US EARLY MORNING: Index futures slightly lower ahead of NFP; focus will start shifting onto next week's CPI and start of Q2 corporate reporting

US index futures were largely horizontal following a four-day win streak for cash markets. YM -0.2%, RTY -0.3%, ES -0.3%, NQ -0.4%. Futures are currently trading a little beneath neutral, but are off lows, ahead of today’s key US labour market data, that will form part of the case in setting expectations around the July 27th FOMC meeting; the data, in combination with next week’s CPI report, will help shape the debate on whether the Fed will raise rates by a 50bps or a 75bps increment. The data releases could also be influential in determining the course for rate hikes through the rest of this year; a recent dovish repricing of the trajectory of Fed rate hikes (on the back of recession fears) has been unwinding, and money markets now assign an approximately 50% chance rates will rise to 3.25-3.50% by year-end. (Newsquawk’s NFP preview can be accessed here). Elsewhere, the day features remarks from ECB President Lagarde; while there will not be a text release accompanying her comments, traders will be looking for any clues on the size of the July rate hike, after recent meeting minutes suggested a larger than 25bps increment is a possibility, although traders still think the central bank will start off with a smaller rate rise; additionally, any commentary around the upcoming anti-fragmentation tool will be of note. NY Fed President Williams is also due to make comments later today in wake of the jobs data. The docket is thin for other events/speakers, and attention will begin pivoting onto next week’s CPI data and the start of corporate reporting when major banks start releasing their numbers. The consensus expects earnings growth to rise 5.6% in Q2, according to Refinitiv and revenues are seen rising 10.4%. Taking the energy sector out of the equation, earnings growth is seen -2.4% in Q2, while revenue growth is estimated to rise 6.7%. Heading into Q2 reporting, Refinitiv notes that there have been 77 negative pre-announcements by S&P 500 companies, and 45 positive pre-announcement. Many analysts have suggested that stocks will only bottom out after corporates lower optimistic guidance, with some arguing that those that can demonstrate earnings stability in Q2 may be rewarded with outperformance. Full Day Ahead here.

EQUITY NEWS:

INDUSTRIALS:

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  Spirit Airlines, Inc. (SAVE), Frontier Group Holdings, Inc. (ULCC), JetBlue Airways Corporation (JBLU) - Spirit intends to reopen and immediately adjourn its Special Meeting of Stockholders relating to the proposed merger agreement with Frontier Group to allow Spirit to continue talks with Frontier and JetBlue. There will be no voting or other matters conducted at the meeting on July 8th, and Spirit intends to reconvene the Special Meeting on July 15th. After the announcement, JetBlue said it was encouraged by discussions with Spirit.


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  Tesla, Inc. (TSLA) - China's CPCA said 1.97mln passenger cars were sold in June (prev. 1.37mln in May); Tesla sold 78,906 China-made vehicles in June (prev. 32,165 in May), and Tesla exported 968 China-made vehicles in June (prev. 22,340 in May).


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  BMW (BMWYY) - Q2 Group Deliveries -19.8% Y/Y at 565.3k units; Brand Deliveries -19.6% Y/Y at 496.7k units; Europe deliveries -19.4% Y/Y, China -28.3% Y/Y, US -20.6% Y/Y.


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  Rolls-Royce Holdings Plc (RYCEY) - Rolls-Royce sees the widebody aircraft market rebounding more quickly than it had previously expected. CEO said it was seeing a "definite tick up" in widebody activity, and he sees strong demand after 2025, but added that airlines were starting to think about that now.


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  General Dynamics Corporation (GD) - Was awarded a USD 280.1mln Army contract.

CONSUMER STAPLES:

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  Philip Morris International Inc. (PM), Swedish Match AB (SWMAY) - Elliott Investment Management is building a stake in Swedish Match AB, the tobacco company that's agreed to be taken over by Philip Morris in a USD 16bln deal, Bloomberg reported. Elliott plans to oppose sale to Philip Morris.


