US EARLY MORNING: Equity futures lower on hawkish Fed; Bullard raises risk of inter-meeting move, although that doesn't seem to be consensus

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  EQUITIES: Asian equities declined, while the European start was negative, and US equity futures are trading lower by -0.5% (YM) to -0.8% (NQ). Global equities have come under pressure following the hot US CPI report which has seen traders raise bets of aggressive Fed normalisation; an aggressive normalisation cycle, where the Fed could lift rates by 50bps in March (perhaps sooner!) is seen weighing on the Tech sector, where investors pay up for future growth – higher rates reduces the net present value of future earnings. Growth styles are also likely to face pressure, analysts say, with some concerns that aggressive policy normalisation to manage inflation upside risks slowing economic growth significantly, which is likely to hinder the performance of cyclically focussed names. But with that said, there appears to be some calm this morning: futures have picked-up off lows – both in Europe and in the US – while technicians note that the slide on Thursday did not test the lows of last week or the week before, suggesting that for now, the consolidation ranges are still intact.


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  TREASURIES: There was no overnight cash trading with market holidays in Asia, and cash Treasuries started with Europe on Friday; at pixel time, yields are lower by between 1-5bps from 5s through 30s, but the 2s and 3s parts of the curve are wider. Yields on 2s are still above the 1.5% mark, although 10s and 30s have slipped back below the 2.0% and 2.3% levels respectively – which were considered psychological signposts among fixed income traders. Many desks have been revising up their Fed calls in wake of January’s CPI Data. Fed’s Bullard fanned the flames of hawkishness on Thursday – he favours 100bps of interest-rate increases by July, a half-point rate hike in March, and balance sheet reduction to commence in Q2; he also suggested that the Fed should consider lifting rates in between meetings. A curious Bloomberg article has been receiving attention. Without specifically citing sources, Bloomberg claims that despite the hot CPI, the FOMC does not yet favour a 50bps rate hike or even making any emergency policy moves outside of a scheduled meeting (next one is scheduled for March 16th). It adds that such moves would risk signalling panic and cementing criticism that the Fed is behind the curve on inflation; it would also involve bringing forward the conclusion of the Fed’s asset purchases, which could exacerbate the potential shock among unprepared market participants. Bullard is not representative of the central consensus on the FOMC; indeed, Fed’s Barkin yesterday said that he still needs to be convinced on a 50bps move. Currently, Refinitiv’s pricing data suggests there is around 66% chance of that half-point hike in March (it was around 50% in wake of the hot CPI data on Thursday), and by the end of this year, money markets are pricing the Federal Funds Rate target being lifted to 1.50-1.75% (which would represent six 25bps hikes from current levels) and there are risks of 1.75-2.00%. Even so, the Fed has announced a closed-door meeting of the Board for Monday 14th February at 11:30EST/16:30GMT, held under expedited procedures; officially, the meeting appears to be to review and determine the advance and discount rates to be charged by the Federal Reserve Banks, and banks remind us these can be regular events, but traders will be on alert after some of the inter-meeting hike talk from officials like Bullard. The prominent Fedwatcher Tim Duy would not be surprised by an inter-meeting move either today or on Monday, for what it is worth.

DAY AHEAD FEBRUARY 11TH:

• 10:10GMT/05:10EST: Italy 3yr, 7yr, 15yr, 20yr, 30yr BTP Auctions


• 10:30GMT/05:30EST: CBR Rate Decision


• 11:30GMT/06:30EST: India Deposit Growth (JAN/28), FX Reserves (04/FEB), Bank Loan Growth (JAN/28)


• 11:30GMT/06:30EST: Spain Consumer Confidence (JAN)


• 12:00GMT/07:00EST: Brazil IBC-BR Economic Activity (DEC)


• 12:00GMT/07:00EST: India Industrial Production, Manufacturing Production (DEC)


• 12:00GMT/07:00EST: Mexico Industrial Production (DEC)


• 12:00GMT/07:00EST: Russia CBR Press Conference


• 15:00GMT/10:00EST: US Fed Monetary Policy Report


• 15:00GMT/10:00EST: US Michigan Sentiment (FEB, Prelim)


