Morning Reads

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Futures

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S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures are down 6 points and are trading slightly below fair value.

Equity futures are mixed ahead of the latest inflation reading this morning, the August PCE Price Index, out at 8:30 a.m. ET. A slight drop in Treasury yields is providing a modicum of support. The 10-yr note yield is down six basis points to 3.69% and the 2-yr note yield is down two basis points to 4.15%. 

Global recession/inflation worries are in play this morning after the Eurozone CPI showed a record 10.0% increase year-over-year in September versus 9.1% in August. The latest reading is solidifying expectations that the ECB will raise rates by 75 basis points at its October meeting. The Reserve Bank of India voted 5-to-1 to raise its repo rate by 50 basis points to 5.90%, as expected.

In other central bank news, San Francisco Fed President Daly (non FOMC voter) said that the Fed needs to slow the U.S. economy to bring down inflation but does not need to trigger a recession, according to Reuters. She thinks getting to 4.50%-5.0% and holding there through the end of 2023 could get inflation in check.

Separately, Russian President Putin will formally annex 18% of Ukraine today, according to CNN.

Hurricane Ian is expected to make a second landfall in South Carolina later today.

Energy complex futures are mixed. WTI crude oil futures are down 0.4% to $80.85/bbl while natural gas futures trade up 1.2% to $6.95/mmbtu. 

Today's economic data includes:

  • 8:30 ET: August Personal Income (Briefing.com consensus 0.3%; prior 0.2%), Personal Spending (Briefing.com consensus 0.2%; prior 0.1%), PCE Prices (Briefing.com consensus 0.2%; prior -0.1%), and core PCE Prices (Briefing.com consensus 0.4%; prior 0.1%)
  • 9:45 ET: September Chicago PMI (Briefing.com consensus 51.9; prior 52.2)
  • 10:00 ET: Final University of Michigan Consumer Sentiment (Briefing.com consensus 59.5; prior 59.5)

In corporate news:

  • NIKE (NKE 85.23, -10.10, -10.59%): beats by $0.01, beats on revs; gross margin down 220 bps, revenue for NIKE Brand up 4% on reported basis; expects Q2 gross margins to decline approximately 350-400 bps yr/yr
  • Micron (MU 50.75, +0.74, +1.48%): beats by $0.07, misses on revs; guides Q1 EPS below consensus, revs below consensus; reducing supply growth, including ~50% fab equipment capex cut versus last year
  • Meta Platforms (META 136.80, +0.39, +0.29%): announces hiring freeze, warns employees of restructuring, according to Bloomberg
  • Rent-A-Center (RCII 18.28, -4.05, -18.14%): Lowers Q3 guidance, says external economic conditions have continued to deteriorate; also CFO steps down, names Fahmi Karam as CFO
  • Microsoft (MSFT 238.92, +1.42, +0.60%): resumed with an Outperform at Raymond James

