Daily Game Plan

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

TODAY’S ECONOMIC DATA:  8:30ET Initial Jobless Claims, Trade Balance Revisions

ECB CUTS MAIN REFINANCING RATE BY 25BPS TO 4.25%; EST. 4.25%. ECB NOT PRE-COMMITTING TO ANY PARTICULAR RATE PATH. ECB RAISES INFLATION FORECASTS FOR 2024, 2025.

HIGHLIGHTS and News:  

• Putin says Russia could deploy missiles in striking distance of the West
• Nvidia, Apple and Microsoft currently account for about 20% of the S&P 500 market value

Global stocks are higher following another set of record highs on Wall Street, as big tech stocks continue to power gains and investors extend bets on an autumn Fed
rate cut. Yesterday’s rate cut from the Bank of Canada added to hopes of an autumn Fed move, with investors focused on today’s European Central Bank decision. Economists expect the central bank to trim its key rate to 3.75% from the record high 4.0% level
it has been at since September, but what it does after that remains subject to much debate.  On the geopolitical front, Russian President Vladimir Putin said on Wednesday he could deploy conventional missiles within striking distance of the United States and
its European allies if they allowed Ukraine to strike deeper into Russia with long-range Western weapons.  He added that the West was wrong to assume Russia would never use nuclear weapons.     

EQUITIES:

US equity futures stalled overnight after hitting record highs that increasingly rests on chipmaker Nvidia and a handful of other giant stocks, reviving concerns that the market’s performance
has become tied to a cluster of companies. About 60% of the S&P 500’s total return this year has been driven by five companies whose shares have some of the heaviest weightings in the index: NVDA, MSFT, META, GOOGL and AMZN. The ten largest stocks in the S&P
500 have seen their weighting ballooned to 34% at the end of May, the highest-ever month-end weight for the index’s top ten, according to analysts at S&P Dow Jones Indices. Nvidia, Apple and Microsoft currently account for about 20% of the S&P 500. Microsoft,
Nvidia and Apple are now worth more combined than China’s stock market.      

Futures ahead of the bell: E-Mini S&P flat, Nasdaq +0.1%, Russell 2000 -0.5%, DJI -0.1%.

In pre-market trading, Nvidia (NVDA) Is up 1% after crossing $3 trillion in market valuation in the previous session that saw it overtake Apple as the world’s second
most valuable company. Lululemon Athletica (LULU) jumped more than 7% after the sports and leisurewear company posted stronger-than-expected first quarter earnings thanks in part to robust China sales. Five Below (FIVE) plunged 17% after slashing its current-quarter
and full-year sales forecasts following a disappointing first quarter update. Semtech (SMTC) shares are up 8.1% after the semiconductor device company reported first-quarter results that beat expectations. AI is expected to be a growth driver going forward.
Sprinklr (CXM) shares are down 22% after the social media management software company cut its full-year forecast for both revenue and subscription revenue. StoneCo (STNE) gains 2.5% following an upgrade to overweight from neutral by JPMorgan. ZIM Integrated Shipping
Services (ZIM) shares fall 8% after the stock is downgraded to sell from neutral at Citi.

DJIA has short term resistance at its 50 day mvg avg.

Equal weight S&P relative to the S&P 500.

Magnificent Seven earnings are expected to rise about 27% in 2024, against a 7.4% increase for the S&P 500 excluding those seven.

Utilities relative to the S&P 500 back at the key 200 day mvg avg

Homebuilders relative to the S&P

European gauges rallied to record highs ahead of a widely expected interest-rate reduction by European Central Bank. The Stoxx 600 Index gained steadily throughout the session, with technology
and healthcare shares leading gains. ASMLHolding NV and ASM International NV surged to record peaks on the back of gains in US tech shares. Novo Nordisk A/S climbed 4% to a record. SAP SE climbed after the German software company said it expects revenue growth
to accelerate beyond 2025. Private bank Julius Baer Group shed as much as 5.9% on speculation that it could take over rival EFG International, which spiked as much as 10%.  Stoxx 600 +0.75%, DAX +0.7%, CAC +0.5%, FTSE 100 +0.4%. Technology +1.8%, Healthcare
+1.4%, Food & Bev +0.8%  Telecomm -0.4%, Utilities -0.25%. 

Asian equities rose on expectations that the European Central Bank will cut rates, with softer US labor market data fueling hopes that the Fed might follow suit. Indian shares were near
the top of the leader board in the region, building on Wednesday’s gains as the country’s National Democratic Alliance appeared set to form the next government. Taiwan led gains while China small-cap underperformed. South Korea’s markets were closed for a
public holiday. Taiwan +~2%, Philippines +1.1%, Sensex +0.9%, ASX 200 +0.7%, Nikkei 225 +0.5%, Indonesia +0.4%, Hang Seng Index +0.3%. Vietnam -0.05%, CSI 300 -0.05%, Thailand -0.7%, CSI 1000 -2.2%.

