TODAY’S GAME PLAN: from the trading
desk, this is not research
TODAY’S ECONOMIC DATA: 10:00ET FOMC begins two-day meeting; 1:00ET 10-Year Note Auction
Fed officials are expected to refrain from commenting until after their June 12 policy announcement.
HIGHLIGHTS and News:
-
CVS branded drugs have been recalled ~twice as often as Walgreens’ and 3x more than Walmart’s
-
Pimco Warns of More US Regional Bank Failures on Property Pain
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Hamas official said the group accepts the UN ceasefire resolution
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General Motors Announces $6B Share Buyback, Boosts Dividend 33%
Global stocks fell as investors adopted a defensive tone across global markets heading into the start of the Federal Reserve’s two-day policy meeting in Washington.
In the UK, an unexpected rise in the jobless rate boosted the outlook for rate cuts later this year, with traders fully pricing in the first quarter-point reduction by November. All eyes are now on the policy decisions by the Federal Reserve tomorrow and Bank
of Japan later this week. Meanwhile, a Hamas official said the group accepts the UN ceasefire resolution and ready to negotiate the details. US Secretary of State Antony Blinken said Israeli Prime Minister Benjamin Netanyahu reaffirmed his commitment to a
cease-fire proposal during a meeting in Jerusalem.
EQUITIES:
US equity futures are lower, reversing yesterday gains that saw the S&P 500 notch its 26th record high close on the year. Apple is set to extend losses after the iPhone maker’s debut
of long-awaited artificial intelligence features failed to enthuse traders. Investors are also preparing for the likelihood of a volatile session on Wednesday with both the latest monthly print for US consumer prices and Fed policy decision due. While policymakers
are widely expected to keep borrowing costs on hold, there’s plenty of uncertainty on officials’ rate projections. US small-business optimism edged up in May to the highest level this year, but the Independent Business sentiment index remains well below pre-pandemic
levels as firms contend with high prices, interest rates and labor costs.
Futures ahead of the bell: E-Mini S&P -0.3%, Nasdaq -0.3%, Russell 2000 -0.7%, DJI -0.4%.
In pre-market trading, Oracle (ORCL) shares edge lower ahead of the cloud computing group’s fourth quarter earnings, slated for after the closing bell. Calavo Growers (CVGW) rises 12%
after the distributor of avocados and other produce posted 2Q profit and sales that topped estimates. Cleveland-Cliffs (CLF) slips 3% after JPMorgan downgrades its rating on the steel producer to neutral. DXC Technology (DXC US) rises 2% after Reuters reported
Apollo Global and Kyndryl Holdings are in talks for a joint bid for the information technology services company. Eli Lilly (LLY) advances 2% after an FDA advisory panel deemed the firm’s Alzheimer’s drug effective and recommended US regulatory approval. General
Motors (GM) rises 1% after announcing a $6 billion share buyback. Target Hospitality (TH) sinks 28% after a Wall Street Journal report that the Biden administration is closing an Immigration and Customs Enforcement detention center in Texas, that was used
to jail migrant families who crossed the border illegally. Yext (YEXT) falls 13% after the digital-media technology company cut its full-year revenue forecast.
Elon Musk isn’t a fan of Apple’s AI announcement. He said he’d ban Apple devices from his companies if OpenAI’s software is integrated at the OS level, calling the tie-up a security risk.
European gauges reversed opening gains to extended Monday’s losses as jitters over political upheaval in France continued. UK unemployment unexpectedly rose to 4.4% in the three months
through April, while pressures for higher pay eased in the private sector. The Stoxx Europe 600 Index is falling for the third day, with all sectors in the red, led by a sharp decline in banks. Banco BPM SpA was the biggest decliner among banking stocks following
a downgrade at Morgan Stanley. Shipping stocks were notable decliners following weakness across Asian peers, while dashed takeover hopes weighed on Spain’s Naturgy Energy Group SA. Stoxx 600 -0.75%, DAX -0.7%, CAC -1%, FTSE 100 -0.9%. Banks -2.2%, Basic Resources
-1.9%, Telecomm -1.1%, REITs and Utilities -1.1%.
Shares in Asia fell, as Chinese and Australian shares led declines as markets reopened following holidays. The MSCI Asia Pacific Index fell 0.5%, with BHP Group, Samsung Electronics and
China Construction Bank among the biggest drags. Benchmarks in mainland China fell to their lowest closing levels since April as travel growth over the Dragon Boat Festival holiday was the latest sign of weak consumer demand. A lukewarm response to Apple’s
highly anticipated launch of new artificial intelligence features weighed on shares of some of the company’s key Asian suppliers. ASX 200 -1.3%, Hang Seng Index -1%, Indonesia -0.95%, CSI 300 -0.9%, Vietnam -0.5%, Taiwan -0.3%, Topix -0.2%, Sensex -0.05%.
Kospi +0.15%, Nikkei 225 +0.25%.
FIXED INCOME:
Treasuries gained for the first time in three days as investors await inflation data and the Federal Reserve’s interest rate decision on Wednesday. Bond traders who
have come to terms with the prospect of higher-for-longer interest rates through 2024 are looking toward this week’s Fed meeting for clues on how to game out 2025 and beyond. French bonds tumbled, driving the biggest two-day jump in yields since 2020. The
UK attracted over £104 billion ($132B) of orders for bonds in a record for gilt sales. US 10-year yield is down three basis points to 4.35% with the 5s30s spread steeper by ~2bp; the Treasury will auction $39B of 10-year debt today after the sale of three-year
notes drew a higher-than-expected yield on Monday.