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region were mixed on Friday as market participants generally showed some reserve in the wake of Wall Street's losses. Japan's Nikkei: -1.8% (-2.7% for the week), Hong Kong's Hang Seng: +0.3% (-4.0% for the week), China's Shanghai Composite: -0.6% (-2.1% 0 for the week), India's Sensex: +1.8% (-1.2% for the week), South Korea's Kospi: -0.7% (-5.9% for the week), Australia's All Ordinaries: -1.2% (-1.6% for the week).
    • In economic data:
      • China's September Manufacturing PMI 50.1 (expected 49.6; prior 49.4) and Non-Manufacturing PMI 50.6 (prior 52.6); September Caixin Manufacturing PMI 48.1 (expected 49.5; prior 49.5)
      • Japan's August Industrial Production +2.7% m/m (expected +0.2%; prior +0.8%); August Unemployment Rate 2.5% (expected 2.5%; prior 2.5%); August Retail Sales +4.1% yr/yr (expected 2.8%; prior 2.4%); August Housing Starts +4.6% yr/yr (expected -4.1%; prior -5.4%); September Household Confidence 30.8 (prior 32.5)
      • South Korea's August Industrial Production -1.8% m/m (expected -0.5%; prior -1.3%) and +1.0% yr/yr (expected +1.3%; prior +1.5%); Retail Sales -1.8% m/m (prior -0.3%)
      • Australia's August Housing Credit +0.5% (prior +0.5%)
    • In news:
      • India's Sensex (+1.8%) was a standout, gaining ground after the RBI voted 5-to-1 to raise its repo rate by 50 basis points to 5.90%, as expected.
      • Japanese Prime Minster Kishida instructed his government to prepare a new stimulus package before the end of October, according to Reuters.
      • Reports indicate that the People's Bank of China is lowering the floor rate on mortgages for first-time home buyers; and Reuters indicates that the PBOC is angling to provide support for the yuan by asking state-owned banks to be ready to sell dollars in offshore markets. USD/CNH +0.4% to 7.1255.
      • China reported some mixed manufacturing PMI data for September that showed a slight expansion in the official manufacturing PMI (50.1) reading and a some continued contraction in the Caixin Manufacturing PMI reading (48.1).
  • Major European indices are trading higher ahead of the U.S. open. STOXX Europe 600: +0.7%, Germany's DAX: +0.3%, U.K.'s FTSE 100: +0.3%, France's CAC 40: +0.6%, Italy's FTSE MIB: +0.9%, Spain's IBEX 35: +0.6%.
    • In economic data:
      • Eurozone's September CPI +1.2% m/m (expected +0.9%; prior +0.6%) and +10.0% yr/yr (expected +9.7%; prior +9.1%); August Unemployment Rate 6.6% (expected 6.6%; prior 6.6%)
      • Germany's September Unemployment Rate 5.5% (expected 5.5%; prior 5.5%)
      • UK's Q2 GDP revised to +0.2% qtr/qtr (expected -0.1%; prior +0.8%) and +4.4% yr/yr (expected +2.9%; prior +8.7%); September Nationwide HPI 0.0% m/m (expected +0.3%; prior +0.8%) and +9.5% yr/yr (expected +10.0%; prior +10.0%)
      • Italy's September CPI +0.3% m/m (expected +0.1%; prior +0.8%) and +8.9% yr/yr (expected +8.7%; prior +8.4%); August Unemployment Rate 7.8% (expected 7.9%; prior 7.9%)
      • France's September CPI -0.5% m/m (expected -0.1%; prior +0.5%) and +5.6% yr/yr (expected +5.9%; prior +5.9%); August PPI +2.7% m/m (prior +1.9%); August COnsumer Spending 0.0% m/m (expected -0.1%; prior -0.9%)
      • Spain's August Retail Sales 0.0% yr/yr (prior -0.5%)
      • Switzerland's August Retail Sales +3.0% yr/yr (prior +3.0%)
    • In news:
      • Eurozone CPI was up a record 10.0% year-over-year in September versus +9.1% in August. The latest reading is solidifying expectations that the ECB will raise rates by 75 basis points at its October meeting.
      • The 10-yr UK gilt yield is down 11 basis points to 4.03% following reports that Prime Minister Truss and Finance Minister Kwarteng met with the Office for Budget Responsibility to talk about their fiscal plan.
      • The OBR is expected to have a first draft of its forecast for the finance minister on Oct. 7, according to CNBC. GBP/USD -0.4% to 1.1072.

U.S. equity futures:

  • S&P 500 Futures: +5 @ 3,645
  • DJIA Futures: +6 @ 29,232
  • Nasdaq 100 Futures: +15 @ 11,178

Overseas:

  • Europe: DAX +0.3%, FTSE +0.3%, CAC +0.6%
  • Asia: Nikkei -1.8%, Hang Seng +0.3%, Shanghai Composite -0.6%

Commodities:

  • Crude Oil -0.26 @ 80.97
  • Nat Gas  +0.065 @ 6.939
  • Gold +3.50 @ 1672.10
  • Silver +0.241  @ 18.953
  • Copper +0.0065 @ 3.4245


U.S. Summary:

