Daily Game Plan

by Contributor
on October 21, 2024

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

TODAY’S ECONOMIC DATA:  8:55ET Fed’s Logan speaks; 10:00ET Leading Index; 1:00ET Fed’s Kashkari speaks; 5:05ET:
Fed’s Schmid speaks; 6:40ET Fed’s Daly speaks

HIGHLIGHTS and News:  

  • MLIV Pulse survey shows corporate earnings strength more crucial than Fed policy or the US election
  • US expected to announce a new $400mm aid package for Ukraine, Politico
  • Hezbollah says it repeatedly targeted Israeli troops in south Lebanon border villages today
  • HARRIS, TRUMP NEARLY EVEN ACROSS BATTLEGROUND STATES: WAPO POLL

 

Global stocks kicked off the week with mild losses, after strong gains last week. Chinese banks slashed rates again to bolster their economy by cutting 1yr and 5yr
LPR by 25bps. France received a downgrade from Scope Ratings today in another warning on the state of the country’s finances. Global politics is a focal point, with a general election in Japan this weekend and the US presidential ballot about two weeks away.
Israel extended its bombing campaign in Lebanon, targeting financial institutions it says help fund Hezbollah. PM Benjamin Netanyahu met with top aides to discuss the next attack on Iran after a Hezbollah drone exploded near his home.

 

EQUITIES:  

US equity futures dipped, following a sixth straight week of gains, as investors looked to a busy week of company earnings for further signs on the strength of the economy. Attention
turns to more Magnificent Seven names, with Tesla set to report quarterly results on Wednesday. So far, ~83% of S&P 500 companies have delivered a positive earnings surprise for Q3, according to LSEG data.  Boeing and the union representing 33,000 striking
workers hammered out a tentative deal that includes a 35% wage increase over four years. Approval is far from certain when machinists vote on Oct. 23, the same day as earnings. US stocks are unlikely to sustain their above-average 13% annual performance of
the past decade as investors turn to other assets including bonds for better returns, Goldman Sachs strategists said. The S&P 500 Index is expected to post an annualized nominal total return of just 3% over the next 10 years, according to Goldman.  

Futures ahead of the bell: E-Mini S&P -0.3%, Nasdaq -0.5%, Russell 2000 -0.3%, DJI -0.2%. 

In pre-market trading, Spirit Airlines (SAVE) skyrocketed as much as 45% after the company reached an agreement to extend a debt refinancing deadline by two months.
Boeing (BA) jumped 3% on news that workers could vote on a new deal to end a costly five-week-long strike. Tylenol-maker Kenvue (KVUE) jumped over 9% after the WSJ reported that Starboard holds a sizable stake in the company and is now seeking changes to boost
the stock. Humana (HUM) gains 4% as Cigna revives efforts to combine with its smaller rival. Piedmont Lithium (PLL) drops 5% after JPMorgan downgraded the stock to underweight as market price declines are set to eat into earnings. SolarEdge Technologies (SEDG)
slip 2% after TD Cowen cut the stock to hold citing deteriorating demand in Europe.

European gauges are lower ahead of a busy week for earnings. Investors remained cautious about the health of European economies and rising tensions in the Middle East.
German producer prices fell more than expected in September, declining 1.4% year on year, due mainly to significantly lower energy prices, the federal statistics office said today.  This was the 15th decline in a row in Germany’s PPI.  The Stoxx 600 reversed
small early gains, with real estate and technology leading losses, while energy shares outperformed as oil rebounded. Among single stocks, JDE Peet’s NV soared 16% after JAB agreed to acquire Mondelez International’s stake in the coffee retailer. Munich Re
fell after getting a downgrade, while Sandvik AB fell after missing operating profit estimates. Stoxx 600 -0.6%, DAX -1%, CAC -1%, FTSE 100 -0.25%. Real Estate -1.25%, Technology -1%, Utilities -0.9%. Energy +1%, Basic Resources +0.1%.

