Daily Game Plan

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

TODAY’S ECONOMIC DATA:  8:30ET Initial Jobless Claims,
PPI Final Demand; 12:00ET Fed’s Williams interviews Janet Yellen; 1:00ET 30-Year Bond Auction; 4:30ET Tesla annual meeting, including vote on Elon Musk pay

US MAY PRODUCER PRICES FALL 0.2% M/M; EST. 0.1% / US MAY PRODUCER PRICES RISE 2.2% Y/Y; EST. 2.5%

HIGHLIGHTS and News:  

• Shelter CPI has now been above 5% for 26 straight months, the longest period of elevated housing inflation since the early 1980s; food prices, now up 21.2% since Jan ’21
• Florida declared a state of emergency for southern parts of the state as record downpours disrupted flights at major airports
• Trump will meet today with JPMorgan’s Jamie Dimon, Citi’s Jane Fraser, BofA’s Brian Moynihan and Apple’s Tim Cook, among other business execs
  
• US Open begins; only four golfers have finished the previous three Opens below par

Global equities retreated from record highs as the world digests yesterday’s commentary from the Fed as well as concerns closer to home. The Bank of Japan is widely
expected to consider reducing its bond purchases as it moves toward quantitative tightening, with investors also alert for signals on the prospects for an interest-rate hike in July. Emerging-market stocks rose for a second day, boosted by tech shares in Asia
trade. Javier Milei’s reform package won a major victory as the Senate approved the Argentine president’s omnibus bill in a second round of razor-thin voting.

EQUITIES: Futures spike and yields decline after the PPI data.

US equity futures are mixed ahead of PPI, as traders weighed Wednesday’s softer US inflation print against the Fed’s more hawkish tone on interest rates. Cooler-than-expected consumer
price data reduced concerns on US interest rates, even after the Fed dialed back expectations for cuts this year to just one. PPI data this morning may offer more signals. Tesla shares jumped over 6% post-market after Elon Musk said preliminary results for
proposals to re-ratify his $56B pay package and move Tesla’s legal home to Texas were passing by “wide margins.”   Mutual funds have been upping their technology positions since the beginning of 2024 — while cutting exposure everywhere else. That’s pushed
their overweight on the group to an all-time high, data compiled by Barclays strategists show.

Futures ahead of the bell: E-Mini S&P +0.2%, Nasdaq +0.7%, Russell 2000 -0.3%, DJI -0.2%.

In pre-market trading, Broadcom (AVGO) rose 12% after the chip supplier reported second-quarter results that beat expectations and gave a positive forecast. Net revenue for the latest
quarter was ~$12.5B, up from $8.73B a year earlier. Dave & Buster’s (PLAY) shares slide 10% after the restaurant chain reported first-quarter revenue and earnings per share that missed consensus estimates. Virgin Galactic (SPCE) fell 8% after the space tourism
firm’s board approved a 1-for-20 reverse split.  Stellantis (STLA) falls 2% ahead of its investor day.

Communication Services sector underperformed relative to the S&P 500, with XLC vs SPY back to the key 200dma.

Consumer Discretionary (+0.8%) shares sharply outperformed Staples (-1%) yesterday.

European gauges are under pressure as ECB Governing Council member Joachim Nagel warned that consumer price growth in the euro zone is proving stubborn. However, inflation in Europe and
the UK is lower than in the US. Euro area industrial production unexpectedly fell 0.1% month on month in April. The Stoxx 600 dropped as much as 1% after advancing the most in a month following the softer US inflation print. Autos lead losses as China signaled
it would respond to the EU’s move to slap tariffs of up to 38.1% on China-made electric vehicles. Banks are lower as well, not only pointed to the market’s changed outlook on rates but also the uncertainty caused by this week’s sharp swing to the right in
EU elections. All major sectors in the red. Stoxx 600 -0.7%, DAX -1%, CAC -1.1%, FTSE 100 -0.3%. Autos -2.2%, Chemicals -1.5%, Construction and Fin Services -1.3%. Media is flat.

Shares in Asia were mixed, with weakness in Japan countering advances in technology shares triggered by lowered concerns on Federal Reserve policy. The MSCI Asia Index fluctuated in a
tight range, ending just slightly lower. Tencent and TSMC were among the biggest boosts while Toyota fell. Japanese stocks declined as investors took a cautious stance ahead of the BOJ’s policy decision tomorrow. Chinese electric-vehicle stocks gained as analysts
said the European Union’s preliminary announcement of tariff increases was in line with market expectations and manageable. Taiwan +1.2%, Kospi +1%, Hang Seng Index +1%, Singapore +0.5%, ASX 200 +0.4%, Sensex +0.3%, Vietnam +0.1%. Philippines -0.3%, CSI 300
-0.5%, Topix -0.9%.

FIXED INCOME: 
 

Treasuries are narrowly mixed with yields within 1bp of Wednesday’s closing levels, outperforming gilts which are cheaper by 4bp-5bp. US 10-year at around 4.31%.
while curves are mixed. Swap traders are currently pricing in a 25-basis-point rate cut by November, with a 75% likelihood of a similar reduction by year-end. That compares with a 50% chance of a second cut two days ago. The European Union’s bonds fell after
MSCI Inc. said it won’t add the bloc’s debt to its range of government bond indexes. Focal points of US session include PPI print and 30-year bond reopening, following strong demand for Tuesday’s 10-year sale.

