US EARLY MORNING: US equity futures are tilting lower; next week's Jackson Hole and PCE data coming into focus

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  SNAPSHOT: After finishing higher on Thursday following a strong Philly Fed report and a surprise fall in weekly claims data, US equity futures have tilted lower in premarket trade. Equity trading in the overnight APAC session lacked direction, while European indices are lower in morning trade. There has been no specific headline catalyst for the downside, but desks continue to cite the hawkish impulse of monetary policy on both sides of the Atlantic; ECB’s Schnabel yesterday in Europe, while in the US, Fed officials lean back against any imminent policy pivot in wake of the dovish meeting minutes released on Wednesday. Next week’s Jackson Hole Economic Symposium and PCE data -- both on Friday, are being eyed.


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  BEAR RALLY: Many on the sell-side continue to frame the US equity action as a ‘bear market rally’; Citi, for instance is expecting a recession in 2023, where assets like equities may struggle to trade well, and as such is treating recent rallies as a bear market rally. “We investigate previous bear market rallies in equities and credit and find that the current episode in equities is already in line with the median in terms of length and size,” the bank wrote, “sentiment indicators also have improved to the extent that they typically do by the end of the median bear market rally,” and tells clients that it is remaining slightly underweight equities, driven by cyclical geographies and sectors. Bank of America’s analysts said that bear market rallies were always “narrow,” noting that that the 17% advance in S&P 500, where just four stocks -- Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN) and Tesla (TSLA) -- have contributed 30% of the gains.


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  BULLS: But these bearish views have not convinced JPMorgan’s bullish strategist Kolanovic, who Thursday told clients that at ~4,300, the S&P 500 is ~10% away from its year end price target of 4,800, less than 1 standard deviation based on the current market volatility and the appropriate time horizon, while the most common ‘bearish’ price target of 3,500 is about 2 standard deviations away. “While the perception is that bears were vindicated this year, one should keep in mind that price targets are for year end, and not intra-year lows (also they shouldn’t be changed many times intra-year as it defeats the purpose of forecasting).” Kolanovic also points out a “misconception” about ‘buying dips’ vs ‘selling the rips’: “If one had purchased 1 share of the S&P 500 every day of this year, this overlay strategy would be up 1.6% year to date. Buying 2% dips (from e.g. trailing 1 week highs) would produce a 3% return, buying 3% dips would produce a 5% return and so on.” The strategist says “buying on weakness so far yielded positive returns and has worked better, than suggestions to stay out of the market and start ‘nibbling’ at 3,500 or 3,300, levels that have not been reached.” That said, he concedes that his strategy is not to buy the S&P 500 as a whole, and is open to a possibility that the final S&P 500 price slightly underperforms its target. “We continue to advocate staying away from expensive defensive segments and recommend buying sectors with attractive valuations such as Energy, which remains by far the best performing sector this year (with significant further upside remaining) and pointed to distressed high beta and small cap segments near their lows (e.g. biotech that is now up ~50% from the May lows),” he wrote.

WEEKLY FLOWS:

• BofA weekly flow report said global stock funds had inflows of USD 7.9bln in the week, USD 0.5bln inflows to bonds, Gold had outflows of USD 0.7bln, cash had outflows of USD 5.0bln. 


• US saw inflows for a second week at USD 9.2bln, Europe saw outflows for a 27th straight week at USD 2.2bln. 


• Equity inflows driven driven by optimism around a Fed policy pivot; “Very few fear Fed (think ‘pivot’ & return of meme stocks), but whether Fed knows or not, they’re nowhere near done,” BofA said. 


• The bank said that Treasury outflows were the largest since September 2019, while it saw the biggest inflows into EM debt in 5 months. 


• In terms of styles, US large cap style saw USD 5.2bln of inflows, while the growth style sawUSD 1.6bln, small caps USD 1.1bln, and value 800mln. 


• By sector, the week saw the largest inflows into technology in 5 months; Tech, financials and consumer lead inflows, while energy and materials had the largest outflows. 


• BofA said that bear market rallies were always “narrow” and noted that the 17% advance in S&P 500, where just four stocks ­– Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN) and Tesla (TSLA) – contributed a 30% of gain.

COMMUNICATIONS:

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  Twitter, Inc. (TWTR) - Elon Musk is seeking documents from advertising technology firms as part of his quest to gain more information on bot and spam accounts on Twitter, according to filings cited by Reuters.


