US EARLY MORNING: US equity futures are trading around flat ahead of CPI data due to be released later today

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  OVERNIGHT: On Wall Street, US stocks rose on Monday (see here); President Biden will name Federal Reserve Vice Chair Lael Brainard as a replacement for outgoing NEC Director Brian Deese, with an announcement possible today, Bloomberg reports. Additionally, Council of Economic Advisers member Jared Bernstein is likely to be named its chair, replacing Cecilia Rouse, who is stepping down. Asia-Pac equities were mixed, with only a slight positive bias following the firm handover from Wall Street (see here); Japan GDP data showed the economy returning to growth in Q4, albeit at a slower-than-expected pace, while its government nominated academic Kazuo Ueda as the next BoJ Governor, and Executive Director Uchida and former FSA chief Himino as Deputy Governors, as expected. European shares opened around flat; UK jobs data did little to alter perceptions of the BoE’s trajectory (see here).


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  US PRE-MARKETS: US equity futures are trading a touch beneath neutral ahead of today’s CPI release; Treasury yields are lower across the curve by between 3-4bps, with the long-end outperforming, and the curve modestly flattening; the complex appears to be taking a breather after yields rose to six-week highs recently. The dollar Index is around flat. Crude benchmarks are on the defensive ahead of weekly inventory data, which is expected to show builds for crude stocks and the products.


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  CPI AHEAD: The highlight of the day is the release of January CPI data, which is expected to see the monthly rates continue to rise, although annual rates are seen paring back (headline seen falling to 6.2% Y/Y from 6.5%; core seen falling to 5.5% Y/Y from 5.7%). JPMorgan has been telling its clients that an in-line reading may even support risk sentiment (see below for the link to our CPI preview, which contains JPM's trading scenarios for the release). Today's US CPI data will help inform expectations of Fed rate hikes. The Fed Funds Rate will peak between 5.00-5.25%, according to a Reuters economist poll; economists had expected the terminal rate between 4.75-5.00% when polled in January. On rate cuts, 54 of the 80 surveyed do not see the Fed lowering rates in 2023. The poll is in keeping with money markets' hawkish repricing of the Fed rate hike trajectory in wake of the hot January jobs data and Services ISM surveys. Ahead of CPI data out today, money markets are assigning a 90% chance that the Fed raises rates by 25bps to 4.75-5.00% at its March 22nd meeting, with around 10% chance of a larger 50bps move. Markets see the Fed hiking to the 5.00-5.25% terminal rate in May, where it is expected to remain until the end of this year, with money market pricing imply a 40% chance that rates will be cut in December (back to 4.75-5.00%).

DAY AHEAD:

• Our live day ahead calendar can be accessed here; a PDF version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: Flash GDP data for the Eurozone (which is actually the second reading) is expected to confirm the 1.9% Y/Y and 0.1% Q/Q reported in the advanced metrics; the Q4 employment data, released at the same time, will likely be ignored. On the central bank speakers front, Riksbank's Thedeen will deliver remarks on the current economic situation and monetary policy. The main data point of the day, however, will be the US CPI report, which we talk more about below.


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  NORTH AMERICAN DATA/SPEAKERS: The main event of the day will be the US CPI report for January, where the annual rates of headline inflation are expected to pare back, although the monthly metrics are likely to still allude to rising price pressures. The market reaction may be nuanced, however, given the significant hawkish repricing of the Fed rate rise trajectory priced by financial markets in wake of hot jobs data and hot ISM services data. JPMorgan thinks that a print between 6.0-6.3% (consensus looks for 6.2%), would likely be a positive for risk assets. We have more to say about the CPI data in our preview, which contains trading scenarios from the folks at JPM, and can be accessed here. Elsewhere, there is a heavy amount of Fedspeak that will follow in wake of the CPI release; Fed's Barkin (non-voter), Logan (voter), Harker (voter) and the influential NY Fed President Williams (voter) are all on today’s docket.


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  SUPPLY: On the supply front, Italy will auction between EUR 7.0-8.5bln of 2026, 2029, 2038 BTPs; the UK will sell UK GBP 3bln of 2033 Gilts. Elsewhere, books have opened for the EU's 2029 and 2042 issuance, which will be priced today. Our G7 bonds preview note can be accessed here.
  


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  ENERGY: The API will report its gauge of energy inventories for the week after the market close today; this week, analysts are expecting headline crude stocks to build by 300k, distillates to build by 400k, while gasoline stocks are seen building by 2mln.


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  EARNINGS: Today's corporate earnings include Coca-Cola (KO), Suncor (SU), Devon Energy (DVN), Zoetis (ZTS), GlobalFoundaries (GFS), Restaurant Brands (QSR), AirBnB (ABNB); our note containing expectations for these releases can be accessed here.

STOCK SPECIFIC NEWS:

CONSUMER CYCLICAL:

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  Amazon.com, Inc. (AMZN) - Amazon CEO vows to double down on the company’s struggling grocery store business despite recently announcing that its growth plans were on hold, according to an FT interview. CEO said AMZN was ready to 'go big' on bricks-and-mortar stores, blaming a lack of 'normalcy' during the pandemic for a series of stumbles.