• 15:30GMT/10:30EST: BoC Senior Loan Officer Survey


• 17:00GMT/12:00EST: ECB Survey of Monetary Analysts Aggregate Results


• 18:00GMT/13:00EST: US Baker Hughes Rig Count (11/FEB)

EQUITY NEWS:

INDEX:

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  AstraZeneca (AZN), Xilinx (XLNX) - AstraZeneca's ADRs will replace Xilinx in the Nasdaq 100 Index and Nasdaq 100 Equal Weighted Index; effective 22nd Feb. (Nasdaq)

CONSUMER CYCLICAL:

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  Expedia Group, Inc. (EXPE) - Added +5.3% after results; Q4 adj. EPS 1.06 (exp. 0.69), Q4 revenue USD 2.3bln (exp. 2.3bln). Is seeing a solid return to travel, and expects a "significant increase" in travel demand this year. Will return to share repurchases "at the right time." Sees higher compensation costs. VRBO unit performance was "super strong". (EXPE)


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  Urban Outfitters, Inc. (URBN) - Slipped in after hours trade as it pre-announced its Q4 metrics and warned on margins; Q4 revenue USD 1.33bln (exp. 1.33bln), net sales +13.9% Y/Y. Total Retail segment net sales +15% (exp. 21.4%). Retail comp net sales +14%, driven by strong double-digit growth in digital channel sales, partially offset by low double-digit negative retail store sales primarily due to reduced store traffic. Wholesale sales -22% primarily from reducing the Free People Group's sales to promotional wholesale customers. Said it believes that the total company Q4 gross margin could deleverage more than planned primarily due to higher than anticipated inbound transportation costs. (URBN)


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  Carnival (CCL) - Princess Cruises will do its first-ever summer season sailing to Mexico, Hawaii and the California coast roundtrip from LA. (CCL)


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  Caesars Entertainment (CZR) - Expands Sportsbook to Washington state following its receipt of a sports wagering license. (CZR)


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  Mohawk Industries, Inc. (MHK) - Added +0.9% after results; Q4 adj. EPS 2.95 (exp. 2.87), Q4 revenue USD 2.76bln (exp. 2.7bln). Earnings benefited from improved price, mix and productivity, offset by increased inflation also notes significant short-term material, energy and transportation inflation which is impacting the business. Is implementing price increases, will continue to adjust pricing as necessary. Sees Q1 adj. EPS between 2.90-3.00 (exp. 3.08) as it warns on European ceramic business. (MHK)

CONSUMER STAPLES:

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  British American Tobacco (BTI) - FY21 adj. operating profit GBP 11.15bln (exp. 11.20bln). revenue GBP 25.684bln (exp. 25.6bln). Adj. EPS 3.535 (exp. 3.270). Dividend 2.178 (exp. 2.1757). Approved GBP 2bln buyback. Said global tobacco industry volume expected to be down around 2.5% this year. (MarketWatch)


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  Flowers Foods, Inc. (FLO) - Fell 1.75% after soft results, though guided above street expectations. Q4 adj. EPS 0.20 (exp. 0.21), Q4 revenue USD 983.5mln (exp. 991.1mln). Sees FY22 revenue between USD 4.66-4.695bln (exp. 4.42bln). (FLO)

COMMUNICATIONS:

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  Comcast (CMCSA), Disney (DIS) - Comcast's NBCUniversal near deal to alter content-sharing partnership with Hulu (DIS has big stake in the latter). (WSJ)


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  Microsoft (MSFT), Activision (ATVI), Nintendo (NTDOY) - Microsoft wants to bring Call of Duty and other Activision games to Nintendo consoles. (IGN)


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  Zillow Group, Inc. (ZG) - Gained 15.75% in extended trade. Introduced new 2025 targets, and is now targetting annual revenue of USD 5bln by 2025 (exp. 3.2bln). Is making progress exiting the homebuying business. (Barron's)


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  Yelp Inc. (YELP) - Gained 4.4% in after hours; Q4 EPS 0.30 (exp. 0.14), and Q4 revenue USD 273.4mln (exp. 272mln). Sees FY22 revenue between 1.16-1.18bln (exp. 1.16bln). (YELP)

TECH:

