US EARLY MORNING: US equity futures are around flat; House passes debt measure; US labour market metrics to set the scene for Friday's NFP

OVERNIGHT: On Wall Street, stocks were lower after weak China official PMI data, while the Chicago PMI data was below expectations, and there was a surprise spike in JOLTS job openings, which continues to show labour market strength. The USD gained, supported by yield differentials. Nvidia (NVDA) closed lower amid profit taking into month-end, although the Nasdaq still closes the month +6%, while the SPX was flat in May. Our US wrap is here. APAC stocks rose after the US House voted in favour of suspending the debt limit (see below), while Chinese Caixin manufacturing PMI data showed an improvement, in contrast to the official PMI data released earlier in the week, helping to lift Chinese shares. Aussie shares gained after strong capex data. Nikkei 225 was supported by robust business capex and profits. Our APAC wrap is here. The mood was constructive in Europe given the positive tailwinds from Wall Street/APAC; additionally, German retail sales data also improved. It is a heavy data slate today in Europe, with the primary focus the inflation metrics for May, which are expected to show a cooling in line with national reports released this week. Our European cash open note is here.

US PRE-MARKETS: US equity futures are around the neutral mark in pre-market trade. Lawmakers have made progress is in attempting to suspend the debt ceiling, decent manufacturing data out of China overnight, while slowing Eurozone inflation also reduces expectations of a hawkish monetary impulse are the themes underpinning global equities. US Treasury yields are rising by 2-7bps, with much of the underperformance in the short-end of the curve. Market pricing for the Fed’s June meeting has been fluctuating, at one point on Wednesday implying a 70%+ chance of a 25bps rate hike, though are now back to pricing an unchanged outing, though there is not a lot of high conviction in that view. Influential Fed officials have been guiding towards a hold in June, but have caveated their views around the tone of incoming data. As we noted yesterday, we are now entering a key data window that could influence the Fed: ISM manufacturing data is out today, along with ADP/Challenger/weekly jobless claims data, all ahead of Friday's NFP report; the services ISM is out on Monday, and a day before the Fed announcement, the CPI report will be released (during the Fed blackout). The Fed will enter blackout at the end of this week ahead of the June 13-14th policy meeting. We also note that concerns around the banking sector are refusing to fully dissipate (see below).

DEBT CEILING: The Republican-controlled House approved a bill by a margin of 314-117. The legislation extends the government’s borrowing limit until January 1st, 2025, enabling President Biden and Congress to defer the politically sensitive matter until after the November 2024 Presidential Election. The Bill imposes spending limits for two years, streamlines permitting for select energy projects, recovers unused COVID-19 funds, and broadens work requirements for food aid programmes. House Leader McCarthy lost the support of 71 in his own party, but 149 Republicans eventually backed the bill, joined by 165 Democrats, allowing it to pass via a simple majority. Fox News noted that more Democrats voted for the Bill than Republicans. Now the bill goes to the Senate, where Majority Leader Schumer plans to schedule votes later this week. Senators may propose amendments to expedite the process, Politico said. Schumer and Senate Minority Leader McConnell aim to finalise the bill and send it to President Biden before the weekend, but Schumer warned that lawmakers cannot risk amending the debt bill and sending it back to the House. The deadline to pass the bill is June 5th, when the government’s borrowing limit is expected to be reached.

US BANKS: US banks underperformed on Wednesday amid concerns surrounding the commercial real estate sector, after executives from Wells Fargo and Blackstone expressed worries about potential losses in office real estate loans at a conference. Wells Fargo assured investors that the bank is actively managing its portfolio, and not overly concentrated in that area, while Blackstone highlighted the unprecedented weakness in older office buildings. Meanwhile, Fed Governor Bowman said residential real estate appears to be rebounding, with implications for the Fed’s inflation battle; the Fed has been trying to take some of the heat out of the real estate market as it tries to combat high inflation. In recent months, Fed officials have been sounding warnings over commercial real estate, and the impact it could have on the nation’s financial system, and have expressed concerns over the loans provided to office landlords. Goldman Sachs warns that there could be more regulation aimed at banks to improve capital levels in the near- and medium-term. In reviewing large bank regulatory capital, GS says capital adequacy for the large cap banks continued to improve in Q1, with more constrained firms adding up to 60bps to excess capital through a mix of retained earnings and mitigation. However, it sees “continued increases in capital requirements over both the near- and medium-term from a variety of factors, which leads us to expect the top seven banks to continue to operate in a capital-constrained manner, in terms of limiting growth in more capital-consumptive products and continuing to mitigate in areas, including buying CDS.”