  • Earnings/Guidance:
    • Micron (MU) beats by $0.07, misses on revs; guides Q1 EPS below consensus, revs below consensus; reducing supply growth, including ~50% fab equipment capex cut versus last year
    • NIKE (NKE) beats by $0.01, beats on revs; gross margin down 220 bps, revenue for NIKE Brand up 4% on reported basis; expects Q2 gross margins to decline approximately 350-400 bps yr/yr
    • Rent-A-Center (RCII) lowers Q3 guidance, says external economic conditions have continued to deteriorate; also CFO steps down, names Fahmi Karam as CFO
    • Vertex Energy (VTNR) lowers Q3 throughput guidance; lowered outlook reflects management's decision to accelerate significant planned maintenance following recent and temporary crude supply issues
  • General News:
    • Russian President Putin will formally annex 18% of Ukraine today at 8:00 ET, according to CNN
    • House will vote today on continuing resolution to fund government through December 16. Congress will then go on recess until mid-November, according to ABC News
    • Hurricane Ian has 85 mph winds and is expected to make a second landfall in South Carolina later today
    • Federal Reserve President Mary Daly notes that the Fed needs to slow the U.S. economy to bring down inflation but does not need to trigger a recession, according to Reuters
    • CMS announces lower premiums for Medicare advantage and prescription drug plans in 2023
    • ABB (ABB) makes Q3 provision relating to the remaining Kusile matters
    • Alphabet (GOOG) made a decision to begin winding down its Stadia gaming streaming service
    • Altria (MO) provides Juul update
    • American Outdoor Brands (AOUT) announces that its Board of Directors has approved the repurchase of up to $10 mln of the Company's outstanding common stock through September 2023
    • Amylyx Pharmaceuticals (AMLX) receives FDA approval for Relyvrio for the treatment of amyotrophic lateral sclerosis (ALS), according to FDA's website
    • Apple (AAPL): Gene Munster of Loup Ventures tweets that Pro models are still on average 4 weeks out, which is unchanged
    • Barclays PLC (BCS) it will pay $361 mln to SEC on internal control failures related to issuance of securities, according to Reuters
    • BioMarin Pharmaceutical (BMRN) resubmits a Biologics License Application (BLA) to the FDA for its investigational AAV gene therapy, valoctocogene roxaparvovec, for adults with hemophilia A
    • Blue Apron's (APRN) CFO plans to resign after accepting a position at another company; appoints Mitchell Cohen to serve as interim CFO
    • Boeing (BA) temporarily closes factory in South Carolina due to Hurricane Ian, according to the New York Times
    • Boeing (BA): FAA officials told Boeing that it has still not completed work needed to certify 737 Max later this year, according to Reuters
    • British American Tobacco (BTI) announces share buyback- non-discretionary agreement
    • Chevron (CVX): FreeWire Technologies to make available battery-integrated EV charging equipment for CVX branded stations, including company-owned and independently-owned retailer stations
    • ComScore (SCOR) announces a workforce reduction as part of its efforts to improve cost efficiency
    • Comtech Telecom (CMTL) reports EPS in-line, beats on revs; guides Q1 revs above consensus
    • Corteva (CTVA): FTC files suit against company, according to FTC website
    • Daseke (DSKE) approved a stock repurchase program, under which the Company is authorized to repurchase up to $40 million of its outstanding common stock
    • Embraer SA (ERJ) confirmed its subsidiary Eve Holding will restate select financial statements
    • Equinor (EQNR) names Torgrim Reitan as new CFO
    • Fannie Mae (FNMA) names Priscilla Almodovar as CEO, effective Dec 5
    • FEMSA (FMX) publishes the provisional end result of the public tender offer for Valora – participation rate of 96.87%
