US EARLY MORNING: Index futures are around flat after Thursday's CPI-inspired upside; big bank earnings ahead

SNAPSHOT: US equity futures are trading a touch under neutral following Thursday’s rally, which was underpinned by cooling headline CPI data which crystallises expectations that the Federal Reserve will downshift to a 25bps rate hike increment at its February 1st meeting. The Fed officials who have spoken in wake of the data are generally supportive of this argument; 2023 voter Harker suggested that it was time to downshift to 25bps, but warned that rates would likely still need to be lifted above 5.00% (money markets are currently pricing a peak below this level) – a line echoed by the Fed’s Bullard, who has previously also warned that rates would rise above that 5.00% mark. Non-voter Barkin also expressed support for a slower rate hike path, but warned that the cycle could be longer and potentially higher. In terms of the sell-side views, Goldman Sachs said the data solidified the case for a step down to a 25bps hike in February, and continues to expect 25bps hikes at the February, March, and May confabs. We have another round of Fedspeak today, by way of voters Williams, Kashkari and Harker (again), and we expect these officials will reiterate these themes. Additionally, the inflation components within the prelim January University of Michigan data will contribute to the debate (the NY Fed’s survey of consumer expectations, released earlier in the week, gave a more mixed take on consumer’s views on inflation). Elsewhere, corporate reporting season gets underway, with major banks set to publish Q4 numbers.

EARNINGS SEASON: The Q4 corporate reporting season will get underway in earnest, with focus on the heavyweight financial institutions, as Blackrock (BLK), Bank of New York Mellon (BK), Bank of America (BAC), Citi (C), JPMorgan (JPM), Wells Fargo (WFC) all unveil numbers. There have been some anecdotal murmurings of lower deal making activity amid challenging economic conditions, but higher interest rates are expected to be supportive for banks. Investors will also be focussed on how these institutions are managing expenses, and what sorts of provisions are being made for loan losses, as some forecast that the US economy will tumble into a recession this year. Additionally, banks own guidance and views on the economic outlook will be of note. Elsewhere, healthcare giant UnitedHealth (UNH) will also report. As a reminder, Newsquawk publishes both Daily and Weekly research sheets with the consensus estimates; today's edition can be accessed here.

WEEKLY FLOWS: BofA's weekly flow data shows investors moved into bonds and cash ahead of the December CPI data, shunning stocks. In the week (data for the week through January 12th), bond funds saw USD 17.5bln of inflows (IG bonds saw the largest inflows since July 2021). Stocks overall saw 7.2bln of inflows, although US stock funds saw outflows of USD 2.6bln. Europe saw a 48th week of outflows at USD 0.5bln, Japan saw a sixth week of inflows at USD 1.1bln, EM stocks saw a fourth week of inflows at USD 2.2bln. By style, value funds saw USD 1.7bln of outflows, while growth funds had USD 1.3bln of outflows. Cash saw USD 8.3bln of inflows. BofA's strategists said inflation and jobless claims pushed stocks higher, spurring bets for rate cuts from the second half of this year, although "peak Goldilocks" is seen coming soon.

DAY AHEAD: Events will pick up as US participants arrive and as corporate earnings season gets underway, with Blackrock (BLK), Bank of New York Mellon (BK), Bank of America (BAC), Citi (C), JPMorgan (JPM), Wells Fargo (WFC) all set to unveil Q4 numbers, while health care giant United Health (UNH) will also report. The University of Michigan's prelim January consumer confidence survey will be eyed, with particular focus on the inflation metrics, to see if consumers expectations on price pressures are also cooling (the NY Fed's update earlier in the week was mixed, with consumer expectations of near-term inflation easing, but the longer-term views ticked up a little). On the speakers front, Fed voters Williams, Kashkari and Harker will give remarks in wake of the December CPI data, which has crystalised expectations for a 25bps rate hike on February 1st. Elsewhere, US import and export prices will be published. After hours, Moody's may announce updated ratings on Spain, while Fitch may update on Poland. Our full Day Ahead schedule sheet can be accessed here.