TODAY’S AGENDA:

• An interactive calendar can be found here; a pdf version can be accessed here.


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  EUROPE DATA/SPEAKERS: National inflation data for May across the bloc slowed even further than analysts were expecting, giving rise to hopes we could see similar in the Eurozone HICP data released in the morning; the consensus looks for the headline to decline to 6.3% Y/Y from 7.0%, although the core measure is expected to fall only more modestly, to 5.5% Y/Y from 5.6%. The ECB meeting minutes will be a stale affair (our primer is here). Final Eurozone manufacturing PMI data for May is expected to be unrevised, as is the UK gauge. From the UK, we will also get the Bank of England's Decision Maker Panel for May; this release usually garners a lot of attention since it is typically the last point we will get before a BoE meeting, however, last week's CPI Data has taken the sting out of it, and in wake of that hot data, desks have been revising up their BoE calls, with analysts now forecasting the MPC will lift rates by 25bps on June 22nd, and will keep raising until a terminal rate of 5.0% has been reached. On the speaker's slate, ECB President Lagarde will speak again today, and there will be a text released. ECB's supervisory chief Enria is due to make remarks.


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  US DATA/SPEAKERS: The ADP and Challenger jobs data will provide our usual pre-NFP preview (NFP is out on Friday); and for good measure, we will also get the weekly initial jobless claims data (that data does not coincide with the survey period for the BLS jobs data). Any revisions to Q1 unit labour costs and productivity data will be released in the pre-market. After the open, the ISM Manufacturing survey is expected to see the headline little changed, although traders will be paying attention to the sub-components too. Fed's Harker (2023 Voter) will give another set of remarks today at the NABE.


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  CORPORATE EARNINGS: DG, LULU, AVGO are the earnings highlights for the day; our Daily US Earnings Estimates note can be accessed here.


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  ENERGY: The weekly DoE energy inventory data is expected to show a crude stock drawdown of 1.2mln, distillate stocks are seen building by 1.1mln, while gasoline inventories are seen drawing 0.2mln. the API data reportedly showed Crude stocks building +5.2mln (exp. -1.4mln), Cushing +1.8mln, Gasoline +1.9mln (exp. -0.5mln), Distillate +1.8mln (exp. +0.9mln); Citi said that the data was bearish versus expectations across the board, if confirmed in Thursday's more definitive DOE report. Meanwhile, the EIA's NatGas storage change is expected to show a build of 106BCF vs last week’s build of 96BCF.

EQUITY NEWS:

TECH:

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  Nvidia (NVDA) - Director Persis Drell sold 7.8K shares on May 26th for a total USD 3.01mln; director Tench Coxe sold 100K shares on May 26th for a total USD 37.9mln.


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  Salesforce (CRM) - Shares fell 5.8% afterhours, despite beating on the top and bottom lines and raising guidance, with some citing concerns surrounding costs, while others flagged the slowest quarterly revenue growth since 2010. Q1 adj. EPS 1.69 (exp. 1.61), Q1 revenue USD 8.25bln (exp. 8.18bln). Raises FY24 adj. operating margin guidance. CEO announced generative AI across its entire product portfolio, using Einstein GPT, Slack GPT, and Tableau GPT. Said coming wave of AI will be more revolutionary than any technology in our time, but noted a more measured buying environment in technology. Expects to see the turnaround in the tech buying environment before others. Sees Q2 Adj. EPS USD 1.89-1.90 (exp. 1.70), and Q2 revenue USD 8.51bln-8.53bln (exp. 8.49bln). For the FY, sees adj. EPS USD 7.41-7.43 (exp. 7.14), and sees FY revenue USD 34.5bln-34.7bln (exp. 34.65bln). CEO told CNBC that it was focused on restructuring efforts.


