US EARLY MORNING: Equity futures flat with attention on the final Fed speakers pre-blackout after dovish Brainard

SNAPSHOT: US equity futures are a little above flat, yields are higher by 2-4bps, with much of the underperformance in the short-end. The Dollar Index is flat. Crude benchmarks are around 60c higher.

FED TO ENTER BLACKOUT: The Fed will enter its blackout window ahead of the February 1st FOMC meeting at the end of today. Before then, we are due to hear from Governor Waller, who tends to lean on the hawkish side, as well as 2023 voter Harker, who has already spoken a few times recently. Analysts note that the influential Fed Vice Chair Brainard’s remarks on Thursday were focussed on how inflation has cooled as the Fed tightens, with policy now in restrictive territory – she also alluded to the two-sided risks as the Fed further enters the restrictive zone. Brainard has typically leaned on the dovish side, so her remarks were not too surprising, although a few have suggested that if her language finds its way into the upcoming Fed statement, the market may frame it as dovish. Both money market implied pricing and analyst estimates now expect the central bank to lift rates by 25bps at that February meeting, although the focus remains on how far the Fed will go, and how long it will stay at terminal. This was a point made by the FOMC Vice Chair Williams on Thursday, where he reiterated that it was data that would determine where the central bank stops raising rates, speed was less of an issue. It is worth noting that, in the blackout window, we are due to get crucial Personal Income, Spending and PCE metrics – the latter being a measure that the Fed specifically forecasts; additionally, Brainard said that she’d be watching the employment cost index data carefully, due at the end of this month, for signs on how wage growth has decelerated into Q4. This raises the risk that if these data come in hotter than expected, some pricing for 50bps could see a revival; after all, Fed officials have warned that there is the potential for a reacceleration of inflation in the months ahead, and the central bank does not want to be caught wrong-footed (again). The Fed’s recent economic projections have pencilled in a median 5.1% terminal rate, more hawkish than current market expectations of somewhere between 4.75-5.00%; perhaps that is why Fed officials earlier in the week were impressing the need to get rates to above 5.00%. Given Governor Waller’s past form, it is likely that he will reiterate a similar argument.

DAY AHEAD: The data docket is generally benign for the day. Commentary is expected from ECB President Lagarde from Davos (again). IMF’s Georgieva will deliver remarks on the global outlook before the organisation updates its global projections at the end of the month (these are likely to look similar to its previous projections, officials have said). The US Day Ahead will feature commentary from the Fed’s 2023 voter Harker, who has spoken a few times in recent days; remarks from Fed Governor Waller may be more interesting; he tends to err on the hawkish side, and his comments will hit after the European close. NOTE: The Fed’s blackout period before the February 1st FOMC kicks in after today; money markets are anticipating a 25bps rate hike. Data-wise, existing home sales for December, and the weekly Baker Hughes Rig Count data will round out the week. Our full calendar can be accessed here. 

COMMUNICATIONS:

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  Netflix Inc (NFLX) - Q4 EPS 0.12 (exp. 0.45), Q4 revenue USD 7.85bln (exp. 7.85bln), Q4 net subscriber additions of 7.66mln (exp. 4.57mln); expects modest positive paid net additions in Q1 2023, adding that paid net additions is likely to be greater in Q2 2023 than in Q1 2022. Said it is likely to roll out paid sharing more broadly later in Q1, and sees some cancel reaction in each market when paid sharing is rolled out, which will impact nearterm member growth, and it anticipates paid sharing will result in a very different quarterly paid net additions pattern in 2023. Sees Q1 EPS at 2.82 (exp. 2.97), and Q1 revenue at USD 8.17bln (exp. 8.16bln). Netflix also announced that it had completed its succession process, Reed Hastings gives up CEO role, becomes now Executive Chairman; Greg Peters and Ted Sarandos named as co-CEOs.


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  T-Mobile US, Inc. (TMUS) - The telecommunications company said it may incur significant expenses over its recent cyber incident, where a "bad actor" was obtaining data through a single Application Programming Interface without authorisation. TMUS said its investigation was still ongoing, but the malicious activity appears to be fully contained at this time, and there was currently no evidence that the bad actor was able to breach or compromise its systems or its network. A WSJ reporter said that the FCC was investigating T-Mobile's latest data breach.


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  Sony Group Corporation (SONY) - Sony announced 13 more new titles coming to PlayStation VR2. Said it was now tracking more than 30 games for the launch window through March.


