US EARLY MORNING: Index futures lower after 'hawkish' Brainard stokes yields higher; FOMC minutes eyed later

EQUITIES: US index futures are softer (RTY -0.4%, YM -0.4%, ES -0.5%, NQ -0.7%), with tech names suffering as US yields climb following ‘hawkish’ commentary by Fed Governor Brainard on Tuesday. For equities, this takes the ES to the low-end of the sideways range we have been patrolling over the last nine sessions, bringing the 200dma around 4,484 back into focus. Analysts have suggested this sideways trade will continue until we have fresh catalysts. The near-term catalysts on our radar include: Fed monpol (pace of the balance sheet tightening – we know it will be quicker than the last time around, and Chair Powell wants it to be a process that ‘runs in the background’), ECB monpol (minutes due Thursday, confab next week – officials’ view on the timing of rate hikes is key), Ukraine-Russia updates (so far, the fallout has been limited for US corporates, though presents inflationary headwinds and by extension potential margin revisions), inflation progress (CPI report next week), earnings season (gets going next week when banks begin reporting – Deutsche Bank told its clients Tuesday that it expects above-average beats in Q1, noting that consensus estimates for earnings have held firm in the face of higher inflation, tightening monpol and Russia-Ukraine geopolitics), European politics (Le Pen gaining ground in the French election polls, raising risks of fiscal disruption and cooler tone towards Europe).

TREASURIES: Yields are higher by 4-8bps across the curve, and curve spreads are once again mixed – widening shorter-dated spreads, and a narrowing of longer-dated spreads, alluding to short-term inflationary pressures and longer-term growth concerns. Fed Governor Brainard’s (the Vice Chair in Waiting) remarks were framed as hawkish, but this may be a framing based on her own history rather than what others on the Fed have expressed. Brainard said that the balance sheet drawdown will be more rapid versus the Fed’s previous QT, which would help bring policy into a more neutral stance, after which further tightening can be implemented as needed. This implies that she has not yet decided whether rates should be brought above the so-called neutral level. Additionally, her remarks on the balance sheet are consistent with the light guidance already provided by Chair Powell – he has suggested that although the process will be quicker than last time, he does not want it to be the cause of any market disruption, and it will be a process that ‘runs in the background’. Traders will be looking for more clues around this theme within the release of the March meeting minutes, due 19:00BST/14:00EDT today (our preview is here). Currently, money markets imply a 83% chance of a 50bps ate hike in May, and has fully priced the Fed lifting rates to between 2.25-2.50 by end-2022, with some risks of a move to 2.50-2.75% (note: the Fed’s latest projections made in March pencilled in a rise to 1.75-2.00% by the end of the year). Our ‘Day Ahead’ calendar can be accessed here.

EQUITY NEWS:

KEY LEVELS (VIA CREDIT SUIISE): 

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  SPX: 4437, 4462/55, 4488, 4514/08, 4539, 4637, 4663/68, 4685, 4700, 4707/12.


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  NDX: 14578, 14724/20, 14885, 15007/00, 15055, 15162, 15230/65, 15335/82, 15446, 15500/43


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  RUT: 2019/16, 2035, 2047/45, 2054, 2075/68, 2100/01, 2138, 2162, 2177, 2185.

TECH:

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  Apple (AAPL) - Announced that its Worldwide Developers Conference will return in its all-online format, June 6-10th. Will showcase the latest innovations in iOS, iPadOS, macOS, watchOS, and tvOS. (AAPL)


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  Intel (INTC) - Suspends operations in Russia. (INTC)


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  Analog Devices (ADI) - Sees long-term revenue growth CAGR 7%-10%, and sees a path to adj EPS of USD 15/share and 40% FCF margin; also updated its synergy targets related to the acquisition of Maxim Integrated, now sees cost synergies of USD 400mln in FY23, and revenue synergies of more than USD 1bln over five years. Exec added that "there's a concern by customers that there’s no inventory available for them," and "there's still demand that needs to be met." (BBG)


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  Array Technologies (ARRY) - Appoints Kevin Hostetler as CEO, succeeding Jim Fusaro. Q4 adj EPS -0.06 (exp. -0.03), Q4 revenue USD 219.9mln (exp. 213.8mln). FY revenue and adj. EBITDA adversely impacted by approximately USD 7mln shifting revenue restatement for first three quarters of 2021, but reiterated that this shifting is merely a timing issue. Sees FY22 adj EPS 0.55-0.74 (exp. 0.66), and sees FY22 revenue between USD 1.45-1.75bln (exp. 1.39bln). (ARRY)


