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Morning Prep 08/18
- S&P equity futures are trading below the previously reported level, remaining under Thursday's close due to widespread losses in both European and Asian markets overnight.
- The negative sentiment persists as stocks continue their decline over the past two weeks. The prevailing path appears to be the downside, with concerns including overbought conditions, elevated valuations, and the narrative of peak disinflation. Additionally, the market has incorporated a significant shift in expectations for the Fed's funds rate by the end of 2024.
- Despite these concerns, there are several bullish factors, including better-than-expected growth, expectations of a rebound in 2H and 2024 earnings, and record-high money market assets.
- China's situation remains prominent, as Evergrande files for bankruptcy in New York amid an ongoing property crisis. State developers are grappling with substantial losses due to a prolonged slump in home sales. The yuan shows strength, breaching a 16-year high against the dollar, partly due to a robust PBOC fix and reports of state banks selling dollars.
- US news is relatively quiet, while China-related updates continue to dominate. UK retail sales miss expectations due to adverse weather conditions, and Japan's CPI remains above the BoJ's target while continuing to ease.
European Markets:
- FTSE 100 (-0.82%), DAX (-0.65%), CAC40 (-0.82%)
- European indices maintain their negative trajectory. UK retail sales in July declined by 1.2%, signaling possible pressure from elevated inflation and interest rates on consumer sentiment.
- Economic data includes Norway's Q2 GDP, Eurozone's final CPI for July, Austria's final CPI for July, and Portugal's PPI for July. The ECB issues a warning to Italy regarding a proposed bank tax that is viewed as potentially detrimental to the economy and credit availability.
- Corporate updates feature u-blox Holding's transaction framework agreement, Emmi's robust H1 net income, and Compagnie Financière Tradition's announcement of a share buyback program.
Asian Markets:
- Nikkei (-0.55%), Hang Seng (-2.05%), Shanghai Composite (-1.00%)
- Asian equities conclude the session with losses. China's Evergrande files for bankruptcy in New York, while concerns extend to Country Garden's impending repayment deadline on dollar bonds.
- Softbank secures underwriters for the ARM unit listing, and Celltrion reveals plans for a merger with Celltrion Healthcare.
- Key stock movements include Hugel Inc's proposed stake increase, Celltrion's merger announcement with Celltrion Healthcare, Lenovo Group's Q1 report, and Bilibili's Q2 report.
News Highlights Since Prior Close:
International News:
- An escalating number of state developers in China are issuing warnings about significant impending losses, amplifying concerns over the ongoing China property crisis. (Bloomberg)
- The European Central Bank (ECB) is testing the cohesion of the Meloni government by cautioning against a proposed bank tax, highlighting potential impacts on financial stability and overall economic health.
US Morning News:
- $BKE (Buckle): The company's Q2 EPS has been reported at $0.92, marking a decline from the previous year's $1.01.
- $MRK (Merck): Merck has announced positive Phase 3 trial results for WELIREG (belzutifan) - the LITESPARK-005 trial achieved its primary endpoint of progression-free survival in specific advanced renal cell carcinoma patients.
- $MITK (Mitek): Nasdaq's hearings panel granted a request for continued listing by Mitek, pending compliance with NASDAQ's filing requirement.
- $AVGO (Broadcom): In light of the pending acquisition of VMWare, Broadcom has disclosed term loan commitments amounting to $28.39 billion.
- WE (WeWork): WeWork is set to initiate a 1-for-40 reverse stock split.
- $DE (Deere & Co.): Q3 EPS has been reported at $10.20, surpassing FactSet estimates of $8.22, with an estimated range of $7.40 to $9.07.
- $BAX (Baxter International): The EU has granted clearance for Advent International and Warburg Pincus to acquire Baxter's BioPharma solutions business.
- $QCOM (Qualcomm): The EU has accepted requests from 15 EU Member States to evaluate Qualcomm's acquisition of Autotalks.
- $HE (Hawaiian Electric): An investor update has been disclosed by Hawaiian Electric in connection with recent wildfires.
- $AJX (Great Ajax): Great Ajax has filed a $100 million mixed securities shelf.
- $LQR (LQR House): LQR House has engaged law offices to spearhead a preliminary investigation into possible naked short selling and market manipulation.
- $RLX (RLX Technology): RLX Technology's Q2 non-GAAP EPADS is reported at CNY0.06, contrasting with the previous year's CNY0.49.
- $VIPS (Vipshop Holdings): Q2 non-GAAP net income for Vipshop Holdings is reported at CNY2.40 billion, exceeding FactSet's estimate of CNY1.91 billion.
- $3333.HK (China Evergrande): A bankruptcy filing in the US has been made by China Evergrande, as per Reuters' court filing report.
- $AMAT (Applied Materials): Q3 EPS, excluding items, is reported at $1.90, surpassing FactSet's estimate of $1.74.
- $ROST (Ross Stores): Ross Stores has reported Q2 EPS of $1.32, exceeding FactSet's projection of $1.16, with an estimated range of $1.11 to $1.29.
- $KEYS (Keysight Technologies): Q3 EPS, excluding items, is reported at $2.19, surpassing FactSet's estimate of $2.04, with an estimated range of $2.02 to $2.06.
- $BLMN (Bloomin' Brands): Media reports highlight Starboard Value's construction of a stake exceeding 5% in Bloomin' Brands.
- $+INSTACART (Instacart): Instacart is reportedly planning an IPO as early as September, according to Bloomberg.
- The crypto sector is experiencing downward movement, partially attributed to reports suggesting SpaceX's sale of its Bitcoin holdings for around $373 million in 2021.}
Post-Close Market Movements:
Traded Higher Post-Close:
- +9.4% $DRTS (Alpha Tau Medical): Announces positive long-term safety and efficacy data from multiple clinical trials of Alpha DaRT.
