Daily Game Plan

by Contributor
on October 3, 2024

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

TODAY’S ECONOMIC DATA:  8:30ET Initial Jobless Claims; 9:45ET S&P Global US Services PMI; 10:00ET Factory Orders,
Durable Goods Orders, ISM Services, Fed’s Schmid speaks; 10:40ET Fed’s Kashkari and Bostic speak

HIGHLIGHTS and News:  

  • US households’ stock allocation as a percentage of financial assets hit a new record of 41.8% in Q2
  • China Ready for $1.4 Trillion Fiscal Bazooka, Top Economist Says
  • Israeli military says it ‘eliminated’ Hamas government chief in Gaza
  • Stephen Ross may sell stakes in the Miami Dolphins to Ares and Joe Tsai

 

Global stocks fell and are on course for their first weekly loss in four as the world monitors Israel’s response to a missile strike by Iran. Israel’s warplanes bombed
Beirut overnight, after eight of its soldiers were killed in southern Lebanon in ongoing ground battles against Hezbollah. The IDF said it killed 15 Hezbollah militants in an overnight airstrike on a local government building used by the group.  A drone attack
also took place on a weapons-storage facility in Syria near Russia’s biggest airbase there. No one has claimed responsibility for that strike. Swiss inflation weakened to 0.8% in September, the slowest pace in more than three years, suggesting further monetary
easing by the country’s central bank. Private-sector activity in Italy contracted for the first time this year.

 

EQUITIES:  

US equity futures fell as the risk of escalating conflict in the Middle East damped risk appetite ahead of economic data that may shed more light on the Federal Reserve’s policy path.
Stronger-than-expected ADP jobs data on Wednesday led traders to pare bets on aggressive Fed rate cuts. President Biden ratcheted up pressure on US port employers and shipping lines to restart talks with striking dock workers, warning that the unfolding strike
could turn into a “man-made disaster.”

Futures ahead of the bell: E-Mini S&P -0.1%, Nasdaq -0.2%, Russell 2000 -0.4%, DJI -0.2%. 

In pre-market trading, Nvidia rose 1.5% as Jensen Huang told CNBC that demand for its new Blackwell chip is “insane.” Nvidia insiders have cashed in on shares worth
more than $1.8 billion so far this year.  Levi Strauss (LEVI) shares slumped 11% after the apparel company lowered its revenue growth outlook for the full year. US-listed China stocks are sliding after big gains this week. EVgo (EVGO) rises 12% after JPMorgan
upgraded the EV charging firm on the view that companies like EVgo, which have an owner-operator model, will outperform peers. Hims & Hers Health (HIMS) drops 9% as the FDA said Eli Lilly’s weight-loss drugs are no longer considered to be in shortage in the
US. Wolfspeed (WOLF) declines 5% as Mizuho cut its recommendation of the semiconductor device company to underperform, noting slower global EV sales in second half and next year.

Communications Services relative to S&P 500.  After outperforming by more than 30% since October 2022, XLC vs SPY has been trading in this channel all of ’24. Hit the
top of the trend channel yesterday.

Energy sector ETF holding within the descending channel for now.

European gauges are mixed to lower as investors digested weak business activity survey data from the bloc. UK stocks outperformed as the pound weakened following a
report that BOE Governor Andrew Bailey held out the prospect for “bit more aggressive” interest-rate cuts. France’s CAC 40 benchmark underperformed, falling as much as 1%, after French President Emmanuel Macron endorsed a temporary tax on the country’s largest
companies. Italy is also planning a windfall levy on companies to narrow its deficit.  Auto, mining and construction shares are underperforming in Europe. German software maker SAP SE dropped after US prosecutors broadened a probe of potential price-fixing.
Stellantis NV shares were down more than 3% after the company slashed vehicle production in its key Italian market. Tesco Plc shares rose after the British supermarket operator hiked its profit outlook.  Stoxx 600 -0.4%, DAX -0.3%, CAC -0.6%, FTSE 100 +0.5%.
Autos -1.6%, Basic Resources -1.2%, Construction -1.1%, Technology -1%.

Shares in Asia fell as a historic rally in Chinese stocks in Hong Kong took a breather, as traders took profit following gains of more than 30% from a September low.
The MSCI Asia Pacific Index dropped .05%, weighed down by Chinese tech shares. The Hang Seng China Enterprises Index fell as much as 4.9% before finishing the day down 1.6%, snapping a 13-session run of gains. Chinese developers led the declines. The recent
surge in the Hang Seng Index led it to reach levels close to that at the end of 2021, when China’s property problem began to appear. A leading economist in China said the country has room to ramp up fiscal support for the economy by issuing as much as 10 trillion
yuan ($1.4 trillion) in special debt. Japan was the lone region to advance as the local currency weakened after new prime minister Shigeru Ishiba said the economy isn’t ready for another interest-rate increase. Mainland Chinese markets remain closed through
Oct. 7 for the Golden Week holidays. Taiwan’s market remained shut due to a typhoon, while South Korea is closed for a holiday. Hang Seng Tech -3.5%, Sensex -2.1%, Hang Seng Index -1.5%, Vietnam -0.8%, Thailand -0.6%, Indonesia -0.25%, Singapore -0.2%. Nikkei
225 +2%.

KWEB +56% from the August low is severly overbought (14 day RSI at 88).

Emerging markets continue to outperform the S&P 500 as EEM vs SPY holds above the 200dma in the pair.