Shares in Asia were mostly lower, dragged by losses in Hong Kong. The MSCI Asia Pacific Index fell 0.6%, with financials and consumer discretionary sectors being the
worst performers. Chinese stocks onshore managed to eke out a small gain after banks cut their benchmark lending rates. Also, more than 20 Chinese listed companies have announced plans to tap special central bank lending for share purchases, days after the
PBOC kicked off the $42 billion funding scheme. Analysts expect more firms to follow suit, injecting fresh cash into the stock market. Asian defense stocks mostly advanced following reports of rising Israel-Iran tensions and North Korea’s possible troop deployment
to support Russia. Hang Seng Tech -2.4%, Hang Seng Index -1.6%, Singapore -0.7%, Vietnam -0.4%, Topix -0.3%, Sensex -0.1%. Indonesia +0.2%, Taiwan +0.25%, CSI 300 +0.25%, Kospi +0.4%, ASX 200 +0.7%.

FIXED INCOME: 
 

Treasuries trade lower into early US session, following losses in European rates as supply pressure there weighs.  US yields are 3bp-5bp cheaper on the day across
the curve near session highs; 10-year around 4.135%. Treasury auctions this week include Wednesday’s $13b 20-year bond reopening and a $24b 5-year TIPS sale Thursday.  “The 10‑year
Treasury yield will test the 5% threshold in the next six months, steepening the yield curve,” according to Arif Husain, chief investment officer of fixed-income at T. Rowe Price.

 

 

 

METALS: 

Gold rose to a fresh record high on heightened uncertainty over conflict in the Middle East. Money managers have increased their net-long position in gold, while
investors have added to exchange-traded fund holdings in recent sessions.  Spot gold +0.5%, Silver +0.8%, Copper +1%.

 

 

ENERGY:   

 

Oil prices moved higher following a nearly 8% drop last week on worries about demand in China and an easing of concerns about potential supply disruptions in the
Middle East.  A Hezbollah drone exploded next to Prime Minister Netanyahu’s private home on Saturday. The following day, Israel opened a fresh military assault on the group’s strongholds in Lebanon. Prices rose after China cut its benchmark lending rate. Saudi
Aramco’s CEO said he remains “fairly bullish” on demand in the world’s second largest economy. WTI +2.2%, Brent +1.9%, US Nat Gas +3.3%, RBOB +1.8%.

 

 

CURRENCIES:   

In currency markets, the dollar is mixed versus Group-of-10 peers as a series of speeches by Fed officials this week is in focus. The yen reversed gains after the
Tokyo fix. Japan’s largest labor union federation aims to secure wage increases averaging at least 5% in next year’s pay negotiations, in a bid to maintain momentum that’s considered a key factor in the Bank of Japan’s policy path. Thin data calendar weighs
on volumes, with spot and options running around 60%-70% of recent averages. US$ Index +0.1%, GBPUSD -0.2%, EURUSD -0.1%, USDJPY +0.3%, AUDUSD -0.3%, NZDUSD -0.25%, USDCHF -0.05%.

 

 

 

Spot Bitcoin %, Spot Ethereum %. Bitcoin fell after flirting with $70,000.

 

 

 