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  Costco Wholesale Corporation (COST) - Reported June net sales +20.4 Y/Y at USD 22.78bln. 4wk comps 21.5% in June (vs 17.5% in May), total 4wk comps 18.1% (vs 15.5% in May). Ex-gas, US 4wk comps +13.2% in June (vs 10.7% in May), while total 4wk comps +13.0% in June (vs +11.8% in May).

CONSUMER DISCRETIONARY:

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  Levi Strauss & Co. (LEVI) - Rose 4.7% in afterhours trading following the publication of Q2 results. Q2 adj. EPS 0.29 (exp. 0.23), Q2 revenue USD 1.5bln (exp. 1.43bln). Raised its quarterly dividend +20% to 0.12/shr. Reiterated its FY22 adj. EPS outlook between USD 1.50-1.56 (exp. 1.55), and reiterated its FY22 revenue outlook at between USD 6.4-6.5bln (exp. 6.4bln).

FINANCIALS:

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  Weekly Flows - BofA's weekly report noted USD 62.6bln flows into cash, USD 2.4bln into bonds, and USD 4.6bln out of equities. BofA said that USTs saw their largest inflows in eight-weeks, adding that bond market gauge of USTs is at levels coinciding with recessions/defaults. BofA's Bull & Bear indicator remained at "extreme bearish" territory.


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  Crypto - The US Treasury announced a 'framework' for international crypto regulation, CoinDesk reported. The document is the first publication from the department to stem from President Biden's executive order on digital assets.


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  Voya Financial, Inc. (VOYA) - Announced leadership-succession plan: Heather Lavallee appointed president and CEO-elect, and appointed to Voya’s board; will become chief executive officer in January. Rodney O. Martin Jr. will become executive chairman in January.


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  Upstart Holdings, Inc. (UPST) - Slid by 17.5% afterhours as it slashed its Q2 revenue outlook to USD 228mln (Exp. 298mln, prev. guidance range USD 295-305mln), and cut its Q2 net income outlook to between USD -31mln to -27mln (vs prev. guidance of -4mln to 0). Upstart said inflation and recession fears have driven interest rates up and put banks and capital markets on cautious footing; revenue was negatively impacted constraints in marketplace funding driven by concerns about the macroeconomy; additionally, in Q2, it took action to convert loans on its balance sheet into cash, which, given the quickly increasing rate environment, negatively impacted its revenue.


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  Marathon Digital Holdings, Inc. (MARA) - Published its June bitcoin production metrics, reporting that BTC production was +8% Y/Y in Q2 at 707; it now holds 10,055 BTC directly after eliminating investment fund structure, and has USD  88.7mln cash on hand, and USD 153.7mln total available liquidity.

HEALTH CARE:

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  Emergent BioSolutions Inc. (EBS) - Emergent BioSolutions and Ridgeback Biotherapeutics entered into an agreement for Ebanga treatment for Ebola.

COMMUNICTIONS:

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  Twitter, Inc. (TWTR) - Lower by 4% afterhours on reports that Elon Musk’s deal to buy Twitter was in serious jeopardy, according to sources cited by WaPo, as Musk’s camp concluded that Twitter’s figures on spam accounts were not verifiable. The report said Musk’s team had stopped engaging in certain discussions around funding for the USD 44bln deal. Separately, Twitter said it laid off 30% (fewer than 100 people) of its talent acquisition team as it deals with increasing business pressures and a potential takeover from Elon Musk, WSJ reported. The layoffs follow a May announcement where the social media company said that it would be pausing hiring and looking to cut costs.


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  GameStop Corp. (GME) - Tumbled over 5% afterhours on reports that it had terminated the contract of its CFO; Axios reported that Mike Recupero will be replaced as CFO by Diana Jajeh. GameStop is also to implement layoffs across company, according to a memo, although the size of the layoffs was not specified.

