Morning Briefing - Sluggish start indicated on a slower morning for news

 The S&P 500 futures trade eight points, or 0.2%, below fair value following yesterday's afternoon slide, although futures are off overnight lows ahead of the latest jobless claims data. 

Some continue to attribute the negative bias to the Fed's cautious stance on the economy, as revealed yesterday in the FOMC Minutes from the July 28-29 meeting, but it seems more likely that the market is digesting its record run off its March 23 lows amid no new macro catalysts today. 

The weekly initial jobless claims report is set to be released at 8:30 a.m. ET, and the Briefing.com consensus is projecting another 990,000 Americans filed for reduced benefits. Reports suggest that a smaller coronavirus relief bill could be reached, although there are no indications that a deal is imminent. 

The Philadelphia Fed Index for August (Briefing.com consensus 21.0) will be released alongside the claims data, followed by the Conference Board's Leading Economic Index for July (Briefing.com consensus 1.1%) at 10:00 a.m. ET. China and the United States will meet "in the coming days" to discuss the progress of the Phase 1 trade deal reached in February. Earlier this week, the White House signaled that no high-level trade talks were on the schedule. Phase 1 requires China to import $77B more than 2017 levels of certain U.S. goods within the first year, and official data suggests China is running far behind schedule on the target.H

U.S. Treasuries Household spending surprised Fed officials by its strength: FOMC minutes

While the Fed's policy-setting committee was surprised by how strong household spending grew since its June meeting, it was quick to caution that uncertainty over the economic outlook is "highly elevated", according to FOMC minutes for the July 28-29 meeting. Risks to the outlook include new waves of the coronavirus and the possibility that government fiscal support wasn't enough. Some Fed officials worried that banks and financial institutions might come under "significant stress" if they face a more adverse scenario due to increased COVID-19 infections. Several participants suggested that additional accommodations might be required to promote economic recovery and return inflation to the FOMC's 2% objective.ave edged higher, pushing yields 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 92.92. WTI crude futures are down 1.0%, or $0.45, to $42.66/bbl. 

Intel announces $10B accelerated share buyback, reversing suspension

Intel (NASDAQ:INTC) revived its buybacks with a $10B accelerated share repurchase agreement. The ASR is part of the $20B share repurchase program announced last October that was suspended in March due to the coronavirus pandemic. After the sale closes, Intel will have repurchased $17.6B of shares under the program.

Facebook wins court approval to settle biometric privacy lawsuit

Facebook (NASDAQ:FB) has received preliminary court approval to settle a suit that charged the company with illegally collecting and storing user biometric data. Illinois users relied on the state's Biometric Information Privacy Act to say that Facebook's "Tag Suggestions" photo-recognition feature was illegal. Facebook had raised its settlement offer by $100M, to $650M, which looks to have resolved court concerns.

What else is happening…

JPMorgan (NYSE:JPM) in talks for banking services at post offices.Icahn boosts stake in Xerox (NYSE:XRX) to 12.82%.GE (NYSE:GE) signs deals to add 1.5 GW to Iraq's power grid.

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
1:00 PM Fed's Daly: "The New Future of Work"
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

In U.S. Corporate news:

• NVIDIA (NVDA 482.00, -3.54): -0.7% despite beating top and bottom-line estimates and guiding Q3 revenue above consensus. 
• Intel (INTC 50.18, +1.85): +3.8% after announcing plans to repurchase $10 billion of common stock as part of an accelerated program. The company suspended repurchases in March. 
• Estee Lauder (EL 201.61, -10.89): -5.1% after missing earnings estimates and issuing downside quarterly guidance. The company reinstated its quarterly dividend. 

Emergent BioSolutions (EBS #6) is a life sciences company which provides both specialty products as well as contract development and manufacturing services. The stock has been making a big move the past two months as it's being picked up as a coronavirus play. Most recently, in late July, EBS announced an agreement to provide contract development and manufacturing services for large-scale commercial drug substance manufacturing for AstraZeneca's COVID-19 vaccine candidate, AZD1222. The agreement is valued at $174 mln through 2021 and follows an $87 mln contract in June for development services. EBS also recently signed a five-year large-scale drug substance manufacturing agreement for Johnson & Johnson's lead COVID-19 vaccine candidate beginning in 2021, valued at approximately $480 mln for the first two years.