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  Amazon.com, Inc. (AMZN) - US National Labor Relations Board concludes that Amazon illegally used subpoenas to coerce staff and try to interfere with labor activism at a New York warehouse, Bloomberg reports.


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  Starbucks Corp. (SBUX) - Starbucks illegally threatened, interrogated, and terminated pro-union employees in Philadelphia, the US labor board ruled, Bloomberg reports. National Labor Relations Board ordered Starbucks to “cease and desist” from prohibiting staff from raising workplace complaints, placing them under surveillance when engaged in collective action, and discriminating against baristas for supporting labor groups. The decision also ordered the company to offer reinstatement with backpay to two terminated activists.


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  Flutter Entertainment Plc (PDYPY) - Flutter has reached a prelim view on a US listing of its shares to yield strategic and capital market benefits; expects to start consultations on listing immediately.


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  Tesla Inc. (TSLA) - The automaker has cut the price of the standard 'Model 3' in the US by USD 500; performance model is unaffected.


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  Ford Motor Co. (F) - The automaker will cut approx. 3,800 jobs in Europe, Bloomberg reports, the latest sign of industrial disruption caused by the sector’s shift to EVs.


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  Compagnie Generale des Etablissements Michelin (MGDDY) - Michelin sees lower 2023 profits but a more stable market, and sees no reason for price cuts at this time.

TECH:

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  Apple Inc. (AAPL) - Apple is hitting stumbling blocks in its effort to increase production in India, as the US tech giant faces pressure to cut its manufacturing reliance on China, FT reports. Apple has been sending product designers and engineers from California and China to factories in southern India to train locals and help establish production.


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  Toshiba Corp. (TOSYY) - Toshiba warned on profit outlook following a slump, while its COO quits over expenses issues. Q3 net profits JPY -16.65bln (exp. +25.31bln), Q3 operating income JPY 5.33bln (exp. 36.6bln); cuts FY operating income view to JPY 95bln (prev. 125bln), but maintains FY dividend at JPY 290bln (prev. 290bln).


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  Amkor Technology, Inc. (AMKR) - Q4 EPS 0.67 (exp. 0.70), Q4 revenue USD 1.91bln (exp. 1.85bln). Exec said all end markets set new record revenue levels for the year, resulting in significant outperformance compared to the semiconductor market. Sees Q1 EPS between 0.06-0.22 (exp. 0.53), and sees Q1 revenue between USD 1.4-1.5bln (exp. 1.6bln).


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  Arista Networks, Inc. (ANET) - Q4 adj. EPS 1.41 (exp. 1.21), Q4 revenue USD 1.28bln (exp. 1.2bln). Sees Q1 revenue between USD 1.275-1.325bln (exp. 1.2bln), and sees FY23 revenue between USD 5.47bln (exp. 5.4bln); reiterates its target for +25% annual growth.


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  Cadence Design Systems, Inc. (CDNS) - Q4 EPS 0.96 (exp. 0.92), Q4 revenue USD 900mln (exp. 884.8mln). Q1 EPS seen between USD 1.23-1.27 (exp. 1.10), and Q1 revenue seen between USD 1.0-1.02bln (exp. 930.9mln). FY23 EPS seen between USD 4.90-5.00 (exp. 4.70), and FY23 revenue seen between USD 4.00-4.06bln (exp. 3.88bln).


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  Lattice Semiconductor Corporation (LSCC) - Q4 EPS 0.49 (exp. 0.48), Q4 revenue USD 176.0mln (exp. 175.2mln). Exec said that while it is not immune to any macro-economic challenges impacting the industry, the company is well positioned in secular growth markets, with an expanding product portfolio, accelerating customer momentum and strong financial execution. Q1 revenue seen between USD 175-185mln (exp. 175mln), and Q1 gross margin seen between 69-71%.


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  nCino, Inc. (NCNO) - Announced that the DoJ has closed its investigation of the company's hiring and wage practices, and did not impose any fines or penalties.


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  Palantir Technologies Inc. (PLTR) - Q4 adj. EPS 0.04 (exp. 0.03), and Q4 revenue USD 508.6mln (exp. 502.3mln). CEO said that with these results, Palantir is profitable, "a significant moment". Q1 revenue seen between USD 503-507mln (exp. 520mln), Q1 adj. income seen between USD 91-95mln (exp. 100mln). For FY23, sees revenue between USD 2.18-2.23bln (exp. 2.3bln), and sees FY23 adj. income from operations between USD 481-531mln (exp. 458mln).


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  SolarEdge Technologies, Inc. (SEDG) - Q4 adj. EPS 2.86 (exp. 1.56), Q4 revenue USD 890.7mln (exp. 879.2mln). Sees Q1 revenue between USD 915-945mln (exp. 919mln), and sees adj. gross margins in a range of 28-31% (exp. 29.5%), adj. operating profit between USD 150-170mln (exp. 110mln). Q1 revenues from the solar segment seen between 875-905mln, GM from the solar segment seen between 31-34%.