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  Apple (AAPL) - Apple is testing new high-end Mac computers and their accompanying processors ahead of the company's Worldwide Developers Conference next week, Bloomberg said, indicating that it is close to releasing professional-focused desktop computers.


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  Crowdstrike (CRWD) - Q1 adj. EPS 0.57 (exp. 0.51), Q1 revenue USD 692.6mln (exp. 677.4mln). Exec said "our demonstrated leadership in leveraging AI to drive better security outcomes and consolidate security spend strategically positions CrowdStrike to win in our markets." Announced IL5 authorisation from DoD. Sees Q2 adj. EPS between USD 0.54-0.57 (exp. 0.54), and sees Q2 revenue between USD 717.2-727.4mln (exp. 718.9mln). Raises FY24 EPS outlook to 2.32-2.43 (exp. 2.30) from 2.21-2.39, and raises its FY24 revenue outlook to between USD 3.0005-3.0367bln (exp. 3.0bln) from USD 2.955-3.014bln.


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  NetApp (NTAP) - Q4 adj. EPS 1.54 (exp 1.34), Q4 revenue USD 1.58bln (exp. 1.54bln). Exec said "our sharpened focus and disciplined execution yielded solid Q4 results in a dynamic environment." Sees Q1 adj. EPS between USD 1.00-1.10 (exp. 1.19), and sees Q1 revenue between USD 1.325-1.475bln (exp. 1.47bln). Sees FY24 adj. EPS between USD 5.65-5.85 (exp. 5.57), and sees FY24 revenue down low-to-mid single digits.


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  Applied Materials (AMAT) - CEO told CNBC that Silicon Valley was still the innovation capital of the world, and the CHIPS Act had been a catalyst. CEO expects AMAT to double its dividend over the next four years. Said its backlog was pretty strong, and AMAT was "right in the top of the first inning with AI."


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  C3.ai (AI) - Q4 EPS -0.13 (exp. -0.17), Q4 revenue USD 72.4mln (exp. 71.3mln). Exec believes that the market for enterprise AI applications is substantially larger and growing at a much greater growth rate than experts predicted. C3 AI has been at the vanguard of the enterprise AI market for over a decade as that market has developed from its roots in IoT, to unsupervised learning, supervised learning, NLP, deep learning, reinforcement learning, and now generative AI. Said that "the interest in applying AI to business processes is more active than we've ever seen." Sees initial FY24 revenue outlook between USD 295-320mln (exp. 317mln), and a FY24 operating loss between USD 75mln and 50mln.


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  Okta (OKTA) - Q1 EPS 0.22 (exp. 0.13), Q1 revenue USD 518mln (exp. 510.5mln). Q1 RPO subscription backlog +9% Y/Y, Q1 cRPO +20% Y/Y. Sees Q2 EPS between 0.21-0.22 (exp. 0.17), sees Q2 revenue between USD 533-535mln (exp. 527.9mln), sees Q2 Current RPO between USD 1.71-1.72bln (+14-15% Y/Y). Lifts FY24 EPS outlook to 0.88-0.93 (exp. 0.78) from 0.74-0.79), and lifts FY24 revenue outlook to USD 2.17-2.185bln (exp. 2.2bln) from 2.155-2.17bln.


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  nCino (NCNO) - Q1 EPS 0.07 (exp. 0.05), Q1 revenue USD 113.7mln (exp. 112.6mln). Remains confident in its trajectory. Sees Q2 EPS between USD 0.06-0.08 (exp. 0.08), and sees Q2 revenue between USD 114-115.5mln (exp. 117.5mln). Sees FY24 EPS between 0.37-0.40 (exp. 0.37), and sees FY24 revenue between USD 474-478.5mln (exp. 479.8mln).


