DAILY MORNING CHAI BRIEFING

Morning Briefing - Steady ahead of jobless claims report The S&P 500 futures trade eight points, or 0.2%, below fair value a day after the benchmark index nearly closed at a record high. On tap is the weekly initial claims report, which is expected to show little improvement in hiring activity through the first week of August. The Briefing.com consensus is projecting 1.150 million Americans filed for reduced unemployment benefits, down slightly from the prior week's 1.186 million initial jobless claims. The report will be released at 8:30 a.m. ET alongside Export and Import Prices for July. Ahead of the opening bell, shares of Cisco (CSCO 44.87, -3.23, -6.7%) have dropped 7% after the company issued disappointing quarterly guidance. The company also announced its CFO will resign but will stay on until a replacement is named. U.S. Treasuries trade near their flat lines ahead of the unemployment data. The 2-yr yield is flat at 0.16%, and the 10-yr yield is flat at 0.67%. The U.S. Dollar Index is down 0.3% to 93.14. WTI crude futures are down 0.1% to $42.64/bbl. In U.S. Corporate news: Cisco (CSCO 44.87, -3.23): -6.7% after issuing disappointing quarterly guidance. Cisco also announced that CFO Kelly Kramer will resign but will stay on until a replacement is named. Lyft (LYFT 30.06, -0.46): -1.5% after providing mixed earnings results. Lyft also said it may need to suspend operations in California starting next week if court ruling classifying drivers as employees is upheld. Vroom (VRM 57.90, -11.11): -16.1% after issuing downside Q3 revenue guidance, which has outweighed its better-than-expected quarterly results. Aspen Technology (AZPN 124.28, +26.57): +27.2% after beating top and bottom-line estimates and raising its FY20 outlook. The coronavirus crisis has "cast a long shadow" over crude demand, the IEA said in its latest oil market report, as it lowered its forecasts for the first time in several months. Due to ongoing weakness in the aviation and travel sectors, the agency sees global crude demand for 2020 at 91.1M barrels per day, down 140K bpd from a previous projection and reflecting a fall of 8.1M bpd Y/Y. The agency also revised down its 2021 global oil demand estimate by 240K barrels per day to 97.1M bpd. The report comes shortly after oil majors from BP (NYSE:BP) to Shell (RDS.A, RDS.B) reported historic losses in Q2 as lockdown measures led to an unparalleled shock for energy markets. Jobless claims due amid stimulus deadlock U.S. stock index futures inched between gains and losses overnight following a steady August rally that pushed the S&P 500 to the cusp of fresh record high on Wednesday. Traders are eyeing the latest round of jobless claims this morning, which are expected to have declined for a second straight week to 1.12M (from 1.186M). That would be the lowest level in almost five months, but would also mark the 21st week in which claims have topped 1M. Regarding a coronavirus stimulus package, House Speaker Nancy Pelosi said Democratic leaders and the White House are still "miles apart." U.S. consumer prices jump in July After tanking in the first two months of the pandemic, the consumer price index came roaring back, posting a gain that was double what economists had been expecting. U.S. inflation picked up pace as consumer prices jumped 0.6% again in July, mirroring the June increase. It was driven up by new and used car prices, but falling oil and food prices kept a lid on gains. The news came as the U.S. budget deficit climbed to $2.81T in the first 10 months of the budget year, exceeding any on record. in to the next bankrupt retailer How are mall owners coping with the coronavirus crisis? They're looking to scoop up high-profile tenants. Fresh off a deal to buy Brooks Brothers out of bankruptcy for $325M (with Authentic Brands), Simon Property Group (NYSE:SPG), the largest U.S. mall owner, and Brookfield Property Partners (NASDAQ:BPY), another major shopping center player, entered advanced talks to purchase J.C. Penney's (OTCPK:JCPNQ) retail operations. Simon has also been exploring the possibility of turning over space left by ailing department stores like Penney into Amazon (NASDAQ:AMZN) distribution hubs. Netflix premiere before Broadway debut More Broadway shows are finding a home in the streaming world during the COVID-19 pandemic. "Diana," a musical based on the life of Princess Diana, will be released on Netflix (NASDAQ:NFLX) next year ahead of its rescheduled Broadway debut on May 25, 2021 (it had originally been slated for an official opening in March 2020). "Hamilton," the runaway Broadway hit, also began streaming on Disney+ earlier this summer, while "The Prom," a Tony Award-nominated musical that ran on Broadway in 2018-19, is being developed for Netflix. Go deeper: Change in