Daily morning chai briefing

 The S&P 500 is looking to hit a new record with stimulus in focus and the Fed keeping rates low, which support higher valuations. The index had a modest gain yesterday that pushed it to a new record. Futures are up 0.17% today aiming to hit a new record. Possible support of the move is the stimulus deal with top Congressional Democrats yesterday signaling a willingness for further compromise, and the White House this morning optimistic about the chance to quickly pass a slimmed-down deal. On the negative side, trade tensions are rising with China. Regarding the next coronavirus relief bill, the Trump administration believes it's possible that both sides agree on a $500 billion proposal that includes money for the USPS, schools, and small businesses, according to Bloomberg.On the earnings front, the latest retail reports continue to come in better than expected. Target (TGT 149.10, +12.20, +8.9%) and Lowe's (LOW 160.00, +2.09, +1.3%) beat top and bottom-line estimates, sending shares higher ahead of the opening bell. Earlier this morning, the weekly MBA Mortgage Applications Index decreased 3.3% amid higher interest rates following a 6.8% increase in the prior week. Later,..



 The Shanghai Composite fell 1.25% in Wednesday's action.equity indices in the Asia-Pacific region had another mixed outing, only the tables were turned Wednesday with the Shanghai standing out as the biggest laggard. Hong Kong, which had its morning session canceled due to a typhoon storm warning, also lagged when trading resumed. Bloomberg reported that the U.S. State Department has asked colleges and universities to divest holdings of Chinese stocks from their endowment plans. Japan saw its first winning session of the week after reporting July trade figures, which featured imports (-22.3% yr/yr) declining more than exports (-19.2% yr/yr).


Major European indices are registering modest gains after a sluggish start. Once again, session lows posted shortly after the start of trading coincided with the overnight low for the S&P 500 futures seen around 03:30 ET. The UK reported an uptick in CPI for July that was much higher than anticipated. Separately, Italian Prime Minister Conte reportedly suggested an Italian recovery plan, which focuses on infrastructure improvements, will be ready by mid-October. The euro (+0.05%) is slightly stronger against the dollar at 1.1933 and trading at its best level since May 2018.

  • In economic data:
    • Eurozone's July CPI -0.4% m/m (expected -0.3%; last -0.3%) and +0.4% yr/yr (expected +0.4%; last +0.3%); June adjusted Current Account Balance EUR 17.3B (last EUR -10.5B)
    • UK's July CPI +0.4% m/m (expected -0.1%; last +0.1%) and +1.0% yr/yr (expected +0.6%; last +0.6%); Core CPI +0.4% m/m (expected -0.1%; last +0.2%) and +1.8% yr/yr (expected +1.3%; last +1.4%); June House Price Index +2.6% yr/yr (last +3.5%)

On the earnings front, the latest retail reports continue to come in better than expected. Target (TGT 149.10, +12.20, +8.9%) and Lowe's (LOW 160.00, +2.09, +1.3%) beat top and bottom-line estimates, sending shares higher ahead of the opening bell. 

Earlier this morning, the weekly MBA Mortgage Applications Index decreased 3.3% amid higher interest rates following a 6.8% increase in the prior week. Later, investors will receive the FOMC Minutes from the July 28-29 meeting at 2:00 p.m. ET. 

U.S. Treasuries are showing modest gains, pushing yields slightly lower. The 2-yr yield is down one basis point to 0.13%, and the 10-yr yield is down two basis points to 0.65%. The U.S. Dollar Index is little changed at 92.31. WTI crude is down 0.8% to $42.57/bbl ahead of an OPEC+ meeting. 




In U.S. Corporate news:

  • Target (TGT 149.10, +12.20): +8.9% after beating top and bottom-line estimates. 
  • Lowe's (LOW 160.00, +2.09): +1.3% after beating top and bottom-line estimates and saying sales momentum has continued into August.
  • Momenta Pharma (MNTA 52.21, +21.40): +69.5% after agreeing to be acquired by Johnson & Johnson (JNJ 150.37, +0.28, +0.2%) for approximately $6.5 billion in cash. 
  • Gilead Sciences (GILD 65.61, -3.45): -5.0% after receiving a Complete Response Letter from the FDA for its Filgotinib drug. 
  • Southwest Air (LUV 34.86, +0.70): +2.1% after saying it has experienced a modest improvement in close-in leisure passenger demand.



Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region had another mixed outing, only the tables were turned Wednesday with the Shanghai standing out as the biggest laggard. Japan's Nikkei: +0.3%, Hong Kong's Hang Seng: -0.7%, China's Shanghai Composite: -1.2%, India's Sensex: +0.2%, South Korea's Kospi: +0.5%, Australia's ASX All Ordinaries: +0.7%.
    • In economic data:
      • Japan's July Trade Balance JPY11.6B (expected JPY -77.6B; last JPY -269.3B); exports -19.2% yr/yr (expected -21.0%; last -26.2%) and imports -22.3% yr/yr (expected -22.8%; last -14.4%); June Core Machinery Orders -7.6% m/m (expected +2.0%; last +1.7%)
      • Australia's July MI Leading Index +0.1% m/m (last +0.5%)
      • Hong Kong's July Unemployment Rate 6.1% (last 6.2%)
    • In 