MATERIALS:

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  Glencore (GLNCY) - Ragian mine union has pulled out of arbitration discussions, strike activity at the site has been in place since late-May.


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  WD-40 Company (WDFC) - Q3 2022 EPS 1.07 (exp. 1.28), Q3 revenues -9% at USD 123.7mln (exp. 143mln). Exec noted the challenging macroeconomic environment which has continued to deteriorate its gross margin, adding that it continues to experience short-term margin pressures due to inflation. Lowers FY outlook, now sees revenue growth of up 6-9% (prev. guidance of up 7-12%), and sees EPS in a range of 5.02-5.10 (prev. guidance was for 5.14-5.27).


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  Kaiser Aluminum Corporation (KALU), Alcoa Corporation (AA) - Kaiser declared force majeure at its Warrick Rolling Mill due to the limited availability of magnesium used in the production of aluminium beverage and food packaging products. Kaiser anticipates production and deliveries will be reduced by 30-40% in July, and 50% in Q3. In addition, on July 1, Alcoa announced the curtailment of one of three operating smelting lines at its Warrick Operations facility in Indiana due to operational challenges. Kaiser does not anticipate Alcoa's announced curtailment to reduce Kaiser Warrick's current or anticipated output, but continuing performance issues at Alcoa's Warrick Operations facility and the resulting impact on delivery of molten aluminium will continue to impact the financial and operational performance of Kaiser.


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  Teck Resources Limited (TECK) - Q2 steelmaking coal sales were 6.3mln tonnes (vs guidance for 6.3-6.7mln tonnes). Tech said record steelmaking coal FOB prices resulted in an increase in average realised steelmaking coal prices in Q2 to USD 453/tonne. Teck expects to record provisional pricing adjustments of USD -73mln in the quarter due to the decline in coal prices.


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  Yamana Gold Inc. (AUY) - Preliminary Q2 operating results noted total gold equivalent ounce production of 260,960 GEO. Q2 gold production was 232,542 ounces, silver production 2.36mln ounces. Yamana said all-in sustaining costs were expected to be less than USD 1,090/oz. Cash and cash equivalents increased by more than USD 30mln to a total quarter-end cash balance of over USD 328mln from USD 298mln at the end of Q1, representing an improvement vs Q1. Yamana said YTD operating results position the company to achieve both its annual production and cost guidance. Year to date gold equivalent production has exceeded budget despite the gold to silver ratio being near an all-time high and significantly above the company's budget assumption for that ratio.

ENERGY:

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  Valero Energy Corp. (VLO) - Valero's board authorised a new share buyback programme for up to USD 2.5bln. The new facility replaces a previous authorisation from January 2018, where it purchased about 45.4mln shares.


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  Tenaris SA (TS) - Tenaris said it would acquire US seamless steel pipe producer Benteler Steel & Tube Manufacturing Corp for USD 460mln as the Luxembourg-based company seeks to expand its manufacturing capabilities in the country, Reuters reported.


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  MRC Global Inc. (MRC) - Rose over 8% after hours. Reported prelim Q2 revenue +14%. Exec said that the year started off strong and has continued to improve, significantly exceeding its expectations. Exec added that robust activity in all of its sectors underpins its strong outlook for the full year, supported by continued growth in its order intake and backlog. It increases 2022 targets to USD 3.3bln (prev. 3.1bln), and its adj. EBITDA view to USD 230mln (prev. 200mln).

UTILITIES:

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  Pacific Gas and Electric Company (PCG), Tesla Inc. (TSLA) - The two launched a new pilot programme that creates a virtual power plant, to help support electric grid reliability and save customers money. Tesla invited approximately 25,000 PG&E customers with Powerwalls to join the VPP and help form the world’s largest distributed battery. In the first two weeks of the new program, more than 3,000 customers have expressed interest in enrolling, with more than 1,500 customers officially in the programme.

08 Jul 2022 - 09:31- EnergyData- Source: Newsquawk