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
    • Albertsons Cos (ACI) Raised to Buy at Melius; PT $24
    • Ally Financial (ALLY) Raised to Market Perform at Raymond James
    • Anglogold (AU) Raised to Overweight at ABSA Securities; PT $32.35
    • Getty Realty (GTY) Raised to Buy at BofA
    • Gilead (GILD) Raised to Outperform at Leerink; PT $96
    • Gitlab (GTLB) Raised to Buy at Needham
    • Healthpeak Properties (DOC) Raised to Buy at Deutsche Bank; PT $28
    • Home Bancorp (HBCP) Raised to Outperform at Raymond James; PT $50
    • Independent Bank Corp (INDB) Raised to Strong Buy at Raymond James
    • JD.com (JD) ADRs Raised to Buy at Loop Capital; PT $48
    • Mid-America (MAA) Raised to Strong Buy at Raymond James
    • Mohawk Industries (MHK) Raised to Outperform at Baird; PT $196
    • NexPoint Residential (NXRT) Raised to Outperform at Raymond James
    • Simmons First (SFNC) Raised to Overweight at Stephens; PT $28
    • Sportradar (SRAD) Raised to Overweight at JPMorgan; PT $15
    • Travere Therapeutics Inc (TVTX) Raised to Overweight at Wells Fargo
    • Warby Parker (WRBY) Raised to Buy at Goldman; PT $18
  • Downgrades
    • Canada Goose (GOOS CN) Cut to Sell at Goldman; PT C$13
    • Centerspace (CSR) Cut to Market Perform at Raymond James
    • Essex Property (ESS) Cut to Market Perform at Raymond James
    • Extra Space (EXR) Cut to Equal-Weight at Wells Fargo; PT $175
    • HCI Group (HCI) Cut to Neutral at Compass Point; PT $120
    • Hilton Worldwide (HLT) Cut to Hold at Melius
    • MDU Resources (MDU) Cut to Neutral at BofA
    • Old Dominion (ODFL) Cut to Hold at Stifel; PT $197
    • Petrobras (PETR4 BZ) ADRs Cut to Hold at HSBC; PT $15
    • Piedmont Lithium (PLL) Cut to Underweight at JPMorgan; PT $8
    • Prologis (PLD) Cut to Neutral at Goldman; PT $132
    • Rexford Industrial (REXR) Cut to Neutral at BofA
    • Saia (SAIA) Cut to Hold at Stifel; PT $437
    • ServiceNow (NOW) Cut to Equal-Weight at Morgan Stanley; PT $960
    • SolarEdge (SEDG) Cut to Hold at TD Cowen
    • Trinity Industries (TRN) Cut to Neutral at Susquehanna; PT $35
    • UPS (UPS) Cut to Underweight at Barclays; PT $120
    • WaFd Inc (WAFD) Cut to Market Perform at KBW; PT $40
  • Initiations
    • Arcus Biosciences (RCUS) Rated New Neutral at HC Wainwright; PT $20
    • BioAge Labs (BIOA) Rated New Overweight at Morgan Stanley; PT $40
      • Rated New Buy at Jefferies; PT $42
    • BKV (BKV) Rated New Outperform at Mizuho Securities; PT $29
      • Rated New Buy at Jefferies; PT $28
      • Rated New Overweight at KeyBanc; PT $23
    • Capricor Therapeutics (CAPR) Rated New Overweight at Piper Sandler
    • CyberArk (CYBR) Rated New Sector Outperform at Scotiabank; PT $340
    • DTE Energy (DTE) Reinstated Hold at Jefferies; PT $137
    • Elme Communities (ELME) Rated New Peerperform at Wolfe
    • Esco Tech (ESE) Rated New Buy at Benchmark; PT $150
    • GE Vernova (GEV) Rated New Buy at Deutsche Bank; PT $354
    • Gladiator Metals Corp (GLAD CN) Rated New Speculative Buy at Argonaut Securities; PT C$1
    • Guardian Pharmacy Services (GRDN) Rated New Outperform at Raymond James
      • Rated New Buy at Truist Secs; PT $22
    • Hormel (HRL) Rated New Underperform at BNPP Exane; PT $28
    • Korro Bio, Inc. (KRRO) Rated New Strong Buy at Raymond James; PT $153
    • Palantir (PLTR) Rated New Market Perform at CICC; PT $33
    • Rhythm Pharma (RYTM) Rated New Buy at Guggenheim; PT $70
    • Sarepta (SRPT) Rated New Buy at Jefferies; PT $165
    • SimilarWeb (SMWB) Rated New Buy at Needham; PT $11

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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