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  AMC Entertainment Holdings, Inc. (AMC), Cineworld Group plc (CNNWF) - AMC Chair/CEO notes Cineworld anticipates low levels of admissions until November 2022, which are expected to negatively impact its liquidity position in the near-term; notes AMC previously disclosed its view that the film slate in Q3 is expected to be relatively weak, but it continues to be quite optimistic about increasing demand in Q4 and FY23. Said AMC ended Q2 with more than USD 1bln of liquidity, and its new AMC Preferred Equity security, which begins trading on NYSE on Monday, should also make it a much stronger company.


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  Nintendo Co., Ltd. (NTDOY) - Nintendo is reportedly planning to boost Switch supply by shrinking its packaging, according to Video Games Chronicle, which said that reducing the size of the product’s box will enable the company to ship more units.


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  Roblox Corporation (RBLX), Meta Platforms, Inc. (META) - Roblox poaches Meta executive Steve Park for the newly created role of Asia-Pacific head of public policy, as the videogame company chases growth in the region, WSJ reported. Park had been at Meta for more than eight years and had also worked on the Meta’s Oculus VR business.


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  Roku, Inc. (ROKU) - Announced the arrival of new Aiwa, Daewoo, and Sansui TV brands in Mexico.


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  Madison Square Garden Entertainment Corp. (MSGE) - Board authorised management to explore a potential spin-off that would create a separately-traded public company comprised of its traditional live entertainment business and the MSG Networks business. The proposed spin-off would separate these businesses from the Company’s MSG Sphere and Tao Group Hospitality businesses.

TECH

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  Apple Inc. (AAPL) - The iPhone maker disclosed serious security vulnerabilities for iPhones, iPads and Macs, Sky News reported, which could potentially allow attackers to take complete control of devices. Apple added it was aware of a report that this issue may have been actively exploited.


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  Applied Materials, Inc. (AMAT) - Q3 EPS 1.94 (exp. 1.79), Q3 revenue USD 6.52bln (exp. 6.3bln). Sees Q4 EPS between 1.82-2.18 (exp. 1.94), and sees Q4 revenue at USD 6.65bln +/- USD 400mln (exp. 6.6bln). Exec said ongoing supply chain challenges constrained its ability to meet demand, top priority remains increasing shipments to its customers; is confident in its ability to navigate macroeconomic headwinds, remains very positive about the long-term strength of the semiconductor market.


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  Robinhood Markets, Inc. (HOOD) - July Net Cumulative Funded Accounts 0% M/M and +2% Y/Y at 22.9mln; Monthly Active Users -6% M/M and -33% Y/Y at 1.2mln in July. Equity Trading Volumes -3% M/M and 33% Y/Y, Crypto Trading Volumes -1% M/M and -59% Y/Y.


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  OSI Systems, Inc. (OSIS) - Q4 EPS 1.96 (exp. 1.95), Q4 revenue USD 332.2mln (exp. 336.4mln). Sees FY23 EPS between 6.02-6.25 (exp. 6.30), sees FY23 revenue between 1.24-1.275bln (exp. 1.26bln).


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  Atlas Corp. (ATCO) - Board has already formed a special committee of independent directors to evaluate the unsolicited non-binding proposal from Poseidon Acquisition.


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  Bill.com Holdings, Inc. (BILL) - Q4 adj. EPS -0.03 (exp. -0.13), Q4 core revenue USD 194.8mln (exp. 183mln). Sees Q1 adj. EPS between 0.05-0.07 (exp. -0.09), sees Q1 revenue between USD 208-211mln (exp. 187mln). FY23 adj EPS seen between 0.23-0.38 (exp. -0.34), and sees FY23 revenue between USD 955.5-973.5mln (exp. 880mln). Irana Wasti joins as Chief Product Officer, Sofya Pogreb joins as Chief Operating Officer.


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  Globant S.A. (GLOB) - Q2 adj. EPS 1.22 (exp. 1.19), Q2 revenue USD 429.3mln (exp. 426.5mln), Sees Q3 adj diluted EPS at least 1.24 (exp. 1.24), and sees Q3 revenue at least USD 456mln (exp. 455.9mln). FY22 adj, EPS seen at least 5.03 (exp. 4.99), and FY22 revenue seen at least USD 1.775bln (exp. 1.77bln).

CONSUMER CYCLICAL:

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  Bed Bath & Beyond Inc. (BBBY) - Tumbled 45% afterhours on news that RC Ventures exit its stake; on August 16th, RC held an 11.8% in the company. RC sold nearly all of its 7.8mln shares on Tuesday and Wednesday, at prices between USD 18.68-29.22. Separately, Bloomberg reported that BBBY has hired Kirkland & Ellis to deal with debt load.


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  Home Depot, Inc. (HD) - Board authorised a new USD 15bln share repurchase programme, replacing the previous authorisation. CEO and President Edward Decker elected as chair of the board, effective October, will succeed Craig Menear, who will retire in September.


