 11,789

Overseas:

  • Europe: DAX +0.9%, FTSE +1.4%, CAC +2.0%

  • Asia: Nikkei +1.2%, Hang Seng +2.1%, Shanghai Composite +0.9%

Commodities:

  • Crude Oil +1.80 @ 106.07

  • Nat Gas +0.06 @ 6.30

  • Gold -4.20 @ 1825.60

  • Silver -0.25  @ 20.80

  • Copper -0.01 @ 3.73

U.S. Summary:

  • Earnings:

  • BlackBerry (BB) beats by $0.01, beats on revs

  • CalAmp (CAMP) misses by $0.07, misses on revs; expects sequential sales growth in AugQ in the mid to high single digit percentages

  • CarMax (KMX) beats by $0.01, beats on revs

  • FedEx (FDX) misses by $0.01, reports revs in-line; guides FY23 EPS above consensus; says its FY23 volume forecast has low single digit growth; expects margin expansion at all of its transportation segments on an adjusted basis

  • LendingTree (TREE) lowers Q2 revenue guidance due to a challenging interest rate environment impacting its Home segment; annual guidance is under review

  • Smith & Wesson Brands (SWBI) beats by $0.15, reports revs in-line; also increases dividend by 25%

  • General News:

  • Fed releases the results of its annual bank stress test, which showed that banks continue to have strong capital levels, allowing them to continue lending to households and businesses during a severe recession

  • Ukraine will withdraw from Sievierodonetsk in eastern Ukraine amid heavy Russian bombardment, according to New York Times

  • Senate passes bill that would provide incentives to states to pass red flag laws for gun purchases and provide funding for school security; House expected to vote today

  • The Federal Trade Commission has proposed a rule to ban junk fees and bait-and-switch advertising tactics that can plague consumers throughout the car-buying experience

  • Bally's Corporation (BALY) announces modified "Dutch auction" tender offer to purchase shares at $19.25-$22

  • BioMarin Pharmaceutical (BMRN) confirms that the Committee for Medicinal Products for Human Use has adopted a positive opinion recommending conditional marketing authorization for its investigational gene therapy, valoctocogene roxaparvovec, for adults with severe hemophilia A

  • Coinbase Global (COIN) derivatives exchange to make nano bitcoin futures available through leading brokers

  • Emergent BioSolutions (EBS) receives FDA Acceptance of BLA for AV7909 Anthrax vaccine candidate

  • J.M. Smucker (SJM) CEO Mark Smucker will assume role of Chair of the Board, effective August 17

  • Merck (MRK): European Commission approves keytruda as adjuvant treatment for adult and adolescent patients (=12 Years of Age) with stage iib or iic melanoma following complete resection

  • Mercury (MRCY) appoints Howard Lance and Bill Ballhaus to Board of Directors; Enters into cooperation agreements with Jana Partners and Starboard Value

  • Novavax (NVAX) receives EUA in Taiwan for its Nuvaxovid COVID-19 vaccine for use in individuals 18 and over

  • Primoris Services (PRIM) receives $260 mln solar project award

  • Revlon (REV) discloses that a portion of the proceeds of the initial borrowing under the DIP Term Loan Facility were used to repay in full and terminate the Foreign ABL Credit Agreement

  • Sarepta Therapeutics (SRPT): US FDA placed a clinical hold on SRP-5051 for the treatment of Duchenne muscular dystrophy

  • SoftBank (SFTBY) founder Masayoshi Son supports Nasdaq (NDAQ) listing for Arm unit, according to FT

  • Toyota (TM) and Subaru recall some EV models, according to Reuters

  • Twitter (TWTR) provides Elon Musk with more data on bots after lawyer request, according to Business Insider

  • M&A:

  • AZZ (AZZ) agrees to sell a 60% interest in its Infrastructure Solutions segment to Fernweh at an implied EV of $300 mln; proceeds total approximately $228 mln

