Tuesday June 21, 2022 Trading
Desk: (312) 236-8907
TODAY’S GAME PLAN: from
the trading desk, this is not research
DATA/HEADLINES
8:30ET Chicago Fed national activity index; 10:00ET Existing home sales; 11:00ET Fed’s Barkin speaks; 12:00ET Fed’s Mester speaks; 3:30ET Fed’s Barkin speaks
TODAY’S HIGHLIGHTS:
-
Biden says decision nearing on gas-tax pause, student debt
-
Biden delivers remarks on vaccines for children this afternoon
-
COVID Cases in Beijing and Shanghai look to be subsiding
World shares are higher for a second day while bonds retreated amid improved investor sentiment after last week’s rout in global markets. President
Biden is considering scrapping tariffs on a range of Chinese goods to curb inflation, but no decision is likely before next week’s Group of Seven summit, sources said. European Central Bank President Christine Lagarde reaffirmed on Monday plans to raise the
ECB’s interest rates twice this summer while fighting widening spreads in borrowing costs of different euro zone countries. Italian bonds outperformed peers, supported by a variety of comments from ECB speakers throughout the European morning. The EU is set
to formally grant Ukraine candidate status later this week in the first, but highly symbolic step to membership. Moldova, also, and Georgia if it meets conditions.
US EQUITIES:
US equity futures are broadly higher after last week’s beat down that erased nearly $2 trillion in market value from the S&P 500. President Biden
said that a US recession isn’t “inevitable” following a conversation with former Treasury Secretary Lawrence Summers, helping sentiment. Many on Wall Street are skeptical, as strategists at Morgan Stanley and Goldman Sachs Group warned equities may have further
to fall to fully price in the risk of an economic downturn. Lawrence Summers said in a speech in London on Monday that “we need five years of unemployment above 5% to contain inflation.” “The US may need as severe monetary tightening as Paul Volcker pushed
through in the late 1970s early 1980s,” Summers said. Focus this week will be on Federal Reserve Chairman Jerome Powell’s testimony before the Senate and the House on Wednesday – Thursday.
E-mini S&P futures +1.4%, Nasdaq +1.3%, Russell 2000 futures +1.5%, Dow futures +1.25%.
QQQ’s hold the major support area at its 200 week moving average.
Tesla is cutting its salaried workforce by about 10% over the next three months, an overall reduction of 3.5% in total headcount.
TSLA shares are up 3% pre-market. Kellogg (K) jumps 9% after announcing plans to separate into three companies; a cereal maker, a snack maker and a plant-based food company. Major technology and internet stocks advanced ahead of the bell, poised to extend
Friday’s gains, with Apple climbing 2% and Microsoft rising 1.7%. Meanwhile, Revlon surged as much as 27%, extending Friday’s rally after the cosmetics firm filed for Chapter 11 bankruptcy. Spirit (SAVE) shares jump as much as 13% after JetBlue (JBLU) raised
its offer to $33.50 per share. Arrival gains 8.6% after the electric-vehicle maker announced that its zero-emission van has achieved EU certification. Palantir (PLTR) shares rise as much as 5% after a buy rating from BofA.
Equities in Europe extended Monday’s gains with most indexes rallying over 1%. The Stoxx Europe 600 index climbed as much
as 1.2%, with basic resources, chemicals and consumer products leading gains. CAC 40 outperforms. French industrial gas company Air Liquide climbed 3.4% after striking its largest power purchase deal with Swedish utility Vattenfall, helping boost chemical
stocks. Valneva rises as much as 23% after its CEO said the company’s Lyme disease vaccine has the potential of becoming a “blockbuster.” Luxury shares jump after Swiss watch exports for the month of May showed strong demand. European apparel retail shares
drop after JPMorgan downgrades Asos, About You, Boohoo and Primark owner AB Foods to neutral. Leonardo jumps as much as 9.7% in Milan trading after its DRS unit agreed to buy Israeli radar-maker RADA Electronic. Germany’s DAX is up for a third straight day
+0.75%, CAC +1.2%, FTSE 100 +0.7%, Stoxx 500 +0.7%. Autos +1.9%, banks +1.7%, miners +1.7%. Utilities lag, down 0.9%.