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  Alphabet (GOOG) - Google is the target of an antitrust complaint by the European Publishers Council over its digital advertising business. Separately, UK CMA accepts revised Google offer on removal of third party cookies from Chrome browser. (Reuters)


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  GoDaddy Inc. (GDDY) - Gained 6.2% as Q4 metrics topped expectations and announced new buyback; guidance was a little light. Q4 EPS 0.52 (exp. 0.41), Q4 revenue USD 1.02bln (exp. 0.97bln). Guides Q1 revenue between USD 985-990mln (exp. 995mln), FY22 revenue seen between USD 4.15bln (exp. 4.17bln). Announced USD 3bln share buyback programme, will launch an accelerated USD 750mln buyback in Q1 2022. (GDDY)


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  VeriSign, Inc. (VRSN) - Gained 1.5% in extended trade; Q4 adj. EPS 1.48 (exp. 1.41), Q4 revenue USD 340.3mln (exp. 340.2mln). Adds USD 705mln to buyback authorisation. To increase annual registry-level wholesale fee to USD 8.97 (prev. 8.37). Sees FY22 revenue between 1.42-1.44bln (exp. 1.43bln). (VRSN)


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  Zendesk, Inc. (ZEN) - Gained 2.9% after rejecting PE offers. Confirmed it rejected a USD 127-132/shr offer from private equity, said offer significantly undervalued the company, recommends holders vote in favour of Momentive deal. Reported Q4 adj. EPS 0.16 (exp. 0.18), and Q4 revenue of USD 375.4mln (exp. 370mln). Sees FY22 revenue between USD 1.68-1.71bln (exp. 1.69bln). (ZEN)


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  HubSpot, Inc. (HUBS) - Rose by 5% in after hours; Q4 EPS 0.58 (exp. 0.53), Q4 revenue USD 369.3mln (exp. 357.5mln). Sees Q1 revenue around USD 382mln (exp. 377mln); sees FY22 EPS between 2.34-2.42 (exp. 2.39), and FY22 revenue seen between USD 1.72-1.73bln (exp. 1.66bln). (HUBS)


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  BlackLine, Inc. (BL) - Fell 12% after the bell as profit missed expectations; Q4 EPS 0.08 (exp. 0.10), Q4 revenue USD 115.3mln (exp. 113.6mln). Sees Q1 EPS between -10c and -7c (exp. 0.12), and sees Q1 revenue between USD 119-120mln (exp. 119mln). Sees FY22 EPS between 0.08-0.11 (exp. 0.71), and sees FY22 revenue between USD 520-525mln (exp. 512.8mln). (BL)


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  Confluent (CFLT) - Fell by over 10% despite reporting Q4 metrics and Q1/FY22 guidance in line with the consensus. Q4 EPS -0.19 (exp. -0.21), Q4 revenue USD 120mln (exp. 109.8mln). Sees Q1 EPS midpoint at -0.22 (exp. -0.22)m and revenue between USD 117-119mln (exp. 111mln). (CFLT)


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  Freshworks Inc. (FRSH) - Fell 6.5% after results; Q4 EPS -0.06 (exp. -0.06), Q4 revenue USD 105.5mln (exp. 100.3mln). Sees Q1 EPS -6c at the midpoint (exp. -7c), and sees Q1 revenue between USD 107-109mln (exp. 106mln). FY22 EPS seen at -21c at the midpoint (exp. -23c), and sees FY22 revenue between USD 486.5-495mln (exp. 484mln). (FRSH)


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  JFrog Ltd. (FROG) - Gained in extended trade after results. Q4 adj. EPS 0.01 (exp. zero), Q4 revenue USD 59mln (exp. 58mln). (FROG)

HEALTH CARE:

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  Eli Lilly (LLY) - To supply up to 600k doses of bebtelovimab to US. (LLY)


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  Novavax (NVAX) - Announces positive results of COVID-19 vaccine in pediatric population of PREVENT-19 Phase 3 clinical trial. (NVAX)


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  Regeneron (REGN) - FDA grants orphan drug designation for cemdisiran. (FDA)


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  Illumina, Inc. (ILMN) - Fell by around 0.9% in after hours; Q4 adj. EPS 0.75 (exp. 0.49), Q4 revenue USD 1.2bln (exp. 1.1bln); sees FY22 adj. EPS between 4.00-4.20 (exp. 4.20), and FY22 revenue growth seen between 14-16% (exp. 5bln). (ILMN)


