US EARLY MORNING: Index futures are flat, Treasuries are rallying; focus sharpens around Thursday's US CPI data release amid a thin docket for today

SNAPSHOT: APAC equities rallied on a positive lead from Wall Street, as well as continued optimism around China reopening, while European shares follow suit, trading a touch in the green, but off highs. US stock index futures are trading around unchanged after Tuesday’s upside, and Treasuries are slightly bid, while the Dollar Index is around flat. Crude futures are tilting lower after a surprise (and significant) build within weekly data reported by the API. There hasn’t been anything significantly incremental for the macro narrative, and as such, traders are beginning to sharpen their focus on Thursday US CPI data release for December, ahead of crucial bank earnings on Friday.

POWELL WAS A NOTHINGBURGER: Tuesday upside for US stocks seems to have been inspired by a lack of fresh hawkishness from Fed Chair Powell in his remarks at the Riksbank. This could either signal that the Fed chief was satisfied with current messaging, or that given the subject matter, this was not the forum for Powell to provide a meaningful update (the panel was on central bank independence); additionally, markets were positioning in a hawkish fashion into Powell’s appearance, and as such, the upside may have been a function of unwinding that positioning. Afterall, it seems unlikely that the Fed is completely satisfied with the messaging at the moment, given that money markets continue to chart a course for interest rates more dovish than the Fed’s December SEPs, and are also pricing rate cuts towards the end of this year, which Fed officials have leaned back on. And while we are seeing progress on inflation, Chair Powell has previously warned that despite cooling, it was still significantly above target, meaning that the Fed should stick to its course. On that note, some analysts argued that Powell's lack of fresh insight may have been a calculated move to avoid meddling with expectations regarding Thursday's release of December inflation metrics, or even expectations for the February FOMC, where money markets are expecting another downshift to 25bps increment hikes, which may be the last of the cycle. For traders, the next major focus is that CPI release to see if inflation data is showing those further signs of ‘substantial progress’ that the Fed wants to see following cooling in October and November, before it is comfortable in refocussing its attention on the deteriorating growth backdrop. The consensus currently expects that the December CPI data will show another paring back in annual rates of inflation, and while that will likely give legs to further stock upside, analysts at JPMorgan have been telling their clients that they continue to be bearish, and have argued that the S&P 500 will likely re-test the lows seen in 2022; accordingly, JPM has been telling clients to fade any near-term rallies.

DAY AHEAD: Today’s economic data slate is thin, with only the weekly MBA mortgage applications data of note. On the supply front, the US Treasury will auction 10yr notes following a solid sale of 3s on Tuesday, which was supported by resurging indirect demand (which is seen as a proxy to gauge foreigner demand). Energy traders will be watching the DoE’s weekly energy inventory update after the API equivalent reported a large surprise build in crude stocks afterhours on Tuesday. Full daily schedule sheet can be accessed here.

CONSUMER:

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  Tesla, Inc. (TSLA) - Tesla has applied for a massive USD 700mln expansion of its Gigafactory Texas in Austin, where it produces Model Y vehicles; it plans to add Cybertruck production to the site, and it has talked about expanding for future production of vehicle programmes and battery production, Electrek reports. Separately, surveillance footage shows a Tesla Model S changing lanes and then abruptly braking on a San Francisco Bay Bridge, resulting in an eight-vehicle crash which injured nine people, and blocked traffic on the bridge for over an hour, The Intercept reports.


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  Rivian Automotive, Inc. (RIVN) - Several top executives at the EV manufacturer – including its VP of body engineering and its head of supply chain – have left in recent months, as the company exits a year in which it fell short of its production targets, WSJ reports.


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  Conagra Brands, Inc. (CAG) - The packaged foods company's CEO said it does not currently have any plans to take additional pricing beyond the current quarter, but added that plans could change if inflation persists.


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  Best Buy Co., Inc. (BBY), Amazon.com, Inc. (AMZN) - The retailer will take on Amazon Prime with a new free shipping benefit, CNET reports, but unlike Amazon Prime, BBY's service is coming to My Best Buy customers for free.


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  LVMH Moet Hennessy Louis Vuitton SE (LVMUY) - The luxury goods giant appoints Pietro Beccari as Chair and CEO of Louis Vuitton. Delphine Arnault becomes Chair and CEO of Christian Dior Couture. Stéphane Bianchi will oversee Tiffany and Repossi, which joins the watches and jewellery division.

COMMUNICATIONS:

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  Walt Disney Company (DIS) - Disney is now rolling out the first changes at its theme parks since Bob Iger returned as CEO, where it will offer ride photos for free rather than paying for a photo pass, and is also offering more Disneyland tickets at the lowest rate of USD 104 per day, according to Bloomberg. The moves come after Disney raised ticket prices and introduced new reservation systems under its former CEO Bob Chapek, which angered long time visitors, BBG wrote.


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  Meta Platforms, Inc. (META) - Instagram announced that it is tweaking navigation on the site, where the navigation bar at the bottom of the app will now have the shortcut for creating content, while the Instagram Shop tab will be removed. IG said that users will still be able to set up and run shops on the platform though.


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  World Wrestling Entertainment, Inc. (WWE) - Board elected Vince McMahon as Executive Chairman; Stephanie McMahon resigned from her roles as Chairwoman and Co-CEO. Nick Khan will serve as WWE CEO.

TECH:

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  Okta, Inc. (OKTA) - The software infrastructure company's chief revenue officer is departing amid a sales shakeup, The Information reports, as it grapples with an industry-wide slowdown in the enterprise software market.


