Daily Game Plan

by Contributor
on October 16, 2024

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

TODAY’S ECONOMIC DATA:  ET 7:00 a.m: US MBA Mortgage Applications, 8:30 a.m.: US September Import Prices, 11:30
a.m.: US sells $64 billion 17-week bills

HIGHLIGHTS and News:  

  • Tom Brady won approval to buy a 10% stake in the Las Vegas Raiders, along with Knighthead co-founder Tom Wagner.
  • The Cboe Volatility Index, or VIX traded above its 200-DMA for 64 sessions through Tuesday — the longest streak since June 2020.

 

Global stocks were mixed on Wednesday, following disappointing results from major European firms LVMH and ASML. U.S. futures were slightly higher, oil prices slipped
after a recent decline, and Treasuries edged higher. Data released earlier on Wednesday indicated that UK inflation slowed more than anticipated last month, reinforcing expectations for the Bank of England to implement at least one, if not two, rate cuts this
year. The strength of the dollar is currently driven by the outlook for Federal Reserve monetary policy, with traders pricing in 46 basis points of rate cuts this year; this is a significant decrease from nearly 80 basis points expected less than a month ago
after the Fed’s previous rate cut.

 

EQUITIES:  

 

U.S. equity futures edged higher on Wednesday as chip stocks partially recovered from the previous session’s decline, aided by better-than-expected results from Morgan
Stanley. Morgan Stanley rose 3% in Wednesday’s premarket trading session after the bank beat analysts’ estimates for both its third-quarter earnings and revenue. Shares of Penguin Solutions plummeted 17% after the semiconductor firm reported fourth-quarter
earnings that fell short of consensus estimates. Interactive Brokers fell 3% after reporting adjusted earnings that missed analyst expectations, whereas JB Hunt surged 7% following a third-quarter profit that exceeded estimates due to improved demand in its
intermodal services segment. Novocure’s stock surged 29% following FDA approval for its Optune Lua device, designed to treat metastatic non-small cell lung cancer. United Airlines saw a slight dip despite beating adjusted earnings estimates for the third quarter,
although analysts expressed concerns about potential impacts on fourth-quarter demand due to the upcoming U.S. election.

 

Futures ahead of the bell: E-Mini S&P +0.06%, Nasdaq +0.1%, Russell 2000 +0.9%, DJI +0.06%.

 

European stocks experienced a decline on Wednesday, primarily influenced by a surprising drop in sales from luxury giant LVMH and a grim outlook from Dutch chipmaker
ASML Holding NV. The Stoxx Europe 600 Index fell, moving further away from its record high of 528.08 set on September 27, as the earnings season unfolds. LVMH’s shares plummeted after reporting its first sales decline in the fashion and leather goods sector
since the pandemic, largely due to diminished demand from Chinese consumers. This downturn in the luxury market coincided with ASML’s disappointing forecast, which triggered a global sell-off in technology stocks, leading to significant losses exceeding $420
billion in market value for major chipmakers. In contrast, London’s FTSE 100 index rose, buoyed by a drop in UK inflation below the Bank of England’s target, hinting at potential interest rate cuts next month. DAX -0.2%, FTSE +0.7%, Stoxx 600 -0.2%, CAC 40
-0.5%.

Asian stocks declined sharply, with the MSCI Asia Pacific Index falling to its lowest level in three weeks, primarily due to significant losses in the semiconductor sector following ASML
Holding NV’s disappointing sales outlook for 2025. Key chipmakers like TSMC, Tokyo Electron, and Samsung Electronics contributed heavily to this downturn, leading to a 3.6% drop in a Bloomberg gauge of Asian chipmakers. Chinese equities also struggled, with
the CSI 300 Index nearing correction territory amid uncertainty over fiscal stimulus and weak economic data. Despite some gains in sectors related to China’s “low-altitude economy” and property developers benefiting from mortgage rule changes, overall sentiment
remained bearish, particularly after luxury stocks like LVMH reported declining sales due to weakened Chinese consumer demand. Topix -1.2%, Nikkei -1.8%, China’s CSI 300 -0.6%; Hang Seng -0.16%; Kospi -0.88%; ASX 200 -0.4%.

FIXED INCOME: 
 

Treasuries rallied across the curve on Wednesday, supported by a sharp increase in gilts following softer-than-expected UK inflation data for September. The UK yield
curve steepened as markets priced in a more aggressive trajectory for rate cuts by the Bank of England this year and next, with UK 2-year yields dropping approximately 9 basis points. Meanwhile, U.S. Treasury yields fell by 2 to 2.5 basis points, with the
10-year yield at around 4.01%. Additionally, economic data from the U.S., including New York Fed services activity and import/export prices, is being closely monitored ahead of the Federal Reserve’s upcoming policy meeting.

 

METALS: 

Gold edged higher and is rallying toward a fresh record high as investors focus on the upcoming US election, with polls indicating a razor-thin contest less than three weeks away. Gold
+0.6%, Silver +1.1%.

 

ENERGY:   

 

Oil prices weakened as traders remained vigilant about escalating tensions in the Middle East and the outlook for demand, particularly from China. Brent and West
Texas Intermediate crude fluctuated between minor gains and losses after both benchmarks fell over 4% due to reports that Israel would avoid targeting oil facilities in its response to Iran’s missile strike. Israeli Prime Minister Benjamin Netanyahu asserted
the nation’s right to act independently, leading to renewed military actions in southern Beirut. WTI -0.3%, Brent -0.35%, Nat Gas -1.2%.

 

CURRENCIES:   

In currency markets, the U.S. dollar stabilized as investors anticipated a more gradual decrease in interest rates in the United States.  The pound fell to its lowest level in two months
on Wednesday, dropping after UK inflation data revealed a decline to 1.7% in September, below the Bank of England’s 2% target for the first time since April 2021. This unexpected dip reinforced expectations of back-to-back interest rate cuts by the BoE in
November and December, leading traders to anticipate further underperformance of the pound, which now trades under the $1.30 mark for the first time since August 20. The euro also fell against the dollar as traders adjusted their outlook on U.S. Federal Reserve
rate cuts, with current odds favoring a 25-basis-point cut at the Fed’s upcoming meeting on November 7. Meanwhile both the Australian and New Zealand dollars weakened amid skepticism regarding China’s stimulus measures.  US$ Index -0.02%, GBPUSD -0.4%, EURUSD
+0.01%, USDJPY +0.04%, AUDUSD -0.2%, NZDUSD -01%, USDCHF +0.08%.

 

 

 

Spot Bitcoin +2.2%, Spot Ethereum +2.8%   

 

 

 

 

 

 

 

Colors within the report:
Green is always the 200 period (day, week).
Red is always 21,
Blue = 50,
Brown =
100 *Stars have added importance 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

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