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  Starbucks Corporation (SBUX) - A US judge ordered Starbucks to reinstate seven employees at a Tennessee cafe who were allegedly fired for supporting a union organising campaign, Reuters reported, as the company seeks to halt pending nationwide union elections. Separately, COO John Culver is departing after two decades, CNBC reported, with his exit coming amid a broader executive reshuffle at Starbucks. SBUX to eliminate the role of COO, and will instead move many of its responsibilities to its head of strategy and transformation, CNBC added.


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  Ross Stores, Inc. (ROST) - Q2 EPS USD 1.11 (vs 1.39 Y/Y), Q2 revenue USD 4.6bln (exp. 4.6bln), Q2 comparable store sales -7%. Exec said it was disappointed with its sales results, which were impacted by the mounting inflationary pressures customers faced, and an increasingly promotional retail environment. Exec said it was facing a very difficult and uncertain macro-economic environment, expects to customers discretionary spending remain strained. Cuts its FY22 EPS outlook to USD 3.84-4.12 (prev. guidance range 4.34-4.58).


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  Vista Outdoor Inc. (VSTO) - Awarded a USD 114.8mln US Army contract for the 5.56mm Semi-Jacketed Frangible Cartridge, and MK311 MOD 3 ammunition.


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  Just Eat (JTKWY) - Sold its Ifood Stax for cash consideration of up to EUR 1.8bln.

CONSUMER STAPLES:

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  Keurig Dr Pepper Inc. (KDP) - Keurig in Talks to buy bang energy owner VPX, according to Bloomberg; talks are in an early stage, and a transaction price has not yet been finalised; one source said it could fetch USD 2bln, though others believe it could be north of USD 3bln.

INDUSTRIALS:

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  Tesla, Inc. (TSLA) - NHTSA demands Tesla answer questions about its in-car camera intended to monitor driver awareness, Reuters reported, as part of a probe into 830k Tesla vehicles that employ the carmaker’s advanced driver assistance system; regulators are  assessing the performance of the Autopilot system after earlier identifying a dozen crashes in which Tesla vehicles struck stopped emergency vehicles, the report added.


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  General Motors Company (GM) - GM and LG Energy mull New Carlisle, Indiana, as the location for their fourth Ultium Cells joint venture battery cell manufacturing plant, Detroit News reported.


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  US Airlines - Unions demand that US airlines invest in workers and fix operational issues before resuming share buybacks, Reuters reported, as the ban on share repurchases - which was implemented after the Federal COVID Relief package - expires on September 30th, Reuters reported. Unions argue that now was not the time to start sending cash to Wall Street when the airlines can’t yet meet public demand or manage effectively through operational challenges.


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  Generac Holdings Inc. (GNRC) - Exec told CNBC that the Inflation Reduction Act will benefit the company, noting that its ‘smart energy home system’ puts control of energy in the consumer’s hands, and its legacy is backup power generation; said grid operators might not be able to handle demand, making Generac’s products attractive.

ENERGY:

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  Maersk Drilling (DRLCO) - H1 2022 revenue USD 532mln (prev. 614mln Y/Y), EBITDA USD 95mln (prev. 163mln). Maintains FY guidance. Said demand for global floaters was expected to increase in 2022 and beyond.


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  Shell (SHEL) - Said that due to the low Rhine water level, Shell Energy & Chemicals park Rhineland has reduced capacity. Said that the supply situation was challenging, but is being carefully managed.

MATERIALS:

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  Wheaton Precious Metals Corp. (WPM), Glencore Plc (GLNCY) - Wheaton enters into an agreement with subsidiaries of Glencore to terminate its silver stream on the Yauliyacu Mine in Peru for a cash payment of USD 150mln, less the aggregate value of any deliveries to Wheaton of silver produced in 2022 prior to closing. Wheaton agreed to terminate the stream to help facilitate the sale by Glencore of the Yauliyacu Mine.

FINANCIALS:

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  Cboe Global Markets, Inc. (CBOE) - Cboe Global Markets boosts quarterly dividend +4% to 0.50/shr (prev. 0.48).


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  Allstate Corporation (ALL) - Jess Merten named CFO, succeeding Mario Rizzo.


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  UK BNPL - UK regulators warn buy-now-pay-later companies about misleading adverts; says it will use regulatory and criminal enforcement if it sees promotions that do not comply with rules.

HEALTH CARE:

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  Valneva (VALN) - Initiated rolling submission of the Biologics License Application (BLA) to the US FDA seeking approval of its single-shot chikungunya vaccine candidate in persons aged 18 years and above.

19 Aug 2022 - 09:28- EquitiesResearch Sheet- Source: Newsquawk