FIXED INCOME: 
 

Treasury yields are higher across the curve following similar price action in bunds. Bond yields across Europe ticked higher ahead of the ECB meeting, as traders
waited to see if President Christine Lagarde might offer more guidance on the path for additional easing. Wagers on further ECB cuts have turned more cautious in the wake of data showing stronger-than-anticipated economic growth, inflation and wage increases.
Gilts outperform in sharp bull-steepening move as traders price in more aggressive path of Bank of England rate cuts. 10-year yield ~4.3%, curve is roughly flat. 

METALS: 

Gold is slightly higher after hitting a two-week high yesterday as US bond yields fell on signs of a cooling labor market, strengthening a case for a September interest
rate cut by the Federal Reserve. Investors are now awaiting the non-farm payrolls data on Friday for further clues. The Fed will likely cut its key interest rate in September and once more this year, according to a majority of forecasters in a Reuters poll.
Spot gold +0.3%, silver +1%.

ENERGY:   

Oil prices rose for a second session, with the Saudi energy minister warning that OPEC+’s planned production increases can be reversed. JPMorgan analysts pegged Brent
in the high $80s-$90 range by September, supported by summer inventory draws. Citigroup expects oil to be in the $70s during the second half of this year and then drop into the $60s next year. Saudi Aramco lowered prices for all of its oil to Asia next month,
the first reduction since February. WTI +1.1%, Brent +0.8%, US Nat Gas +3.5%, RBOB +0.7%

CURRENCIES:   

In currency markets, the euro fluctuated ahead of the ECB policy decision, with most traders sitting on their hands, waiting to see what the ECB signals for later.
Traders expect a quarter-point interest rate cut today, followed by a second by October and assign a 60% chance for a third cut in December. The dollar erased losses supported by a move lower in Treasuries. The yen reversed early gains to trade roughly flat. 
US$ Index +0.05%, GBPUSD -0.1%, EURUSD -0.03%, USDJPY +0.05%, AUDUSD -0.1%, USDCHF -0.2%, NZDUSD -0.25%.

Spot Bitcoin -0.1%, Ethereum -0.4%.

TECHNICAL LEVELS:  

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
• American Electric Power (AEP) Raised to Neutral at Ladenburg Thalmann
• Capital One (COF) Raised to Buy at Jefferies; PT $165
• EBay (EBAY) Raised to Buy at Citi; PT $64
• Geopark (GPRK) Raised to Outperform at Bradesco BBI; PT $17
• MEG Energy (MEG CN) Raised to Buy at TD Cowen; PT C$34
• Pinnacle West Capital (PNW) Raised to Buy at Ladenburg Thalmann
• Rubrik (RBRK) Raised to Outperform at BMO; PT $40
• Sealed Air (SEE) Raised to Buy at Mizuho Securities; PT $50
• StoneCo (STNE) Raised to Overweight at JPMorgan; PT $20
• Ultragenyx (RARE) Raised to Buy at Goldman
• United Airlines (UAL) Raised to Buy at Redburn; PT $70
• Downgrades
• 2Seventy Bio (TSVT) Cut to Sell at Goldman; PT $2
• Dollar Tree (DLTR) Cut to Neutral at Citi; PT $120
• Fluence Energy (FLNC) Cut to Neutral at Guggenheim
• HashiCorp (HCP) Cut to Market Perform at JMP
• Shopify (SHOP CN) Cut to Neutral at MoffettNathanson LLC; PT C$88.97
• Sprinklr (CXM) Cut to Neutral at DA Davidson; PT $9
• Cut to Neutral at Cantor; PT $10
• WalkMe (WKME) Cut to Hold at Needham
• ZIM Integrated Shipping (ZIM) Cut to Sell at Citi; PT $13
• Initiations
• AGNC Investment (AGNC) Rated New Buy at Janney Montgomery; PT $10.50
• Air Canada (AC CN) Rated New Hold at Jefferies; PT C$20
• Annaly (NLY) Rated New Buy at Janney Montgomery; PT $21
• Armour Residential (ARR) Rated New Neutral at Janney Montgomery
• CAE (CAE CN) Rated New Hold at Jefferies; PT $21
• Charles River (CRL) Rated New Buy at Goldman; PT $290
• Dutch Bros (BROS) Rated New Buy at William O’Neil
• Dynex Capital (DX) Rated New Buy at Janney Montgomery; PT $13.50
• Fortrea (FTRE) Rated New Neutral at Goldman; PT $28
• Geely Auto (175 HK) ZK US Rated New Buy at Deutsche Bank; PT $35
• Iamgold (IMG CN) Resumed Outperform at BMO; PT $5
• Icon (ICLR) Rated New Buy at Goldman; PT $370
• Invesco Mortgage (IVR) Rated New Buy at Janney Montgomery; PT $10
• Iqvia (IQV) Rated New Buy at Goldman; PT $270
• Lexeo Therapeutics (LXEO) Rated New Buy at HC Wainwright; PT $22
• Orchid Island (ORC) Rated New Buy at Janney Montgomery; PT $9.50
• Rio2 (RIO CN) Rated New Buy at Eight Capital; PT C$1.10
• TreeHouse (THS) Rated New Neutral at Mizuho Securities; PT $37
• Viridian Therapeutics Inc (VRDN) Rated New Buy at Goldman; PT $23

Data sources: Bloomberg, Reuters, CQG