Daily Game Plan

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

TODAY’S ECONOMIC DATA:  8:30ET Fed’s Goolsbee on CNBC; 9:45ET S&P Global US Services PMI, S&P Global US Composite
PMI; 10:00ET ISM Services Index

FED’S GOOLSBEE SAYS JOBS DATA NOT YET INDICATING RECESSION

HIGHLIGHTS and News:  

• Stock exchanges in Canada closed today for the Civic Holiday
  
• Hurricane Debby is expected to slam into the Big Bend region of Florida’s Gulf Coast by midday
  
• Goldman economists increased the probability of a US recession in the next year to 25%
• Nvidia’s upcoming AI chips will be delayed by three months or more due to design flaws, the Information reported
  
• 2-year yield is below the 10-year yield for the first time since July ‘22
• Aerosmith announced its retirement from touring

World stock markets are broadly lower as recession fears in the United States triggered a global sell-off. Fears that the Federal Reserve has gone a bit too far with
its monetary policy in terms of keeping rates restrictive for too long is creating negative sentiment that has spilled over into other markets. Stock markets from Asia to Europe took a beating and bond yields slid as investors rushed to safe-haven assets.
Global bonds rallied as traders bet the Federal Reserve and fellow central banks will turn more aggressive in cutting interest rates amid mounting concern that economic growth is faltering at a faster pace than expected just weeks ago. The global repricing
was so sharp that at one point the swap market assigned a 60% chance of an emergency rate reduction by the Federal Reserve over the coming week. Geopolitical tensions in the Middle East further added to the cautious sentiment as Israel braced for a possible
attack from Iran and regional militias.

EQUITIES:  

US equity futures tumbled overnight, with the Nasdaq 100 contracts falling nearly 5% and set for its biggest opening drop in more than four years as fears of the United States slipping
into a recession rippled through global markets. Megacap and growth stocks, the main drivers for the indexes hitting record highs earlier this year, fell sharply in premarket trading. Apple shares are sharply lower after Berkshire Hathaway slashed its stake
in the iPhone maker by almost 50%. Nvidia shares tumbled in early trading, extending its one-month decline to around 23% after reports of a delay in the launch of its upcoming artificial intelligence chips known as Blackwell, due to design flaws. Analysts
had expected Blackwell to generate revenues for Nvidia starting in the third quarter of this year. A slew of Fed officials will be speaking on the economy and monetary policy through the week.      

Futures ahead of the bell: E-Mini S&P -4.3%, Nasdaq -5.9%, Russell 2000 -5.3%, DJI -3%

In pre-market trading, Nvidia (NVDA) falls 12% as megacap technology stocks are bearing the brunt of the selloff. Apple (AAPL) -7%, Meta Platforms (META) -5% Microsoft Corp. (MSFT) -4%,
Tesla (TSLA) -9%. Berkshire Hathaway slashed its Apple stake by almost 50%, while its cash pile soared to a record $277B. Intel shares are down 7% after plunging 26% on Friday in its biggest drop since at least 1982.  Kellanova (K) rises 20% after Reuters
reported Mars was exploring an acquisition of the snack maker. Moderna (MRNA) drops 5% as RBC cut its rating to sector perform, noting an “increasingly uncertain outlook.”  

VIX is at a four-year high. Carry traders unwinding their positions fueled more volatility.

European gauges are extending last week’s decline amid a deepening global rout in equities and a rotation away from the technology shares that have powered this year’s rally. The Euro
Stoxx 600 fell as much as 3.2%, the steepest intraday drop since March 2022. All sectors declined, with energy and REIT shares sinking the most. London’s FTSE 100 plunged over 2.5% to hit its lowest in over three months. France’s CAC Index has now fallen more
than 10% from its recent peak, the technical definition of a correction. Among single stocks, L’Oreal SA said it is buying a 10% stake in Swiss skincare company Galderma Group AG. While L’Oreal fell with the rest of the market, Galderma rose as much as 6.6%.
Stoxx 600 -3.2%, DAX -3.3%, CAC -2.6%, FTSE 100 -2.9%. Energy -4.4%, REITs -4.4%, Banks -4.1%, Technology -4.1%. 

