US EARLY MORNING: Stock futures and Treasury yields are little changed ahead of big bank earnings, retail sales, University of Michigan sentiment

US PRE-MARKETS: US equity futures are a around neutral, while Treasury yields and the US Dollar Index are a touch lower. The overnight session has not had any major catalysts to sway trading direction, with a few key risk events still on the radar for this week. US big banks will today begin reporting Q1 results, and in addition to the usual focus on the top- and bottom-lines, there will be a great deal of attention centring around commentary on deposits, loan loss provisions, as well as economic outlooks (we have a few more thoughts in our Day Ahead section below). There is also the US retail sales report for March, which is expected to slip again, as well as prelim University of Michigan sentiment data for April, where there will be attention on the inflation expectations measures (note: the NY Fed's recent survey of consumer inflation expectations continues to paint a mixed picture, but analysts note that consumers have traditionally tended to assume inflation would be more pernicious relative to market expectations). 

DAY AHEAD:

• Our full interactive calendar can be accessed here; a pdf version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: The European data release slate is thin. On the speakers front, BoE's Tenreyro will speak, and although her term will conclude in July, she will still help set policy at two more meetings. US Treasury Secretary Yellen will meet BoE Governor Bailey at 15:30EDT/20:30BST. ECB's Nagel is due to make further remarks today after the European close.


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  US DATA/SPEAKERS: US retail sales are the highlight, and are expected to fall 0.4% M/M in March, matching the rate of prior decline (see below for more). Import and export prices for March are also due. Ahead of the open, the February manufacturing output and industrial production data will be released. After the open, the prelim University of Michigan data for April will be released, where analysts will be paying particular attention on the inflation expectations components. The hawkish Fed Governor Waller will give remarks before the open, as will Fed's Goolsbee.


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  US CORPORATE EARNINGS: Results are due today from UNH, BLK, JPM, WFC, C (see below); our full earnings expectations sheet can be accessed here.


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  PREVIEW - US BANK EARNINGS: Financials are expected to report Q1 2023 earnings growth of 4.3% (vs -5.2% for the S&P 500, in aggregate), and revenue growth of 9.0% (vs 1.6% for the S&P 500, in aggregate). In addition to the top- and bottom-line performance, loan provisions, economic projections, traders will be paying particular attention to any commentary on how the recent stresses in the banking system have impacted operations; Goldman Sachs said it expects investor focus to centre on deposit inflows and pricing dynamics, but also what will the offset be from tighter lending standards, a weaker economic backdrop and the impacts on provisions and charge-offs, as well as the longer-term ramifications from regulatory reform.


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  PREVIEW - US RETAIL SALES (13:30BST/08:30EDT): Headline retail sales are expected to slip 0.4% M/M in March, retail sales ex-autos are seen falling by 0.3% M/M, and the Control Group is seen falling by 0.3%. The data will be framed in the context of slowing economic growth dynamics, which is increasingly becoming a focal point for traders. The Conference Board’s gauge of consumer confidence in March improved slightly at the headline level, but the present situation measures decreased. The report noted that while consumers feel a bit more confident about what’s ahead, they are slightly less optimistic about the current landscape. Overall purchasing plans for appliances continued to soften while automobile purchases saw a slight increase in the month. The data also contained a special question this month, asking about consumers’ spending plans on services over the next six months; the data showed consumers plan to spend less on highly discretionary categories, but they will spend more on less discretionary categories.

EQUITY NEWS:

INDEX:

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  Dividends - Goldman Sachs cuts its S&P 500 dividend forecast to USD 73 in 2024 (prev. USD 75), on the back of weak earnings.

INDUSTRIALS:

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  Boeing Company (BA), Spirit AeroSystems (SPR) - Boeing has halted deliveries of some 737 MAXs as it grapples with a new supplier quality problem by Spirit AeroSystems that could stretch back to 2019. The issue will likely affect a "significant" number of undelivered 737 MAX airplanes both in production and in storage, the report said, and could result in lowered 737 MAX deliveries in the near term. Boeing said that the issue with Spirit AeroSystems, where the supplier used a "non-standard" process in installing fuselage fittings on some narrow bodies, resulted in the possibility of it not complying with FAA specifications, but the planes can safely operate - the FAA agreed with Boeing that there is no immediate 737-MAX safety issue involving two fittings on fuselage sections of some airplanes.


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  Nikola Corporation (NKLA) - Gerrit Marx, Lynn Forester de Rothschild and Mark Russell are retiring from Nikola's Board in June. Nikola said that as the company evolves, the size and composition of the Board will as well.


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  General Dynamics Corporation (GD) - General Dynamics and IMT Defense Corp. will compete for each order of the USD 344.2mln contract for the manufacture, test, packaging and delivery of 155 mm M1128 artillery metal parts assembly.


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  Lockheed Martin (LMT) - Was awarded a USD 172.1mln Navy contract modification.