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  Nintendo Co., Ltd. (NTDOY) - Nintendo plans to increase production of its Switch console in the coming fiscal year after shipping roughly 21mln units in the year ending March, Bloomberg reports. Nintendo had lowered its sales forecast for the console to 19mln units in November due to component shortages, but is now convinced it can make more and demand remains strong.


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  Ericsson (ERIC) - Earnings missed analyst estimates, and the telecoms company sees uncertainties ahead. Q4 2022 net SEK 6.07bln (exp. 7.05bln), Q4 Revenue SEK 86bln (exp. 85bln), Q4 adj. EBIT SEK 8.1bln (exp. 10.74bln), Q4 adj. gross margin 41.5% (exp. 43.%). FY dividend 2.70/shr (exp. 2.57). Sees Q1 2023 adj. EBTIDA somewhat lower than 2022. Cloud is on a clear path to operating break-even for 2023. Expects enterprise to grow somewhat slower than 2022. Sees declining margins in networks for H1 2023.

TECH:

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  Alphabet Inc. (GOOG) - Google is delaying a portion of employee bonus checks, CNBC reports. The tech giant usually pays full bonuses in January, but this year it is pushing out 20% of payments to employees until at least March.


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  Texas Instruments Incorporated (TXN) - Haviv Ilan named next CEO, effective April 1st. Will succeed current CEO and President Rich Templeton, who will transition out of these roles over the next two months, but will remain Chairman.


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  Sandvik AB (SDVKY) - Q4 revenue SEK 31.094bln (exp. 30.470mln). Oroposes a SEK 5/shr dividend. Capex is seen around SEK 4.5bln in 2023. Refrains from providing a market outlook or company outlook.


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  Concentrix Corporation (CNXC) - The IT service management company reported Q4 EPS of 3.01 (exp. 3.33), and Q4 revenue of USD 1.64bln (exp. 1.68bln). Sees Q1 revenue coming in between USD 1.61-1.64bln (exp. 1.66bln), and said Q1 adj. FXN revenue growth would likely be between 2-4%. For the FY23, revenue is seen between USD 6.715-6.865bln (exp. 6.74bln), and sees FY FXN revenue growth in the range of 4-6%.

MATERIALS:

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  ArcelorMittal (MT) - The proposal to set up a 7mln tonne per annum steel plant in Jagatsinghpur of Odisha has been approved, according to India's Economic Times.


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  Holcim (HCMLY) - The building materials company's CEO said it was mulling acquisitions to move into sectors beyond cement.


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  PPG Industries, Inc. (PPG) - Q4 adj. EPS 1.22 (exp. 1.13), Q4 revenue USD 4.19bln (exp. 4.1bln). Sees Q1 adj. EPS between 1.10-1.20 (exp. 1.36), and sees Q1 aggregate sales volumes down mid-single-digits Y/Y. Exec said PPG expects overall Q1 demand environment to remain consistent sequentially with the Q4, with soft economic activity remaining in Europe and China. But as the year progresses, it anticipates several positive catalysts that will enable earnings improvement, including moderating raw material costs, coatings demand stabilisation in Europe beginning in Q2, and strong economic recovery in China as the pandemic reopening progresses. Adds that with fewer supply chain disruptions, it expects ample commodity raw material availability and improved manufacturing efficiencies.

INDUSTRIALS:

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  Spirit Airlines, Inc. (SAVE) - Spirit entered into an agreement to sell 29 unencumbered A319ceo aircraft powered with V2500 engines to an affiliate of Gryphon Aviation Leasing, for an aggregate price ranging between USD 152-201mln. Deliveries are anticipated in Q1-Q3 2023. Spirit expects to remove 14 and 15 A319ceo aircraft from its operating fleet in 2023 and 2024, respectively, with the remaining two A319ceo aircraft in the company's operating fleet, which are leased, are anticipated to be returned to the lessor upon lease expiration in 2025.

CONSUMER CYCLICAL:

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  Nordstrom, Inc. (JWN) - The department store chain reported sales fell by 3.5% for the nine-week holiday period ending December Y/Y. It said the holiday season was highly promotional, sales were softer than pre-pandemic levels. While it continues to see greater resilience in our higher income cohorts, consumers were being more selective with their spending given the broader macro environment. Exec said it enters 2023 in a stronger position, however, as it prioritised starting the new fiscal year with clean inventory levels, even if this required more markdowns than planned; sees year-end inventory levels to be down by a double-digit percentage Y/Y, and roughly at 2019 levels. Nordstrom cut its FY22 adj. EPS outlook to between 1.50-1.70 (exp. 2.36) from 2.30-2.60, and sees FY22 revenue growth, including retail sales and credit card revenues, at the low-end of its previously issued outlook of up 5-7% (exp. 15.64bln).