  • Barclays PLC (BCS) acquires Kensington Mortgage Company

  • Merck (MRK) talks to acquire Seagen (SGEN) are picking up speed, according to The Wall Street Journal

  • NerdWallet (NRDS) to acquire On The Barrelhead for $120 mln

  • Zendesk (ZEN) getting very close to being acquired by buyout firms, according to The Wall Street Journal

  • Syndicate

  • Replimune (REPL) files for $400 mln mixed securities shelf offering

  • IPOs:

  • Priced to Trade:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • PRIM +5.5%, FERG +5%, SWBI +4.5%, SWBI +4.5%, SNY +2.9%, FDX +2.7%, CSTL +2.2%, BHC +1.9%, TAK +1.9%, RKLB +1.5%, DDOG +1.3%, BCS +1.3%, GSK +1.3%, PBR +1.3%, NRDS +1.2%, AZZ +0.7%

  • Gapping down:

  • CAMP -16.4%, TREE -9.8%, REV -6.7%, SRPT -3.9%, BB -0.9%, NVAX -0.6%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Aurora Cannabis (ACB) upgraded to Overweight from Neutral at Cantor Fitzgerald

  • Becton Dickinson (BDX) upgraded to Overweight from Equal Weight at Wells Fargo; tgt $275

  • Altria (MO) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt lowered to $43

  • Progressive (PGR) upgraded to Mkt Perform from Underperform at Keefe Bruyette; tgt raised to $107

  • Sunoco LP (SUN) upgraded to Buy from Neutral at Mizuho; tgt lowered to $44

  • TETRA Tech (TTI) upgraded to Buy from Hold at Johnson Rice; tgt $7

  • Wolfspeed (WOLF) upgraded to Buy from Neutral at Goldman; tgt lowered to $108

  • Downgrades:

  • Ameriprise Financial (AMP) downgraded to Neutral from Buy at Goldman; tgt lowered to $270

  • Assurant (AIZ) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $185

  • Baxter (BAX) downgraded to Equal Weight from Overweight at Wells Fargo; tgt $71

  • 8x8 (EGHT) downgraded to In-line from Outperform at Evercore ISI; tgt $6

  • Denny's (DENN) downgraded to Neutral from Outperform at Wedbush; tgt lowered to $10

  • Futu Holdings (FUTU) downgraded to Neutral from Overweight at JP Morgan; tgt $55

  • H.B. Fuller (FUL) downgraded to Underweight from Neutral at JP Morgan; tgt lowered to $52

  • Others:

  • Agilon Health (AGL) initiated with a Neutral at BTIG Research

  • Bausch + Lomb ((BLCO) initiated with an Outperform at Evercore ISI; tgt $21

  • biote Corp. (BTMD) initiated with an Outperform at Cowen; tgt $11

  • Caleres (CAL) initiated with a Buy at Seaport Research Partners; tgt $35

  • Cano Health (CANO) initiated with an Outperform at Raymond James; tgt $8

  • Core Scientific (CORZ) initiated with an Outperform at Cowen; tgt $3.10

  • CytomX Therapeutics (CTMX) initiated with an Outperform at BMO Capital Markets; tgt $9

  • Endeavor Group (EDR) assumed with an Outperform at Credit Suisse; tgt $40

  • Exelixis (EXEL) initiated with an Outperform at BMO Capital Markets; tgt $28

  • Genmab (GMAB) initiated with a Market Perform at BMO Capital Markets; tgt $34.73

  • Iron Mountain (IRM) initiated with an Overweight at Barclays; tgt $58

  • Nuvalent (NUVL) initiated with an Outperform at BMO Capital Markets; tgt $28

  • Seagen (SGEN) initiated with a Market Perform at BMO Capital Markets; tgt $169

  • Seibels Bruce Group, The (SBIG) initiated with a Buy at Jefferies; tgt $4.50

  • Shopify (SHOP) resumed with an Equal-Weight at Morgan Stanley; tgt $450

  • Y-mAbs Therapeutics (YMAB) initiated with an Outperform at BMO Capital Markets; tgt $27

