Daily Game Plan

by Contributor
on September 4, 2024

TODAY’S GAME PLAN:  from the trading
desk, this is not research

TODAY’S ECONOMIC DATA:  8:30ET Trade Balance; 9:45ET Bank of Canada Rate Decision; 10:00ET JOLTS Job Openings, Factory
Orders, Durable Goods Orders, Cap Goods; 2:00ET Fed’s Beige Book

Dan and I are out of the office tomorrow so there will not be a morning note. We are back on Friday.

HIGHLIGHTS and News:  

  • DOJ sent subpoenas to Nvidia and other tech firms as part of an escalating antitrust probe
  • China Weighs Cutting Mortgage Rates in Two Steps to Shield Banks
  • OPEC+ is discussing possible delay to oil output hike: delegates

A global retreat from risk assets continued after fears about the US economy and a move away from big tech triggered a sharp decline in US stocks on Tuesday.  The
US Justice Department sent subpoenas to Nvidia Corp. and other companies as it seeks evidence that the chipmaker violated antitrust laws. Antitrust officials are concerned that Nvidia is making it harder to switch to other suppliers and penalizes buyers that
don’t exclusively use its artificial intelligence chips. After underwhelming figures on US manufacturing in the previous session, data today showed China’s services activity expanded less than expected. The Caixin China services PMI fell to 51.6 in August,
compared with 52.1 the previous month. A vast majority of global banks now expect China’s economy to grow less than 5% this year, with Bank of America Corp. the latest to slash its forecast.   

 

EQUITIES:  

US equity futures are lower, a day after leading global AI chipmaker Nvidia Corp. shed a daily record of $278.9 billion in market value. S&P 500 contracts extended its loss after suffering
its worst day since the August 5 market meltdown. Traders are bracing for further big swings as they await data for clues on whether the US economy is on the brink of a recession and how the Federal Reserve might approach monetary policy.  A US job openings
report due today is expected to show further cooling in the labor market, following yesterday’s data showing a fifth consecutive month of contraction in manufacturing activity. As the market’s focus shifts from inflation to concerns over economic growth, negative
macro data is increasingly translating into pain for stocks and other risk assets. Payrolls data due on Friday is considered crucial in shaping the magnitude of the initial rate cut.  

Futures ahead of the bell: E-Mini S&P -0.35%, Nasdaq -0.7%, Russell 2000 -0.35%, DJI -0.15%

In pre-market trading, Nvidia (NVDA) shares drop 1.5% after Bloomberg reported that the US Justice Department sent subpoenas to the chipmaker, as well as other companies. Asana (ASAN
US) shares tumble 15% after the application software company reported second-quarter revenue that was largely in line with expectations. GitLab (GTLB US) shares climb 16% after the application software company reported second-quarter results that beat expectations
and raised its full-year forecast. PagerDuty (PD US) shares slide 14% after the application software company cut its full-year revenue forecast. Zscaler (ZS US) shares slide 16% after the security-software company gave a full-year forecast that is weaker than
expected.

Consumer Staples ETF (XLP) hit an all-time high yesterday, at the top of the ascending trend channel.

European gauges slumped as worries about the health of the global economy dented sentiment ahead of key US jobs data later in the week. The Euro Stoxx 600 dropped as much as 1.1% early,
with technology stocks such as ASML Holding NV taking the biggest losses. About 90% of the stocks in the Stoxx 600 are in the red. Commerzbank AG fell as the German government plans to cut around a fifth of its stake in the lender. China’s manufacturing activity
sank to a six-month low in August, weighing on luxury stocks in Europe. Growth in Germany’s services sector slowed for a third consecutive month in August, a survey showed today.  Overall, European investors are navigating a period of weak economic growth
at home. Stoxx 600 -1%, DAX -0.8%, CAC -1%, FTSE 100 -0.6%. Technology -3.2%, Travel & Leisure -1.9%, Household Goods -1.8%. REITs +0.2%, Telecomm +0.1%.  

