US EARLY MORNING: Equity futures are seeing modest gains; there is a quiet data slate for Tuesday, but big macro events later in the week

• 
  OVERNIGHT: Asia-Pac stocks were mostly positive as the majority of bourses took impetus from Friday’s gains on Wall Street (see here). Gains were capped, however, after China set a modest economic growth target of about 5% for 2023 (exp. 5.0-5.5%), the slowest growth target in over two decades (see below). European equities opened slightly higher (see here), with some caution as traders digest lower than expected growth targets out of China, which weighed on the commodity complex. There has been hotter-than-expected inflation data out of Switzerland.


• 
  US PRE-MARKETS: Stocks are continuing higher after last week’s gains, albeit more moderately this morning, with macro traders citing caution after underwhelming growth forecasts set by Chinese officials (see below). Treasuries have been rallying, but yields are off lows; there may have some influence from hotter than expected Swiss inflation data out before the European open. Yields on US 10yr debt were still sub-4.00%. The dollar Index is around flat, unable to garner much support from a falling CNY, while crude benchmarks are lower after China’s policy update. Today’s docket is benign, but traders will be eying testimonies from Fed Chair Powell on Tuesday and Wednesday – one of his last opportunities to set the policy narrative ahead of the blackout that kicks in at the end of this week before the March 22nd FOMC; the jobs data, out Friday will be a piece of this debate, and we will get the usual preview by way of ADP’s data on Wednesday.


• 
  UPCOMING DATA: US data releases in January have generally alluded to the theme of sticky prices and resilient activity conditions, exacerbating hawkish monetary policy expectations, where many now see rates ‘higher for longer’, while some have suggested that there will be a ‘no landing’ growth outcome rather than the ‘hard’ or ‘soft’ landings the debate centred around a few weeks ago. However, these nascent narratives may face stern tests in the coming weeks as we enter a window of hard data releases (like jobs data and retail sales metrics) ahead of the March 22nd FOMC meeting. “Recent data are a standoff between weakness in traditional leading indicators like PMI new orders, the yield curve or the Conference Board LEI, and strength in other series (payrolls, retail sales),” Morgan Stanley says, “it’s possible that these leading indicators are too downbeat, but January data could also have been flattered by large seasonal adjustments and not be as strong as advertised,” the bank warns, noting that some of January’s seasonal adjustments could reverse in February; “good readings could confirm a strong data narrative, but disappointments would mean the weaker readings on those leading indicators suddenly loom large.” The bank’s equity strategists have been unimpressed with the recent corporate earnings season: “because US stocks rallied during reporting season, Q4 earnings have generally been described as decent, but the actual numbers don’t look great,” MS says, noting that the earnings surprise for the S&P 500 was unusually low at around 0%, while earnings growth was negative, more so when excluding the energy sector. These strategists write that, from a technical perspective, there is both bullish and bearish factors in play, but the strong gains seen on Friday coud potentially extend the rally in the near-term; the bank identifies resistance at 4,150 in the S&P 500, but longer-term are still cautious, arguing that US earnings expectations remain too high.


• 
  CHINA GROWTH: China set a modest economic growth target of about 5% for 2023 (exp. 5.0-5.5%), the slowest growth target in over two decades, and CPI around 3% (target unchanged vs 2022). SocGen said while the growth view may seem underwhelming, it may be a strategy of ‘aim low and overachieve’ by the upcoming new government team, rather than lack of confidence among policymakers. “The Government Work Report does indeed set economic growth and job creation as the top priorities, but there is no visible step-up in either fiscal or monetary easing,” SocGen writes, “despite a smaller broad deficit ratio, we see two big positive developments on the fiscal front: 1) this year’s fiscal resources will be used to support the real economy, rather than zero-COVID measures; and 2) the central government is finally willing to borrow more.” The bank adds that “the biggest stimulus to the Chinese economy this year will be the end of zero-COVID and COVID, and the second biggest is a more pragmatic policy stance toward real estate and internet platforms, which is reconfirmed in the NPC reports.”