METALS:
Gold edged lower, trading at around $2,300 an ounce, as traders await US inflation data and the Federal Reserve’s interest-rate decision on Wednesday. The Fed is
expected to keep borrowing costs on hold, but there is uncertainty about future rate projections, with 41% of economists expecting two rate cuts and an equal percentage forecasting one cut or none. Copper dropped to the lowest in more than a month as investors
weighed muted purchases from Chinese fabricators even after a pullback in prices. Spot gold -0.2%, silver -1.7%, copper -2%.
ENERGY:
Oil prices are slightly lower after its biggest jump since March. Time spreads are indicating some degree of strength, with Brent’s three-month spread at $1.40 a
barrel in backwardation. The bullish market structure signals tight supply. OPEC maintained forecasts for strengthening oil demand in the second half of the year. World oil consumption will see a year-on-year increase of 2.3 million barrels a day in the second
half, about 150,000 a day more than during the first, amid continued economic growth in China and other emerging economies, OPEC said in a monthly report. The estimates are considerably more bullish than others in the industry. WTI -0.15%, Brent -0.1%, US
Nat Gas +5.5%, RBOB -0.6%.
CURRENCIES:
In currency markets, the dollar headed for a third daily advance, while ranges were relatively tight in most major currencies as the market took a breather ahead
of Wednesday’s key risk events. The Mexican peso sank on a plan to reform the judicial system. The euro slipped after Governing Council member Olli Rehn said the European Central Bank isn’t pre-committing to any path for interest rates. Focus turns to tomorrow’s
US CPI data due a few hours before the Federal Reserve’s policy decision at which officials are expected to scale back forecasts for a pivot. US$ Index +0.2%, GBPUSD +0.05%, EURUSD -0.3%, USDJPY +0.05%, AUDUSD -0.25%, USDCHF +0.05%, NZDUSD -0.1%, USDNOK +0.7%.
Spot Bitcoin -4%, Ethereum -3.8%. The investment arm of cryptocurrency company Tether Holdings Ltd. expects to pour more than $1 billion into deals over the next
12 months.
TECHNICAL LEVELS:
ESM24 |
10 Year Yield |
August Gold |
July WTI |
Spot $ Index |
|
Resistance |
5500.00 |
|
2454.2 |
81.87 |
|
|
5484.00 |
5.020% |
2427.7 |
80.66 |
108.000 |
|
5445.00 |
4.755% |
2405.3 |
79.74 |
107.350 |
|
5400.00 |
4.520% |
2386.0 |
78.28 |
106.515 |
|
5387.50 |
4.493% |
2355.4 |
75.95w |
105.950 |
Settlement |
5371.25 |
2327.0 |
77.74 |
||
|
5336.00 |
4.350% |
2300.0 |
73.98 |
105.105 |
|
5317.00 |
4.150% |
2285.2 |
72.48 |
104.450 |
|
5295.00 |
4.025% |
2250.0 |
71.33/44 |
103.880 |
|
5274.00 |
3.780% |
2213/25 |
70.00 |
103.565 |
Support |
5264.00 |
3.500% |
2190.00 |
69.00* |
103.170 |
Colors within the report:
Green is always the 200 period (day, week).
Red is always 21,
Blue = 50,
Brown =
100 *Stars have added importance
- Upgrades
- Apple (AAPL) Raised to Buy at DA Davidson; PT $230
- AT&T (T) Raised to Neutral at BNPP Exane
- ManpowerGroup (MAN) Raised to Outperform at BNPP Exane
- Robert Half Inc (RHI) Raised to Outperform at BNPP Exane
- Staar Surgical (STAA) Raised to Buy at BTIG; PT $46
- Downgrades
- Bigg Digital Assets (BIGG CN) Cut to Neutral at HC Wainwright
- Biomea Fusion (BMEA) Cut to Hold at Truist Secs
- Cleveland-Cliffs (CLF) Cut to Neutral at JPMorgan; PT $17
- Comcast (CMCSA) Cut to Underperform at BNPP Exane; PT $34
- Corus Entertainment (CJR/B CN) Cut to Underperform at CIBC
- NexPoint Residential (NXRT) Cut to Hold at Deutsche Bank
- PowerSchool (PWSC) Cut to Market Perform at Raymond James
- Squarespace (SQSP) Cut to Neutral at B Riley; PT $43
- Initiations
- Akero Therapeutics (AKRO) Rated New Outperform at Wolfe; PT $40
- Appfolio (APPF) Rated New Overweight at Piper Sandler; PT $295
- Bitdeer Technologies Group (BTDR) Rated New Overweight at Cantor
- Celldex (CLDX) Rated New Outperform at Wolfe; PT $51
- Cleveland-Cliffs (CLF) Rated New Neutral at Seaport Global Securities
- Enliven Therapeutics (ELVN) Rated New Outperform at Baird; PT $32
- GE Vernova (GEV) Rated New Neutral at Citi; PT $183
- Home Depot (HD) Rated New Hold at Soochow Securities Int’l
- Independent Bank – Mich (IBCP) Reinstated Neutral at Piper Sandler
- Madrigal Pharma (MDGL) Reinstated Outperform at Wolfe; PT $382
- Mercantile Bank (MBWM) Rated New Neutral at Piper Sandler; PT $42
- Neurogene Inc (NGNE) Rated New Outperform at Baird; PT $54
- On Holding (ONON) Rated New Outperform at Bernstein; PT $50
- REV Group (REVG) Rated New Equal-Weight at Morgan Stanley; PT $29.50
- Rocket Lab USA (RKLB) Rated New Neutral at Goldman; PT $4.50
- Shopify (SHOP CN) Rated New Overweight at JPMorgan; PT C$101.85
- Viridian Therapeutics Inc (VRDN) Rated New Outperform at Wolfe; PT $29
- Western Copper (WRN CN) Rated New Buy at Eight Capital; PT C$4.25
Data sources: Bloomberg, Reuters, CQG
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