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  Align Technology (ALGN) - Director Kevin Dallas purchased 7K shares on May 30th for a total USD 2.0mln.


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  Pure Storage (PSTG) - Q1 adj. EPS 0.08 (exp. 0.04), Q1 revenue USD 589.3mln (exp. 559.3mln). Subscription services ARR +29%, CEO said, noting strong momentum from its record Evergreen//One subscription sales.

COMMUNICATIONS:

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  Meta Platforms (META) - Meta said it could remove news content from California over its Journalism Preservation Act, which Meta said would force it to remove news from Facebook and Instagram rather than pay into a slush fund that primarily benefits big, out-of-state media companies under the guise of aiding California publishers.


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  Activision (ATVI), Microsoft (MSFT) - Activision Blizzard saw a rise in employee reports of misconduct in 2022, with 114 cases of harassment, discrimination, or retaliation, Axios reports.

CONSUMER:

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  Amazon (AMZN) - Amazon agreed to pay USD 30.8mln in penalties for two separate violations: It improperly stored children's voice recordings and let employees spy on Ring customers - one employee even watched private videos of female users. The company also failed to protect customer information from hacking attacks, regulators said. The FTC fined Amazon USD 5.8mln for the Ring case, and USD 25mln for keeping children's data in violation of privacy laws. The FTC advised other companies to be careful with data retention in the development of new technologies.


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  PVH (PVH) - Q1 EPS 2.14 (exp. 1.93), Q1 revenue USD 2.158bln (exp. 2.12bln). Reaffirmed guidance. Sees Q2 adj. EPS 2.08 (exp. 2.26), and sees Q2 revenue up low single-digits; reiterated its FY23 adj. EPS outlook for around 8.97 (exp. 10.03), and reiterated its FY23 revenue growth target of 3-4%.


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  Victoria's Secret (VSCO) - Q1 adj. EPS 0.28 (exp. 0.54), Q1 revenue USD 1.41bln (exp. 1.42bln), Q1 total comparable sales -11%. CEO noted the volatile macro environment, and said that as the quarter progressed, business became more challenging. Sales were in-line with expectations, but it was more promotional than planned. Inventory levels in Victoria's Secret and PINK business ended the quarter down low-double digits Y/Y. International business continued growth, with China a particular bright spot. Sees Q2 EPS between 0.10c-0.40 (exp. 0.88), and sees Q2 revenue down mid-single digits. Lowers its FY23 revenue outlook to flat-to-down low-single-digits (prev. up mid-single digits).


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  Nordstrom (JWN) - Q1 EPS 0.07 (exp. -0.08), Q1 revenue USD 3.18bln (exp. 3.12bln), Q1 gross profit margin +110bps Y/Y, which execs said reflected its focus on increasing inventory productivity. CEO said it was "encouraged" by its momentum. Nordstrom Rack sales trends improved late in the quarter, with the strongest performance in April, primarily driven by increased penetration of strategic brands in its merchandise mix. Sees FY23 adj. EPS between 1.80-2.20 (exp. 1.88), and sees FY23 revenue down between 4-6% Y/Y (exp. 14.7bln).


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  Chewy (CHWY) - Q1 adj. EPS 0.20 (exp. -0.04), Q1 revenue USD 2.78bln (exp. 2.73bln). Exec said 2023 was off to a strong start. Net sales per active customer and Autoship customer sales both hit new record highs. Sees Q2 revenue between USD 2.75-2.77bln (exp. 2.70bln), and lifts its FY23 revenue outlook to between USD 11.15-11.35bln from USD 11.1-11.3bln (exp. 11.3bln).


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  Lucid (LCID) - Lucid announced USD 3.0bln stock offering, and a corresponding PIF investment, which agreed to purchase 265,693,703 shares in a private placement for approximately USD 1.8bln.


