Morning Briefing - Climbing higher with Q2 earnings season on deck



The S&P 500 futures trade 25 points, or 0.8%, above fair value as investors look forward to the start of the Q2 earnings-reporting season, which begins in earnest on Tuesday with the big banks. 
In the meantime, PepsiCo (PEP 137.78, +3.32, +2.5%) announced results today, beating top and bottom-line estimates, and Analog Devices (ADI 127.70, +3.20, +2.6%) issued upside Q3 guidance and agreed to acquire Maxim Integrated (MXIM 76.64, +12.55, +19.6%) for $21 billion in an all-stock deal.
There also remains some optimism on the coronavirus front. Pfizer (PFE 34.70, +0.97, +2.6%) announced that two of its COVID-19 vaccine candidates being co-developed by BioNTech (BNTX 77.70, +7.34, +10.8%) received Fast Track designation from the FDA.
Elsewhere, stocks in China continued to rally in a momentum trade, with the Shanghai Composite gaining 1.8% and the Shenzhen A Share Index gaining 3.5% on Monday. The Europe Stoxx 600 is currently up 0.9%.
U.S. Treasuries trade mixed. The 2-yr yield is down one basis point to 0.15%, while the 10-yr yield is up two basis points to 0.65%. The U.S. Dollar Index is down 0.2% to 96.54. WTI crude is down 1.1%, or $0.48, to $40.07/bbl.
In U.S. Corporate news:
  • PepsiCo (PEP 137.78, +3.32): +2.5% after beating top and bottom-line estimates. 
  • Analog Devices (ADI 127.70, +3.20): +2.6% after issuing upside guidance for Q3 and agreeing to acquire semiconductor company Maxim Integrated (MXIM 76.64, +12.55, +19.6%) for approximately $21 billion in an all-stock deal.
  • Pfizer (PFE 34.70, +0.97): +2.6% after announcing that two of its COVID-19 vaccine candidates being co-developed by BioNTech (BNTX 77.70, +7.34, +10.8%) received Fast Track designation from the FDA. 
Reviewing overnight developments:
  • Equity indices in the Asia-Pacific region began the week on a positive note, with strong gains registered in Japan, China, and South Korea. Japan's Nikkei: +2.2%, Hong Kong's Hang Seng: +0.2%, China's Shanghai Composite: +1.8%, India's Sensex: +0.3%, South Korea's Kospi: +1.7%, Australia's ASX All Ordinaries: +0.9%.
    • In economic data:
      • Japan's May Tertiary Industry Index -2.1% m/m (last -7.7%)
    • In news:
      • There weren't many news drivers behind the gains. Investors continued to shrug off reports about rising coronavirus case counts, diplomatic tension between the U.S. and China, and reports that the PBOC is tempering policy easing expectations.
      • Speculative momentum alive and well in China, which saw the Shenzhen A Share Index jump 3.5%. The Shenzhen is up 17.9% this month and 36.5% over the last three months.
  • Major European indices trade on a firmly higher note. STOXX Europe 600: +0.9%, Germany's DAX: +1.2%, U.K.'s FTSE 100: +1.3%, France's CAC 40: +1.4%, Italy's FTSE MIB: +0.8%, Spain's IBEX 35: +1.4%.
    • There was no economic data of note.
    • In news:
      • The U.S. will impose a 25% tariff on $1.3 bln worth of imports from France as retaliation for France's plan to impose a digital tax.
      • French Finance Minister, Bruno Le Maire, said that his country must go through with pension reform, adding that a major plan for jobs for young people will be unveiled.
      • Bulgaria and Croatia could join the eurozone in 2023 after being admitted to the European Exchange Mechanism II on Friday.

U.S equity futures:
  • S&P 500 Futures +24 @ 3202
  • DJIA Futures +211 @ 26188
  • Nasdaq Futures +101 @ 10938
Overseas:
  • Europe: DAX +1.2%, FTSE +1.3%, CAC +1.4%
  • Asia: Nikkei +2.2%, Hang Seng +0.2%, Shanghai +1.8%
Commodities:
  • Crude Oil -0.44 40.11
  • Nat Gas -0.031 @ 1.774
  • Gold +12.65 @ 1815
  • Silver +0.509 @ 19.562
  • Copper +0.0558 @ 2.9533

