US EARLY MORNING: US equity futures are higher ahead of PMIs and earnings from AI bellwether Nvidia (NVDA)

US PRE-MARKETS: US equity futures are higher and Treasury yields are narrowing ahead of PMI data today, as well as earnings from AI bellwether Nvidia (NVDA), which is due to report results after the close (primer below), all ahead of the Jackson Hole Economic Symposium, which kicks off on Friday. In Europe, the PMI data has been disappointing expectations, with Germany’s services gauge slipping below 50.0 and its composite measure being dragged lower; in France the services PMI also missed expectations; the Eurozone measures saw lower-than-expected Services and Composite data. The soft German data triggered a rally in Bunds, and Treasuries have followed in sympathy, with US yields backing away from the near 16-year highs seen this week along some parts of the curve. The Dollar Index is a touch above neutral as the EUR suffers. Crude futures are lower on a mix of a smaller-than-expected inventory draw reported by the API, while Turkey said that an agreement has been reached to resume the flow of oil from the Iraqi-Turkish pipeline.

PRIMER - NVIDIA (NVDA) EARNINGS (AMC WEDNESDAY): Traders will be eying results from AI bellwether Nvidia (NVDA), which are due after the US close today (earnings expectations can be accessed here). The general theme in news reports ahead of the earnings release has been focusing on the surge NVDA's shares have seen this year, where it is up over 200%. The suggestion is that the bar to surprise is extremely high, and after it posted a hefty surprise last quarter, many are sceptical that this may be repeated. That said, HSBC argues that despite the high expectations surrounding the stock, its full potential into the second half of 2024 and into 2025 has not yet been fully priced. "Although market expectations have clearly risen for Nvidia and the overall AI supply chain, we expect bullish AI server momentum continued to surpass market expectations YTD," adding that it continues to see strong demand that continues to outpace supply, especially with regard to AI GPU shipments. "We believe this will continue to be the case going into FY25e especially as the market has better visibility over US CSP cloud 2024e CAPEX expectations by late 4Q23."

TODAY’S AGENDA:

• Our full online Day Ahead calendar is here; a pdf version can be accessed here.


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  US DAY: Flash PMI data will give a glimpse on how activity is progressing in August, and will help to guide expectations for what the ISM reports, released early September, will show; the consensus looks for the manufacturing gauge to improve a little, but remain sub-50.0, while the services index is seen little changed. The rate of new home sales data in July is seen gaining a little. The BLS will also release prelim nonfarm payrolls benchmarks for 2023. Weekly MBA mortgage applications data and revisions to July building permits are also due. From Canada, June retail sales data will be released. On the supply front, the Treasury will sell USD 16bln of 20yr bonds (history here). On the earnings slate, Nvidia (NVDA) earnings will be eyed after the US close; analysts note the significant rally seen in shares of late, driven by AI themes, and have suggested that the bar is high for the stock to continue gains, though others remind that NVDA surprised significantly in its last earnings report; the release may be influential for how the much-loved AI stock complex – and tech in general – trades in the near-term; our primer with all the key metrics to watch is here.


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  ENERGY: The DoE weekly energy inventory report is due; the comparable API data released Tuesday reportedly showed headline crude stocks -2.4mln (exp. -2.9mln), Cushing -2.2mln, gasoline +1.9mln (exp. -0.9mln), and distillate inventories -0.2mln (exp. +0.2mln).

EQUITY NEWS:

TECH:

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  Qualcomm (QCOM) - FTC is expected to open an in-depth probe on Wednesday of Qualcomm’s purchase of an Israeli chipmaker focused on auto safety, according to Politico.


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  SAP (SAP) - Employee survey at SAP shows confidence in the executive board is dwindling, Handelsblatt reports; complaints include insufficient money.


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  Uber Technologies (UBER) - CFO Nelson Chai sold 100K shares on August 21st for a total USD 4.5mln.