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  Wayfair Inc. (W) - The online furniture retailer has been struggling shrinking sales after a pandemic-driven boom, and is preparing to lay off more than 1,000 workers (just over 5% of its workforce), according to the WSJ.


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  Entain PLC (GMVHY), MGM Resorts International (MGM) - MGM could look to renew a takeover offer for UK's Entain, after the UK Gambling Commission's publication of a whitepaper, which could be published in late March.


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  Bed Bath & Beyond Inc. (BBBY) - The retailer received a notice from Nasdaq stating that it was not in compliance with the requirements for continued listing, as it had not yet filed its quarterly report for the period ended November 26th, 2022 with the SEC. The notice has no immediate effect on the listing or trading of the company's common stock on Nasdaq. BBBY has until March 13th, to submit a plan to regain compliance. If Nasdaq accepts the plan, then Nasdaq may grant the company up to 180 calendar days to file its quarterly report to regain compliance.


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  Ralph Lauren Corporation (RL) - CEO Patrice Louvet sold 18.5K shares on January 18th for a total USD 2.22mln, according to a filing.

CONSUMER STAPLES:

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  Costco Wholesale Corporation (COST) - Board reauthorised a common stock repurchase programme of up to USD 4bln. This programme expires in January 2027, and replaces the current USD 4bln facility, under which around USD 1.4Bbln had been purchased. Board also declared a quarterly cash dividend 0.90/shr (exp. 0.88).


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  Keurig Dr Pepper Inc. (KDP) - CFO Sudhanshu Priyadarshi purchased 10K shares on January 18th for a total USD 350k, according to a filing.

INDUSTRIALS:

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  Boeing (BA), Airbus (EADSY), Safran (SAFRY) - Air India's order for as many as 500 planes from Airbus and Boeing is being delayed by an impasse at the engine makers behind the 737 Max, according to Bloomberg.

UTILITIES:

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  Consolidated Edison, Inc. (ED) - Board lifts annual dividend to USD 3.24/shr (prev. 3.16/shr, exp. 3.17). Declares quarterly dividend of 0.81/shr (exp. 0.80).

FINANCIALS:

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  Credit Suisse (CS) - The Swiss bank is said to consider focused acquisitions as one of its strategic options, according to reports.


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  UBS Group AG (UBS) - The Swiss bank plans to pick off disgruntled dealmakers from investment banking boutiques, as it looks to bolster its capabilities in mergers and acquisitions while competitors lay off staff, FT reports. The moves come as big investment banks cut thousands of jobs following a tough 12 months for dealmaking.


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  SVB Financial Group (SIVB) - Q4 EPS USD 4.62 (exp. 5.27), Q4 net interest margin 2% (vs 1.91% Y/Y), Q4 client cash burn and the pace of VC investment decline both moderated. Said it saw solid growth in loans and core fees, better-than-expected net interest income, and healthy investment banking activity. Exec said the broader market conditions were limiting growth and driving somewhat higher credit costs. Sees FY23 net interest margin between 1.75-1.85%, and Q1 net interest margin between 1.85-1.95%.

HEALTH CARE:

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  Eli Lilly and Company (LLY) - FDA issued a complete response letter for the accelerated approval submission of donanemab for the treatment of early symptomatic Alzheimer's disease due to the limited number of patients with at least 12 months of drug exposure data provided in the submission. No other deficiencies in the application were noted. The confirmatory Phase 3 TRAILBLAZER-ALZ 2 trial remains ongoing, with topline data read-out expected in Q2 2023, and will form the basis of donanemab's application for traditional approval shortly thereafter.


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  UnitedHealth Group Incorporated (UNH), EMIS Group plc (EMIS LN) - UK CMA begins merger investigation on the anticipated USD 1.5bln acquisition of UK health tech company EMIS. Regulators are investigating whether the transaction would result in a substantial lessening of competition within the market.


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  Roche (ROG SW) - Genentech received accelerated FDA approval for Moseunetuzumab.

20 Jan 2023 - 09:20- Data- Source: Newsquawk