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  DaVita Inc. (DVA) - Up +0.25% in extended trade; Q4 adj. EPS 2.02 (exp. 1.80), Q4 revenue USD 2.94bln (exp. 2.91bln). Guides FY22 adj. EPS between 7.50-8.50 (exp. 8.38). (DVA)


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  DexCom, Inc. (DXCM) - Fell 4% after profit miss and soft guidance; Q4 EPS 0.68 (exp. 0.85), Q4 revenue USD 698.2mln (exp. 696mln). Sees FY22 revenue between USD 2.82-2.94bln (exp. 2.96bln). (DXCM)

INDUSTRIALS:

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  Toyota Motor (TM), General Motors (GM), Ford Motor (F), Stellantis (STLA) - The automakers said they have been forced to cancel or scale back some production at North American plants on Thursday due to parts shortages stemming from Canadian trucker protests. (Reuters)


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  Maersk Drilling (DRLCO) - FY21 revenue USD 1.27bln (exp. 1.18bln). EBITDA USD 346mln (exp. 315mln). Revenue backlog USD 1.9bln (prev. 1.5bln Q/Q). (Newsquawk)


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  Republic Services, Inc. (RSG) - Q4 adj. EPS 1.02 (exp. 1.01), Q4 revenue USD 2.952bln (exp. 2.87bln). Sees FY22 adj. EPS between 4.58-4.65 (exp. 4.63).  (RSG)


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  Lockheed Martin (LMT) - Finland set to sign deal with US for 64 F-35 jets, sources say (US News); Separately, awarded USD 138.92mln US Army contract (DoD).


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  Bloom Energy Corporation (BE) - Stock rises 5.8% in after hours as it reports revenues above estimates; Q4 adj. EPS -0.05 (exp. -0.04c), Q4 revenue USD 342.5mln (exp. 307mln). Sees FY22 revenue between USD 1.1-1.15bln (exp. 1.2bln). (MarketWatch)


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  Aston Martin (ARGGY) - Reportedly in discussions with Britishvolt about a potential partnership where Britishvolt batteries could power future Aston Martin EVs. (Telegraph)


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  Volvo (VLVLY) - Said supply chain issues are set to continue, weighs on profits. (Auto News)


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  Saab (SAABY) - Lifts dividend as 4Q earnings, orders beat forecasts. (MarketWatch)

MATERIALS:

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  Huntsman Corporation (HUN) - Activist Starboard open letter to HUN holders highlights "Company's history of failed operational execution, long-term stock price underperformance and missed promises, believes new independent board members are required, and urged holders to vote for its board nominees. (Starboard)


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  BASF (BAS GY) - Established a JV with Hereus in China. (Chemen Online)


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  Algoma Steel (ASTL) - Q3 EPS 0.92 (exp. 1.79), Q3 revenue USD 1.06bln (exp. 1.01bln). Initiates quarterly dividend of 0.05/shr. (ASTL)

FINANCIALS:

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  Citi (C), Deutsche Bank (DB) - Australia drops landmark criminal cartel cases against Citi, Deutsche. (Reuters)


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  Western Union Company (WU) - Gained 1.2% in the after hours; Q4 adj. EPS 0.64 (exp. 0.52), Q4 revenue USD 1.3bln (exp. 1.29bln). Approves new USD 1bln share buyback. Sees FY22 adj. EPS between 1.90-2.00 (exp. 2.24), and FY22 GAAP revenue to be lower by mid-single-digits, and adj. revenue growth seen flat-to-up-low-single-digits (exp. 5.2bln). Analysts note the Business Solutions unit, which is in the process of being sold, was not included in the outlook figures. (WU)

UTILITIES:

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  FirstEnergy (FE) - Six board members will not seek re-election as part of a settlement to resolve shareholder lawsuits after bribery scandal. (Bloomberg)


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  EDF (ECIFY) - Confirms reports it will higher 1.6k engineers and 1.6k technicians this year. (Reuters)

11 Feb 2022 - 09:57- EquitiesResearch Sheet- Source: Newsquawk