thinking due to the streaming revolution. Concerns about WeChat ban While Tencent (OTCPK:TCEHY) is playing down the recent moves by Washington, saying soon to be banned WeChat (for international users) and key revenue driver Weixin (for mainland Chinese customers) are two separate products, more action from the U.S. may be on the table. The executive orders against TikTok (BDNCE) and WeChat could be "broader" than just those two apps, according to Secretary of State Mike Pompeo, adding that "American data will not end up in the hands of an adversary like the Chinese Communist Party." If Apple (NASDAQ:AAPL) is forced to remove WeChat from its global app stores, iPhone annual shipments will decline 25% to 30%, TF International Securities analyst Kuo Ming-chi wrote in a research note. Go deeper: Multinationals raise concerns with the White House. Shifting supply chains The recent trade war, which has spiraled into a tech war, has also seen a shakeup of the global supply chain. Hon Hai Precision Industry, a key supplier to Apple (AAPL) that is also known as Foxconn (OTC:FXCOF), is gradually adding more capacity outside of China. The proportion outside the country is now at 30%, up from 25% last June, and the ratio will increase as the company seeks to avoid escalating tariffs on Chinese-made goods headed to U.S. markets. "No matter if it's India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each," Chairman Young Liu told investors, saying that while China will still play a key role in Foxconn's manufacturing empire, the country’s "days as the world's factory are done." Aircraft subsidy dispute continues The U.S. is maintaining 15% tariffs on Airbus (OTCPK:EADSY) aircraft despite moves by the EU to resolve a 16-year-old dispute over billions of dollars of aircraft subsidies (some tariffs were also introduced on French jams and and German knives). U.S. Trade Representative Robert Lighthizer said the bloc had not taken actions necessary to come into compliance with WTO rulings, and it was not enough for Airbus to increase loan repayments to France and Spain. An escalation will likely come in the fall when the EU is expected to win WTO approval to level its own tariffs over subsidies to Boeing (NYSE:BA) __________________________________________________________________________________________________________________________________________________ Gapping UP In reaction to strong earnings/guidance: AZPN +27.2%, RVLV +22.9%, YY +10.7%, FOSL +9.9%, ONEM +8.9% (also launches One Medical Now), AZEK +5.9%, TPR +4.6%, ENS +3.5%, BAM +3.4%, IIVI +3.3% (to acquire Ascatron and outstanding interests in INNOViON), WCC +3.1%, CHL +2.9%, WPM +2.6%, NLTX +2.2%, TGP +2.2%, CACI +1.9% (also acquires Ascent Vision Tech), VIE +1.8%, MSGN +1.7%, MMM +1.3% (July sales) Other news: SJ +50.5% (signed agreement to acquire BeeLive and expand its global footprint) SRNE +8.7% (will take legal action against Hindenburg Research for statements believed intended to manipulate stock price) CERC +5.8% (announced the publication of a peer-reviewed paper demonstrating significantly elevated free LIGHT levels in the serum of hospitalized patients with severe COVID-19 infection) RDHL +5% (RedHill Biopharma and Cosmo Pharmaceuticals to expand strategic partnership with exclusive licensing agreement and manufacturing agreement for multiple products) IIVI +3.8% (to acquire Ascatron and outstanding interests in INNOViON) SRRK +3.7% (FDA has granted Rare Pediatric Disease (RPD) designation for SRK-015 for the treatment of Spinal Muscular Atrophy) GFL +3% (to purchase WCA Waste) RST +2% (launches new program to support Emergent Bilinguals) TGTX +1.3% (announces FDA acceptance New Drug Application for umbralisib as a treatment for patients with previously treated marginal zone lymphoma) NVS +0.9% (receives FDA for acceptance of Xolair) Analyst comments: PENN +3.8% (initiated with a Buy at Goldman) KAR +3.2% (upgraded to Buy from Neutral at Northcoast) SWN +2% (upgraded to Equal Weight from Underweight at Wells Fargo) KEYS +1.9% (upgraded to Buy from Neutral at Goldman) CNHI +0.8% (upgraded to Overweight from Neutral at JP Morgan) XEC +0.7% (upgraded to Overweight from Neutral at Piper Sandler) SLB +0.7% (upgraded to Overweight from Equal Weight at Wells Fargo _____________________________________________________________________________________________________________________________________ Gapping down In reaction to disappointing earnings/guidance: VRM -13.7%, VREX -13.4%, MNRL -9.2%, CSCO -7% (also CFO to resign), PING -6.4%, SDC -4.7%, ZTO -4.3%, PCVX -3.7% (also provides updates on clinical programs), LYFT -2.2%, CMCL -2.1% Other news: VREX -13.2% (files to delay its 10-Q; currently intends to file the Form 10-Q no later than the fifth calendar day following the prescribed due date ADVM -6.8% (prices offering of 14,500,000 shares of its common stock at $13.00 per share) STC -3.6% (prices offering of 2,631,600 shares of its common stock at $38.00 per share) SPT -2.6% (prices follow-on public offering of 6,000,000 shares of Class A common stock at $27.50 per share) MT -2.4% (to build an Electric Arc Furnace at AM/NS Calvert) STNE -2.3% (prices follow-on offering of 27,375,000 of Class A common shares at $47.50 per share) UAL -1.5% (to add up to 28 daily flights to Florida this winter) TFII -1.3% (upsizes and prices offering of 4,400,000 common shares at $43.25 per share) LUV -1.2% (CEO says profit in 2020 is unrealistic, according to Reuters) OCFT -1% (prices offering of 18 mln ADSs at $18.00 per ADS) JNPR -0.9% (in sympathy with CSCO) MCRB -0.9% (prices offering of 10,500,000 shares of its common stock at $21.50 per share) TYME -0.8% (files for $250 mln mixed securities shelf offering) DOCU -0.8% (stock offering) RLMD -0.7% (stock offering) Analyst comments: NBR -4% (downgraded to Sell from Neutral at Goldman) ATI -3.4% (downgraded to Market Perform from Outperform at Cowen) KBH -3% (downgraded to Neutral from Buy at Seaport Global Securities) CRS -2% (downgraded to Market Perform from Outperform at Cowen) IVZ -2% (downgraded to Underweight from Equal Weight at Barclays) MU -2% (downgraded to Hold from Buy at Deutsche Bank) BJ -1.5% (downgraded to Hold from Buy at Deutsche Bank) OSK -1.4% (downgraded to Neutral from Overweight at JP Morgan) DOYU -1.4% (downgraded to Hold from Buy at 86Research) DE -1% (downgraded to Underweight from Neutral at JP Morgan) _____________________________________________________________________________________________________________________________________ Reviewing overnight developments: Equity indices in the Asia-Pacific region ended Thursday on a mixed note. Japan's Nikkei: +1.8%, Hong Kong's Hang Seng: -0.1%, China's Shanghai Composite: UNCH, India's Sensex: -0.2%, South Korea's Kospi: +0.2%, Australia's ASX All Ordinaries: -0.5%. In economic data: China's July FDI 0.5% (last -1.3%) Japan's July PPI 0.6% m/m (expected 0.3%; last 0.6%); -0.9% yr/yr (expected -1.1%; last -1.6%) Australia's July Employment Change 114,700 (expected 40,000; last 210,800) and Full Employment Change 43,500 (last -38,100). July Unemployment Rate 7.5% (expected 7.8%; last 7.4%) and July Participation Rate 64.7% (expected 64.4%; last 64.0%). August MI Inflation Expectations 3.3% (last 3.2%) New Zealand's July FPI 1.2% m/m (last 0.5%) In news: The Chinese government is reportedly considering more direct funding for companies. China's aviation regulators announced that passenger traffic in July was down 34.1% yr/yr after being down 42.4% in June. Australia reported better than expected employment figures for July, but the report does not reflect the impact of aggressive lockdown measures taken at the end of the month. Major European indices trade in negative territory. STOXX Europe 600: -0.5%, Germany's DAX: -0.3%, U.K.'s FTSE 100: -1.1%, France's CAC 40: -0.3%, Italy's FTSE MIB: -0.3%, Spain's IBEX 35: -0.2%. In economic data: Germany's July CPI -0.5% m/m, as expected (last 0.6%); -0.1% yr/yr, as expected (last 0.9%) France's Q2 Unemployment Rate 7.1% (expected 8.3%; last 7.8%) Spain's July CPI -0.9% m/m, as expected (last 0.5%); -0.6% yr/yr, as expected (last -0.3%) In news: European officials welcomed the U.S. decision to hold off on imposing additional tariffs over subsidies to Airbus. The two sides will begin a new resolution process. Wirecard will be replaced by Delivery Hero in the DAX. Italy sold 3-, 7-, and 30-yr debt. what else is happening... Churchill Downs (NASDAQ:CHDN) posts safety plan for rescheduled Kentucky Derby. General Motors (NYSE:GM) to continue ventilator production in Indiana. More GM news... Goldman Sachs (NYSE:GS) vies for credit card business. Facebook (NASDAQ:FB), Snap (NYSE:SNAP) reportedly held talks to buy TikTok rival Dubsmash. Wednesday's Key Earnings Cisco (NASDAQ:CSCO) -6.4% AH as downside guidance overshadowed earnings beat. SmileDirectClub (NASDAQ:SDC) -4.9% AH weighed down by pandemic disruptions. Lyft (NASDAQ:LYFT) -1% AH following revenue drop of 61%. Vroom (NASDAQ:VRM) -18.9% AH giving weak Q3 revenue forecast. Today's Markets In Asia, Japan +1.8%. Hong Kong -0.1%. China flat. India -0.2%. In Europe, at midday, London -0.9%. Paris -0.1%. Frankfurt -0.2%. Futures at 6:20, Dow flat. S&P -0.1%. Nasdaq -0.1%. Crude -0.3% to $42.55. Gold -0.5% to $1939.60. Bitcoin -1.2% to $11382. Ten-year Treasury Yield -2 bps tp 0.67% Today's Economic Calendar 8:30 Initial Jobless Claims 8:30 Import/Export Prices 10:30 EIA Natural Gas Inventory 11:00 Fed's Bostic: "Equitable Solutions for the Future of Cities" 1:00 PM Results of $26B, 30-Year Note Auction 4:30 PM Money Supply 4:30 PM Fed Balance Sheet