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  SMART Global Holdings (SGH) - Fell over 5% in after hours due to its soft Q2 revenue guide. Reported Q2 EPS 0.87 (exp. 0.72), Q2 revenue USD 449mln (exp. 435.4mln). Sees Q3 EPS between 0.67-0.83 (exp. 0.71), and sees Q3 revenue between 435-475mln (exp. 455mln); announced USD 75M share buyback authorisation. (SGH)


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  Riot Blockchain (RIOT) - Produced 511 BTC in March (+176% Y/Y), currently has a deployed fleet of approximately 42,919 miners, with a hash rate capacity of 4.3 exahash per second. (RIOT)

CONSUMER CYCLICAL:

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  Amazon (AMZN) - More than 50 of its warehouses in the US have contacted labour union representatives following its New York City warehouse voting to form the first union. (Reuters)


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  Starbucks (SBUX) - General counsel Rachel Gonzalez removed from her role, comes after the return of chairman emeritus Howard Schultz as CEO; SBUX currently battling a unionisation efforts by its workers, has also come came under investor scrutiny over anti-bias training to employees. (Bloomberg)

CONSUMER STAPLES:

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  Imperial Brands (IMBBY) - FY outlook in-line with March revised guidance, H1 adjusted group operating profit is up Y/Y. (City AM)

INDUSTRIALS:

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  JetBlue (JNLU), Spirit Airlines (SAVE), Frontier Airlines (ULCC) - JetBlue makes USD 3.6bln all-cash offer for Spirit Airlines. Spirit confirmed the offer and said it was  evaluating the proposal. CNBC said it raised questions about Spirit's deal to combine with Frontier Airlines, which was agreed two months ago. Deal shows renewed appetite for consolidation in the airline industry. (CNBC)


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  Rivian Automotive (RIVN) - Rose over 2% in extended trade after Q1 2022 production update; produced 2,553 vehicles, delivered 1,227 vehicles. RIVN had warned in March that supply-chain issues could weigh on production, but Tuesday said it was well positioned to deliver on its 25,000 annual production guidance. (RIVN)


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  Mercedes-Benz (MBG) - CEO said it will hasten climate change goals. (Newsquawk)


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  Volkswagen (VWAGY) - CFO said the automaker was focusing more on quality and margins rather than volume and market share, and will be reducing their offering of ICE vehicles by 60% within Europe in the next eight years. (Newsquawk)


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  US, UK, Australia want hypersonic weapons and laser defence systems to counter Russia; will work on high-speed weapons that can carry nuclear warheads. (Times)


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  Landstar System (LSTR) - Updated Q1 guidance, now sees EPS between 3.30-3.35 (exp. 2.96), or 18-20% above the high-end of the initial Q1 2022 guidance, and sees revenue between USD 1.955-1.975bln (exp. 1.8bln), or approximately 12-13% above initial guidance. (LSTR)

COMMUNICATIONS:

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  AT&T (T), Discovery (DISCA) - HBO Max executive vice president and general manager Andy Forssell exits WarnerMedia ahead of closing of Discovery merger. Close of merger now eyed as early as Friday. (Variety)


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  ITV (ITVPY) – ITV reportedly interested in making an offer for Channel 4, which is due to be privatised before 2024. (Daily Mail)


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  Ubisoft (UBSFY) - Announced that ongoing development of "Tom Clancy's Ghost Recon Breakpoint" is ending. (UBSFY)

UTILITIES:

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  Southwest Gas Holdings (SWX) - Said it was "pleased" after a Delaware Court granted summary judgment in favour of the Company, ruling that Icahn Partner's Special Meeting Proposal was not lawful. (SWX)

MATERIALS:

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  West Fraser Timber (WFG) - Said its Hinton Pulp will reduce production capacity and move to unbleached Kraft Pulp. (WFG)

HEALTH CARE:

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  GlaxoSmithKline (GSK), Vir Biotechnology (VIR) - FDA pulls authorisation for GSK-Vir's COVID therapy, suggesting it was unlikely to be effective against the dominant Omicron sub-variant. (Reuters)

FINANCIALS:

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  Mapfre (MPFRY), Santander (SAN) - European Commission reportedly approves Mapfre-Santander JV. (La Informacion)

ENERGY:

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  Energy - UK to announce plans to double the targets for low-carbon hydrogen as an alternative to gas. Separately, UK regulator Ofgem delays proposals to make suppliers ring-fence customers cash, amid concerns over whether all firms can afford to take such steps. (Gov.UK, Times)


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  Saipem (SAPMY) - Secured a new offshore drilling contract worth USD 400mln+. (oedigital)

REAL ESTATE:

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  Redrow (RDW) - Signed up to the Building Safety Pledge, will be remediating all buildings they were involved with for 30 years. (MarketWatch)

06 Apr 2022 - 09:45- EquitiesResearch Sheet- Source: Newsquawk