DAY AHEAD:

• Our live day ahead calendar can be accessed here; a PDF version can be accessed here.


• 
  EUROPEAN DATA/SPEAKERS: The Sentix Index for March is expected to improve a little. Eurozone January retail sales for January are seen rising vs December, but still seen lower on an annual basis. ECB Chief Economist Lane will participate in a Q&A on inflation; last week, Lane noted that risks to inflation remained to the upside, and that monetary policy transmission could be slower this cycle, which many analysts took as a sign that he may be more open towards another 50bps rate rise at the May meeting, as well as a potentially higher terminal rate than previously assumed.


• 
  NORTH AMERICAN DATA/SPEAKERS: US factory orders for January, and durable goods revisions for the month are the highlight on a thin docket. From Canada, the Ivey PMI data for February is due.


• 
  WEEK AHEAD: Highlights include Fed Chair Powell's dual testimonies to Congress (Tue, Wed), US jobs data (Fri); markets will be looking to these events for any incremental contributions to the debate on whether rates should be held higher level and for longer than was assumed in the Fed’s previous forecasts. Elsewhere, China CPI (Thu) and trade data (Tue), Aussie retail sales (Tue); policy announcements from the RBA (Tue), BoC (Wed), BoJ (Fri). Our full week ahead preview can be accessed here.

STOCK SPECIFIC NEWS:

INDEX:

• 
  S&P 500 (SPX), Fair Isaac & Co (FICO), Lumen Technologies (LUMN) - S&P Dow Jones Indices announced that Fair Isaac will replace Lumen in the S&P 500, effective March 20th.


• 
  GICS Sectors - S&P Dow Jones and MSCI will dissolve the 'Data Processing & Outsourced Services' sub-sector group on March 17th (under the Information Technology sector), and its constituents will be moved into the Financials and Industrials sectors. Goldman Sachs says this reclassification will add several growth stocks to the traditional value stocks in Financials, like Visa (V), Mastercard (MA), and PayPal (PYPL), the three largest stocks affected, and will then make up some 16% of Financials capitalisation. GS says there are three takeaways from this: (1) The macro correlations of the sector will change modestly, but the sector will remain cyclical and positively correlated with rates; (2) Implied mechanical net ETF flows for stocks across affected sectors would represent less than 1% of market cap; (3) Mutual funds would become more overweight Financials and more underweight Tech. Overall, these would only have limited macro implications.


• 
  Dax 40 (DAX) - Rheinmetall (RNMBY) will replace Fresenius Medical Care (FMS) in Germany's Dax 40 index, effective March 20th.

TECH:

• 
  Alphabet Inc. (GOOG) - Google execs are continuing to deal with the fallout from last month’s fumbled announcement of its AI engine and ChatGPT competitor, Bard, but seem to be causing further confusion among the workforce, CNBC reports.


• 
  Salesforce.com, inc. (CRM), Veeva Systems Inc. (VEEV) - Salesforce receives a cautious mention in CNBC, which reports that Salesforce faces an underappreciated risk of platform customers jumping ship, like Veeva Systems, which announced in December that it would move its customer management software off of Salesforce’s platform and onto its own home-brewed technology in 2025.


• 
  NVIDIA Corporation (NVDA) - The chipmaker plans to sell technology to China's Huawei would be thwarted if the US government proceeds with a proposal to further restrict shipments to the blacklisted company, according to a draft report cited by Reuters.


• 
  Taiwan Semiconductor Manufacturing Company Limited (TSM) - The world's largest contract chipmaker will this year recruit more than 6,000 engineers in cities all across Taiwan, despite a global downturn in the chip industry, Reuters reports. Separately, Apple’s 5G modem will be mass produced on TSMC’s 3nm process, and there is a risk that production starts in late 2023, wccftech.com reports.


• 
  Foxconn Intl (FXCNY) - The Apple-supplier's February sales -11.7% Y/Y despite a boost from China’s reopening; Q1 is still tracking roughly in line with market expectation, based on sales figures in the last two months, Bloomberg said.


