Daily Game Plan

by Contributor
on October 8, 2024

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

TODAY’S ECONOMIC DATA:  8:30ET Trade Balance; 12:45ET Fed’s Bostic speaks; 1:00ET 3-Year Note Auction; 4:00ET Fed’s
Collins speaks; 7:30ET Fed’s Jefferson speaks

Current Market expectations for Fed Rate Cuts…-Nov 7, 2024: 25 bps cut to 4.50-4.75%-Dec 18, 2024: 25 bps cut to 4.25-4.50%-Jan 25, 2025: 25 bps cut to 4.00-4.25%-Mar 19, 2025: 25 bps
cut to 3.75-4.00%-May 7, 2025: No change

HIGHLIGHTS and News:  

  • Haiti condemns Dominican Republic’s plan to deport 10,000 migrants weekly
  • Rockets from Lebanon launched toward Haifa, Israel today
  • China disappointed investors, holding back from more major stimulus
  • Google is working with utilities around the globe to assess nuclear power as a possible energy source
  • Hurricane Milton downgraded to Category 4; top wind speed slowed to 155mph – NHC

 

Global stocks fell as China’s top economic planner ended a highly anticipated briefing on Tuesday without new stimulus measures, sparking a risk-off mood across markets.
The lack of details on China’s long-awaited fiscal stimulus caused a rally in Chinese shares to fizzle, sending Hong Kong stocks tumbling and dragging down European companies and oil prices. China said it’s confident in reaching its economic targets this year
and promised to further support growth, although it held back from offering more major stimulus in a disappointment to investors. The fallout spread to China-exposed assets around the world.     

 

EQUITIES:  

US equity futures rose, reversing an earlier slide, as traders turned their focus to inflation data due later this week. The inflation data is seen as especially key, given the possibility
that the ongoing US hurricane season and workers’ strikes will impact this month’s jobs print. The Fed is well positioned to pull off a soft landing, John Williams told the FT as he signaled support for slower easing. Alberto Musalem and Adriana Kugler called
for “gradual reductions” and a “balanced approach.”  US-listed Chinese shares are sharply lower ahead of the bell, after China’s latest pledge to support its economy disappointed investors who had hoped for a fresh wave of stimulus. On the corporate front,
big US banks kick off the earnings season in earnest from Friday, with guidance for the coming quarters seen as key.    

Futures ahead of the bell: E-Mini S&P +0.35%, Nasdaq +0.4%, Russell 2000 +0.1%, DJI +0.1%. 

 In pre-market trading, Super Micro Computer Inc. (SMCI) rose 5% after shipment data suggested robust demand for its servers, while Honeywell (HON) gained 2% as the
Wall Street Journal reported the industrial company plans to spin off its advanced materials division. PepsiCo fell after trimming its growth outlook for the year. DocuSign (DOCU) rises over 5% after S&P Dow Jones Indices said that the e-signature company
will join the S&P Midcap 400 Index before trading opens Oct. 11. PepsiCo (PEP) slips 1% as the company trimmed its revenue outlook for the year as a major recall hit volumes of its food and beverages. Sage Therapeutics (SAGE) drops 12% after posting disappointing
results from a Phase 2 study for a drug candidate aimed at treating mild dementia in Alzheimer’s disease. US firms with high revenue exposure to greater China, or a high reliance on Chinese consumers, also fall: Albemarle (ALB) -3%, Estee Lauder (EL) -2%,
Las Vegas Sands (LVS) -3%

European gauges with China-sensitive mining and luxury companies among the biggest losers. Defensive sectors like real estate, telecoms and consumer staples outperformed.
The Stoxx 600 recouped some of its early loss as ECB’s Centeno said the easing cycle will be faster than in June.  He added that the ECB must be careful and maintain gradualism in decisions. German industrial production rebounded in August after a 2.9% drop
a month earlier. Sweden’s core inflation fell to the Riksbank’s 2% target for the first time since 2021. Among individual names, Remy Cointreau SA slumped 8% as China imposed a levy on brandy from the European Union. Continental AG slipped after reports it
has lined up banks to help with the separation of its struggling car parts business. Stoxx 600 -0.5%, DAX -0.2%, CAC -0.6%, FTSE 100 -1%. Basic Resources -3.8%, Household Goods -1.2%, Energy -0.9%. Telecomm +0.4%, Utilities +0.2%.