CONSUMER:

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  Toll Brothers (TOL) - Q3 EPS 3.73 (exp. 2.87), Q3 revenue USD 2.69bln (exp. 2.41bln); Q3 deliveries +5% to 2,524 (exp. 2,380); Q3 backlog 7,295 (exp. 7,251), Q3 adj. home sales gross margin 29.3% (exp. 27.1%, prev. 27.9% Y/Y). Exec said demand remains solid, and it is raising FY guidance for deliveries, adjusted gross margins and SG&A leverage. Says the market for new homes continues to benefit from historically low levels of resale inventory, favourable long-term demographic trends, persistent underproduction of homes for well over a decade. Adds that while rising rates remain a challenge, they further cement the lock-in effect that has kept resale inventory at historically low levels. Sees FY deliveries between 9.5-9.6k (prev. 8.9-9.5k).


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  Ford (F) - Ford entered into a revolving credit agreement on August 17th, where lenders provided USD 4bln of commitments to Ford with a maturity date of August 15th 2024.


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  Walmart (WMT) - Walmart accrued a liability for approximately USD 3.3bln for Opioid settlement framework, and administrator determined that the settlement will become effective September 6th, according to a filing.


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  Urban Outfitters (URBN) - Q2 EPS 1.10 (exp. 0.89), Revenue 1.27bln (exp. 1.25bln); Q2 comp sales +4.9% (exp. +4.3%); Q2 gross margin 35.8% (exp. 34.6%), inventory USD 586.5mln (exp. 696.2mln). Exec said Q2 sales strength continued to date in Q3.


• 
  Driven Brands (DRVN) - Driven Brands announces a USD 50mln share repurchase authorisation. The share repurchase will be funded through a combination of cash on hand, cash flow from operations, and the Company's revolving line of credit.


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  La-Z-Boy (LZB) - Q1 EPS 0.62 (exp. 0.55), Q1 revenue USD 481.65mln (exp. 474.6mln). Exec said that ahead, it expects consumer trends to remain soft and sales trends remain challenged Y/Y (which benefited from an elevated pandemic backlog); still sees Q2 sales slightly higher than Q1, and sees Q2 operating margin similar to Q1. Sees Q2 revenue between USD 490-510mln (exp. 507.1mln).

INDUSTRIALS:

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  UPS (UPS) - Teamsters ratify historic UPS contract; five-year contract protects and rewards more than 340k members, raising wages for full-time and part-time workers. All supplemental agreements with UPS were ratified as well, except for the local 769 lai supplement which covers 174 members in Florida.


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  Nikola (NKLA) - Files for resale of up to 10.3mln shares of common stock by selling stockholder.

MATERIALS:

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  BASF (BASFY), Cheniere (LNG) - BASF signed a long-term LNG deal with Cheniere, where the it will purchase 800k tonnes of LNG from mid-2026 to 2043, according to the FT.

HEALTHCARE:

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  Bristol Myers Squibb (BMY) - BMY received European Commission approval for Opdivo as an adjuvant treatment for patients with completely resected Stage IIB or IIC melanoma.


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  Roche (RHHBY) - Roche provided an update on its Phase III Skyscraper-01 study in PD-L1-high metastatic non-small cell lung cancer; said it been made aware of an inadvertent disclosure of the second interim analysis of the Phase III SKYSCRAPER-01 study. The interim results for the primary endpoint of overall survival were not mature at the time of the second interim analysis. SKYSCRAPER-01 is ongoing and the study remains blinded to patients and investigators.


• 
  GSK (GSK) - Shingrix data demonstrates 100% efficacy in China.

FINANCIALS:

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  FTSE 100 - Indicative changes for the quarterly review (formally announced AMC on August 30th) suggest additions of: Dechra Pharma. (DPH LN), Diploma (DPLM LN), Hikma (HIK LN), Marks & Spencer (MKS LN); indicative deletions of Abrdn (ABDN LN), Johnson Matthey (JMAT LN), Persimmon (PSN LN), RS Group (RS1 LN).

23 Aug 2023 - 09:30- Data- Source: Newsquawk