Fastly (FSLY #8) has created an edge cloud platform helping developers deliver computing power and speed to the edge of their network. Edge computing is being seen as the next evolution of the cloud. The idea of the edge cloud is to move compute power and logic as close to the end-user as possible in order to speed up download time for webpages and video. When milliseconds matter, processing at the edge is an ideal way to handle dynamic and time-sensitive data. For example, Ticketmaster uses Fastly for its edge cloud needs as that when tickets go on sale, the company is able to handle the thousands of requests per second it's receiving. FSLY believes the pandemic has permanently accelerated the need for businesses to focus on digital transformation. Developers across all verticals and geographies are moving more functions to the edge to achieve better performance, scale, and security. FSLY reported impressive Q2 beat-and-raise earnings report in early August, including a surprise profit and 62% yr/yr revenue growth to $75 mln. Enterprise customers ($100K+ in past year) continue to be FSLY's primary revenue driver, generating 88% of its trailing 12-month revenue. FSLY focuses on partnering with large companies that have the capability and available budget to increase engagement on its platform.

Sapiens (SPNS #11) is an Israel-based provider of software to the insurance industry with an emerging focus on the broader financial services sector. Insurance carriers are required to comply with regulations that are frequently changing. A majority of insurance carriers are still using inefficient and outdated systems which tend have high error rates. SPNS believes that it's very well positioned to become one of the dominant players in this market over time. This is a huge market with 11,000 potential carriers (Sapiens focuses mostly on Tier-1 and Tier-2 insurance carriers) and the move from legacy systems to updated platforms is still in the early stages. Also, they said that once you get your foot in the door, you can be at that customer for 15 years or more, so its platform is very sticky. This also has led to a sizeable percentage of revenue being highly recurring in nature. SPNS believes its market is very similar to what the ERP market was 10-15 years ago. There, the participants started out small, then in 3-5 years, the market evolved into a smaller amount of larger players. Sapiens thinks it can become one of those larger players in the insurance software market. They say they are among the best in terms of technology and there are simply not a lot of competitors. We also would not be surprised to see Sapiens acquired at some point as perhaps a large enterprise software company would see Sapiens as an attractive addition. It would also make sense for a company that wants a quick entry into the insurance software market. Sapiens strikes us as one of those steady and slow growing companies operating in an attractive market niche. With its industry in the early stages of a transition phase, there should be a long runway of steady growth ahead.

Equity Markets---

• Japan's Nikkei: -1.0%
• Hong Kong's Hang Seng: -1.5%
• China's Shanghai Composite: -1.3%
• India's Sensex: -1.0%
• South Korea's Kospi: -3.7%
• Australia's ASX All Ordinaries: -0.7%

Major European indices trade in negative territory. Germany's Finance Ministry announced that July tax revenue was down 0.3% yr/yr and that the overall drop in revenue due to the lockdown was not as steep as initially feared. Accor may merge with InterContinental Hotels, according to Le Figaro.

• In economic data:
  • Eurozone's June Construction Output 4.04% m/m (last 29.37%)
  • Germany's July PPI 0.2% m/m (expected 0.1%; last 0.0%); -1.7% yr/yr (expected -1.8%; last -1.8%)

In news:

• South Korean chipmakers were pressured by a Yonhap report suggesting that they may reduce their capital spending.
• Growth-sensitive names underperformed in China on growing expectations that the People's Bank of China will not lower the reserve requirement ratio again in 2020. The PBoC made no changes to its one-year and five-year loan prime rates for the fourth consecutive month.

• Germany's Finance Ministry announced that July tax revenue was down 0.3% yr/yr and that the overall drop in revenue due to the lockdown was not as steep as initially feared.
• Accor may merge with InterContinental Hotels, according to Le Figaro.