US EARLY MORNING: US equity futures are trading with slight gains ahead of Big Bank earnings

US PRE-MARKETS: US equity futures are trading with slight gains, yields are lower across the curve, the dollar index is a touch lower, while crude futures while crude futures are higher. US CPI data released Thursday showed headline and super core consumer prices printing above expectations, which some fear could see the Fed keeping policy 'higher-for-longer', but other analysts noted that the trend is still lower; Pantheon Macroeconomics said that this months inflation data imply a 0.3% increase in September’s core PCE deflator (data released on October 27nd, before the FOMC meeting starting on the 31st), and says it is forecasting core PCE rose at a mere 2.5% annualised rate in the three months to September, compared to the previous three months, which would be the slowest rate since January 2021, and closing in on the Fed's inflation target. "The annual rate will remain elevated, dipping to 3.7% from 3.9% in August, but the Fed will not wait until 2% Y/Y is reached before starting to ease," Pantheon says. There will be further inflation updates later today, when the University of Michigan releases its prelim consumer confidence survey, which contain inflation expectations; as a point of reference, the NY Fed survey this week saw year-ahead consumer inflation expectations rise to 3.7% Y/Y (prev. 3.6%), with the 3yr ahead expectation rose to 3.0% Y/Y (prev. 2.8%), though the longer-term 5yr gauge slipped to 2.8% (prev. 3.0%). Elsewhere, US banks will begin reporting earnings from today, with BLK, PNC, JPM, WFC, C all set to report before the market open (primer below); the theme will be higher rates, for longer, with large banks poised to write off more bad loans than they have since the early days of the pandemic.

WEEKLY FLOWS: In its weekly flows report, Bank of America said USD 16.9bln went into cash, USD 3.7bln into bonds, USD 1bln from gold, and USD 8.2bln out of equities. US saw outflows resume at USD 3bln, Japan saw USD 1bln inflows (fifth straight week), USD 0.7bln of out Europe (31st straight week), and USD 4.3bln out of EM. By style, USD 1.1bln went into US large caps, USD 0.3bln out of US growth, USD 2.1bln out of US small caps, USD 2.1bln out of value. And by sector, USD 0.3bln into communication services, USD 0.3bln into energy, USD 0.2bln into real estate, USD 77ln out of utilities, USD 126mln out of tech, USD 137mln out of materials, USD 0.5bln out of health care, USD 1bln out of financials, USD 1.2bln out of consumer. In fixed income, Treasuries saw USD 7.2bln of inflows (35th straight week). The bank's Bull & Bear Indicator fell to 2.2 from 2.6.

TODAY’S AGENDA:

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  DAY AHEAD: The European morning sees the release of Eurozone industrial production stats for August. US import and export prices will be published before the cash open. Prelim University of Michigan sentiment data for October will gain attention, particularly the inflation expectations gauges. On today's corporate earnings schedule, Big Banks will get attention, with BLK, PNC, JPM, WFC, C all set to report before the market open, while numbers from UNH and PGR are also due today; our Daily US Earnings Estimates note can be accessed here. On the speakers list, Fed’s Harker (voter) will speak on the economic outlook, and ECB President Lagarde will deliver some remarks on the global economy from an IMF seminar. Some calendars also list remarks due from BoE's Governor Bailey, as well as the BoE's Cunliffe. In the US afternoon, Baker Hughes will release its weekly rig count stats. Our full interactive calendar can be accessed here; a pdf version can be downloaded here.


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  BIG BANK EARNINGS: The theme this season will be higher rates for longer. Large US banks are poised to write off more bad loans than they have since the early days of the pandemic as higher-for-longer interest rates and a potential economic downturn are putting borrowers in a bind, Bloomberg reports. Wells Fargo notes that the higher rates will affect banks' funding, lending, ability of borrowers to repay loans, losses in securities and capital requirements. Reuters says that options traders are braced for larger-than-usual post-earnings stock price swings for some US banks, despite signs of cooling volatility in broader markets. Analysts say the biggest US consumer banks are set to post higher Q3 profits, in contrast with investment banks which are still facing a slump in dealmaking. Previewing Big Bank earnings, Bank of America's analysts said its conversations with investors suggest a long bias on JPMorgan (JPM) among both institutional and long/short investors; "investors eyeing potential for further NII revisions while expense outlook seems well anchored." BofA says the investors also anecdotally favoured Goldman Sachs (GS) over Morgan Stanley (MS) given 1.1x P/TBV, well-telegraphed expectations for weak EPS, as well as potential for improving its EPS/ROTCE outlooks. On Wells Fargo (WFC) BofA says that after being well-liked recently, it notes some scepticism on Wells given the outlook for declining NII, expense/capital leverage less differentiated. Meanwhile, BofA says that Citigroup (C) is garnering interest (though it was unclear whether the positioning is matching) on potential for cost-cuts to rejuvenate its ROTCE. Our full US Daily Earnings Estimates note can be accessed here.

US EQUITY NEWS:

CONSUMER:

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  Ford Motors (F) - Ford says it can't offer more to the UAW auto workers' union, its is already pushing its limits, and extra costs could hurt its ability to invest in the future, CNBC reports. This follows UAW unexpectedly launching a strike at the automaker's highly profitable SUV and pickup truck plant in Kentucky.


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  Albertsons (ACI), Kroger (KR) - California's Attorney General has concerns about Kroger buying Albertsons for USD 24.5bln, and might sue to stop it. AG concerned about higher prices, less money for farmers, and problems for workers and communities. Kroger says if the merger was blocked, only non-unionised retailers like Walmart (WMT) and Amazon (AMZN) will benefit.


