Daily Game Plan

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

TODAY’S ECONOMIC DATA:  8:30ET CPI*, Real Avg Hourly Earnings; 1:00ET 10-Year Note Auction

HIGHLIGHTS and News:  

• Moment of Silence at 9:20ET for 9-11
• US companies with fragile balance sheets and higher debt loads have outpaced their high-profitability peers by 3.5% thus far in Q3; best comeback since Q4 of 2022 
• ORCL – third straight quarter that the company has rallied 10%+ in reaction to earnings

Global stocks traded mixed as investors braced for a crucial US inflation report, the last major data release prior to next week’s Fed policy meeting, which is likely
to clarify market bets on near-term rate cuts. Worries over slowing growth in major economies have resurfaced this week with oil trading below $70 and global bond yields retreating to a two-year low. Data today showed Britain’s economy stagnated for a second
month running in July as manufacturing output dropped sharply and industrial production fell 1.2% versus expectations for a 0.1% drop. 

EQUITIES:  

US equity futures are slightly lower as investors’ attention is squarely on the US consumer price index report prior to the start of trading, where headline CPI is expected to have risen
0.2% on a month-on-month basis in August. That would probably keep Fed officials leaning toward a 25-bp rate cut next week, though any downside surprise may boost bets on a bigger move. Firms with the most fragile balance sheets and higher debt loads have
outpaced their sturdier brethren by 3.5 percentage points thus far in the third quarter — on pace for their best comeback since the final three months of 2022 when the US stock market began its current bull-market run and inflation peaked, according to data
compiled by Goldman Sachs.

Futures ahead of the data: E-Mini S&P -0.15%, Nasdaq -0.15%, Russell 2000 -0.1%, DJI -0.3%

In pre-market trading, Dave & Buster’s (PLAY) jumps 13% after the restaurant chain reported second-quarter profit that came in ahead of estimates. Cantaloupe (CTLP), a provider of payments
technology that’s used in self-serve kiosks, slips 4% after fiscal 4Q profit and revenue fell short of estimates. Designer Brands (DBI) drops 25% after the parent company of footwear and accessories chain DSW reported an unexpected decline in comparable sales
for its second quarter. GameStop (GME) slides 10% after the video-game retailer reported second-quarter net sales that disappointed. Trump Media & Technology (DJT) falls 13% following the US presidential debate. Viking Therapeutics (VKTX) rises 3% after JPMorgan
initiated coverage of the obesity drug developer with an bullish rating and ahead of obesity pill data.

ORCL – third straight quarter that the company has rallied 10%+ in reaction to earnings.

European gauges fluctuated before ticking higher and are currently at their highs of the day as investors awaited sensitive US inflation data. The Euro Stoxx 600 is being supported by
retailers after Zara-owner Inditex SA reported that sales were rising at the start of the third quarter. Banking stocks were also stronger after Italy’s UniCredit SpA bought shares in Commerzbank AG from the German government. Commerzbank is open to talks
about a potential tie-up after UniCredit built a 9% stake in the potential target, which was said to catch the German government off guard. Rentokil Initial Plc was among the worst performers, plunging as much as 20% after the pest control business issued
a surprise downgrade to its growth expectations. Stoxx 600 +0.5%, DAX +0.5%, CAC +0.4%, FTSE 100 +0.2%. Retail +2%, Technology +1.4%, Basic Resources +1.2%, Energy +1.1%, Banks +0.8%. 

Shares in Asia fell as weakness in Japan deepened amid a strengthening yen. The Topix index fell for a sixth straight day as concerns over the impact of a stronger local currency on exporters’
earnings lingered. The MSCI Asia Pacific Index fell 0.5%, with Toyota Motor, Samsung Electronics and Commonwealth Bank of Australia among the biggest drags. Chinese shares in Hong Kong and the mainland closed lower as investors continued to fret over the outlook
for Asia’s largest economy and as sentiment remained muted around the US presidential debate.  Topix -1.8%, Thailand -0.9%, Hang Seng Index -0.7%, Philippines -0.6%, Sensex -0.5%, Kospi -0.4%, CSI 300 -0.3%, ASX 200 -0.3%. Singapore +0.5%.  