Shares in Asia plunged as AI valuation worry hurt chipmakers, in step with Tuesday’s slump in Nvidia. The MSCI Asia Pacific Index fell 2.4%.  Among key Nvidia suppliers, foundry Taiwan
Semiconductor Manufacturing Co. slid 5.4%. Japanese testing-equipment maker Advantest Corp. plunged 7.7%, while Korean memory maker SK Hynix Inc. tumbled 8%.  Valuations are seen as somewhat less of an issue in Asia, where AI stocks have lagged the gains in
major US-listed peers. Asian energy stocks fell as oil extended its slide on glut concerns and China braced for storm Yagi. China may cut interest rates on as much as $5.3 trillion of mortgages in two steps to lower borrowing costs while mitigating the profit
squeeze on banks. Regulators proposed reducing rates by about 80 bps, sources said. Taiwan -4.5%, Nikkei 225 -4.25%, Kospi -3.1%, ASX 200 -1.9%, Singapore -1.1%, Hang Seng Index -1.1%, CSI 300 -0.65%, Sensex -0.25%, Philippines flat, Indonesia +0.7%.

FIXED INCOME: 
 

Treasuries gained for a second day as traders added to bets on a jumbo cut from the Fed, with the yield on two-year notes down to 3.83%. The chance of a half-point
reduction later this month has increased to about 30% from 20% last week, according to swaps. 2s10s and 5s30s spreads are steeper by .5bp. 10-year yield down 2bps at 3.81%. US session includes several pieces of economic data led by JOLTS job openings.

 

 

METALS: 

Gold edged lower for a fourth day as investors took stock following a broad sell-off that rattled equity and commodity markets. Focus will remain on economic figures,
especially US payrolls data due Friday. Any signs of labor-sector weakening are likely to support a more aggressive pivot to easing by the Federal Reserve, potentially aiding gold. Spot gold -0.1%, silver +0.05%, copper -0.4%.

 

 

ENERGY:   

 

Oil prices reversed losses after falling to the lowest level this year. Downbeat economic data from China and the US stirred fears over demand in the top two consumers,
while a Libyan official predicted a resolution to the crisis that has shuttered half the country’s output. Brent futures fell below $73 a barrel on growing concerns that fragile demand and restored supplies from OPEC+ will create a new glut. WTI dropped under
$70 for the first time since early January. Goldman said oil’s latest selloff was “large relative to the fundamental news” and leaves room for financial demand to recover, even as prices risk a further drop.  WTI +0.8%, Brent +0.7%, US Nat Gas -0.1%, RBOB
+0.4%.

 

 

 

CURRENCIES:   

Currency markets are relatively muted amid a global flight from risk assets. The dollar eased as traders focus on US data releases today including JOLTS job openings
and factory orders. USDJPY was down 0.5% before halving losses. The Aussie inched up from the intraday low after the nation’s second quarter GDP print beat year-on-year median estimates. China’s yuan consolidates after falling in the last two sessions amid
broad dollar weakness. China’s benchmark 10-year bond yield briefly fell to a fresh record low. US$ Index -0.15%, GBPUSD ~flat, EURUSD +0.1%, USDJPY -0.25%, AUDUSD +0.05%, USDNOK -0.05%, USDCHF -0.05%. USDCAD is flat ahead of the Bank of Canada rate decision.

 

 

Spot Bitcoin -3%, Spot Ethereum -2.9%. 

 

 

 