METALS: 

Gold is lower after the Federal Reserve projected just one interest rate reduction this year, dashing investors’ hopes of two cuts, while a cooler-than-expected inflation
report limited the dip. The Fed is unlikely to take action until either a more convincing decline in price pressures is seen or unemployment rate jumps.  Spot gold -0.8%, silver -2%.

ENERGY:   

Oil prices dipped after a three-day advance as traders continued to weigh an unexpected build in US crude stockpiles and the prospect of tighter-for-longer US monetary
policy. Traders are also watching ongoing talks for a ceasefire in Gaza, which, if resolved, would reduce fears of potential supply disruptions from the oil producing region. Singapore’s port, already one of the busiest in the world, is facing a sustained
period of congestion as vessel diversions to avoid the Red Sea push more container ships to the Asian maritime hub. European natural gas prices extended gains as disruptions from Australia to Germany threaten the region’s balance of supplies.  WTI -0.9%, Brent
-0.7%, US Nat Gas -2%, RBOB -0.4%.

CURRENCIES:   

In currency markets, the yen slipped, erasing Wednesday’s advance, with focus shifting to the Bank of Japan’s policy decision on Friday. The euro fell, after what
had been its best day of the year, albeit after three days of politics-driven losses. Mexico’s peso gained after the country paid off a dollar bond due next year in a bid to calm a market selloff. Banxico said it’s ready to intervene in the peso if volatility
becomes “extreme.”  US$ Index +0.3%, GBPUSD -0.2%, EURUSD -0.25%, USDJPY +0.3%, AUDUSD -0.3%, USDCHF +0.25%, NZDUSD -0.3%, USDNOK +0.3%.

Spot Bitcoin +0.2%, Ethereum -1.5%.

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
• 3M Co (MMM) Raised to Outperform at Wolfe; PT $125
• PagSeguro (PAGS) Raised to Outperform at Bradesco BBI; PT $16
• PAR Technology (PAR) Raised to Overweight at Stephens; PT $60
• Zebra Tech (ZBRA) Raised to Neutral at BNPP Exane; PT $305
• Downgrades
• Cara Therapeutics (CARA) Cut to Neutral at HC Wainwright
• Cut to Hold at Needham
• Cut to Hold at Canaccord; PT $1
• Cut to Hold at Stifel; PT $1
• Corning (GLW) Cut to Equal-Weight at Morgan Stanley; PT $38
• Generac (GNRC) Cut to Neutral at Janney Montgomery; PT $154
• NextEra Energy Partners (NEP) Cut to Underweight at Barclays; PT $25
• Roper (ROP) Cut to Peerperform at Wolfe
• W R Berkley Corp (WRB) Cut to Neutral at Goldman; PT $83
• Initiations
• Ares Management (ARES) Resumed Hold at Deutsche Bank; PT $132
• Benitec Biopharma (BNTC) Rated New Overweight at Piper Sandler; PT $30
• Cassava Sciences (SAVA) Rated New Buy at Rodman & Renshaw
• Chipotle (CMG) Rated New Buy at Goldman
• Cincinnati Financial (CINF) Rated New Hold at Baptista Research
• Civitas Resources Inc (CIVI) Rated New Buy at TD Cowen; PT $90
• CNA Financial (CNA) Rated New Hold at Baptista Research; PT $47.10
• Cognition Therapeutics (CGTX) Rated New Buy at Rodman & Renshaw
• Coya Therapeutics (COYA) Rated New Buy at Rodman & Renshaw; PT $18
• Domino’s Pizza (DPZ) Rated New Buy at Goldman
• Enovis Corp (ENOV) Rated New Neutral at JPMorgan; PT $53
• Fabrinet (FN) Rated New Buy at Citic Securities; PT $239
• First American (FAF) Rated New Outperform at Baptista Research
• Goodyear (GT) Reinstated Equal-Weight at Morgan Stanley; PT $14
• Greenfire Resources (GFR) Rated New Outperform at BMO; PT $7.64
• HealWELL AI (AIDX CN) Rated New Buy at Stifel Canada; PT C$3.60
• Heron Therapeutics (HRTX) Rated New Buy at Rodman & Renshaw; PT $7
• Jack in the Box (JACK) Rated New Sell at Goldman
• Lexeo Therapeutics (LXEO) Rated New Outperform at Baird; PT $28
• Loews (L) Rated New Hold at Baptista Research; PT $82
• MannKind (MNKD) Rated New Buy at Rodman & Renshaw; PT $8
• Mereo Biopharma (MREO) ADRs Rated New Outperform at Baird; PT $8
• Netease (NTES) ADRs Rated New Equal-Weight at Barclays; PT $104
• Rani Therapeutics (RANI) Rated New Buy at Rodman & Renshaw; PT $10
• Reinsurance Group (RGA) Rated New Hold at Baptista Research
• Restaurant Brands (QSR CN) Rated New Buy at Goldman
• Scilex Holding (SCLX) Rated New Buy at Rodman & Renshaw; PT $13
• Shake Shack (SHAK) Rated New Buy at Goldman
• SQM (SQM/B CI) ADRs Rated New Buy at MBI Corredores De Bolsa; PT $55.88
• Starbucks (SBUX) Rated New Buy at Goldman
• Sweetgreen (SG) Rated New Buy at Goldman
• Trevi Therapeutics (TRVI) Rated New Buy at Rodman & Renshaw; PT $7
• W R Berkley Corp (WRB) Rated New Hold at Baptista Research; PT $87.10
• Wendy’s (WEN) Rated New Sell at Goldman
• Xiaomi (1810 HK) ADRs Rated New Overweight at Barclays; PT $15

Data sources: Bloomberg, Reuters, CQG