    • Fluor (FLR): US Dept of Energy extends Fluor-led Savannah River Nuclear Solutions management and operating contract
    • Groupon (GRPN) amended existing credit agreement to modify certain financial covenants and provide for additional flexibility in its operations
    • Illumina (ILMN) Introduces Multiple Breakthrough Sequencing Innovations at Inaugural Genomics Forum
    • ImaRx Therapeutics (IMRX) receives FDA clearance of IND application for Phase 1/2a Clinical Trial of IMM-1-104
    • JD.com (JD) extends partnership with Nike (NKE), according to Reuters
    • JP Morgan (JPM) to hire 2000 engineers, according to Reuters
    • Kezar Life Sciences (KZR) to present complete results from the Phase 2 MISSION Trial of Zetomipzomib in Patients with Lupus Nephritis at the American College of Rheumatology Convergence 2022
    • Kinross Gold (KGC): Toronto Stock Exchange accepts notice filed by KGC to amend its normal course issuer bid (NCIB) program effective October 4 to increase the maximum number of shares that may be repurchased to 10% of its public float from 5%
    • KLA Corporation (KLAC) to build new research and development and manufacturing center in Newport, Wales, UK; expected to include capital investment of more than $100 mln
    • McKesson (MCK) extends its partnership with CVS Health (CVS) to distribute pharmaceuticals to mail order and specialty pharmacies, retail pharmacies, and distribution centers through June 2027
    • Navigator Holdings (NVGS) announces accretive vessel acquisitions through new joint venture with Greater Bay Gas Company
    • Ocular Therapeutix (OCUL) presents OTX-TKI phase 1 australia trial data in slide presentation
    • Philips (PHG) announces that today’s Extraordinary General Meeting of Shareholders appointed Roy Jakobs as the company’s next President and Chief Executive Officer, effective October 15, 2022, succeeding current President and Chief Executive Officer Frans van Houten
    • Playtika (PLTK) provides update on shares tendered to date in its tender offer for its common stock
    • Ready Capital (RC) increases share buyback authorization by $25 mln, bringing total amount authorized to $50 mln
    • Rocket Pharmaceuticals (RCKT) announces positive updates from phase 1 clinical trial for RP-A501 in Danon Disease at the Heart Failure Society of America Annual Scientific Meeting 2022
    • Royal Caribbean (RCL): Hong Kong to remove cruise ship ban, according to SCMP
    • Scorpio Tankers (STNG) purchased 225,000 shares of common stock in the open market today at average price of $40.80/share
    • Trinseo (TSE) initiates consultation process regarding the potential closure of its styrene monomer production site in Germany
    • Tupperware (TUP) reaches settlement with SEC for divested entity
    • Vale S.A. (VALE) approves reorganization of its base metals operations in Brazil; also completes the decharacterization of three more upstream structures
    • Vanda Pharma (VNDA) and OliPass Corp enter into an R&D collaboration agreement to develop a set of antisense oligonucleotide (ASO) molecules based on OliPass' modified peptide nucleic acids
    • Xos (XOS) delivers 13 battery-electric stepvans to four FedEx (FDX) Ground Operators
    • Zealand Pharma (ZEAL) announces positive results from phase 3 Trial of glepaglutide in patients with short bowel syndrome
  • M&A:
    • ABB Ltd (ABB) sells remaining stake in Hitachi Energy to Hitachi
    • Arthur J. Gallagher (AJG) to acquire M&T Insurance Agency from M&T Bank
    • Magnum Opus Acquisition (OPA): Asia Innovations Group to become a publicly listed company through merger with Magnum Opus Acquisition
    • Rogers Corp (ROG) and DuPont (DD) continue to hold cooperative discussions with the State Administration for Market Regulation of China regarding their merger
  • Syndicate: 
    • Aterian (ATER) announces pricing of $20 million registered direct offering
  • IPOs:
    • Expected to Price:
      • No IPOs expected.