FIXED INCOME: 
 

Treasuries are slightly richer across the curve with gains led by long-end after benchmark yields touched new year-to-date lows during the European morning. Key August
CPI data are in focus, with markets still in limbo about likely size of an expected Fed rate cut next week. The US session also includes a 10-year note reopening, following strong demand for Tuesday’s 3-year note auction. Long-end yields remain richer by ~3.5bps.
10-year yield is around 3.62%, down ~3bps, with the curve slightly flatter.

METALS: 

Gold is higher for a third straight day as traders anticipate US inflation data that could influence the Federal Reserve’s decision on interest rate cuts next week.
Traders in the US interest-rate options market are still betting on at least one 50 basis-point Fed rate cut this year, just probably not before the Nov. 5 election. Spot gold +0.2%, silver +1.5%.

ENERGY:   

Oil prices gained after dropping sharply in the previous session, as a drop in US crude inventories and concern about Hurricane Francine disrupting US output countered
concerns about weak global demand. WTI rebounded over 2% after plummeting as much as 5% on Tuesday. Hurricane Francine gained strength and is expected to make landfall in Louisiana today, after forcing some offshore oil platforms in the Gulf of Mexico to be
shuttered. Earlier forecasts that the storm would reach Category 2 have been revised downward. WTI +2.3%, Brent +2%, US Nat Gas +1.4%, RBOB +2.2%.

CURRENCIES:   

In currency markets, the dollar slipped as markets reacted to the US presidential debate in which Vice President Kamala Harris put Donald Trump on the defensive.
The yen strengthened to its highest level since late December, boosted by comments from Bank of Japan board member Junko Nakagawa who reiterated the central bank would continue to raise interest rates if the economy and inflation move in line with its forecasts.
The Mexican peso erased losses as Mexico’s Senate approved President AMLO’s controversial plan to overhaul the judicial system after a key opposition lawmaker switched sides to vote in favor. US$ Index -0.25%, GBPUSD +0.1%, EURUSD +0.3%, USDJPY -0.5%, AUDUSD
+0.2%, USDNOK -0.3%, USDCHF -0.05%.

Spot Bitcoin -1.2%, Spot Ethereum -2%.   

• Upgrades
• Antero Resources (AR) Raised to Outperform at Wolfe; PT $37
• Charter Communications (CHTR) Raised to Neutral at Citi; PT $350
• Evercore (EVR) Raised to Buy at Goldman; PT $276
• ONE Gas (OGS) Raised to Overweight at Wells Fargo; PT $80
• Williams-Sonoma (WSM) Raised to Buy at Jefferies; PT $156
• Downgrades
• Adicet Bio Inc (ACET) Cut to Neutral at HC Wainwright
• ANI Pharma (ANIP) Cut to Hold at Truist Secs; PT $60
• Morgan Stanley (MS) Cut to Neutral at Goldman; PT $105
• Salesforce Inc (CRM) Cut to Hold at Erste Group
• Supernus (SUPN) Cut to Neutral at Piper Sandler; PT $36
• Initiations
• Badger Meter (BMI) Rated New Buy at Seaport Global Securities; PT $235
• Canaan (CAN) ADRs Rated New Buy at Rosenblatt Securities Inc; PT $3
• Elastic (ESTC) Rated New Buy at Guggenheim; PT $100
• First Savings Finl (FSFG) Reinstated Market Perform at Hovde Group
• Payfare (PAY CN) Rated New Buy at Paradigm Capital; PT C$11.50
• Q32 Bio Inc (QTTB) Rated New Overweight at Wells Fargo; PT $95
• Up Fintech Holding (TIGR) ADRs Rated New Buy at Sealand Securities
• Viking Therapeutics (VKTX) Rated New Overweight at JPMorgan; PT $80

Data sources: Bloomberg, Reuters, CQG

David Wienke