Daily Game Plan

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

TODAY’S ECONOMIC DATA:  8:30ET PPI Final Demand; 10:00ET U. of Mich. Sentiment

No Fed members are scheduled to speak today.

HIGHLIGHTS and News:  

• Russell 2000 index has not hit a new all-time high for 668 straight days, longest streak since 2007-2011
  
• US Spent A Record $140 Billion On Debt Interest In June, 30% Of All Tax Revenues
• US JUNE PRODUCER PRICES RISE 0.2% M/M; EST. +0.1%

Global stocks edged higher and are set for their sixth weekly advance, the longest stretch since March, as Fed easing bets aid overall risk sentiment. Thursday’s
inflation data raised bets that the Federal Reserve will be able to cut interest rates soon, with a reduction in September now fully priced in and at least two by year-end. Investors now await the US producer price index reading.  Global debt funds attracted
inflows for a 29th straight week. China’s exports beat. They rose 8.6% in dollar terms in June from last year while imports unexpectedly declined, pushing the trade surplus to a record.        

EQUITIES:

US equity futures are mixed, with small cap Russell 2000 futures outperforming for a second straight day. The Russell 2000 Index has risen ~5% this week, after cooler inflation data propelled
rate-cut bets. That compares to the S&P 500 Index’s 0.3% advance and the Nasdaq 100’s 0.9% decline. As Wall Street giants start the earnings cycle, investors start to switch to cheaper cyclical stocks including banks and out of tech megacaps. JPMorgan, the
first to report, beat estimates for second quarter investment banking revenue. Investors are now eyeing developments heading toward the US elections for further clues on potential geopolitical risks. President Biden vowed to stay in the presidential race despite
new gaffes during a press conference on the sidelines of the NATO summit. At least three House Democrats called on the president to step aside after the briefing.

Futures ahead of the bell: E-Mini S&P -0.1%, Nasdaq -0.2%, Russell 2000 +0.5%, DJI is flat.

In pre-market trading, JPMorgan Chase (JPM) falls 1% despite investment banking revenue beating estimates. Wells Fargo (WFC) falls 6% after warning that it won’t be able to whittle away
costs as fast it previously expected after the banking giant posted higher-than-expected expenses in the second quarter. AT&T (T) fell 2% after reporting it suffered a massive hack of customer data that included records of calls and texts for nearly all of
its mobile-phone users for six-months in 2022. Tesla (TSLA US) shares drop 2.1% after the electric-vehicle maker was cut to sell from neutral at UBS, which said the stock has rallied “too much, too soon,” making it increasingly difficult to justify its valuation.
The decline adds to Thursday’s selloff after the company postponed its planned Robotaxi unveiling to October. Bally’s (BALY) ticks 1% higher after securing a funding commitment from Gaming and Leisure Properties.

Stock rotation hit megacaps
and shifted into small caps, which typically benefit from lower borrowing costs.  Optimism over lower rates sparked a shift into riskier corners of the market — as money exited
the long-favored safety trade of big tech. The Russell 2000 of smaller firms beat the Nasdaq 100 by 5.8 percentage points. Even though the S&P 500 fell nearly 1%, almost 400 of its shares were up.  Homebuilders soared while banks rose ahead of the start of
their earnings season.

Momentum strategies that buy winning stocks and dump the losers have surged in 2024, with MTUM notching its strongest start to any year ever.

European gauges ticked higher with the Stoxx Europe 600 index gaining for a third day. Energy and retail sectors lead the advance, while utilities and real estate underperform. Second-quarter
earnings season is kicking into gear. Swedish network-equipment maker Ericsson AB surged more than 6% in early trading after reporting results that beat analysts’ expectations. Norwegian Air is up over 5% after reporting better-than-expected profit for the
period. Stoxx 600 +0.4%, DAX +0.3%, CAC +0.7%, FTSE 100 +0.2%. Energy +1%, Retail +0.9%, Media +0.8%. Utilities -0.4%, REITs -0.4%.

Shares in Asia were mixed to lower as tech shares tracked their US peers lower after slowing inflation data. Equities in Hong Kong outperformed amid prospects of lower borrowing costs.
The MSCI Asia Pacific Index fell 0.5% with TSMC, Samsung Electronics and Tokyo Electron among the biggest drags. Tech-heavy markets such as Taiwan, Japan and South Korea led declines in the region. Australian stocks scaled to a record high as most sectors
advanced, with financials contributing the most. Benchmarks in India also advanced after earnings from IT bellwether Tata Consultancy Services sparked a tech rally. Equities in mainland China fluctuated as traders rebalanced their holdings ahead of next week’s
Third Plenum. Property stocks climbed amid rising expectations of more support for the sector at the meeting. Hang Seng Index +2.6%, ASX 200 +0.9%, Sensex +0.8%, Singapore +0.6%, CSI 300 +0.1%. Vietnam -0.2%, Kospi -1.2%, Taiwan -2%, Nikkei 225 -2.5%.