Shares in Asia were mostly lower as gains in Chinese stocks quickly evaporated after a strong open. The MSCI Asia Pacific Index dropped 1.7%, led by Chinese tech names.
China’s stock markets roared back from a week-long break and climbed to their highest levels in more than two years at the open, but lost steam after officials failed to inspire confidence in stimulus plans intended to turnaround a sputtering economy. The
CSI semiconductor sub-index surged 17%, and the brokers sub-index gained over 10%. However, mainland property developers in Hong Kong fell 15.5%, the biggest one-day percentage drop on record. The Hang Seng Index closed 9.4% lower – its heaviest fall since
2008. The onshore CSI 300 Index jumped 11% in early trading before paring its advance to ~6%. Shares declined in Japan, South Korea and Australia on tensions in the Middle East and bets for a smaller Federal Reserve rate cut took a toll. Shanghai Composite
+4.6%, Sensex +0.7%, Indonesia +0.7%, Vietnam +0.15%. ASX 200 -0.35%, Taiwan -0.4%, Kospi -0.6%, Topix -1.5%, Hang Seng Index -9.4%, Hang Seng Tech -12.8%.

FIXED INCOME: 
 

Treasuries are mixed with the curve steeper as front-end outperforms, unwinding a portion of Monday’s losses. US session includes three scheduled Fed speakers, and
the monthly 3-year note auction. Auction series also includes $39b 10-year and $22b 30-year reopenings Wednesday and Thursday. 2-year yields, still richer ~2bp on the day, off session lows, while 20- and 30-year are slightly cheaper. 10-year yield steady around
4.03%.  Traders are pricing a rate cut of less than a quarter-point at the Fed’s November meeting, though they still see about 48 basis points of policy easing by year-end.

 

 

METALS: 

Gold reversed earlier losses to trade slightly higher as traders await Fed minutes and US inflation data due on Wednesday and Thursday that could offer further clues
on the interest-rate path. Spot gold +0.3%, Silver -0.9%, Copper -2.3%.

 

 

ENERGY:   

 

Commodity markets also felt the lack of fresh China stimulus, with Brent crude futures dropping about 2%, snapping a five-day rally.  Hurricane Milton is set to approach
the Florida peninsula as a catastrophic Category 4 storm, downgraded from its earlier Category 5 status, and is bearing down on a region still struggling to recover from Helene’s devastation. Milton’s top wind speed slowed slightly to 155 miles per hour, the
US National Hurricane Center said. Millions have been ordered to evacuate from the Tampa Bay area, which may take a direct hit for the first time since 1921. WTI -2.1%, Brent -2%, US Nat Gas -0.5%, RBOB -1.6%.

 

 

 

CURRENCIES:   

In currency markets, dollar traded mixed versus its Group-of-10 peers while the Aussie underperformed as optimism around China fades. AUDUSD heads for a fourth daily
drop, its longest losing streak since July. Leveraged funds bought the yen for the Aussie and kiwi as tensions in the Middle East fueled demand for havens, according to traders. Sterling is higher as stronger-than-expected retail sales data also offered support
during the Asia session. US$ Index -0.15%, GBPUSD +0.2%, EURUSD +0.05%, USDJPY -0.15%, AUDUSD -0.3%, NZDUSD -0.05%, USDCHF +0.35%.