Upcoming Events:

  • Econ Data:

  • 10:00 ET: May New Home Sales (Briefing.comconsensus 595,000; prior 591,000)

  • 10:00 ET: Final University of Michigan Consumer Sentiment survey (Briefing.comconsensus 50.2; prior 50.2)

  • 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 +1.2%, Hang Seng +2.1%, Shanghai Composite +0.9%

Equity indices in the Asia-Pacific region ended the week on a higher note. South Korea's vice finance minister said that the trade deficit is expected to widen in June due to a temporary slowdown in exports. Australia's Prime Minister Albanese called on China to remove sanctions on AUD 20 bln worth of exports to China. Election polls from Japan suggest that the country's ruling party will maintain majority after the upper house election on July 10.

  • In economic data:

  • Japan's May CPI 0.3% m/m (last 0.4%); 2.5% yr/yr (last 2.5%). May National Core CPI 2.1% yr/yr, as expected (last 2.1%). April Corporate Services Price Index 1.8% yr/yr (last 1.7%)

  • Singapore's May Industrial Production 10.9% m/m (expected 2.8%; last 2.1%); 13.8% yr/yr (expected 5.8%; last 6.4%)

---Equity Markets---

  • Japan's Nikkei: +1.2% (+2.0% for the week)

  • Hong Kong's Hang Seng: +2.1% (+3.1% for the week)

  • China's Shanghai Composite: +0.9% (+1.0% for the week)

  • India's Sensex: +0.9% (+2.7% for the week)

  • South Korea's Kospi: +2.3% (-3.1% for the week)

  • Australia's ASX All Ordinaries: +1.1% (+1.5% for the week)

---FX---

  • USD/JPY: +0.1% to 135.05

  • USD/CNH: -0.1% to 6.6877

  • USD/INR: +0.2% to 78.28

Europe: DAX +0.9%, FTSE +1.4%, CAC +2.0%

Major European indices are looking for a higher finish to the week. Belgium's Prime Minister De Croo said that EU members need to buy energy collectively to avert a crisis in the winter while German Chancellor Scholz claimed that his country is well prepared for energy-related challenges. European Central Bank policymaker Kazimir said that the ECB is likely to hike by 25 bps in July, followed by a 50-bps hike in September. He added that the ECB's key rate could be between 1.50% and 2.00% in a year. Ukraine received EU candidate status, though full accession, which isn't guaranteed, is likely to take at least several years.

  • In economic data:

  • Germany's June ifo Business Climate Index 92.3 (expected 92.9; last 93.0). June Current Assessment 99.3 (expected 99.1; last 99.6) and Business Expectations 85.8 (expected 87.4; last 86.9)

  • U.K.'s May Retail Sales -0.5% m/m (expected -0.7%; last 0.4%); -4.7% yr/yr (expected -4.5%; last -5.7%). May Core Retail Sales -0.7% m/m (expected -1.0%; last 0.2%); -5.7% yr/yr (expected -5.1%; last -6.9%)

  • Italy's June Business Confidence 110.0 (expected 108.5; last 109.4) and Consumer Confidence 98.3 (expected 102.5; last 102.7)

  • Spain's Q1 GDP 0.2% qtr/qtr (expected 0.3%; last 2.2%); 6.3% yr/yr (expected 6.4%; last 5.5%)

---Equity Markets---

  • STOXX Europe 600: +1.6% (+1.4% week-to-date)

  • Germany's DAX: +0.9% (-0.6% week-to-date)

  • U.K.'s FTSE 100: +1.4% (+1.5% week-to-date)

  • France's CAC 40: +2.0% (+2.0% week-to-date)

  • Italy's FTSE MIB: +1.2% (+0.4% week-to-date)

  • Spain's IBEX 35: +0.9% (+0.4% week-to-date)

---FX---

  • EUR/USD: +0.1% to 1.0528

  • GBP/USD: +0.2% to 1.2280

  • USD/CHF: -0.3% to 0.9578


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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