U.S. Summary:
  • Earnings/Guidance (Full Earnings Calendar):
    • Analog Devices (ADI) sees Q3 EPS and revs above consensus
    • Axonics Modulation (AXNX) reports upside prelim Q2 sales
    • B2Gold (BTG) announces gold production and gold revenue for the second quarter and first half of 2020
    • Maxim Integrated (MXIM) reports prelim Q4 sales above consensus
    • PepsiCo (PEP) beats by $0.07, beats on revs
    • Quest Diagnostics (DGX) reports upside Q2 sales
    • Shaw Comms (SJR) beats by CC$0.05, beats on revs
    • Yamana Gold (AUY) announces preliminary second quarter 2020 results
  • General News:
    • China sanctions U.S. officials, according to the New York Times
    • OPEC+ considering output increase, according to the New York Times
    • Retailers adjusting their offerings in response to coronavirus, according to Barron's
    • Atlanta Mayor Bottoms returns city back to Phase 1 reopening, according to local tv CBS46
    • 360 Finance (QFIN) appoints Alex Xu as the CFO
    • Alphabet's Google (GOOG) to spend $10 bln in India, according to Reuters
    • Altimmune (ALT) announced positive results from the preclinical studies of its intranasal COVID-19 vaccine candidate, AdCOVID
    • AMAG Pharma (AMAG) presents data from two Phase 2 randomized, placebo-controlled, dose-ranging studies using ciraparantag demonstrate efficacy and safety in the reversal of apixaban and rivaroxaban
    • Amazon (AMZN) now says that email sent to some employees to ban TikTok was sent in error, employees do not need to delete TikTok, per Business Insider
    • Amdocs (DOX) expands strategic partnership with PLDT (PHI)
    • Amgen (AMGN) announced an additional investment of $421 mln in BeiGene's (BGNE) registered direct offering of ordinary shares
    • Avita Medical (RCEL) announced BARDA plans to initiate procurement of the RECELL System for Emergency Response Preparedness
    • Axsome Therapeutics (AXSM) completed a successful pre-NDA) meeting with the FDA for AXS-05 for the treatment of major depressive disorder
    • Barclays PLC (BCS) provides update on its CET1 capital ratio
    • Bed Bath & Beyond (BBBY) appoints Williams-Sonoma (WSM) veteran Neil Lick to lead new owned brands team launching in 2021
    • BioNTech (BNTX) and Pfizer (PFE) granted Fast Track Designation from FDA for two investigational mRNA-based vaccine candidates against SARS-CoV-2
    • Boeing (BA) is scrambling to shore up financing for its 737 MAX, according to Reuters
    • CytoDyn (CYDY) updates HIV-BLA-PDUFA: FDA requested more information to complete a substantive review
    • Disney World (DIS) reopens
    • Dynavax (DVAX) to partner with Times Pharmacy to offer HEPLISAV-B vaccine to customers in Oahu
    • Equillium (EQ) reports data for Itolizumab demonstration reduction in mortality in patients hospitalized with COVID-19
    • Facebook (FB) may ban political ads during election season, according to Bloomberg
    • Foxconn to spend $1 bln on factory expansion in India (AAPL supplier), according to Reuters
    • Himax Tech (HIMX) appoints Jessica Pan (Ming-Feng Pan) as Chief Financial Officer
    • Kirby (KEX) says it will restate Q1 results to correct a goodwill impairment charge
    • Kodiak Sciences (KOD) presents new data from ongoing Phase 1b study of KSI-301
    • Lannett (LCI) announces restructuring and cost savings plan
    • MEDNAX (MD) appoints Mark S. Ordan as CEO succeeding company founder Roger J. Medel; company reaches agreement with starboard value
    • NextCure (NXTC) reports update for the Phase 2 portion of its NC318 monotherapy phase 1/2 trial; does not plan to advance to Simon 2-stage trial; Chief Medical Officer departs
    • NIO (NIO): Tencent (TCEHY) increases active stake to 16.3% (prior ~11.8%)
    • Ovid Therapeutics (OVID) and Angelini Pharma S.p.A. announce agreement in which Angelini Pharma will be responsible to develop, manufacture and commercialize OV101 (gaboxadol) for the potential treatment of Angelman syndrome in the European Union and other countries in the European Economic area and Russia
    • Peabody Energy (BTU): S&P downgraded to 'B' on weak credit measures, outlook negative
    • Roche Hldg (RHHBY) reports updated data on SPK-8011 from Phase 1/2 clinical trial in hemophilia A
    • Roche Hldg (RHHBY) reports new data from Phase IIIb study reinforces safety profile of Genentech's Hemlibra
    • Spartan Energy Acquisition Corp. (SPAQ) and Fisker entered into a definitive agreement for a business combination
    • Takeda Pharma (TAK) reports data demonstrating benefits of pharmacokinetic-guided prophylaxis therapy in hemophilia
    • Tesla (TSLA) lowers Model Y price, according to Bloomberg
    • Universal Health (UHS) announces final settlement resolving the civil aspects of certain investigations of its behavorial health care facilities
    • Universal Insurance (UVE) announces estimates for incurred weather events above plan for Q2
    • W.R. Berkley (WRB) expects Q2 net catastrophe losses of approx. $145 mln before tax
  • M&A:  
    • Benefytt Technologies (BFYT) to be acquired by Madison Dearborn Partners in all-cash transaction structured as a tender offer of $31.00 per share
    • Hewlett Packard Enterprise (HPE) to acquire Silver Peak
    • Maxim Integrated (MXIM): Analog Devices (ADI) will acquire Maxim in an all stock transaction that values combined enterprise at $68 bln+; Expected to be accretive to free cash flow at closing and adjusted EPS in 18 months post-close
  • Syndicate:
    • 3D Systems (DDD) files for mixed securities shelf offering, no amount given
    • Amyris (AMRS) files for 65,166,658 share common stock offering by selling shareholders
    • Equinor (EQNR) files for mixed securities shelf offering, no amount given
    • Stoke Therapeutics (STOK) files for $400 mln mixed securities shelf offering
  • IPOs:
    • Expected to Price:
      • GoHealth (Nasdaq: GOCO): The provider of a health insurance marketplace using its technology platform is expected to price its 39.5 M share IPO within a range of $18-$20.
      • nCino (Nasdaq: NCNO): The provider of cloud-based software for financial institutions is expected to price its 7.6 M share IPO within a range of $220$24.
      • Relay Therapeutics (Nasdaq: RLAY): The clinical-stage precision medicines company with an initial focus on enhancing small molecule therapeutic discovery in oncology is expected to price its 14.7 M share IPO within a range of $16-$18.
      • Trean Insurance Group (Nasdaq: TIG): The insurance company that has historically focused on specialty risks within the casualty market is expected to price its 10.7 M share IPO within a range of $13-$15.