FIXED INCOME: 
 

Treasury yields ticked up as the US trading day begins, amid steeper declines for most euro-zone bond markets and rising oil prices. UK bonds outperform after BOE
Governor hinted at more aggressive rate cuts. US yields are higher by 2bp-3bp, with intermediate sectors leading losses and curve spreads narrowly mixed; 10-year at 3.805% is about 2bp higher on the day.

 

 

METALS: 

Gold dipped as safe haven flows in the wider market have so far been muted. The metal is pressured by a stronger dollar after traders ramped up wagers on more dovish
pivots by Japanese and UK central banks this month. Traders are looking ahead to Friday’s nonfarm payrolls numbers report, which is the next gut-check on the health of the US economy. Spot gold -0.4%, Silver -1%, Copper -1.5%.

 

 

 

ENERGY:   

 

Oil prices rise for a third day as traders await Israel’s response against Iran. Brent crude climbed near $75 a barrel, on course for the longest run of daily gains
since August. A major strike by Israel on Iran’s oil-exporting capacity could take 1.5 million barrels of daily supplies off the market, Citi said.
Libya’s oil minister said the country lifts force majeure and will resume all oil production today. WTI +1.7%, Brent +1.5%, US Nat Gas +2%, RBOB +1.4%.

 

 

 

CURRENCIES:   

In currency markets, the pound declines over 1% against the dollar as traders add to bets on interest-rate cuts by the Bank of England following dovish comments from
Governor Andrew Bailey. Bailey said that the BOE could become a “bit more aggressive” and “a bit more activist” in its approach to cutting rates if the news on inflation continued to be good. Sterling is on course for its worst day against the euro since 2022.
The yen slipped as PM Ishiba’s unexpected warning against raising rates is pushing back bets of another hike this year. The yen-centered carry trade that helped fuel a market meltdown in August is back on investors’ radars as the yen posted its biggest drop
in more than two years on Wednesday.  US$ Index +0.2%, GBPUSD -1.1%, EURUSD ~flat, USDJPY +0.1%, AUDUSD -0.5%, NZDUSD -0.65%, USDCHF is flat.

 

 

 

Spot Bitcoin %, Spot Ethereum %   

 

 

 

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
    • Enerflex (EFX CN) Raised to Sector Outperform at Peters & Co; PT C$12.75
    • EVgo (EVGO) Raised to Overweight at JPMorgan; PT $7
    • RTX Corp (RTX) Raised to Hold at Deutsche Bank; PT $129
    • Shoals Technologies (SHLS) Raised to Neutral at Citi; PT $5.50
    • Wolverine World Wide (WWW) Raised to Outperform at BNPP Exane; PT $22
  • Downgrades
    • Academy Sports & Outdoors (ASO) Cut to Inline at Evercore ISI; PT $60
    • BAT (BATS LN) ADRs Cut to Underweight at Morgan Stanley; PT $33
    • Blue Bird (BLBD) Cut to Neutral at Roth Capital Partners; PT $48
    • ChargePoint (CHPT) Cut to Underweight at JPMorgan
    • Conagra (CAG) Cut to Sell at CFRA
    • CoreCard (CCRD) Cut to Neutral at B Riley; PT $15
    • New Fortress Energy (NFE) Cut to Equal-Weight at Morgan Stanley
    • Stellantis (STLA) Cut to Equal-Weight at Barclays; PT $13.78
    • Tractor Supply (TSCO) Cut to Inline at Evercore ISI; PT $300
    • Verrica Pharma (VRCA) Cut to Hold at Needham
    • Voya Financial (VOYA) Cut to Neutral at JPMorgan; PT $87
    • Wolfspeed Inc (WOLF) Cut to Underperform at Mizuho Securities; PT $8
  • Initiations
    • AFC Gamma (AFCG) Sunrise Realty Trust Rated New Outperform at Raymond James
    • Bridgebio (BBIO) Rated New Perform at Oppenheimer
    • Cal-Maine (CALM) Resumed Equal-Weight at Stephens; PT $82
    • Casella Waste (CWST) Rated New Outperform at William Blair
    • Concentrix (CNXC) Rated New Outperform at Baird
    • Dianthus Therapeutics Inc (DNTH) Rated New Outperform at Oppenheimer
    • Enovis Corp (ENOV) Rated New Market Outperform at JMP; PT $62
    • Hormel (HRL) Resumed Equal-Weight at Stephens; PT $31
    • Larimar Therapeutics Inc (LRMR) Rated New Outperform at Wedbush; PT $22
    • Ligand Pharma (LGND) Rated New Outperform at Oppenheimer; PT $135
    • Liquidia (LQDA) Rated New Outperform at LifeSci Capital; PT $30
    • NLight (LASR) Rated New Overweight at Cantor; PT $15.50
    • Pilgrim’s Pride (PPC) Resumed Equal-Weight at Stephens; PT $43
    • Republic Services (RSG) Rated New Outperform at William Blair
    • Sila Realty Trust (SILA) Rated New Buy at Janney Montgomery; PT $28
    • South Bow (SOBO CN) Rated New Outperform at RBC; PT C$34
      • Rated New Sector Perform at ATB Capital; PT C$32
      • Rated New Sector Perform at National Bank; PT C$31
    • Two Harbors (TWO) Rated New Buy at Compass Point; PT $15.75
    • Tyson (TSN) Resumed Equal-Weight at Stephens; PT $57
    • Verona Pharma (VRP LN) ADRs Rated New Overweight at Wells Fargo; PT $50
    • WM (WM) Rated New Outperform at William Blair

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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