TODAY’S GAME PLAN: from the trading
desk, this is not research
TODAY’S ECONOMIC DATA: 9:00ET Fed’s Raphael Bostic speaks; 10:00ET New Home Sales,
Fed’s Jerome Powell speaks; 11:00ET KC Fed Services, Fed’s Patrick Harker speaks; 12:00ET Fed’s Austan Goolsbee speaks; 1:45ET Fed’s Austan Goolsbee speaks; 2:15ET Goolsbee speaks
again
HIGHLIGHTS and News:
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On this day in 1989, Pete Rose was banned from baseball
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Multiple casualties in Russian prison rebellion, hostages taken
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Trump threatened large tariffs on countries that don’t accept deported migrants if he’s elected
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Global equity funds see sharp inflows on Fed rate cut hopes
Global shares steadied near all-time highs, while the dollar languished around one-year lows ahead of a speech by the Fed’s Powell which markets will analyze for
guidance on the shape of US rate cuts. Markets are fully priced for a 25 bp rate cut in September and see a cut at each of the Fed’s three remaining meetings this year, and for one to be a larger 50 bp move. Bank of Japan Governor Kazuo Ueda’s comments that
the nation is still on a path toward higher interest rates added a layer of uncertainty to the market. Data out early in the day showed Japan’s core inflation accelerated for a third straight month, but a slowdown in demand-drive price gains suggest no urgency
for any immediate rate hikes. Meanwhile, Israeli negotiators arrived in Cairo for another round of Gaza cease-fire talks.
EQUITIES:
US equity futures are firmly higher as investors braced for a key speech from Federal Reserve Chairman Jerome Powell in Jackson Hole that could clarify the central bank’s plans for autumn
rate cuts. US equity funds saw their largest inflows in the seven days to Aug. 21, bolstered by bets of a Federal Reserve rate cut in September and easing worries about a potential downturn in economic growth. Powell’s address has been the main focus for traders
all week and markets took a hit on Thursday on concern he would push back on the market’s aggressive easing bets.
Futures ahead of the bell: E-Mini S&P +0.5%, Nasdaq +0.8%, Russell 2000 +0.45%, DJI +0.4%
In pre-market trading, Workday (WDAY) rises 13% after the software company said it would increase profitability over the next three years to enable strategic investments. Cava Group (CAVA)
climbs 9% after the fast-casual chain boosted its annual outlook for comparable sales following 2Q results that topped expectations. Las Vegas Sands (LVS) falls 1% after UBS cut the recommendation on the casino operator to neutral. Red Robin (RRGB) drops 14%
after it cut adjusted Ebitda guidance for the full year. Roku (ROKU) rises 4% after an upgrade to buy at Guggenheim. Ross Stores (ROST) climbs 5% after the off-price retailer boosted its earnings per share forecast for the full year. Uber (UBER US) slips 1%
after the company unveiled plans to start offering self-driving Cruise cars to customers on its ride-hailing platform next year. Topgolf Callaway Brands (MODG) falls 3% after Raymond James downgraded the golf company to underperform, citing the recent deterioration
in sales at its chain of driving ranges.
European gauges are higher, set for their longest weekly winning streak since March. The Euro Stoxx 600 is heading for a third straight week of gains. Retail and auto sectors outperform,
while technology stocks were the biggest laggards. Nestle shares tumbled early before paring some of its loss following the abrupt departure of CEO Mark Schneider from the world’s biggest food maker. Dino Polska SA slumped after a weaker-than-expected earnings
report. Stoxx 600 +0.25%, DAX +0.5%, CAC +0.45%, FTSE 100 +0.3%. Retail +0.8%, Autos +0.7%, Insurance +0.7%. Technology -0.5%, REITs -0.2%.
Asian equity markets ended mostly higher after swinging between gains and losses for much of the day, as traders weighed hawkish commentary from the Bank of Japan against expectations
of more easing by the Federal Reserve. The MSCI Asia Pacific Index gained 0.2%, with Alibaba shares erasing early losses to gain 1.2% after its shareholders approved a plan to upgrade its Hong Kong listing to primary status. Chinese tech shares underperformed,
as some of its larger member companies, including NetEase and Baidu, reported disappointing earnings. Mainland Chinese shares erased losses as the country’s housing regulator pledged to speed up the purchase of unsold apartments and turn them into affordable
housing. Equities in Indonesia continued to stand out as a bright spot in the region. Thailand +1%, Indonesia +0.7%, Topix +0.5%, Singapore +0.4%, CSI 300 +0.4%, Vietnam +0.2%, Taiwan +0.05%, Sensex +0.05%. ASX 200 -0.05%, Hang Seng Index -0.15%, Kospi -0.2%,
Hang Seng Tech Index -1.1%.
