Daily Game Plan

by Contributor
on October 28, 2024

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

TODAY’S ECONOMIC DATA:  10:30ET Dallas Fed Manf. Activity; 11:30ET 2-Year auction; 1:00ET 5-Year auction

HIGHLIGHTS and News:  

  • Oil Slumps as Israel Spares Iran Infrastructure
  • Apple to launch new AI features as part of software update later today
  • Google plans to preview AI tech that takes over a web browser to complete tasks such as research and shopping
  • Shohei Ohtani is set to play in Game 3 of the World Series today despite a partially dislocated shoulder

 

World stocks rose as oil prices slide after Israel attacked Iran’s military installations on Saturday, but the strike steered clear of oil, nuclear, and civilian
infrastructure locations as feared. Iran said its oil industry was operating normally. That eased geo-political tensions as markets prepare for a week packed with key economic data and corporate earnings. The risk of a regional war has not diminished however,
after the US stated they would defend Saudi Arabia against any attacks by Iran. Market attention will now turn to cease-fire talks that resumed over the weekend. Weekend data showed China’s industrial profits plunged in September, with a year-on-year drop
of 27.1%. This week is heavy with data, with inflation readings for Europe and Australia, gross domestic product and employment data in the US, and purchasing managers’ indexes for China.

 

EQUITIES:  

US equity futures rose as investors look for a batch of megacap technology earnings this week to keep driving stocks higher. This will be the busiest week of the earnings reporting season
and the final week before the Nov. 5 US Presidential election. Five of the Magnificent Seven companies – Alphabet, Microsoft, Meta Platforms, Amazon and Apple – are scheduled to report third-quarter earnings. Traders are also watching for a slew of key economic
data this week, including the September jobs report due Friday. Meanwhile, Boeing launched a nearly $19 billion share sale meant to address the troubled plane maker’s liquidity needs and avert a potential credit rating downgrade to junk.  

Futures ahead of the bell: E-Mini S&P +0.4%, Nasdaq +0.5%, Russell 2000 +0.4%, DJI +0.2%.

In pre-market trading, United Airlines (UAL) gains 2%, climbing with other airline stocks which are getting a boost as a drop in crude prices signaled a potential impact
on jet fuel costs. Delta Air Lines (DAL) +2%, American Airlines (AAL) +3%. ADT (ADT) slips 2% after holder Apollo Global Management offers 56 million shares. Procept BioRobotics (PRCT) rises 14% after the surgical robotics company boosted its year forecast.
Sunrun Inc. (RUN) gains 5% as the company is in discussions with data center developers to supply distributed solar power generation for their facilities. Exxon Mobil (XOM) declines 2%, falling with other energy stocks amid a drop in oil. 

European gauges traded steady as easing geopolitical concerns in the Middle East lifted sentiment, while slumping oil prices weighed on the energy sector. FTSE 100
index underperformed after Prime Minister Keir Starmer said his government would “embrace the harsh light of fiscal reality” with tax hikes and extra borrowing in a make-or-break budget on Wednesday. France’s credit rating was put on a negative outlook by
Moody’s Ratings in the third warning in two weeks over the deterioration of public finances and political challenges in containing swollen budget deficits. Volkswagen AG plans to close at least three factories in Germany and seeks a 10% salary cut for all
employees as Europe’s biggest automaker tries to slash expenses to become more competitive. Among individual stock moves,  Royal Philips NV dropped 17% after the Dutch medical-technology firm cut its sales outlook. Porsche AG shares dropped after the German
carmaker reported earnings that fell short of analysts’ expectations. Stoxx 600 -0.15%, DAX -0.2%, CAC +0.1%, FTSE 100 -0.3%. Media +0.7%, Construction +0.7%, Travel +0.4%. Energy -2.2%.

Shares in Asia were mostly higher, as gains in Japan offset losses in some other markets in the region. The Nikkei 225 closed up 1.8%, after initially dipping following
the weakest election result since 2009 for the LDP, which has governed the country for most of the post-war era. The MSCI Asia Pacific Index rose 0.3%, snapping a five-day drop, with Japanese exporters among the biggest boosts after the yen extended losses.
Stocks swung between gains and losses in mainland China after profits at industrial firms declined at a faster pace in September compared with a month earlier. Chinese steelmakers surged after the country’s main industry association said it would propose specific
policies to reshape the sector. Topix +1.5%, Kospi +1.1%, Sensex +0.75%, Shanghai Composite +0.7%, Philippines +0.4%, CSI 300 +0.2%, ASX 200 +0.1%, Hang Seng Index +0.05%. Singapore -0.3%, Taiwan -0.6%, Thailand -0.7%, Indonesia -0.8%.

FIXED INCOME: 
 

Treasury yields are slightly higher, with yields in retreat following an opening gap higher as oil slumps. Longer-dated yields are cheaper by 1bp-2bp with shorter
maturities little changed, steepening 2s10s and 5s30s spreads by ~1bp; 10-year is around 4.25%. Traders now see a nearly 95% chance of a quarter basis point cut by the Fed in November, according to CME’s FedWatch Tool. US session includes auctions of 2- and
5-year notes, while Fed officials are in self-imposed quiet period ahead of Nov. 7 policy announcement. 