Today's Markets

In Asia, Japan +0.26%. Hong Kong -0.74%. China -1.24%. India +0.28%.
In Europe, at midday, London +0.11%. Paris +0.32%. Frankfurt +0.32%.
Futures at 6:00, Dow +0.19%. S&P +0.17%. Nasdaq +0.16%. Crude -0.77% to $42.79. Gold -0.55% to $2,002.10. Bitcoin -3.4% to $11,819.
Ten-year Treasury Yield -1.5bps to 0.654%


What else is happening…

ON Semiconductor (NASDAQ:ON) raises $700M via upsized private offering.U.S., China to expand airline flights between them to eight per week.Verona Pharma (NASDAQ:VRNA) launches second part of ensifentrine study in lung disease.Gilead (NASDAQ:GILD) comes up empty with U.S. application for filgotinib for rheumatoid arthritis.JPMorgan (NYSE:JPM) says opioid settlement news is bullish for distributors.Sorrento Therapeutics (NASDAQ:SRNE) ousts CFO Jiong Shao.Conduent (NASDAQ:CNDT) names Icahn's Gary to board for settlement.

Today's Economic Calendar

7:00 MBA Mortgage Applications
10:00 Quarterly Services Report (Advance)
10:30 EIA Petroleum Inventories
1:00 PM Results of $25B, 20-Year Bond Auction
2:00 PM FOMC minutes
3:00 PM Fed's Barkin: Economic Outlook

In the news so far

  • Hong Kong, which had its morning session canceled due to a typhoon storm warning, also lagged when trading resumed.

  • Bloomberg reported that the U.S. State Department has asked colleges and universities to divest holdings of Chinese stocks from their endowment plans.

  • LUXE BRANDS - ARIANA GRANDE'S FRAGRANCE R.E.M. TO LAUNCH ON ULTA.COM ON AUG. 19 & IN STORES AT ULTA BEAUTY IN U.S. ON SEPT. 6 Source text for Eikon: Further company coverage:




Gapping up


In reaction to earnings/guidance:

  • LITB +42%, TGT +8.8%, LZB +2.6% (also reinstates dividend), SUPN +2.6%, KE +2.1%, LOW +1.3%

M&A news:

  • MNTA +69.5% (to be acquired by Johnson and Johnson (JNJ) for $52.50/share)
  • HUD +48.9% (receives acquisition proposal for $7.70 per share) 

Other news:

  • DTIL +10.8% (FDA has granted Fast Track Designation to Precision for PBCAR0191 for the treatment of advanced B-cell precursor acute lymphoblastic leukemia
  • AXDX +9.5% (receives FDA EUA for COVID-19 antibody testing system)
  • ONE +8.8% (extends momentum from +29% move during Tuesday's regular session)
  • CNTG +6.1% (expands its SARS-CoV-2 testing solution to Hamburg Airport)
  • MRCY +5.5% (receives new patent for cyberattack protection technology)
  • VRNA +4.9% (initiates multiple dose part of Phase 2 clinical trial with pMDI formulation of Ensifentrine)
  • WATT +4.3% (announced a strategic partnership with Xentris Wireless to develop ruggedized products for demanding military applications using Energous' radio frequency (RF) based charging technology)
  • IRTC +2.6% (prices offering of 1,093,167 shares of its common stock at $175.00 per share (stock closed at $175.38))
  • REGN +1.7% (Regeneron Pharma and Roche's Genentech to collaborate to increase global supply of REGN-COV2)
  • UAL +1.3% (will increase service to China from two to four weekly flights)
  • MYL +1.3% (FDA approves Mylan's generic version of BIIB's Tecfidera)
  • QGEN +1% (expands coronavirus NGS and software to accelerate research for COVID-19)
  • NMRD +1% (issued a presentation outlining how CGM is being used by quarantined and hospitalised COVID-19 patients)

Analyst comments:

  • RFP +4.6% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
  • XPO +3.1% (upgraded to Overweight from Sector Weight at KeyBanc Capital Markets)
  • PFPT +2.5% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
  • GGB +1.7% (upgraded to Overweight from Neutral at JP Morgan)

Gapping down
In reaction to earnings/guidance:

  • VIPS -12.7%, ATGE -10.5%, JKHY -6%, CREE -4.6%, ALC -4.6%, A -2.9%

Other news:

  • SRNE -10.7% (terminates CFO immediately)
  • SABR -8.7% (stock offering)
  • ALBO -7.4% (clinical trial results did not achieve proof-of-concept for other key NASH measures)
  • PLYM -6.6% (upsizes and prices offering of 7,500,000 shares of its common stock at $12.85 per share)
  • KMDA -5.4% (Kamada and Kedrion Biopharma announce results from a U.S. post-marketing pediatric trial of KEDRAB)
  • GILD -4.7% (receives Complete Response Letter from FDA for Filgotinib)
  • BIIB -1.3% (FDA approves Mylan's generic version of BIIB's Tecfidera)

Analyst comments:

  • KSS -1.5% (downgraded to Underperform from Hold at Gordon Haskett)
  • ETRN -1.4% (downgraded to Underperform from Neutral at BofA Securities)
  • PPL -0.5% (downgraded to Neutral from Buy at Mizuho)






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