FIXED INCOME:
Treasuries marginally richer across the curve, keeping yields within 1bp of Thursday’s closing levels, in light trading ahead of Fed Chair Powell’s speech on the
economic outlook at the Jackson Hole Economic Policy Symposium. US 10-year yield is near 3.84%; curve spreads are roughly flat. Ahead of Powell’s Jackson Hole speech, historical analysis has shown that the event has not been a big market mover with a 10-year
yield move of less than 4 basis points on average.
METALS:
Gold is higher after two days of losses as investors positioned themselves for Federal Reserve Chair Jerome Powell’s speech that could shed light on a potential US
September interest rate cut. Fed policymakers on Thursday lined up in support of rate cuts starting next month now that inflation is well down from its highs and the US labor market is cooling. Traders are expecting a 74% chance of a 25 basis points cut in
September, while 26% expect a deeper 50 bps cut. Spot gold +0.6%, silver +1.5%.
ENERGY:
Oil prices firmed but are set to end the week lower, as weaker US employment data raised concerns over the health of the world’s largest oil consumer, and renewed
ceasefire talks in Gaza eased worries about supply. Morgan Stanley cut its Brent price estimate for the fourth quarter and through 2025 and also trimmed its global demand growth forecast. WTI and Brent hit their lowest since early January this week, after
the US government sharply lowered its estimate of jobs added by employers this year through March. WTI +2%, Brent +1.7%, US Nat Gas -1%, RBOB +1.5%.
CURRENCIES:
In currency markets, the Japanese yen rose as much as 0.7% versus the dollar before paring gains. In replies to lawmakers, Bank of Japan Governor Kazuo Ueda signaled
the central bank is still on the path to raise interest rates, provided inflation and economic data continue in line with its forecasts. He signaled that he doesn’t plan to rush ahead with the next rate hike, saying the BOJ needs to carefully watch the impact
of unstable financial markets on the inflation outlook. The dollar pared Thursday’s advance amid thin flows as markets await Fed Chief Jerome Powell’s speech. The euro inched higher. Governing Council member Boris Vujcic said the ECB probably has room to slowly
lower interest rates as inflation converges toward 2%, but risks remain and officials must proceed carefully. Sterling gained, nearly touching the July 2023 highs as BOE’s Bailey speaks later at Jackson Hole. US$ Index -0.1%, GBPUSD +0.25%, EURUSD +0.1%, USDJPY
-0.2%, AUDUSD +0.4%, USDCAD -0.2%, USDCHF -0.05%.
Spot Bitcoin +0.25%, Spot Ethereum +1.2%.
- Upgrades
- BBB Foods (TBBB) Raised to Hold at HSBC; PT $31
- Bilibili (BILI) ADRs Raised to Overweight at Barclays; PT $19
- BJ’s Wholesale (BJ) Raised to Overweight at Wells Fargo; PT $92
- Chewy (CHWY) Raised to Overweight at Piper Sandler
- Gaming and Leisure (GLPI) Raised to Outperform at Wolfe; PT $57
- Roku (ROKU) Raised to Buy at Guggenheim; PT $75
- Snowflake (SNOW) Raised to Hold at HSBC; PT $121
- Warby Parker (WRBY) Raised to Market Outperform at JMP; PT $20
- Westlake Corp (WLK) Raised to Outperform at RBC; PT $174
- Downgrades
- BILL Holdings Inc (BILL) Cut to Neutral at Goldman; PT $54
- Cyclo Therapeutics (CYTH) Cut to Neutral at HC Wainwright; PT 95 cents
- EQT Corp (EQT) Cut to Neutral at Citi; PT $37
- iQIYI (IQ) ADRs Cut to Hold at Benchmark
- Kore Group (KORE) Cut to Hold at TD Cowen; PT $2
- Las Vegas Sands (LVS) Cut to Neutral at UBS
- Peloton (PTON) Cut to Neutral at JPMorgan; PT $5
- Topgolf Callaway Brands (MODG) Cut to Underperform at Raymond James
- Initiations
- Dorian LPG (LPG) Rated New Buy at SEB Equities; PT $45
- Smurfit WestRock (SW) Rated New Buy at Redburn; PT $60
- Trade Desk (TTD) Reinstated Buy at William O’Neil
- Varex Imaging (VREX) Rated New Buy at B Riley; PT $21
Data sources: Bloomberg, Reuters, CQG
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