Asian shares were mostly higher. The MSCI Asia Pacific Index climbed as much as 1.8%, snapping an eight-day losing streak,
with financial and tech stocks among the biggest contributors to the advance. Benchmarks in Taiwan, Japan and Hong Kong led gains in the region. Australia’s ASX 200 rose 1.4% after central bank chief Philip Lowe signaled he will only raise interest rates by
25-to-50 basis points at the July meeting. Chinese shares edged lower after recent gains. Taiwan +2.35%, Japan’s Topix +2%, Hang Seng +1.9%, Sensex +1.8%, Kospi +0.75%. Philippines -0.75%, Vietnam -0.65%, Shanghai Composite -0.25%.
FIXED INCOME:
Treasuries are cheaper across the curve as trading resumes after Monday’s US holiday, with the long end leading losses.
US yields are cheaper by as much as 7bp at long end, steepening 2s10s by nearly 3bp, 5s30s by nearly 4bp; 10-year, higher by ~5bp at 3.28%. Bunds and gilts outperform Treasuries, while Italian bonds extend recent gains after ECB’s Olli Rehn reiterated determination
to combat unwarranted spikes in borrowing costs for some of the region’s most vulnerable economies.
METALS:
Gold is trading in a narrow range after some volatility last week following shock US consumer price index data and the Fed’s
rate hike. St. Louis Fed President James Bullard warned Monday that US inflation expectations could become “unmoored” without credible action from the Fed. Meanwhile, Russia’s government and parliament are seeking to change rules on the sales and management
of the state’s precious metal and gem stockpiles. The Finance ministry proposed this week to put a portion of the country’s gold and gems into a special reserve that can be accessed in times of war. Spot gold is down 0.3%, silver -0.4%.
ENERGY:
Oil prices rose on high summer fuel demand while supplies remain tight because of sanctions on Russian oil. Oil prices
remain high because the market can’t see where additional supply is coming from to balance demand, Vitol Group’s CEO said in an interview. The Dutch government said on Monday it would remove a cap on production at coal-fired energy plants and will activate
the first phase of an energy crisis plan. Denmark has also initiated the first step of an emergency gas plan. Germany announced its latest plan to boost gas storage levels and said it could restart coal-fired power plants that it had aimed to phase out. Russian
gas flows to Germany through the Nord Stream 1 pipeline were still running at about 40% of capacity on Monday. Italy’s technical committee for gas is expected to meet today, and said it could declare a heightened state of alert on gas this week if Russia continues
to curb supplies. Treasury Secretary Janet Yellen said on Monday that the US is in talks with allies to further restrict Moscow’s energy revenue by imposing a price cap on Russian oil. WTI +2%, Brent +1.5%.
CURRENCIES:
The euro rose after a cluster of ECB speakers discuss the institution’s planned tool to tackle fragmentation in the euro-area,
with tightening yield spreads between Italian and German benchmark bonds supporting the euro. The British Pound gained after BOE Chief Economist Huw Pill said policy makers would sacrifice growth in order to bring down inflation in the UK. The US dollar fell
for a second day. US$ Index -0.4%, EURUSD +0.4%, EURJPY +1.2%, GBPUSD +0.1%, USDJPY +0.8%, AUDUSD -0.15%.
Bitcoin +4%, Ethereum +3.6%. Bitcoin is holding above $20,000 amid a tentative recovery and hopes that prices have bottomed.
Correlation with the Nasdaq has fallen by more than half from a record as crypto losses have outpaced pain for equities. Some digital token watchers are now pointing to signs of a bottom, with Glassnode in particular saying we may be reaching a point of seller
exhaustion after losses on Bitcoin holdings hit a record.