COMMUNICATIONS:

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  Comcast (CMCSA), Warner Bros. Discovery (WBD), Disney (DIS), Apple (AAPL), Amazon (AMZN) - Comcast's NBC Sports is prepared to make an aggressive offer to win back NBA rights after more than 20 years without them, CNBC reports. The report said the NBA cannot begin formal negotiations with companies other than Warner Bros. Discovery and Disney before April 2024 unless they waive their exclusive negotiation rights. Disney is expected to bid on the NBA to keep games on ESPN and ABC, CNBC said, while Apple and Amazon have already expressed interest in buying rights to the NBA.


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  Liberty Global plc (LBTYA), Vodafone Group PLC (VOD) - Liberty acquires a 4.92% interest in Vodafone for GBP 225mln, but said it was not considering an offer for Vodafone.


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  IAC (IAC) - Q4 EPS -0.02 (exp. -0.28), Q4 revenue USD 1.25bln (exp. 1.26bln); Dotdash Meredith Digital revenue USD 260mln, Print revenue was USD 224mln; Angi revenue +6% Y/Y at USD 442mln, Emerging & Other revenue -16% Y/Y at USD 177mln. Sees FY23 adj. EBITDA between USD 270-400mln, and sees FY23 operating loss between -215mln to -30mln.


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  Angi Inc. (ANGI) - Q4 EPS -0.11 (exp. -0.04), Q4 revenue USD 441.5mln (exp. 445mln). Q1 revenue seen at USD 385mln (exp. 464mln); will now recognise services revenue on a net basis instead of a gross basis. FY23 EBITDA seen around USD 80mln (exp. 160mln).

INDUSTRIALS:

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  Boeing (BA) - Aero India exec said Boeing had cut its outlook for the Indian commercial aviation market to around 2,210 planes over the next decade (previously, it forecast 2,240). 1,983 of its deliveries will be single-aisle jets, and the remaining 227 to be widebodies.


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  Avis Budget Group, Inc. (CAR) - Q4 adj. EPS USD 10.46 (exp. 6.79), Q4 revenue USD 2.77bln (exp. 2.7bln). Adds USD 1bln to share repurchase authorisation. Exec said Q4 demand was strong, with commercial business performing well above 2019 levels, leisure segment continuing its strong performance, especially over the holiday period; added that these trends continued into Q1.

MATERIALS:

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  Cleveland-Cliffs Inc. (CLF) - Q4 EPS (ex-items) -0.30 (exp. -0.35), Q4 revenue USD 5.0bln (exp. 5.2bln). Exec believes quarterly adj. EBITDA should progressively improve throughout 2023, confirming its view that Q4 was the inflection point for profitability. CEO added that "with recessionary fears easing among our clients, the demand environment has improved and service centers have begun to restock." Sees a USD 100/ton boost in selling prices for its direct automotive business in 2023 Y/Y. Expects USD 2bln reduction in steelmaking COGS in 2023 Y/Y due to a significant reduction in costs are now normalised repair and maintenance expenses, higher production volume and lower input costs.


• - Activist Investor Engine Capital is said to be calling for a split-up of Brenntag to prioritise its specialties unit; has taken a 1% stake.


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  Thyssenkrupp (TKAMY) - Operating profit down on lower steel prices, clients cut orders.  Q1 revenue EUR 9.02bln (exp. 9.11bln), Q1 adj. EBIT EUR 254mln (exp. 176.4mln), Q1 net profits EUR 98mln (prev. 122mln), Q1 adj. EBIT margin 2.8% (prev. 4.2% Y/Y). Exec said the primary reason for the decline was falling margins as a result of lower material prices.


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  Norsk Hydro (NHYDY) - Q4 revenues and profits miss expectations amid an unpredictable outlook.

FINANCIALS:

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  American International Group, Inc. (AIG) - American International Group entered into a binding MOU with Stone Point Capital LLC to form an independent Managing General Agency to serve High Net Worth and Ultra High Net Worth markets.


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  Arch Capital Group Ltd. (ACGL) - Q4 operating EPS USD 2.14 (exp. 1.34), Q4 insurance gross premiums +10.6% Y/Y, net premiums +17.4% Y/Y; both reflected increases in most lines of business, due in part to rate increases, new business opportunities and growth in existing accounts.


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  Allianz (ALIZY) - The insurer is reportedly shifting towards bonds rather than alternative investments, a major portfolio shift.


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  Credit Suisse (CS) - Former employees reportedly transferred personal data onto a personal device, in breach of Credit Suisse policies, before leaving the bank, Bloomberg reports.

HEALTH CARE:

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  Bristol Myers Squibb (BMY), Exelixis (EXEL) - Announced three-year follow-up results from the Phase 3 CheckMate -9ER trial, demonstrating sustained survival and response rate benefits with the combination of Opdivo and Cabometyx versus sunitinib in the first-line treatment of advanced renal cell carcinoma.


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  MDxHealth SA (MDXH), UnitedHealthcare (UNH) - MDxHealth announced that UnitedHealthcare will cover the mdxhealth Genomic Prostate Score test under ITS commercial policies to assist with treatment decisions for individuals newly diagnosed with localized prostate cancer and meeting coverage criteria.

14 Feb 2023 - 09:31- Research Sheet- Source: Newsquawk