COMMUNICATIONS:

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  Activision Blizzard, Inc. (ATVI), Microsoft Corporation (MSFT) - Google and Nvidia have joined Sony in expressing concerns to the FTC over Microsoft's USD 69bln acquisition of Activision Blizzard, Bloomberg reports. The FTC has sued to block the deal, and has scheduled an in-house trial for August.


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  Warner Bros. Discovery (WBD) - Is reportedly exploring the sale of its music library as it tries to lower its debt, which could be valued at more than USD 1bln, according to the FT. Separately, WBD's HBO Max announced a price hike in the US, where the price of a new HBO Max ad-free monthly subscription will rise from USD 14.99 to USD 15.99.


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  News Corporation (NWSA) - CEO urged employees to return to the office, saying working from home does not allow for the "subtleties of body language and the nuances of knowing glances," Bloomberg reports.


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  World Wrestling Entertainment, Inc. (WWE) - Appoints external advisors to support it in connection with a review of strategic alternatives to maximise value.


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  Vodafone (VOD) - Plans several hundred job cuts, the majority of which will be at its London HQ, FT reports.

TECH:

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  Apple Inc. (AAPL) - Apple CEO Tim Cook will see his annual pay package slashed by more than 40% this year after criticism from shareholders and Cook himself, BBC reports. Other reports suggested

FINANCIALS:

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  Carlyle Group LP (CG), Citigroup Inc. (C), Morgan Stanley (MS) - Carlyle has sounded Citigroup CFO Mark Mason and outgoing Morgan Stanley COO Jonathan Pruzan about becoming its next CEO, FT reports, as it tries to conclude a months-long process to find a new leader after the abrupt departure of Kewsong Lee last year.


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  LendingClub Corporation (LC) - The credit services company announced a 14% workforce reduction (around 225 employees), a cost reduction programme, and a reorganisation plan to align its operations to reduced marketplace revenue. Expects USD 5.7mln of charges, of which USD 4.4mln was expensed in Q4. Says the moves will drive savings of between USD 25-30mln in FY23. It narrowed its Q4 revenue outlook to USD 260-263mln from USD 255-265mln (exp. 262mln), and narrwed its FY22 revenue view to USD 1.185-1.188bln from 1.18-1.19bln (exp. 1.19bln). It also said its Chief Capital Officer Valerie Kay will depart, and it eliminates the Chief Capital Officer position.


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  Ares Capital Corporation (ARCC) - The asset manager reported prelim Q4 announced an offering of 9mln shares of common stock, which were priced and re-offered at USD 18.83. Reported prelim Q4 core EPS of 0.62 (exp. 0.56).


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  Crypto - US sued crypto brokerages Genesis Global Capital and Gemini Trust Co. for breaking securities rules, and said that the firms had illegally raised billions of dollars from hundreds of thousands of investors through the Gemini Earn programme, Bloomberg reports.

HEALTH CARE:

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  AstraZeneca (AZN) - Tezspire approved for self-administration in the EU in a new pre-filled pen, new administration option for first and only severe asthma biologic approved in the EU with no phenotype or biomarker limitations.

CONSUMER:

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  Tesla, Inc. (TSLA) - The EV manufacturer has cut prices across new models in the US, with the largest price drop being seen on the Model Y, which is now USD 13k and 20% cheaper, Electrek reports. Follows similar reports of cutting prices in Asia, of late. A Germany spokesperson said the automakers focus on product improvement enhanced its ability to produce 'the best' products at industry-leading costs, addin that Tesla has laid foundations for growth, despite chip shortages, energy crisism logistics and COVID distruptions, and accordingly, it has achieved some normalisation of cost inflation, which gives it confidence to pass that relief on to customers.