TECHNICAL LEVELS:
ESU |
10 Year Yield |
Aug Gold |
July WTI |
$ Index |
|
Resistance |
3854.00 |
4.650% |
1966.6 |
117.80 |
109.240 |
|
3800.00 |
4.300% |
1931.9 |
115.35 |
107.310 |
|
3760/65 |
4.000% |
1897.2 |
113.65 |
106.800 |
|
3710/15 |
3.770% |
1882.0 |
111.93 |
106.000 |
|
3681.00 |
3.500% |
1839.0 |
108.94 |
105.650 |
Settlement |
3675.75 |
1840.6 |
107.99 |
104.488 |
|
|
3658.00 |
3.200% |
1804.4 |
105.18 |
103.850 |
|
3639.00 |
2.900% |
1785/92 |
104.05 |
102.790 |
|
3600.00 |
2.580% |
1760.0 |
102.65 |
102.250 |
|
3550.00 |
2.300% |
1721.00 |
100.90 |
101.100 |
Support |
3500/02* |
1.950% |
1684.3* |
95.47 |
99.455 |
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:
- ABM Industries (ABM) raised to outperform at Baird; PT $50
- American Tower (AMT) raised to overweight at JPMorgan; PT $285
- Cargojet (CJT CN) raised to sector outperform at Scotiabank; PT C$190
- Chewy (CHWY) raised to outperform at Wedbush; PT $35
- Church & Dwight (CHD) raised to overweight at Wells Fargo; PT $95
- CubeSmart (CUBE) raised to buy at BofA
- FMC Corp (FMC) raised to buy at BofA
- LTC Properties (LTC) raised to market perform at BMO; PT $40
- Quebecor (QBR/B CN) raised to outperform at National Bank; PT C$32
- RCI/B CN (RCI/B CN) raised to buy at Veritas Investment Research Co
- Renasant (RNST) raised to outperform at Hovde Group; PT $34
- Rogers Communications (RCI/B CN) raised to buy at Canaccord; PT C$69
- STEP Energy (STEP CN) raised to strong buy at Raymond James; PT C$7.75
- Shaw Communications (SJR/B CN) raised to buy at Canaccord; PT C$40.50
- Suncor Energy (SU CN) raised to outperform at RBC; PT C$53
DOWNGRADES:
- Adobe (ADBE) cut to equal-weight at Morgan Stanley; PT $362
- Aveanna Healthcare (AVAH) cut to equal-weight at Stephens; PT $3.50
- Hyliion (HYLN) cut to underweight at JPMorgan
- International Paper (IP) cut to neutral at Citi
- Life Storage (LSI) cut to neutral at BofA; PT $133
- National Health Investors (NHI) cut to market perform at BMO; PT $62
- Natura &Co ADRs (NTCO3 BZ) cut to hold at Jefferies; PT $6
- Pennant Group (PNTG) cut to equal-weight at Stephens; PT $17
- Sea Ltd ADRs (SE) cut to sell at Tellimer; PT $60
- Sinopec ADRs (386 HK) cut to sell at Goldman; PT $41.09
- SunPower (SPWR) cut to sell at Goldman; PT $13
- Sunnova Energy (NOVA) cut to neutral at Goldman; PT $24
- Under Armour (UAA) cut to market perform at Cowen; PT $10
- WestRock (WRK) cut to neutral at Citi
INITIATIONS:
- 4Front Ventures Corp (FFNT CN) rated new speculative buy at Canaccord
- Arvinas (ARVN) rated new hold at Jefferies; PT $42
- Deveron (FARM CN) rated new strong buy at Raymond James; PT C$1.10
- Dream Residential REIT (DRR/U CN) rated new sector outperform at Scotiabank
- Freyr Battery (FREY) rated new neutral at Goldman; PT $8
- Inari Medical (NARI) rated new overweight at Piper Sandler; PT $100
- Innergex Renewable Energy (INE CN) rated new buy at Cormark Securities
- KE Holdings ADRs (2423 HK) rated new buy at Citi; PT $22.50
- Mainz Biomed (MYNZ) rated new buy at HC Wainwright; PT $25
- Maxar Technologies (MAXR) rated new overweight at Wells Fargo; PT $39
- Odyssey Marine (OMEX) rated new buy at EF Hutton; PT $7.50
- Offerpad Solutions (OPAD) rated new buy at Compass Point; PT $5.50
- Opendoor Technologies (OPEN) rated new neutral at Compass Point; PT $6
- Palantir (PLTR) rated new buy at BofA; PT $13
- Rexford Industrial (REXR) rated new peerperform at Wolfe; PT $63
- Rocket Lab USA (RKLB) rated new equal-weight at Wells Fargo; PT $5
- Symbotic (SYM) rated new outperform at Cowen; PT $18
- Tenaya (TNYA) rated new outperform at LifeSci Capital; PT $25
- Tenon Medical (TNON) rated new speculative buy at Benchmark; PT $6
- Veeva (VEEV) rated new buy at Guggenheim; PT $252
- Virgin Galactic (SPCE) rated new underweight at Wells Fargo; PT $4
David Wienke
Cabrera Capital Markets, LLC