 

 

 

Spot Bitcoin -0.7%, Spot Ethereum -0.2%   

 

 

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
    • Affirm Holdings (AFRM) Raised to Buy at BTIG
    • Canadian Natural Resources (CNQ CN) Raised to Buy at Desjardins
    • Cemex (CEMEXCPO MM) ADRs Raised to Sector Perform at RBC; PT $6.50
    • Humana (HUM) Raised to Outperform at Bernstein; PT $308
    • Sun Country Airlines (SNCY) Raised to Outperform at Wolfe; PT $14
    • UFP Packaging (UFPI) Raised to Outperform at Wedbush; PT $155
    • UWM Holdings (UWMC) Raised to Equal-Weight at Barclays; PT $8
    • Waters (WAT) Raised to Buy at Jefferies; PT $415
    • Wells Fargo (WFC) Raised to Outperform at Wolfe; PT $65
  • Downgrades
    • AB InBev (ABI BB) ADRs Cut to Hold at TD Cowen
    • Albemarle (ALB) Cut to Hold at CFRA; PT $99
    • American Express (AXP) Cut to Sell at BTIG; PT $230
      • Cut to Hold at HSBC
    • CME Group (CME) Cut to Neutral at Redburn; PT $244
    • Constellation Brands (STZ) Cut to Hold at TD Cowen
    • Frontier (FYBR) Cut to Hold at TD Cowen; PT $38.50
    • Microsoft (MSFT) Cut to Perform at Oppenheimer
    • OneMain (OMF) Cut to Equal-Weight at Barclays; PT $46
    • Otis Worldwide (OTIS) Cut to Peerperform at Wolfe
    • Qualcomm (QCOM) Cut to Sector Weight at KeyBanc
    • SAP (SAP GR) ADRs Cut to Neutral at President Capital Management; PT $245
    • Synaptics (SYNA) Cut to Sector Weight at KeyBanc
  • Initiations
    • Abbott (ABT) Rated New Outperform at Oppenheimer; PT $130
    • ACRES Commercial Realty (ACR) Rated New Hold at JonesTrading
    • AMD (AMD) Rated New Buy at ABC International; PT $186.30
    • Arcellx (ACLX) Rated New Buy at Redburn; PT $109
    • Archrock (AROC) Reinstated Buy at William O’Neil
    • Arcus Biosciences (RCUS) Rated New Overweight at Wells Fargo; PT $29
    • Bicara Therapeutics (BCAX) Rated New Overweight at Cantor
      • Rated New Buy at TD Cowen
      • Rated New Overweight at Morgan Stanley
      • Rated New Buy at Stifel; PT $47
    • Cion Investment (CION) Rated New Market Perform at Oppenheimer; PT $13
    • Cloudflare (NET) Rated New Underperform at BNPP Exane; PT $65
    • CrowdStrike (CRWD) Rated New Neutral at BNPP Exane; PT $285
    • Curbline Properties Rated New Neutral at Citi; PT $25
    • Datadog (DDOG) Rated New Outperform at BNPP Exane; PT $150
    • Dynatrace (DT) Rated New Neutral at BNPP Exane; PT $52
    • Envista Holdings (NVST) Rated New Equal-Weight at Wells Fargo; PT $20
    • First National (FXNC) Rated New Outperform at Hovde Group; PT $22
    • Frontline PLC (FRO) Rated New Buy at SpareBank; PT $29.61
    • Howmet Aerospace (HWM) Rated New Positive at Susquehanna; PT $120
    • Legend Biotech (LEGN) ADRs Rated New Buy at Redburn; PT $86
    • MBX Biosciences (MBX) Rated New Overweight at JPMorgan; PT $30
      • Rated New Buy at Guggenheim; PT $44
      • Rated New Buy at Jefferies; PT $35
      • Rated New Buy at Stifel; PT $40
    • Palo Alto Networks (PANW) Rated New Outperform at BNPP Exane; PT $410
    • Samsara (IOT) Rated New Neutral at BNPP Exane; PT $46
    • Solventum (SOLV) Rated New Buy at Stifel; PT $82
    • South Bow (SOBO CN) Rated New Hold at Jefferies; PT C$32
    • Veeva (VEEV) Rated New Outperform at BNPP Exane; PT $286
    • Viking Holdings (VIK) Rated New Buy at William O’Neil
    • Zenas Biopharma (ZBIO) Rated New Overweight at Morgan Stanley; PT $40
      • Rated New Buy at Jefferies; PT $35
      • Rated New Buy at Guggenheim; PT $45
      • Rated New Buy at Citi; PT $27
    • Zscaler (ZS) Rated New Neutral at BNPP Exane; PT $180

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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