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  NIKE, Inc. (NKE) - CEO gave an interview to CNBC, noted that the brand was focused on Gen Z consumers in China, and continues to see strong demand in the region after recently grappling with a glut of inventory, but aims to see levels normalised by the end of the FY in May. Elsewhere, he added that amid its push to strengthen its direct-to-consumer channels, wholesalers still were important to Nike.


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  Conagra Brands, Inc. (CAG) - After increasing prices multiple times in 2021 and 2022, the packaged foods company's CFO said it does not plan on taking significant action this fiscal year, assuming that inflation doesn’t rise further, WSJ reports.


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  Wendy's Company (WEN) - The fast-food chain will release preliminary Q4 and FY22 results before the market opens on Friday. It will also provide an update on its capital allocation plans, and host a conference call at 08:30EST. The street currently expects Wendy's to report Q4 adj. EPS of 0.20/shr and revenues of USD 519mln; for the FY22, the street looks for adj. EPS of 0.85/shr, and revenues of USD 2.08bln.


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  Bed Bath & Beyond Inc. (BBBY) - The retailer is in talks with lenders over bankruptcy financing, Bloomberg reports. The discussions are also said to include the potential for a stalking horse bid. A spokeswoman for Bed Bath & Beyond reiterated that it was exploring "multiple paths."


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  Royal Caribbean (RCL) - The cruise line announced that it has amended and extended the majority of its two unsecured revolving credit facilities, extending the maturities of USD 2.3bln of the USD 3bln capacity by one year to April 2025, with the remainder maturing in April 2024.


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  Hanesbrands Inc. (HBI) - The apparel manufacturer Q4 sales 'slightly above' the top end of its USD 1.4-1.45bln outlook range (exp. 1.42bln). CFO Michael Dastugue will step down for personal reasons; Company's Chief Accounting Officer and Controller Scott Lewis will take the role of Interim CFO.

ENERGY & UTILITIES:

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  BP (BP), Exxon Mobil Corporation (XOM) - Integrated O&G major BP has doubled output from its Thunder Horse project within the Gulf of Mexico, which can produce as much as 250K BPD of oil and up to 200mln CFD of natgas. The Thunder Horse platform is operated by BP with a 75% stake, while Exxon Mobil has a 25% stake.


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  ConocoPhillips (COP) - The oil and gas E&P company is now open to a deal to sell Venezuelan oil in the US as a way to recover the USD 10bln it is owed by the country, after it abandoned Venezuela after its assets were nationalised in 2007, WSJ reports. A proposal could allow COP to load, transport and sell Venezuelan oil in the US on behalf of state oil company PdVSA, giving ConocoPhillips a chance to recover the money it lost in the country and help the US meet its energy needs. The arrangement would also help Venezuela end the commercial isolation that was caused by US sanctions leveled against its oil industry in 2019, and further open the US market to its crude.


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  TotalEnergies (TTE) - Announced the start-up of the Deutsche Ostsee LNG import terminal for LNG, located in Lubmin on the German Baltic Sea coast. TotalEnergies is contributing a floating storage and regasification unit (FSRU) to the project, and supplying LNG, which will make the energy giant one of Germany's primary LNG suppliers.


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  Duke Energy (DUK) - Duke Energy Progress reached an agreement with all parties in South Carolina for its rate review request filed in September last year.

MATERIALS:

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  Glencore (GLNCY) - Vandals attacked Glencore's Antapaccay copper mine in Peru amid a deepening political crisis marked by violent protests that have broken out near major mines in the southern Andes, Reuters reports.

INDUSTRIALS:

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  Fluor Corporation (FLR) - The engineering and construction company will book a USD 436mln order in Q1 as its JV with Ballast Nedam was selected for roadway project in the Netherlands.


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  Virgin Galactic Holdings, Inc. (SPCE) - Said commercial service remained on track to begin in Q2, and it has updated its leadership structure to support commercial spaceline operations.

13 Jan 2023 - 09:20- Research Sheet- Source: Newsquawk