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  Dollar General (DG) - Surged 8% afterhours after it announced that Todd Vasos would return as CEO immediately. Adjusted its guidance: now sees FY23 net sales growth between 1.5-2.5% (exp. 2.4%, prev. saw 1.3-3.3%) and sees FY23 SSS growth between flat to a decline of 1.0% (exp. +3.0%, prev. saw -1% to +1.0%), and sees FY EPS between USD 7.10-7.60 (exp. 7.73, prev. saw 7.10-8.30).


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  Costco (COST) - CFO James Klauer sold 2,000 shares on October 10th for a total USD 1.1mln.


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  Reynolds Consumer Products (REYN) - Scott E. Huckins will become the CFO of Reynolds in November, replacing Michael Graham. Graham will advise until retiring in February 2024. Huckins will start in an advisory role on October 23rd for a smooth transition.


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  British American Tobacco (BTI) - FDA to ban the sales of Vuse menthol e-cigarettes, according to the WSJ. Company said it will immediately challenge FDA-issued Marketing Denial Orders seeking a stay of enforcement. Vuse alto rich tobacco and golden tobacco remain under FDA PMTA review.

COMMUNICATIONS:

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  Activision Blizzard (ATVI), Microsoft (MSFT) - UK CMA clears deal for Microsoft to acquire Activision without conditions; said Ubisoft (UBSFY) acquiring rights instead of Microsoft addresses its concerns. CMA concluded that it would preserve competitive prices and better services.

TECH:

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  Qualcomm (QCOM) - Qualcomm is cutting 1,258 jobs in California, affecting about 2.5% of its workforce, CNBC reports. The job cuts will hit employees, but there will be no facility closures. Qualcomm had foreseen workplace reductions in its recent quarterly earnings report, CNBC notes.


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  TSMC (TSM) - Taiwan Economy Minister said TSMC received from the US an extension for China chip waiver.


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  Belden (BDC) - Belden's stock fell over 16% in afterhours trading sfter it preannounced lower than expected Q3 revenue projections (USD 625mln vs previous guide of between 675-690mln). CEO cited weak economic conditions and soft demand for Q4.

INDUSTRIALS:

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  Boeing (BA), Spirit (SPR) - Boeing and Spirit AeroSystems are reportedly broadening their inspections of the 737 Max 8's aft pressure bulkhead structure, which could disrupt production, according to The Air Current. The issue initially involved misdrilled fasteners but now includes X-ray inspections, potentially slowing production recovery.


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  Delta Air Lines (DAL) - The airline expects jet fuel prices to remain volatile throughout the rest of 2023 and into 2024. It continues to expect fuel consumption for the FY23 will be higher vs 2022. Expects to continue generating positive cash flows from operations during the remainder of 2023, and anticipates capacity for the FY to be higher than 2022, partially offset by increases in the fuel efficiency of its fleet.


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  Lockheed Martin (LMT) - Awarded a USD 379.6mln Navy contract order against a previously issued basic ordering agreement for the production and delivery of eight MH-60R aircraft for the government of Spain.

HEALTHCARE:

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  Fresenius Medical Care (FMS), Novo Nordisk (NVO) - Fresenius said it assesses the overall effect of GLP-1 analogue use on its own patient flow model as neutral. Said Novo Nordisk's Ozempic and glp-1 drugs may slow the progression of chronic kidney disease, but overall mortality of treated individuals would also be reduced.


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  Cassava Sciences (SAVA) - Sank by over 30% afterhours following news that CUNY neuroscientist Hoau-Yan Wang, who collaborated with Cassava Sciences, is accused of scientific misconduct in 20 research papers; some of these papers supported Cassava's Alzheimer's drug, simufilam.


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  Cigna (CI) - Cigna is launching its Medicare Advantage plan in Nevada, starting in two Las Vegas counties. This plan will be available during Medicare's Annual Enrolment Period from October 15th to December 7th, becoming effective on January 1st.


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  Rite Aid (RAD) - The company is delaying its 10-Q filing because it's exploring ways to improve its financial structure. This process, along with an impairment analysis, is taking up a lot of resources, making it too difficult and costly to meet the filing deadline.

ENERGY:

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  Chevron (CVX) - Australia union official says further progress has been made in LNG labour talks, but there is no deal yet; further talks planned for Monday.


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  EQT Corporation (EQT) - Raises quarterly dividend +5% to 0.1575/shr, 0.63/shr annualised.

FINANCIALS:

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  China Stocks - China is said to weigh a new stabilisation fund to prop up the stock market in which the plans calls for the fund to have access to up to hundreds of billions of yuan in capital.


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  LendingClub (LC) - LendingClub is cutting 14% of its workforce due to an expected drop in revenue in the next quarter, amid challenging economic conditions caused by higher interest rates, MarketWatch reports. The move will save USD 30-35mln annually, but CEO hopes for a revenue rebound in the future, especially from credit card debt refinancing.

UTILITIES:

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  OPAL Fuels (OPAL) - Ann Anthony, the CFO of OPAL Fuels, is resigning to pursue another opportunity. Scott Contino, CFO of the company's sponsor, Fortistar, will serve as interim CFO. The departure date for Ann Anthony is being discussed, and a search for a permanent CFO has begun.

13 Oct 2023 - 09:30- Research Sheet- Source: Newsquawk