FINANCIALS:

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  Fed Balance Sheet - The Fed's balance sheet declined to USD 8.665tln in the latest week (prev. 8.682tln), with Discount Window borrowing falling to USD 67.6bln (prev. 69.7bln), the BTFP to USD 71.8bln (prev. 79bln), and foreign repo usage to USD 30bln (prev. 40bln).


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  BlackRock, Inc. (BLK), Credit Suisse Group AG (CS) - Credit Suisse has hired BlackRock to help sell a USD 300mln portfolio of structured bonds, Bloomberg reports, adding that it is the latest entity to tap the money manager in a time of crisis.


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  Hartford Financial Services Group (HIG) - Hartford Financial fell 4% in afterhours trade following a below-consensus Q1 pre-announcement, where it sees prelim Q1 EPS USD 1.68 (exp. 1.99), sees Q1 Property & Casualty current accident year catastrophe losses of USD 185mln before tax. CAT losses primarily resulted from the significant winter storms along the East and West coasts and tornado, wind and hail events across several regions of the US.


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  Wells Fargo & Company (WFC) - Wells Fargo representatives will meet regulators from the US Office of the Comptroller of the Currency on Friday over so-called "matters requiring attention", NY Post reports. The MRAs are specifically focused on concerns of lacklustre internal financial controls, and a lack of oversight of stock and bond traders, a source said, adding that these MRAs were in part motivated by the bank failures of Silicon Valley Bank and Signature Bank, giving regulators a newfound sense of urgency to ameliorate risk.


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  Washington Federal, Inc. (WAFD) - Reports Q2 EPS of 0.95 (exp. 1.07), Q2 NII of USD 175mln (exp. 181.6mln), Q2 loan loss provisions of USD 3.5mln (vs 0.5mln Y/Y), Q2 net charge-offs USD 5.9mln (vs net recoveries of USD 0.5mln Y/Y). Exec noted that the yield curve was inverted, with long-term rates being lower than short-term rates. The degree to which the yield curve is inverted is near a historical high. WaFd saw its net interest margin decrease from 3.69% in the Q4 to 3.51% in Q1. While this is a significant decline in margins, exec said that the previous quarter had represented a 25-year high, and current margin was still meaningfully higher Y/Y.


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  Iberdrola SA (IBDRY), Banco Bilbao Vizcaya Argentaria SA (BBVA), Banco Santander SA (SAN), Bank of America Corporation (BAC) - BBVA, Santander and BofA have expressed interest in financing Mexico’s deal to purchase power plants from Spain’s Iberdrola for USD 6bln, Bloomberg reports.

TECH:

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  Taiwan Semiconductor Manufacturing Company (TSM) - TSMC has revised its blueprint for capacity expansion, reducing its scale and slowing down its pace, DigiTimes reports. However, the pure-play foundry is still evaluating the feasibility of raising quotes in the second half of the year, sources said.


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  Zscaler, Inc. (ZS) - Chief marketing officer Chris Kozup is leaving the company at the end of the month, The Information reports.


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  Adobe Inc. (ADBE) - Adobe to pay a USD 3mln fine to resolve False Claims Act allegations that it made payments in violation of the Anti-Kickback Act in return for influence over the sale of Adobe software to the federal government.

HEALTH CARE:

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  Eli Lilly and Company (LLY) - FDA issued a complete response letter for the mirikizumab biologic license application for the treatment of ulcerative colitis. FDA cited issues related to the proposed manufacturing of mirikizumab, with no concerns about the clinical data package, safety, or label for the medicine. LLY said it remains confident in mirikizumab's pivotal Phase 3 clinical data, and is working diligently with the FDA; hopes to launch mirikizumab in the US as soon as possible.


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  Teva Pharmaceutical Industries (TEVA), Alvotech (ALVO) - FDA issued a complete response letter to its partner Alvotech for the Biologics License Application for AVT02, a high-concentration biosimilar candidate for Humira(R) (adalimumab). The letter stated that the application could not be approved at this time based on deficiencies associated with Alvotech's manufacturing facility that must be satisfactorily resolved. Additional review of the details following the recent FDA's re-inspection and CRL are being assessed to determine next steps.


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  Quidel Corporation (QDEL) - Prelim Q1 2023 revenue seen between USD 840-850mln (exp. 746.8mln). Respiratory product revenue expected to be between USD 262-267 million, including COVID-19 product revenue of USD 212-217mln.

CONSUMER CYCLICAL:

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  Express, Inc. (EXPR), Walmart Inc. (WMT) - Express and brand management firm WHP Global will acquire menswear brand Bonobos, Inc. from Walmart for USD 75mln. The transaction is expected to close in EXPR's Q2 2023, subject to customary closing conditions.


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  Lucid Group, Inc. (LCID) - Prelim data showed it produced 2,314 vehicles in Q1, and made 1,406 vehicle deliveries (exp. 1,835).

14 Apr 2023 - 09:30- Data- Source: Newsquawk