Shares in Asia plunged as fears of a deeper US economic slowdown and an extended rout in Japanese shares sapped risk appetite. A measure of implied volatility for the Nikkei 225 Stock
Average jumped a record 140% to its highest level since the global financial crisis in 2008.  Many equity indexes across the region hit bleak milestones, with those in export-reliant markets of Japan, Taiwan and Korea suffering the most. Circuit breakers temporarily
suspended trading of futures for the Topix as well as the Nikkei 225 Stock Average multiple times, while trading was also briefly halted for the Kospi and Kosdaq cash and futures markets in Seoul. The MSCI Asia Pacific Index sank as much as 6.7%, its worst
day since 2008, erasing all its gains for the year. The Topix and Nikkei 225 were pummeled, both ending down more than 12% and more than 20% off the year’s high, putting them into bear markets. Nikkei 225 -12.4%, Topix -12.2%, Kospi -8.8%, Taiwan -8.3%, Singapore
-4%, Vietnam -3.9%, ASX 200 -3.7%, Sensex -2.7%, Hang Seng Index -1.5%, CSI 300 -1.2%.

FIXED INCOME: 
 

Treasuries retain about half of their steep, front-end-led gains during Asia session and European morning, with 2-year yields richer by 14bp at around 3.75% after
falling nearly 27bp Friday. Similar gains seen in core European rates, where 2-year German yields are lower by around 11bp on the day. Investors continue to price in aggressive rate cuts by the Federal Reserve, with about 55bp of easing now priced in for September
FOMC meeting, 100bp by November’s. Traders priced in a 60% chance of a 25-bp emergency Fed rate cut within the next week as markets around the world extended their plunge. “I’m calling for a 75 basis point emergency cut in the Fed funds rate, with another
75 basis point cut indicated for next month at the September meeting – and that’s minimum,” says Wharton’s Jeremy Siegel. 2s10s spread is wider by almost 8bp and approaching dis-inversion for the first time since July 2022.

14 day RSI in 2-year and 10-year yield is at most oversold condition since March 2020.

METALS: 

Gold prices fell in volatile trading as investors liquidated positions in tandem with a broader equities sell-off, though analysts said bullion’s safe-haven appeal
remains strong as U.S. recession fears mount. Spot bullion — which neared a record high last week — declined over 3%.  Spot gold -3.05%, silver -7%.

ENERGY:   

Oil prices are sharply lower, pulled down by a continued rout in global equity markets. Geopolitical concerns remain an underlying factor for the oil market, with
traders waiting to see how Iran responds to the assassination of a top Hamas official on Iranian soil last week. Hurricane Debby is expected to slam into the Big Bend region of Florida’s Gulf Coast by midday today before slowly crossing the state, causing
potentially dangerous storm surges and catastrophic flooding, the National Hurricane Center said. The storm could bring “potentially historic rainfall” of between 10 and 20 inches and catastrophic flooding to Georgia and South Carolina, it said. Saudi Arabia
raised September prices of its flagship crude for Asian buyers, but the hike was less than expected. In Europe, it lowered prices by the most in more than four years. WTI -1.8%, Brent -1.6%, US Nat Gas -3.5%, RBOB -1.8%.

CURRENCIES:   

In currency markets, the yen and yuan pushed higher to start the week, while the Mexican peso extended its slump as traders continued to roll back the popular global
carry trades. The Australian dollar pared some of its losses following a 2% drop. Two currencies often used to fund carry trades jumped — the yen by more than 3% and China’s yuan by 1%. US$ Index -0.7%, GBPUSD -0.3%, EURUSD +0.5%, USDJPY -3%, AUDUSD -1%, USDNOK
+1%, USDCHF -1.1%.