 

METALS: 

Gold eased, while investors awaited US economic data for fresh insights on the Federal Reserve’s monetary policy path.  China’s gold demand plunged 22% to 218 tons
in the third quarter as record prices and a sluggish economy dented consumption.  Copper declined as demand from China’s construction industry continues to disappoint. Spot gold -0.5%, Silver -0.7%, Copper -0.4%.

 

 

ENERGY:   

 

Oil plunged more than 6% after Israel’s response on Iran turned out to be military in nature as Iranian energy facilities were not damaged during an Israeli attack
over the weekend. Citi analysts are now discounting chances of an escalation that disrupts oil supplies, cutting its 1-year Brent forecast to $60. The possible easing of Middle East risk moves concerns about oversupply and anemic demand for oil center stage
instead, MLIV said. WTI -6.2%, Brent -5.8%, US Nat Gas -6%, RBOB -5.2%.

 

 

CURRENCIES:   

In currency markets, the Japanese yen pared declines, having earlier dropped close to 1% after the ruling coalition failed to win a majority in parliament for the
first time since 2009. Nomura analysts expect the Bank of Japan, which reviews policy on Thursday, will be more dovish and that will hurt the yen. The dollar reversed earlier overnight highs but is still on track for its best month since April 2022. The euro
is higher after four straight weeks of declines. US$ Index -0.1%, GBPUSD +0.2%, EURUSD +0.3%, USDJPY +0.15%, AUDUSD +0.02%, NZDUSD +0.2%, USDCHF -0.2%, USDNOK +0.35%.

 

 

 

Spot Bitcoin +1.7%, Spot Ethereum +1.6%.

 

 

 

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
    • Aaon (AAON) Raised to Outperform at Baird; PT $130
    • Alaska Air (ALK) Raised to Buy at Melius
    • Ameris Bancorp (ABCB) Raised to Outperform at Raymond James
    • Aon PLC (AON) Raised to Equal-Weight at Wells Fargo; PT $377
    • Community Financial System (CBU) Raised to Strong Buy at Raymond James
    • Dover (DOV) Raised to Outperform at Wolfe; PT $227
    • Federated Hermes (FHI) Raised to Buy at TD Cowen; PT $46
    • Kinsale Capital (KNSL) Raised to Outperform at Wolfe; PT $535
    • NIO Inc. (NIO) ADRs Raised to Outperform at Macquarie; PT $6.60
    • Nutanix (NTNX) Raised to Overweight at Morgan Stanley; PT $72
    • SAP (SAP GR) ADRs Raised to Buy at President Capital Management; PT $278
    • Telus (T CN) Raised to Sector Outperform at Scotiabank; PT C$24
  • Downgrades
    • CDW (CDW) Cut to Neutral at JPMorgan; PT $235
    • Ciena (CIEN) Cut to Equal-Weight at Morgan Stanley; PT $63
    • CNX Resources (CNX) Cut to Hold at Truist Secs; PT $34
    • Colgate-Palmolive (CL) Cut to Hold at Stifel; PT $101
    • Frontier (FYBR) Cut to Market Perform at Raymond James
    • GlobalFoundries (GFS) Cut to Equal-Weight at Morgan Stanley; PT $43
    • HomeTrust Banc (HTBI) Cut to Market Perform at Raymond James
    • Honeywell (HON) Cut to Peerperform at Wolfe
    • NextEra Energy Partners (NEP) Cut to Neutral at Guggenheim; PT $22
    • TriNet Group (TNET) Cut to Hold at Needham
    • WEX (WEX) Cut to Peerperform at Wolfe
  • Initiations
    • Bowlero (BOWL) Rated New Neutral at Piper Sandler; PT $12
    • Ceragon Networks (CRNT) Rated New Buy at Roth Capital Partners
    • Core Scientific (CORZ) Rated New Buy at Jefferies; PT $19
    • First Solar (FSLR) Rated New Buy at Mirae Asset Securities; PT $290
    • FrontView REIT (FVR) Rated New Overweight at Morgan Stanley; PT $23
      • Rated New Overweight at JPMorgan; PT $21
    • Hims & Hers Health (HIMS) Rated New Buy at Nephron Research; PT $30
    • Micron (MU) Rated New Buy at China Renaissance; PT $148
    • Performance Food (PFGC) Resumed Equal-Weight at Morgan Stanley; PT $92
    • Roadzen Inc (RDZN) Rated New Buy at ThinkEquity; PT $6
    • Serve Robotics (SERV) Rated New Buy at Ladenburg Thalmann; PT $16
    • Standard Aero (SARO) Rated New Outperform at Wolfe; PT $34
      • Rated New Equal-Weight at Morgan Stanley; PT $33
      • Rated New Outperform at Bernstein; PT $39
      • Rated New Overweight at JPMorgan; PT $36
      • Rated New Outperform at RBC; PT $37
      • Rated New Buy at Jefferies; PT $38
    • TE Connectivity (TEL) Rated New Hold at Freedom Capital; PT $159

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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