Good Morning US Marex Equities 28th June 2024

Stocks Rise, Yields Fall as PCE Fuels Fed-Cut Bets

Indicators

Wake Up Call

• Hello !  Stock futures rose and bond yields fell as a cooldown in the Federal Reserve’s preferred inflation gauge reinforced bets policymakers will have room to cut rates this year.
  
  
• FED - Fed Bank of Richmond President Thomas Barkin said the inflation battle still hasn’t been won, and the US economy is likely to remain resilient as long as unemployment remains low and asset valuations high. 
  
  
• US STOCKS - Concentration of the main US equity benchmarks around the so-called Magnficent 7 is a source of concern, Natixis says. Strategists write the Magnificent 7 continue to outperform and now account for 33% of the S&P 500 market capitalization and 48% of its volatility, as well as 42% of Nasdaq 100 weight and 52% of its volatility. See both indexes as vulnerable, but strong investor appetite for AI thematic names may amplify Nasdaq 100 shocks relative to S&P 500. Say investor demand for Nasdaq 100 leveraged ETFs is another concern, as this generates a technical gamma effect that could force rebalancing by ETF sellers and amplify negative shocks
  
  
• DATAS
  * US PCE Price Index MM* (May) 0.0% vs. Exp. 0.0% (Prev. 0.3%)
  * US PCE Price Index YY * (May) 2.6% vs. Exp. 2.6% (Prev. 2.7%)
  * US Core PCE Price Index MM * (May) 0.1% vs. Exp. 0.1% (Prev. 0.2%, Rev. 0.3%)
  * US Core PCE Price Index YY* (May) 2.6% vs. Exp. 2.6% (Prev. 2.8%)
  * US Personal Income MM* (May) 0.5% vs. Exp. 0.4% (Prev. 0.3%)
  * Canadian GDP MM* (Apr) 0.3% vs. Exp. 0.3%

Wall Street Movers

• BERSHIRE HATHAWAY flat Warren Buffett will convert 8,674 A shares into 13,011,000 B shares to donate 13,008,758 shares of Berkshire Hathaway “B” stock to five foundations. In an interview earlier with WSJ, the CEO claims to give most of his wealth to charity after death.
  
  
• INFINERA +18% as NOKIA agreed to acquire Co. for an enterprise value of $2.3b, Co. holders will receive $6.65/shr in cash, or 1.7896 Nokia shares, or a combination of cash and stock. At least 70% of the consideration will be paid in cash. 
  
  
• MICROSOFT's flat $13b investment into OPENAI is set to come under added scrutiny from EU’s antitrust watchdogs, who are poised to quiz rivals about the AI firm’s exclusive use of Microsoft’s cloud technology.   
  
  
• NIKE -15.1% as it warns of worsening sales drop. 4Q rev $12.61b (est $12.86b) w/ North America rev $5.28b (est $5.44b). EPS 99c (est 85c). Gross margin 44.7% (est 45.3%). Inventory $7.52b (est $7.99b). Co. plans to take actions to be more competitive. CFO says he expects headwinds to have a more pronounced impact in fiscal 2025, adds expect fiscal 2025 reported rev to be down mid-single digits >> DKS -1.2%, FL -5.7%, LULU -1.8%
   
• ROCKET PHARMACEUTICALS -12% after the FDA rejected its drug application for gene therapy, Kresladi, to treat severe leukocyte adhesion deficiency-I (LAD-I) — a rare immune deficiency disease.
  
  
• TRUMP MEDIA & TECHNOLOGY +9% following yesterday’s presidential debate between President Joe Biden and Donald Trump, with the latter coming away looking stronger.

At A Glance

• AMAZON says it anticipates launching its first batch of internet-from-space satellites in 4Q after previously saying they would be sent aloft as soon as the first half. 
• APPLE’s iPhone shipments in China rose 40% in May despite heavy discounting by major retailers in the weeks. 
• BIOTECH STOCKS MODERNA’s Remsvia, ABBVIE’s Tepkinly, MERCK’s Shars Winrevair, REGENERON’s Ordspono, JNJ’s Balversa get positive recommendation in EU. 
• CARLYLE is readying the sale of Italian manufacturer Forgital.
• GOOGLE Italy’s rev agency is accusing Google of allegedly avoiding paying around €1b in taxes. 
• ILLUMINA flat sees a goodwill impairment charge in 2Q of $1.47b. Co also expects an impairment charge for the GRAIL IPR&D intangible asset of $420m.
• SALESFORCE maintains its Qtr div 40c/shr (est 40c/shr).
• TRACTOR SUPPLY says it’s eliminating DEI and carbon emission goals.
• UBER - LYFT agreed to a series of worker benefits to resolve a longstanding state lawsuit in Massachusetts that challenged drivers’ employment status as independent contractors.
• VINFAST needs to submit names of contractors to Chatham County to get construction permits for general assembly and body shops.

Broker Moves

UPRADES

• CINCINNATI FINANCIAL raised to buy at Citi; PT $135.
• DIGITAL REALTY raised to overweight at JPMorgan; PT $175
• INTERNATIONAL PAPER upgraded to buy at Seaport Global Securities; PT $52

DOWNGRADES

• ACUITY BRANDS dowgraded to equal weight at Wells Fargo; PT $260
• HARTFORD FINANCIAL downgraded to neutral at Citi; PT $114.
• TRAVELERS downgraded to sell at Citi; PT $200

Today's Key Events (UK Time)

1.40pm : Fed's Daly on CNBC 
2.45pm : MNI Chicago PMI
3pm : U. of Mich. Sentiment
4pm : Fed's Bowman Speaks in Moderated Q&A
4.40pm : Fed's Daly Speaks on AI & Workforce

Game Of Corporate Actions

DIV EX DATE 

• Today : Alexandria Real ($1.3); AvalonBay ($1.7); Boston Properties ($0.98); Camden Property ($1.03); Danaher ($0.27); Deere ($1.47); Essex Property ($2.45); Fifth Third ($0.35); FMC ($0.58); Franklin Resources ($0.31); Host Hotels & Resorts ($0.2); Humana ($0.885); Illinois Tool Works ($1.4); Dr Pepper ($0.215); Medtronic ($0.7); Mondelez International ($0.425); Monolithic Power Systems ($1.25); Nucor ($0.54); PG&E ($0.01); Ralph Lauren ($0.825); Steel Dynamics ($0.46); Stryker ($0.8); US Ban($0.49); Veralto ($0.09); Willis Towers Watson ($0.88)
  
  
• Monday : Air Products and Chemicals ($1.77); Cardinal Health ($0.5056); Equity Residential ($0.675); Quanta Services ($0.09); Raymond James ($0.45); Realty Income ($0.263); State Street ($0.69); Ventas ($0.45)
  
  

EARNINGS

• Monday bef mkt : Grail 

Stay Tuned