Gapping Up/Down

  • Gapping up:
    • AMLX +7.3%, XOS +6.3%, RC +4.9%, MU +2.9%, CMTL +2.6%, KGC +2.5%, FLR +2.3%, ILMN +1.8%, BTI +1.4%, APRN +1.1%, BMRN +1%, EQNR +1%, PLTK +1%, BCS +0.9%, BA +0.6%
  • Gapping down:
    • RCII -16.3%, NKE -9.3%, AAN -4.9%, FL -4%, LULU -2.9%, MNSO -2.4%, TSE -2.2%, TUP -2.1%, ASML -1.7%, DKS -1.6%, CTVA -1.2%, AMKR -1.1%, VTNR -0.9%, LRCX -0.7%

Analyst Research (see Upgrades/Downgrades calendar for full list):

  • Upgrades
    • Cboe Global Markets (CBOE) upgraded to Neutral from Sell at Goldman; tgt raised to $126
    • Charles River (CRL) upgraded to Buy from Hold at Jefferies; tgt $240
    • Micron (MU) upgraded to Buy from Hold at Summit Insights
    • NOV Inc. (NOV) upgraded to Buy from Neutral at BofA Securities; tgt $19
    • Voya Financial (VOYA) upgraded to Overweight from Neutral at Piper Sandler; tgt raised to $70
  • Downgrades:
    • Century Aluminum (CENX) downgraded to Underperform from Peer Perform at Wolfe Research; tgt $4
    • J.B. Hunt Transport (JBHT) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets
    • Schneider National (SNDR) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets
    • Verbund AG (OEZVY) downgraded to Hold from Buy at Societe Generale
  • Others:
    • Adecoagro S.A. (AGRO) initiated with an Outperform at Itau BBA; tgt $10
    • Apellis Pharmaceuticals (APLS) placed on Positive Catalyst Watch at Citigroup
    • Arcus Biosciences (RCUS) placed on Positive Catalyst Watch at Citigroup
    • Bioceres (BIOX) initiated with a Buy at Canaccord Genuity; tgt $22.50
    • Brookfield Renewable Partners (BEP) placed on Action List Buy at TD Securities
    • Confluent (CFLT) initiated with a Buy at Truist; tgt $35
    • CrowdStrike (CRWD) initiated with an Overweight at CapitalOne; tgt $235
    • CyberArk (CYBR) initiated with a Buy at Canaccord Genuity; tgt $187
    • Eagle Bulk Shipping (EGLE) initiated with a Buy at Stifel; tgt $62
    • Eiger BioPharmaceuticals (EIGR) placed on Positive Catalyst Watch at Citigroup
    • ForgeRock (FORG) initiated with a Buy at Canaccord Genuity; tgt $20
    • Freshpet (FRPT) initiated with a Buy at UBS; tgt $67
    • Genco Shipping & Trading (GNK) initiated with a Buy at Stifel; tgt $20
    • Generac (GNRC) initiated with an Outperform at Cowen; tgt $229
    • Global Business Travel Group (GBTG) initiated with an Outperform at Credit Suisse; tgt $9
    • Graphic Packaging (GPK) removed from US 1 List at BofA Securities
    • HashiCorp (HCP) initiated with a Buy at Truist; tgt $40
    • HashiCorp (HCP) initiated with a Hold at Needham
    • Hugo Boss AG (BOSSY) initiated with a Buy at Berenberg
    • JFrog (FROG) initiated with a Buy at Truist; tgt $30
    • KLA Corporation (KLAC) placed on North America Focus List at Citigroup
    • Lam Research (LRCX) removed from North America Focus List at Citigroup
    • M&T Bank (MTB) removed from North America Focus List at Citigroup
    • Malibu Boats (MBUU) initiated with a Neutral at DA Davidson; tgt $50
    • Merus (MRUS) placed on Positive Catalyst Watch at Citigroup
    • Microsoft (MSFT) resumed with an Outperform at Raymond James; tgt $300
    • MongoDB (MDB) initiated with a Buy at Truist; tgt $300
    • OneWater Marine (ONEW) initiated with a Neutral at DA Davidson; tgt $35
    • Relay Therapeutics (RLAY) initiated with an Equal Weight at Barclays; tgt $23
    • Rubicon Technologies (RBT) initiated with a Overweight at Cantor Fitzgerald; tgt $5
    • Spirit Airlines (SAVE) resumed with a Neutral at Citigroup
    • Synchrony Financial (SYF) removed from North America Focus List at Citigroup
    • Tattooed Chef (TTCF) initiated with a Neutral at UBS; tgt $6
    • Unity Software (U) resumed with a Neutral at BofA Securities; tgt $40
    • Vital Farms (VITL) initiated with a Buy at UBS; tgt $16


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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