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  Remy Cointreau (REMYY) - Annual profits topped expectations, though it maintains its outlook. FY22 operating income EUR 429.6mln (exp. 426.5mln), revenue EUR 1.55bln (prev. 1.31bln Y/Y), net EUR 294mln (prev. 213mln). Americas sales +2.5% Y/Y, EMEA sales +11.0% Y/Y, APAC sales +22.7% Y/Y. Will pay a FY dividend of EUR 2.00/shr (prev. EUR 1.85), and an exceptional dividend of EUR 1.00/shr.

INDUSTRIALS:

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  Stanley Black & Decker (SWK) - The industrial tools and household hardware manufacturer is seeking buyer for its International Equipment Solutions Attachment Group, Bloomberg reports, as it sells assets to focus on its core building products business. No final decision has been made.


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  ZipRecruiter (ZIP) - Job posting site ZipRecruiter is cutting 20% of its workforce and reducing its CEO's salary due to a hiring slowdown, Bloomberg reports. Around 270 roles will be eliminated, primarily in sales and customer support, by the end of June.

MATERIALS:

• 
  Dow (DOW) - Cut its Q2 revenue guidance to USD 11.0-11.5bln from 11.8-12.3bln (exp. 12.2bln), and said that overall macro conditions were expected to remain challenging as high inflation continues to pressure input costs and demand, particularly in Europe and the US, while China continues to experience a steady but uneven recovery.


• 
  CF Industries (CF) - VP Douglas Barnard sold 17,000 shares at USD 61.28/shr on May 30th for a total USD 1.04mln.

ENERGY:

• 
  Kinder Morgan (KMI) - Announced a plan to expand the working gas storage capacity at its Markham Storage facility in Matagorda County along the Texas Gulf Coast. Will lease an additional cavern at Markham to provide more than 6BCF of incremental working gas storage capacity and 650MCF per day of incremental withdrawal capacity on its Texas intrastate pipeline system.


• 
  BP (BP), Equinor (EQNR) - The two have postponed the Bay du Nord Canadian deep water oil project for three years due to rising costs, CBC reports.

HEALTH CARE:

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  Pfizer (PFE) - FDA approves Pfizer's ABRYSVO bivalent RSV prefusion F vaccine for the prevention of lower respiratory tract disease caused by RSV in individuals 60 years and older.


• 
  AstraZeneca (AZN) - FDA has approved Lynparza for BRCA+ Metastatic Castration-Resistant Prostate Cancer.


• 
  Roche (RHHBY) - Roche is reportedly looking to divest its Vacaville drug manufacturing plant in California; if no buyer is found it will be dialled-down and closed in 2028-2029, according to Reuters.


• 
  Veeva (VEEV) - Q1 adj. EPS 0.91 (exp. 0.79), Q1 revenue USD 526.3mln (exp. 515.8mln). Sees Q2 adj. EPS between USD 1.12-1.13 (exp. 1.07), and sees Q2 revenue between USD 580-582mln (exp. 580.3mln). FY24 adj. EPS seen at 4.59 (exp. 4.32), and FY24 revenue between USD 2.36-2.37bln (exp. 2.36bln). Reiterates FY25 revenue goal of 'at least' USD 2.8bln (exp. 2.8bln), and its adj. operating income goal of at least USD 1bln.


• 
  Cano Health (CANO) - Cano Health issued a stockholder presentation urging re-election of its directors and explaining its undervaluation relative to peers. It plans to focus on Medicare Advantage, divest non-core assets, improve profitability, streamline operations, and optimize management. The company believes former directors aim to dismantle and sell it.


• 
  Cronos (CRON) - Cronos to exit existing US hemp-derived CBD operations, will streamline operating structure. Has made the decision to improve cash flow in the near term, position itself to directly enter the US THC market when changes in US regulatory environment occurs.

FINANCIALS:

• 
  Prudential (PRU) - CFO James Turner is departing amid a code of conduct investigation into a recent recruitment, which reportedly demonstrated that he had fallen short of the company's standards, Reuters reports.


• 
  Upstart (UPST) - CFO Sanjay Datta sold 26,072 shares on May 26th at USD 23.9866/shr.

01 Jun 2023 - 09:04- Data- Source: Newsquawk