FIXED INCOME: 
 

Treasuries were under light pressure as US trading gets under way, amid bigger losses in core European bond markets expecting an increase in French debt auction sizes
next week. Intermediates and long-end underperform. Long-end yields are higher by ~1bp with 2s10s spread steeper by ~1bp; US 10-year around 4.23%. A steepener is the most attractive trade heading into the US election as the market implements dovish FOMC trades,
Citi said.

METALS: 

Gold fell after a sharp rally on Thursday. Bullion is poised to record gains for the 3rd consecutive week, amid hopes that the US Federal Reserve will cut interest
rates in September. Bets of a September rate cut rose to 93% compared to a 70% chance before the data was released, according to the CME FedWatch Tool. Spot gold -0.5%, silver -2.2%.

ENERGY:   

Oil prices climbed for a third day on signs of stronger demand, and signals the Fed is getting close to its much-anticipated pivot. Indications of strong summer fuel
demand in the US kept prices buoyed. US gasoline demand hit 9.4 million barrels per day in the week ending July 5, the highest for Independence Day week since 2019. Jet fuel demand also showed strength.  WTI +1%, Brent +0.7%, US Nat Gas +0.3%, RBOB +0.6%.

CURRENCIES:   

In currency markets, the dollar headed for a third daily drop ahead of the US PPI data release. On Thursday, the dollar saw its biggest drop since May. The yen swung
between gains and losses in early trading before trading slightly weaker. Japan likely stepped into currency markets for a third time this year to prop up the yen soon after US inflation figures came out Thursday.  Japan’s top currency official downplayed
reports of intervention. US$ Index -0.15%, GBPUSD +0.4%, EURUSD +0.2%, USDJPY -0.15%, AUDUSD +0.25%, NZDUSD +0.3%, USDCHF -0.2%.

Spot Bitcoin -0.2%, Ethereum -1.2%.

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
• Array (ARRY) Raised to Buy at Citi
• Booking (BKNG) Raised to Buy at Benchmark
• Inter Parfums (IPAR) Raised to Buy at Jefferies; PT $140
• Osisko Gold Royalties (OR CN) Raised to Buy at Jefferies
• Downgrades
• Diageo (DGE LN) ADRs Cut to Sell at Goldman; PT $125
• Envestnet (ENV) Cut to Market Perform at JMP
• Heroux-Devtek (HRX CN) Cut to Sell at TD Cowen; PT C$32.50
• Marathon Oil (MRO) Cut to Sector Perform at Scotiabank; PT $29
• Spirit Aero (SPR) Cut to Neutral at Baird; PT $37.25
• Tesla (TSLA) Cut to Sell at UBS; PT $197
• UL Solutions (ULS) Cut to Neutral at Baird; PT $46
• Visteon (VC) Cut to Neutral at Baird; PT $120
• Vita Coco (COCO) Cut to Neutral at Piper Sandler; PT $28
• Initiations
• ARM Holdings PLC (ARM) ADRs Rated New Neutral at Fubon; PT $160
• Avidbank (AVBH) Rated New Neutral at Janney Montgomery; PT $21
• Carvana (CVNA) Rated New Buy at BTIG; PT $155
• Ess Tech (GWH) Rated New Buy at Roth MKM; PT $1.50
• Fluence Energy (FLNC) Rated New Sector Perform at Scotiabank; PT $21
• J Jill Inc (JILL) Rated New Buy at Jefferies; PT $44
• Kinsale Capital (KNSL) Rated New Market Perform at Oppenheimer
• Medpace Holdings (MEDP) Reinstated Buy at William O’Neil
• Plymouth (PLYM) Reinstated Neutral at Wedbush; PT $23
• Revolution Medicines (RVMD) Rated New Overweight at Barclays; PT $52
• Shopify (SHOP CN) Rated New Buy at Sealand Securities; PT C$107.69
• Six Flags Entertainment (FUN) Rated New Buy at Stifel; PT $68
• Skyward Specialty (SKWD) Rated New Market Perform at Oppenheimer
• Smurfit WestRock (SW) Rated New Overweight at JPMorgan; PT $66
• Rated New Sector Perform at RBC; PT $52
• Spotify (SPOT) Rated New Outperform at Wolfe; PT $390
• Stag Industrial (STAG) Rated New Neutral at Wedbush; PT $38
• Warner Music (WMG) Rated New Outperform at Wolfe; PT $37
• Western Alliance (WAL) Reinstated Buy at William O’Neil
• Y-mAbs (YMAB) Rated New Buy at JonesTrading; PT $23

Data sources: Bloomberg, Reuters, CQG