Daily Game Plan

by Contributor
on September 12, 2024

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

TODAY’S ECONOMIC DATA:  8:30ET PPI, Initial Jobless Claims; 1:00ET 30-Year Bond Auction

HIGHLIGHTS and News:  

  • Election officials raise ‘serious questions’ about US Postal Service ballot delivery plans

    link
  • Biden, Harris seek ‘full accountability’ after killing of US citizen in West Bank
  • ECB CUTS DEPOSIT FACILITY RATE BY 25BPS TO 3.5%, as expected
  • ECB CUTS GROWTH FORECASTS FOR EVERY YEAR THROUGH 2026
  • ECB TO KEEP RATES SUFFICIENTLY RESTRICTIVE AS LONG AS NEEDED

Global stocks rose, tracking gains in Asian markets as a tech-fueled rebound spread globally.  The prospect of another ECB rate cut today pinned shorter-term euro
zone borrowing costs near to their lowest level since the end of 2022.  The ECB’s second quarter-point rate cut of the cycle is almost certain, but how hard and fast it moves for the rest of the year still seems up in the air and this meeting will throw new
ECB staff forecasts into the mix. Some analysts are predicting faster cuts from the ECB, with Goldman Sachs predicting officials will deliver consecutive rate reductions starting in December, as opposed to one every other meeting.    

 

EQUITIES:  

US equity futures edged higher ahead of upcoming PPI data in the lead up to the Federal Reserve’s likely interest rate cut next week. Most megacap and growth stocks rose slightly in premarket
trading, after Nvidia gained 8% yesterday, helped by a media report that the US government is considering letting the company export advanced chips to Saudi Arabia. Sentiment in the name also improved following comments by the company’s CEO that it’s struggling
to meet strong demand for its AI-related products. In corporate news, OpenAI is in talks to raise $6.5 billion from investors at a valuation of $150B.

Futures ahead of the data: E-Mini S&P +0.2%, Nasdaq +0.2%, Russell 2000 +0.4%, DJI +0.2%

In pre-market trading, Alaska Air (ALK) rises 5% after the company increased its profit forecast for the current quarter, citing an improved revenue and fuel cost outlook. Caleres (CAL)
drops 15% after the footwear retailer reported 2Q sales and adjusted EPS that missed expectations and reduced its annual forecasts. Fulcrum Therapeutics (FULC) sinks 69% after its phase 3 REACH trial failed to achieve its primary endpoint. Moderna (MRNA) falls
8% after the company plans to slash its R&D budget by about 20% over the next three years. Netgear (NTGR) surges 22% after the company raised its 3Q revenue guidance. Signet (SIG) rises 9% after the company posted 2Q profit that topped estimates.

 

Information Technology was the big winner yesterday (+3.4%) after underperforming the last three weeks.

S&P 500 is outperforming its equal-weight equivalent after holding the 200dma in the pair.

European gauges are broadly higher as the European Central Bank is poised to cut interest rates again, bringing its key rate a quarter-point lower to 3.5%. Still, policymakers are taking
a cautious approach with inflation not fully defeated. The Euro Stoxx 600 jumped early, led by gains in Dutch chip-equipment maker ASML Holding NV. Miners, tech and industrials are the strongest performing sectors in Europe. Stoxx 600 +1.1%, DAX +1.2%, CAC
+0.9%, FTSE 100 +0.9%. Technology +2.7%, Basic Resources +2.4%, Retail +1.9%. Utilities lag, +0.1%.

Shares in Asia surged, boosted by gains in technology stocks, with the MSCI Asia Pacific Index climbing the most in almost a month. Japan’s Nikkei 225 Index led gains in the region, snapping
a seven-day slump as a pause in the yen’s strengthening trend boosted exporters including technology companies and automakers.  Semiconductor-related names like Tokyo Electron and Disco Corp. were up more than 4%. Meanwhile, Seven & i Holdings Co. touched
a record high since its 2005 listing, as Alimentation Couche-Tard Inc. is said to weigh a higher price in the takeover proposal for the Japanese convenience store operator. Regional tech-heavy share markets, Taiwan and South Korea were also near the top of
the leaderboard. Chinese shares slumped to their lowest level since early 2019. Nikkei 225 +3.4%, Taiwan +3%, Kospi +2.3%, Sensex +1.8%, Philippines +1.1%, ASX 200 +1.1%, Hang Seng Index +0.8%, Vietnam +0.25%. CSI 300 -0.4%.

FIXED INCOME: 
 

Treasuries yields are cheaper by around 2bp across the curve amid similar weakness in bunds ahead of European Central Bank decision. Gains for stocks globally and
oil futures also weigh. US session includes August PPI and weekly jobless claims data and 30-year bond reopening. US 10-year is around 3.67%. Curve spreads are within 1bp of Wednesday’s closing levels. After Wednesday’s inflation report, traders now see an
87% chance of the Fed cutting interest rates by 25 bps when it meets on Sept. 17-18, according to CME’s FedWatch Tool.

 

 

METALS: 

Gold rose on expectations of a US Federal Reserve rate cut next week, while palladium hit its highest in more than two months due to supply concerns from top producer
Russia. Traders are waiting for the US Producer Price Index for August; the initial jobless claims print today and the consumer sentiment data on Friday for more clues on the Fed’s path. Industrial bellwether metal copper is having its best day since July.
Spot gold +0.35%, silver +0.4%, copper +2%.