- +6.7% $KAVL (Kaival Brands Innovations Group): Amends an agreement with Phillip Morris International for the distribution of ENDS products.
- +5.5% $ROST (Ross Stores): Positive earnings report for Ross Stores.
- +5.0% $BARK (BARK, Inc.): Announces authorization of a share repurchase program for up to $7.5 million.
- +3.7% $MPW (Medical Properties Trust): Reports the sale of $105 million of its interest in Steward's syndicated asset-backed credit facility.
Traded Lower Post-Close:
- -34.9% $FTCH (Farfetch): Farfetch reports disappointing earnings.
- -8.9% $EXPR (Express): Express reports preliminary earnings and announces strategic actions, along with a 1-for-20 reverse stock split.
- -7.7% $KEYS (Keysight Technologies): Earnings-related decline for Keysight Technologies.
- -4.9% $UBA (Urstadt Biddle Properties): Shareholders approve a pending acquisition, contributing to the decline.
- -3.9% $BILL (Bill Holdings): Earnings-related decline for Bill Holdings.
- -2.8% $RRGB (Red Robin Gourmet Burgers): Earnings-related decline for Red Robin Gourmet Burgers.
Most-Read Stories:
- 4503.JP: The European Medicines Agency (EMA) accepts a Marketing Authorization Application (MAA) for Iveric Bio's avacincaptad pegol.
- ABLI.SS: Abliva reports Q2 EPS of SEK0.02, compared to the previous year's SEK0.04.
- MOZN.SW: Mobilezone Holding suspends its 2022-25 share buyback for 2023, as indicated in slides.
- EMMN.SW: Emmi reports H1 net income of CHF97.8 million, surpassing FactSet's estimate of CHF55.6 million, reaffirming FY guidance.
- SPK.NZ: Spark New Zealand releases the 2023 Greenhouse Gas Inventory Report and Modern Slavery Statement.
Upgrades and Downgrades:
Upgrades:
- $MRVL (Marvell Technology): Upgraded to "Buy" from "Neutral" at B Riley Securities.
Downgrades:
- $FTCH (Farfetch): Downgraded to "Sector Weight" from "Overweight" at KeyBanc.
- $KEYS (Keysight Technologies): Downgraded to "Equal-Weight" from "Overweight" at Barclays.
- $SE (Sea Limited): Downgraded to "Neutral" from "Overweight" at JPMorgan and to "Neutral" from "Outperform" at CICC.
US Earnings Today:
- After the close: $PANW (Palo Alto Networks) I have been thinking in start a position in Palo Alto or Fortinet. I ended up allocating my capital to other company but I am very interested in seeing how this fight between FTNT PANW and CRWD ends. (I voted for FTNT)
Economic Data:
- Eurozone Jun Construction Output: Declined by 0.3% year-on-year, differing from the consensus estimate of +0.9% and the prior figure of +0.3% (revised from +0.1%).
- Lipper reports equity fund outflows of $2 billion in the week ending August 16th, contrasting with outflows of $8.6 billion in the previous week.
- Equity exchange-traded funds (ETFs) observed inflows of $2.5 billion. (This does not add up with the idea of a massive market crash)
- Money market funds experienced inflows of $35.8 billion, marking the highest inflow in 13 weeks.
- Investment-grade corporate bond funds saw outflows of $575 million.
- High-yield bond funds saw outflows of $1.1 billion.
- Eurozone Jul Consumer Price Index (CPI): Registered a year-on-year increase of +5.3%, aligning with the preliminary projection.
- UK Jul Retail Sales: Declined by 3.2% year-on-year, compared to the consensus estimate of -2.1%. The prior figure was revised from -1.0% to -1.6%.
- Japan Jul Nationwide Core CPI: Increased by 3.1% year-on-year, aligning with the consensus estimate, but slightly lower than the previous month's +3.3%.
- The Federal Reserve reports balance sheet assets amounting to $8.15 trillion as of Wednesday, reflecting a weekly decrease of ($62.5 billion) and a year-on-year decrease of ($704 billion).
Market Performance:
- S&P futures declined by 0.25% or 10.8 points compared to the previous close.
- FTSE 100 decreased by 0.82% to reach 7250.49.
- DAX experienced a decline of 0.64% to settle at 15575.87.
- Nikkei closed with a 0.55% decrease at 31450.76.
- Hang Seng experienced a notable decrease of 2.05%, settling at 17950.85.
Yield and Commodity Movement:
- The 2-year yield observed a 3 basis points decline, reaching 4.90%.
- The 10-year yield registered a 7 basis points decline, reaching 4.22%.
- WTI Crude for September 2023 experienced a decrease of $0.13 or 0.16%, settling at $80.26.
- Gold for December 2023 increased by $9.20 or 0.48%, reaching $1924.40.
- The euro-to-dollar exchange rate experienced a minimal decline of 0.0005 or 0.05%, reaching 1.0868.
- The pound-to-dollar exchange rate decreased by 0.0021 or 0.16%, settling at 1.2725.
- The dollar-to-yen exchange rate experienced a decline of 0.37 or 0.25%, reaching 145.47.
- The euro-to-yen exchange rate decreased by 0.49 or 0.31%, reaching 158.07.
Clearly, we haven't found our bottom on Wednesday. I am confused about what the market will do not. I expect another red day today to end the week. We might not see a bounce after all, but rather a basing first to continue further. The PUT-CALL ratio indicates that it is time to start curving up!
Have a fantastic day and weekend!!
I am still Bullish as I can be! (and i will be playing 0DTE puts today XD)
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