• 
  Apple Inc. (AAPL) - Apple top executive of cloud initiatives Michael Abbott is leaving the company, according to Bloomberg; he is the second top lieutenant to services chief Eddy Cue to leave this year, joining a growing list of company vice presidents who have departed the iPhone maker in late 2022 and early 2023, Bloomberg added.

COMMUNICATIONS:

• 
  Meta Platforms, Inc. (META) - Meta cut the prices of its VR headsets in hopes of stirring demand for its VR hardware, as its bold bets on the metaverse have struggled to make a big splash, Reuters reports. The flagship Meta Quest Pro will retail for USD 999, down from its launch price of USD 1,499, while the Quest 2 version for USD 429 from USD 499.


• 
  Snap Inc. (SNAP) - Snapchat is kicking dozens of children in UK off its platform each month vs tens of thousands blocked by rival TikTok, Reuters reports, citing internal data the companies shared with UK regulators.


• 
  Twitter (TWTR) - The social media giant's revenue and adjusted earnings fell around 40% in December, after many advertisers ditched the social-media platform following Elon Musk’s takeover, WSJ reports. The company recently made a first interest payment to a group of banks that lent the USD 13bln, sources said. Elsewhere, The Information reports that CEO Musk is running into obstacles in his drive to cut costs, with some of the same vendors that Twitter is squeezing to save money are also its advertising clients; the report adds that last month, Amazon threatened to withhold payment for advertising it runs on Twitter because the social network for months refused to pay its Amazon Web Services bills for cloud computing services, sources said.


• 
  Liberty Global (LBTYA) - CEO says the European Commission’s interest in cross-boarder telecom deals are a “dream that does not reflect the reality of operating businesses” and “are not going to happen.”

FINANCIALS:

• 
  Goldman Sachs Group, Inc. (GS) - Cautious mention in Barron's, which said the "vampire squid has lost its bite," noting that it announced plans to cut USD 1bln in costs, but failed to give guidance on the future of its consumer business, and investors should wait for the bank "to show its teeth again" before wading back into the stock.


• 
  Chubb Limited (CB) - Receives a positive mention in Barron's, which said Chubb is a buy, with many positives are not reflected in Chubb share price.


• 
  Silvergate Capital Corporation (SI) - Silvergate has discontinued the Silvergate Exchange Network payments network that has served as a hub for investors in the cryptocurrency industry, Bloomberg reports. The system offered customers the ability to move cash to each other around the clock. All other deposit-related services remain operational.


• 
  Credit Suisse (CS) - Shareholder Harris Associates began cutting its exposure in October, has now divested completely; Harris owned as much as 10% of the bank in 2022.


• 
  UBS (UBS) - The bank said total performance-based bonus pool fell to USD 3.3bln in 2022 from USD 3.7bln in 2021.

CONSUMER CYCLICAL:

• 
  Amazon.com, Inc. (AMZN) - Amazon has paused construction on its second headquarters in Virginia, the latest cost-cutting effort at the ecommerce and cloud giant, FT reports. Amazon is closing down two cashierless Go stores in New York City, two in Seattle and four in San Francisco on April 1st, according to GeekWire. Separately, FT reports that Amazon's grand vision of a new computing platform controlled by voice assistant Alexa has fallen short as teams working on it have been hit hard by the largest cuts in company’s history.


• 
  Airbnb, Inc. (ABNB) - Airbnb laid off 30% of its recruiting staff this week, Bloomberg reports, even as it plans to expand overall headcount this year. The cuts affected 0.4% of the San Francisco-based company’s total workforce of 6,800, which ABNB said was not an indication of more widespread layoffs.


• 
  Automakers - WSJ article notes that the cost to buy and operate some electric vehicles over several years is now roughly on par with their gasoline-powered counterparts. And while government subsidies available to EV buyers play a part, EVs and their conventional equivalents are in some cases at cost parity even without those.


• 
  Tesla Inc. (TSLA) - Cut prices of Model X AWD and Model X Plaid by USD 10,000, cut prices on Model S AWD and Model S Plaid by USD 5,000.