Spot Bitcoin -14%, Spot Ethereum -18%. Crypto-linked stocks fell after Bitcoin
hit its lowest in five months. Coinbase Global (COIN) fell ~14%, U.S.-listed shares of Bitfarms fell over 15%, MicroStrategy (MSTR) slid 16% and Riot Platforms (RIOT) was down ~11%.  US exchange-traded funds for Bitcoin suffered their largest outflows in about
three months on Aug. 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
• Cboe (CBOE) Raised to Neutral at JPMorgan; PT $195
• Celanese (CE) Raised to Neutral at JPMorgan; PT $130
• DiamondRock Hospitality (DRH) Raised to Buy at Compass Point; PT $10
• EPR Properties (EPR) Raised to Outperform at RBC; PT $50
• ERO Copper (ERO CN) Raised to Buy at Jefferies; PT C$32
• Essent (ESNT) Raised to Outperform at KBW; PT $70
• First Business Financial (FBIZ) Raised to Buy at DA Davidson; PT $50
• Five9 (FIVN) Raised to Buy at BofA; PT $63
• Gulfport Energy (GPOR) Raised to Overweight at KeyBanc; PT $160
• Kellanova (K) Raised to Outperform at RBC; PT $76
• Raised to Outperform at BNPP Exane; PT $74
• Lockheed (LMT) Raised to Outperform at RBC; PT $600
• PayPal (PYPL) Raised to Buy at Phillip Secs; PT $80
• Prosperity Banc (PB) Raised to Overweight at Morgan Stanley; PT $86
• PSEG (PEG) Raised to Buy at Ladenburg Thalmann; PT $86.50
• Renasant (RNST) Raised to Outperform at Hovde Group; PT $39
• Raised to Overweight at Piper Sandler; PT $40
• Robinhood (HOOD) Raised to Neutral at Citi; PT $18
• Rocket Cos. (RKT) Raised to Market Perform at KBW; PT $17
• Valley National (VLY) Raised to Equal-Weight at Morgan Stanley
• Downgrades
• Academy Sports & Outdoors (ASO) Cut to Neutral at JPMorgan; PT $53
• Albemarle (ALB) Cut to Neutral at Baird; PT $85
• CACI (CACI) Cut to Market Perform at Raymond James
• Cullen/Frost (CFR) Cut to Underweight at Morgan Stanley; PT $121
• Definity Financial (DFY CN) Cut to Neutral at CIBC; PT C$51
• KB Home (KBH) Cut to Sell at Seaport Global Securities; PT $65
• Lennar (LEN) Cut to Neutral at Seaport Global Securities
• LGI Homes (LGIH) Cut to Sell at Seaport Global Securities; PT $85
• Meritage Homes (MTH) Cut to Sell at Seaport Global Securities; PT $153
• Middlesex Water (MSEX) Cut to Neutral at Baird; PT $58
• Mobileye (MBLY) Cut to Neutral at BNPP Exane; PT $17
• Cut to Neutral at Daiwa
• Moderna (MRNA) Cut to Sector Perform at RBC; PT $90
• Prologis (PLD) Cut to Sector Perform at RBC; PT $127
• PulteGroup (PHM) Cut to Neutral at Seaport Global Securities
• RCM (RCM) Cut to Hold at TD Cowen; PT $14.30
• Cut to Neutral at Citi; PT $14.30
• RLJ Lodging (RLJ) Cut to Neutral at Compass Point; PT $10
• Squarespace (SQSP) Cut to Neutral at Mizuho Securities; PT $44
• Telus International CDA (TIXT CN) Cut to Neutral at CIBC; PT C$6.93
• Cut to Sector Perform at RBC; PT C$6.93
• Cut to Market Perform at William Blair
• Cut to Speculative Buy at Canaccord
• Toll Brothers (TOL) Cut to Sell at Seaport Global Securities; PT $108
• Vertex Pharmaceuticals (VRTX) Cut to Equal-Weight at Barclays; PT $509
• Webster Financial (WBS) Cut to Equal-Weight at Morgan Stanley; PT $57
• Initiations
• First Bank/Hamilton NJ (FRBA) Reinstated Outperform at Hovde Group
• Mira Pharmaceuticals (MIRA) Rated New Buy at Ascendiant Capital Markets
• MKS Instruments (MKSI) Rated New Overweight at Morgan Stanley; PT $155
• Praxis Precision (PRAX) Rated New Outperform at Oppenheimer; PT $134

Data sources: Bloomberg, Reuters, CQG