  • Upgrades
    • Alcoa (AA) Raised to Outperform at Wolfe
    • Array (ARRY) Raised to Buy at Jefferies; PT $11
    • Astera Labs (ALAB) Raised to Overweight at Morgan Stanley
    • Ball (BALL) Raised to Overweight at Morgan Stanley; PT $78
    • Boyd Gaming (BYD) Raised to Overweight at Morgan Stanley; PT $74
    • Coupang (CPNG) Raised to Outperform at CLSA; PT $31
    • Embraer (EMBR3 BZ) ADRs Raised to Buy at TD Cowen; PT $41
    • Genmab (GMAB DC) ADRs Raised to Equal-Weight at Morgan Stanley; PT $31
    • Nasdaq Inc. (NDAQ) Raised to Buy at BofA; PT $90
    • nVent Electric (NVT) Raised to Overweight at KeyBanc; PT $80
    • Sportradar (SRAD) Raised to Market Outperform at JMP; PT $16
    • Sweetgreen (SG) Raised to Buy at TD Cowen; PT $43
  • Downgrades
    • Amphenol (APH) Cut to Neutral at BofA; PT $71
    • ArcBest (ARCB) Cut to Equal-Weight at Wells Fargo; PT $112
    • Athira Pharma (ATHA) Cut to Market Perform at JMP
      • Cut to Neutral at BTIG
    • Booking (BKNG) Cut to Hold at Jefferies; PT $4,200
    • Liberty Latin America (LILA) Cut to Neutral at Goldman; PT $10.50
    • Mitek (MITK) Cut to Hold at Jefferies; PT $9.50
    • ResMed (RMD) Cut to Hold at Needham
    • Super Micro Computer (SMCI) Cut to Equal-Weight at Barclays; PT $438
    • Tempur Sealy (TPX) Cut to Neutral at Wedbush; PT $52
    • Zscaler (ZS) Cut to Neutral at President Capital Management; PT $195
  • Initiations
    • Adlai Nortye (ANL) ADRs Rated New Buy at HC Wainwright; PT $9
    • Ameresco (AMRC) Rated New Hold at Jefferies; PT $33
    • American Homes (AMH) Rated New Buy at Goldman; PT $48
    • Applied Industrial Tech (AIT) Rated New Outperform at Raymond James
    • Biohaven (BHVN) Rated New Outperform at Bernstein; PT $55
    • BioLine RX (BLRX IT) ADRs Rated New Buy at JonesTrading; PT $2
    • Bridgebio (BBIO) Rated New Overweight at Piper Sandler
    • Camden Property (CPT) Rated New Neutral at Goldman; PT $139
    • Cameco (CCO CN) Rated New Outperform at National Bank; PT C$74
    • CI&T Inc (CINT) Reinstated Neutral at Goldman; PT $7.30
    • Confluent (CFLT) Rated New Neutral at Baird; PT $23
    • Core Scientific (CORZ) Rated New Buy at Needham; PT $16
    • Denison Mines (DML CN) Rated New Outperform at National Bank; PT C$3.50
    • Equity Residential (EQR) Rated New Neutral at Goldman; PT $81
    • Essex Property (ESS) Rated New Neutral at Goldman; PT $318
    • Fluence Energy (FLNC) Rated New Buy at Jefferies; PT $26
    • GE Vernova (GEV) Rated New Buy at Jefferies; PT $261
    • HA Sustainable Infrastructure (HASI) Rated New Buy at Jefferies; PT $39
    • Invitation Homes (INVH) Rated New Buy at Goldman; PT $46
    • Iqvia (IQV) Rated New Outperform at RBC; PT $275
    • Iris Energy (IREN) Rated New Hold at Needham
    • Larimar Therapeutics Inc (LRMR) Rated New Outperform at Baird; PT $16
    • Mid-America (MAA) Rated New Buy at Goldman; PT $187
    • NexGen Energy (NXE CN) Rated New Outperform at National Bank; PT C$11
    • NEXTracker (NXT) Rated New Hold at Jefferies; PT $46
    • Oruka Therapeutics Inc (ORKA) Rated New Outperform at Wedbush; PT $40
    • PTC Therapeutics (PTCT) Rated New Outperform at Baird; PT $44
    • Quanta Services (PWR) Rated New Hold at Jefferies; PT $256
    • Shoals Technologies (SHLS) Rated New Hold at Jefferies; PT $5
    • Sitio Royalies (STR) Rated New Overweight at Stephens; PT $32
    • SolarEdge (SEDG) Rated New Hold at Jefferies; PT $27
    • Spyre Therapeutics Inc (SYRE) Rated New Outperform at Wedbush; PT $45
    • Terawulf (WULF) Rated New Buy at Needham; PT $6
    • Trade Desk (TTD) Rated New Buy at BofA; PT $135
    • UDR (UDR) Rated New Sell at Goldman; PT $42
    • Webtoon Entertainment (WBTN) Rated New Buy at HSBC; PT $23

 

 

 

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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