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  Impinj, Inc. (PI) - The communications equipment company Boosted its Q4 revenue outlook to over USD 76mln (exp. 73mln) from USD 71.5-73.5mln.


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  Axcelis Technologies, Inc. (ACLS) - The semiconductor equipment and materials company announced prelim Q4 EPS will be above USD 1.45 per share (previously guided 1.00-1.10, street was expecting 1.05), and boosted its revenue outlook to 'above' USD 250mln (exp. 134.5mln) vs previous guidance of between 232-240mln. Exec said Q4 performance was driven by higher-than-expected system shipments and aftermarket revenue. Favourable FX also positively impacted EPS. Exec expects Y/Y growth in 2023 based on robust demand.


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  Ichor Holdings, Ltd. (ICHR) - The semiconductor equipment and materials company sees Q4 revenue between USD 300-302mln (exp. 335mln), and guided Q1 revenue between USD 210-240mln (exp. 297mln). CEO said as it progressed through Q4, it became evident that the areas of weakness in wafer fab equipment, particularly those related to memory spending, have resulted in further reductions in near-term demand from customers. Accordingly, it is now seeing Q/Q revenue declines that are modestly higher than what we were expecting a couple of months ago. Does not expect similar levels of sequential declines beyond Q1.

INDUSTRIALS:

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  FedEx Corporation (FDX) - The integrated freight and logistics company plans to further scale back Sunday package deliveries as it grapples with faltering e-commerce demand, Bloomberg said. The pullback will reduce the availability of Sunday service to "more than 50%" of the US population; FedEx had previously announced that it would slash Sunday coverage to roughly 80% of US residents from 95%.


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  Airbus SE (EADSY) - Reported 2022 net deliveries of 661, and gross deliveries of 663 (NOTE: it was initially targeting deliveries of 700 in 2022, but later in the year, it announced this was no longer a realistic target). Net orders were 820 in the year, while gross orders were 1078. CEO said supply chains remained fragile, headwinds of supply chain flexibility will remain in 2023. It maintained its targets for single-aisle production of 65 per month in 2024, and 75 per month for middle of the decade. Its first delivery of the A321XLR is expected in Q2 of 2024.

ENERGY:

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  Energy Inventories - API weekly inventory data showed crude +14.9mln (exp. -2.2mln), Cushing stocks +2.3mln, gasoline +1.8mln (exp. +1.2mln), distillate +1.1mln (exp. -0.5mln), according to Citi.


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  Exxon Mobil Corporation (XOM), Hess Corporation (HES) - A fifth major offshore oil field being developed by an ExxonMobil consortium will add another 1.3bln barrels of recoverable oil reserves to the 10bln barrel Guyana-Surinam basin, according to the Guyanese government, AP reports. The Uaru-Mako project currently under review could come on stream in the next three years, adding add as many as 63 more wells to the 30 already drilled in the Stabroek Block by the consortium, which also includes Hess Corporation and China's CNOOC, AP added.

FINANCIALS/REAL ESTATE:

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  Wells Fargo & Company (WFC) - Once the number one player in mortgages, Wells Fargo is stepping back from the housing market and will now focus on home loans for existing bank and wealth management customers and borrowers in minority communities, CNBC reports. Wells Fargo is also shuttering its correspondent business that buys loans made by third-party lenders and significantly shrinking its mortgage-servicing portfolio through asset sales, the report added. The shift will result in a fresh round of layoffs for the bank’s mortgage operations, but executives have not quantified exactly how many jobs will be lost.


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  Franchise Group, Inc. (FRG) - Investment firm Franchise Group is considering going private in a management buyout, WSJ Reports. Management led by CEO Brian Kahn could pay between USD 30-35/shr; shares closed Monday trading at USD 29.92. Franchise is separately eyeing a potential deal to acquire furniture chain Conn's Inc. (CONN), WSJ added.


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  UK Banks and Housing Names - UK's central bank has launched a crackdown on buy-to-let mortgages as it braces for a wave of defaults in the face of the recession, The Telegraph reports. BoE warned banks that it intends to scrutinise risky areas more heavily given rising interest rates and a surge in inflation, where lending to landlords and small businesses will face greater oversight, as well as borrowing on credit cards. BoE Governor Bailey told lenders to be ready for a prolonged period of credit stress."

HEALTH CARE:

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  Bayer AG (BAYRY) - Further activist attention, with Bluebell Capital reportedly building a stake in the German health care giant, and is pushing for a breakup, Bloomberg reported citing sources. Bluebell also seeks an overhaul of the Bayer's corporate governance, BBG said, and has been in talks with its supervisory board over the past few months.


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  Integra LifeSciences Holdings Corporation (IART) - The medical devices company preannounced Q4 revenue, sees USD 397-398mln (exp. 397.5mln). Sees FY22 adj. EPS above its USD 3.29-3.33 guidance range (exp. 3.30), and narrowed its FY22 revenue outlook to USD 1.557-1.558bln (exp. 1.56bln) from USD 1.551-1.563bln. Reiterates plan to initiate a USD 150mln share buyback in 2023.


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  Tandem Diabetes Care, Inc. (TNDM) - The medical devices company reported prelim Q4 revenue at USD 224mln (exp. 222mln). Sees FY22 revenue at approximately USD 805mln (exp. 802.5mln, vs prev. guidance of 800-805mln). Exec noted a record number of customers renewing in Q4 and strong retention rates.


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  Myomo, Inc. (MYO) - The medical devices company announced a 12% workforce reduction in an effort to improve operating efficiency in its direct billing channel and reduce its cash burn.

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