• 
  Rivian Automotive Inc. (RIVN) - Rivian has told employees that production of 62,000 EVs is possible this year, Bloomberg reports, more bullish than the guidance of 50,000 the company announced last week.


• 
  Honda Motor Co. (HMC) - The automaker is temporarily suspending taking new customer orders for the Civic model within Japan, due to a semiconductor shortage.


• 
  Bed Bath & Beyond Inc. (BBBY) - The financial lifeline that pulled BBBY from the brink of bankruptcy last month is already at risk because of the retailer’s tumbling stock price, Bloomberg reports. Future cash injections are contingent on BBBY maintaining a weighted average stock price of at least USD 1.25 or USD 1.50, depending on the timing, according to a filing.


• 
  Boot Barn Holdings, Inc. (BOOT) - Receives a positive mention in Barron's, which said it can benefit from 'Cowboy Chic' trend, but also has done well when the trend is out of fashion, since it caters to an increasing number of shoppers who are less concerned with trends.


• 
  Dillard's, Inc. (DDS) - Receives positive mention in the WSJ, which notes DDS' stock has outperformed Apple, Amazon and Tesla, as it is supported by share buybacks, keeping costs down, tight inventory and engaged customers.


• 
  Target Corporation (TGT) - Constructive mention in Barron's, which said Target was a standout among big-box retailers, and investors should keep on holding the stock.


• 
  The Wendy's Company (WEN) - Trian Fund Management reduces stake in Wendy's to 17.85% (vs 19.52% in January 2023).

CONSUMER STAPLES:

• 
  Altria Group, Inc. (MO) - The cigarette maker exchanged its 35% stake in Juul for a non-exclusive, irrevocable global license for some of Juul’s heated tobacco intellectual property, FT reports, ending an investment which has declined in value from USD 12.8bln just over four years ago. The decision comes after Juul reached a settlement for lawsuits alleging that it fuelled a teenage vaping epidemic.

INDUSTRIALS:

• 
  Boeing Company (BA) - Boeing said CEO Dave Calhoun will not receive a USD 7mln bonus due to the company's failure to enter the 777X into service by the end of 2023, Reuters reports.


• 
  Deere & Company (DE) - Receives a positive mention in Barron's, which said US farmers appear to be headed for a third consecutive year of healthy pay, and Deere can reap the rewards.


• 
  BAE Systems plc (BAESY) - BAE Systems awarded USD 245.7mln US Army contract.


• 
  Lockheed Martin Corporation (LMT) - Lockheed Martin awarded USD 214.5mln US Navy contract.


• 
  Norfolk Southern Corporation (NSC) - A second Norfolk Southern train derailed in Ohio, NYT reports, and although no hazardous materials were leaked, and there were no injuries reported, the crash on Saturday renewed questions about rail safety, just over a month after the East Palestine derailment.

ENERGY:

• 
  Shell plc (SHEL) - Shell’s new CEO is considering ditching plans to reduce its oil output this decade, The Times reports, declaring that it is 'not healthy'; CEO said Shell was now reflecting on what is the right guidance to the market, because it made steeper cuts than anticipated since the target was set.

HEALTH CARE:

• 
  Quest Diagnostics Incorporated (DGX) - The company's CEO and president James Davis will succeed Steve Rusckowski as Chair effective April 1st.


• 
  Incyte Corporation (INCY) - Will discontinue Phase 3 LIMBER-304 trial following results of a pre-planned interim analysis, which indicated that the study was unlikely to meet the primary endpoint in the intent-to-treat patient population. The recommendation to stop the study was not due to safety.


• 
  Roche (RHHBY) - Received FDA approval of label expansion for Ventana PD-L1.


• 
  AstraZeneca's (AZN) - Enhertu showed clinically meaningful and durable responses across multiple HER2-expressing tumour types in DESTINY-PanTumor02 Phase II trial.

06 Mar 2023 - 09:31- CryptocurrencyData- Source: Newsquawk