Gapping Up/Down
  • Gapping up:
    • EQ +207.5%, WIMI +67.1%, MXIM +16.7%, XERS +15.9%, SJR +5.9%, BNTX +5.8%, QFIN +3.7%, ADI +3.1%, BGNE +2.5%, KOD +2.4%, DGX +2.4%, PEP +1.9%, PFE +1.4%, DVAX +0.9%
  • Gapping down:
    • NXTC -10%, KEX -2.4%, APAM -1.5%, BCS -1.5%, VXX -1%, BTU -0.7%, AMRS -0.7%
Analyst Research (see Upgrades/Downgrades calendar for full list):
  • Upgrades:
    • BRP Group (BRP) upgraded to Overweight from Neutral at JP Morgan; tgt $19
    • CF Industries (CF) upgraded to Buy from Underperform at BofA Securities
    • Cognizant Tech (CTSH) upgraded to Buy from Hold at HSBC Securities; tgt raised to $68
    • Corteva (CTVA) upgraded to Buy from Underperform at BofA Securities
    • Darden Restaurants (DRI) upgraded to Overweight from Neutral at JP Morgan; tgt $82
    • DCP Midstream (DCP) upgraded to Neutral from Sell at UBS; tgt $8.50
    • Deere (DE) upgraded to Outperform from Neutral at Robert W. Baird; tgt $189
    • Fannie Mae (FNMA) upgraded to Neutral from Sell at B. Riley FBR; tgt $2
    • Freddie Mac (FMCC) upgraded to Neutral from Sell at B. Riley FBR; tgt $2
    • IDEAYA Biosciences (IDYA) upgraded to Overweight from Neutral at JP Morgan; tgt $28
    • Nutrien (NTR) upgraded to Buy from Underperform at BofA Securities
    • Sensata Tech (ST) upgraded to Overweight from Neutral at Atlantic Equities; tgt $53
    • Sunrun (RUN) upgraded to Overweight from Sector Weight at KeyBanc Capital Markets; tgt $32
  • Downgrades:
    • Advanced Drainage Systems (WMS) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt $41
    • Graphic Packaging (GPK) downgraded to Hold from Buy at Jefferies; tgt $15
    • HCA (HCA) downgraded to Market Perform from Outperform at BMO Capital Markets; tgt $100
    • Illinois Tool (ITW) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt $156
    • Midland States Bancorp (MSBI) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $15.50
    • Moelis (MC) downgraded to Neutral from Buy at Goldman; tgt lowered to $27
    • Redfin (RDFN) downgraded to Underperform from Neutral at BofA Securities; tgt $24
    • Zynex (ZYXI) downgraded to Neutral from Buy at B. Riley FBR
  • Others:
    • Aimmune Therapeutics (AIMT) initiated with an Outperform at Cowen; tgt $35
    • AllianceBernstein (AB) initiated with an Outperform at Evercore ISI; tgt $30
    • AMC Networks (AMCX) initiated with a Sell at Goldman; tgt $19
    • Costco (COST) initiated with an Overweight at Atlantic Equities; tgt $375
    • Discovery (DISCA) initiated with a Neutral at Goldman; tgt $20
    • Ellington Financial (EFC) initiated with a Neutral at BofA Securities; tgt $11.50
    • Fox Corporation (FOXA) initiated with a Sell at Goldman; tgt $21
    • Lions Gate Entertainment (LGF.A) initiated with a Neutral at Goldman; tgt $8
    • Moderna (MRNA) initiated with a Buy at Jefferies; tgt $90
    • Royalty Pharma (RPRX) initiated with a Buy at BofA Securities; tgt $55
    • Royalty Pharma (RPRX) initiated with a Neutral at UBS; tgt $52
    • Royalty Pharma (RPRX) initiated with a Buy at SunTrust; tgt $56
    • Royalty Pharma (RPRX) initiated with a Neutral at Goldman; tgt $47
    • Royalty Pharma (RPRX) initiated with an Equal-Weight at Morgan Stanley; tgt $51
    • Royalty Pharma (RPRX) initiated with a Neutral at JP Morgan; tgt $50
    • Royalty Pharma (RPRX) initiated with a Neutral at Citigroup; tgt $50
    • Royalty Pharma (RPRX) initiated with an Outperform at Cowen; tgt $55
    • TAL Education (TAL) resumed with a Buy at BofA Securities
    • Vaxart (VXRT) initiated with a Buy at B. Riley FBR; tgt $22
    • ViacomCBS (VIAC) initiated with a Buy at Goldman; tgt $34
    • Walt Disney (DIS) initiated with a Buy at Goldman; tgt $137
Upcoming Events:
  • Econ Data:
    • No economic data releases today
  • Earnings:
  • Monday (July 13)
    • Morning: PEP
  • Tuesday (July 14)
    • Morning: C DAL FAST FRC JPM WFC
  • Wednesday (July 15)
    • Morning: ASML BK GS PNC USB UNH
    • Afternoon: AA SNBR
  • Thursday (July 16)
    • Morning: ABT ANGO BMI BAC DPZ HOMB JNJ MS SON TSM TFC WNS
    • Afternoon: FNB JBHT MRTN NFLX PPG WAL
  • Friday (July 10) 
    • Morning: ALLY ALV BLK CFG ERIC FHN KSU RF STT
Full Earnings Calendar 