 

 

ENERGY:   

 

Oil prices extended gains as Hurricane Francine ripped through key oil-producing zones in the Gulf of Mexico, raising fears of lengthy production shutdowns in the
US. Hurricane Francine — which made landfall in Louisiana Wednesday — had forced the shut-in of about 670,000 barrels a day in the Gulf of Mexico. That’s equivalent to more than a third of the region’s oil production. Libyan oil exports fell around 81% last
week, Kpler data showed, as the National Oil Corporation cancelled cargoes amid a crisis over control of Libya’s central bank and oil revenue. The International Energy Agency said Thursday that global oil demand growth is slowing sharply as China’s economy
cools. It sees a glut next year even if OPEC+ prolongs supply cuts. WTI +1.5%, Brent +1.3%, US Nat Gas +1.2%, RBOB +0.8%.

 

 

 

CURRENCIES:   

In currency markets, the euro is steady versus the dollar and pound ahead of a widely expected 25bps interest-rate cut from the European Central Bank, with traders
looking to parse President Christine Lagarde’s address for guidance on the pace of easing. Traders will look for clues on whether the Governing Council may proceed with a consecutive cut next month; money markets assign a 32% probability on October easing. 
The dollar stayed within tight ranges versus its major peers. Traders no longer price the prospect of a 50 basis-point cut by the Fed next week.  US$ Index +0.05%, GBPUSD -0.01%, EURUSD +0.01%, USDJPY +.01%, AUDUSD +0.03%, USDNOK -0.15%, USDCHF +0.2%.

 

 

 

Spot Bitcoin +1%, Spot Ethereum ~flat.     

 

 

 

  • Upgrades
    • BILL Holdings Inc (BILL) Raised to Outperform at BNPP Exane; PT $90
    • Blackline Safety (BLN CN) Raised to Buy at Canaccord; PT C$7
    • Potlatch (PCH) Raised to Buy at BofA; PT $51
  • Downgrades
    • Dollarama (DOL CN) Cut to Equal-Weight at Wells Fargo; PT C$130
    • Micron (MU) Cut to Underperform at BNPP Exane; PT $67
    • Nordic American Tankers (NAT) Cut to Hold at Jefferies; PT $4
    • Simon Property (SPG) Cut to Hold at Stifel; PT $159
    • Tsakos Energy (TEN) Cut to Hold at Jefferies; PT $27
  • Initiations
    • Apollo Global (APO) Rated New Overweight at Wells Fargo; PT $132
    • Ares Management (ARES) Rated New Equal-Weight at Wells Fargo; PT $156
    • Asbury Auto (ABG) Rated New Equal-Weight at Stephens; PT $216
    • Atlas Engineered Products Ltd (AEP CN) Rated New Strong Buy at Raymond James; PT C$2.25
    • AutoNation (AN) Rated New Overweight at Stephens; PT $210
    • Benitec Biopharma (BNTC) Rated New Buy at Guggenheim; PT $17
    • BlackRock (BLK) Rated New Overweight at Wells Fargo; PT $1,000
    • Blackstone (BX) Rated New Overweight at Wells Fargo; PT $163
    • Bridge Investment Group (BRDG) Reinstated Overweight at Wells Fargo
    • Brookfield Asset Management (BAM CN) Reinstated Underweight at Wells Fargo; PT C$57.05
    • Carlyle Group (CG) Rated New Equal-Weight at Wells Fargo; PT $42
    • Carvana (CVNA) Rated New Overweight at Stephens; PT $190
    • Evercore (EVR) Rated New Equal-Weight at Wells Fargo; PT $258
    • Franklin Resources (BEN) Rated New Equal-Weight at Wells Fargo; PT $20
    • Group 1 Automotive (GPI) Rated New Equal-Weight at Stephens; PT $394
    • Hamilton Lane (HLNE) Rated New Equal-Weight at Wells Fargo; PT $156
    • Houlihan Lokey (HLI) Rated New Underweight at Wells Fargo; PT $149
    • Inozyme (INZY) Rated New Buy at Stifel; PT $16
    • Invesco (IVZ) Rated New Underweight at Wells Fargo; PT $16
    • Janus Henderson (JHG) Rated New Equal-Weight at Wells Fargo; PT $37
    • KKR & Co. (KKR) Rated New Equal-Weight at Wells Fargo; PT $130
    • Larimar Therapeutics Inc (LRMR) Rated New Buy at JonesTrading; PT $14
    • Lazard Inc (LAZ) Reinstated Equal-Weight at Wells Fargo; PT $51
    • Lithia & Driveway (LAD) Rated New Overweight at Stephens; PT $360
    • LPL Financial (LPLA) Rated New Equal-Weight at Wells Fargo; PT $235
    • Moelis & Co (MC) Rated New Equal-Weight at Wells Fargo; PT $70
    • Penske Automotive (PAG) Rated New Equal-Weight at Stephens; PT $161
    • Raymond James (RJF) Reinstated Overweight at Wells Fargo; PT $138
    • Rocket Lab USA (RKLB) Rated New Market Perform at JMP
    • Schwab (SCHW) Rated New Equal-Weight at Wells Fargo; PT $70
    • Sonic Automotive (SAH) Rated New Equal-Weight at Stephens; PT $64
    • Sprouts Farmers (SFM) Reinstated Sector Perform at RBC; PT $107
    • Stifel Financial (SF) Reinstated Overweight at Wells Fargo; PT $101
    • T. Rowe (TROW) Reinstated Equal-Weight at Wells Fargo; PT $109
    • TPG (TPG) Rated New Overweight at Wells Fargo; PT $60

 

 

 

 

 

 

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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