      Asia & Europe detail:
      Asia: Nikkei +2.2%, Hang Seng +0.2%, Shanghai +1.8%
      Equity indices in the Asia-Pacific region began the week on a positive note, with strong gains registered in Japan, China, and South Korea. There weren't many news drivers behind the gains. Investors continued to shrug off reports about rising coronavirus case counts, diplomatic tension between the U.S. and China, and reports that the PBOC is tempering policy easing expectations. Speculative momentum alive and well in China, which saw the Shenzhen A Share Index jump 3.5%. The Shenzhen is up 17.9% this month and 36.5% over the last three months.
      • In economic data:
        • Japan's May Tertiary Industry Index -2.1% m/m (last -7.7%)
      ---Equity Markets---
      • Japan's Nikkei: +2.2%
      • Hong Kong's Hang Seng: +0.2%
      • China's Shanghai Composite: +1.8%
      • India's Sensex: +0.3%
      • South Korea's Kospi: +1.7%
      • Australia's ASX All Ordinaries: +0.9%
      ---FX---
      • USD/JPY: +0.2% to 107.06
      • USD/CNH: -0.1% to 7.000
      • USD/INR: unch at 75.169
      Europe: DAX +1.2%, FTSE +1.3%, CAC +1.4%
      Major European indices trade on a firmly higher note. The U.S. will impose a 25% tariff on $1.3 bln worth of imports from France as retaliation for France's plan to impose a digital tax. French Finance Minister, Bruno Le Maire, said that his country must go through with pension reform, adding that a major plan for jobs for young people will be unveiled. Bulgaria and Croatia could join the eurozone in 2023 after being admitted to the European Exchange Mechanism II on Friday.
      • There was no economic data of note.
      ---Equity Markets---
      • STOXX Europe 600: +0.9%
      • Germany's DAX: +1.2%
      • U.K.'s FTSE 100: +1.3%
      • France's CAC 40: +1.4%
      • Italy's FTSE MIB: +0.8%
      • Spain's IBEX 35: +1.4%
      ---FX---

      • EUR/USD: +0.3% to 1.1330
      • GBP/USD: -0.1% to 1.2607
      • USD/CHF: +0.1% to 0.9419

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