Daily Game Plan

by Contributor
on October 31, 2024

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

TODAY’S ECONOMIC DATA:  8:30ET Employment Cost Index, Personal Income, Personal Spending, PCE*, Jobless Claims;
9:45ET MNI Chicago PMI; HAPPY HALLOWEEN

US headline and core PCE price indexes are expected to rise 0.2% and 0.3% in September, respectively, after both grew 0.1% in August.

HIGHLIGHTS and News:  

  • The LA Dodgers won their eighth World Series championship after overcoming a five-run deficit in Game 5 to beat the NY Yankees 7-6
  • Amazon-owned AV company Zoox to launch Robotaxis in San Francisco and Las Vegas within weeks
  • Ukraine to weigh China, Brazil, South African peace proposals
  • North Korea fired an ICBM that flew longer than any previous one tested by Kim Jong Un’s regime

 

World stocks slid, after Meta Platforms and Microsoft both warned of accelerating costs for artificial intelligence, stoking worries among investors that the pay-off
for heavy spending on AI may take longer than many had hoped.  China’s manufacturing activity expanded for the first time in six months and services picked up in October, indicating the latest stimulus measures are helping the battered economy turn a corner.
PMI rose to 50.1 from 49.8 in September, beating forecasts of 49.9. The Bank of Japan kept its benchmark interest rate unchanged while sticking to its view that it’s on track to achieve its inflation target, an outlook that points to the possibility of another
rate hike in the coming months. Euro zone inflation accelerated more than expected in October, bolstering the case for caution in European Central Bank interest rate cuts.

 

EQUITIES:  

 US equity futures are lower, a day after results from Microsoft and Meta Platforms failed to impress investors, sending their shares lower by 4% and weighing on the broader market. The
slide in the two stocks combined represented half of the losses in the Nasdaq futures. Whether this Big Tech earnings season turns out to be a success or disappointment will likely come down to results from Apple and Amazon.com later today. Amazon’s report
will give insight into the state of the consumer with its e-commerce business, while results from its cloud-computing business will show any tailwind from AI.

Futures ahead of the bell: E-Mini S&P -0.5%, Nasdaq -0.6%, Russell 2000 +0.02%, DJI -0.4%.

In pre-market trading, Microsoft (MSFT) shares fell 3.6% after a disappointing forecast for its Azure cloud-computing business. Meta declines 2.6% after warning of
worsening AI losses. Analysts are broadly positive but note that capital expenditure plans did raise concerns. Uber fell 9% after it reported weaker-than-expected ride bookings and issued a middling forecast for the holiday quarter. Estée Lauder (EL) sank
20% after the company scrapped guidance on China uncertainty. Carvana (CVNA) shares soar 20% after the used car retailer reported another strong quarter as sales growth coupled with cost-cutting measures helped boost profits. Biogen (BIIB) shares slipped 1.2%
after Morgan Stanley downgraded the drugmaker to equal weight from overweight. Coinbase (COIN) shares fall 2.7% after the cryptocurrency platform operator’s earnings fell short of expectations. DoorDash (DASH) rises 3.5% after the food delivery company reported
earnings that surpassed analyst expectations and issued strong guidance. EBay (EBAY) shares drop 7.9% after the e-commerce company’s projections for the fourth quarter fell short of analyst expectations. Etsy (ETSY) rises 5.2% after the retailer reported third-quarter
results beat estimates. Robinhood (HOOD) shares fall 11% after failing to meet high revenue expectations. Twilio (TWLO) shares jump 13% after the cloud communications firm showed continued improvement in its operating margins, spurring Morgan Stanley and JPMorgan
to raise their price targets on the stock. Root (ROOT) soars 81% after the auto insurance platform said it reached net income profitability for the first time as third-quarter revenue topped estimates.

European gauges are broadly lower, set for their worst monthly decline in a year after a slate of disappointing corporate earnings. Euro zone inflation climbed to 2.0%
from 1.7% in September mostly on higher food and energy costs, above expectations for 1.9%. Closely watched core inflation, unexpectedly held steady at 2.7%, while increases in food prices were faster. The Stoxx Europe 600 retreated for a third day, on track
for its biggest monthly decline in a year. Retail shares underperform while banks lead gainers. French lender BNP Paribas SA was the biggest drag on the index, plunging more than 7% after reporting third-quarter earnings. Peers BBVA SA, Banco Sabadell SA and
ING Groep NV were more mixed after their results. Societe Generale SA stood out among lenders, soaring 11% after beating estimates. Stoxx 600 -0.9%, DAX -0.5%, CAC -1%, FTSE 100 -0.7%. Banks +0.5%, Construction +0.05%. Retail -3%, REITs -1.7%, Food & Bev -1.7%.

Shares in Asia were mixed to lower, with the MSCI Asia Pacific Index nudging lower by 0.2%. The regional benchmark is on course for a decline of 4.4% in October, its
first monthly loss since April. Chinese stocks swung between gains and losses, with the benchmark CSI 300 Index rising as much as 0.9% after losing 0.8% earlier. Factory activity in China unexpectedly expanded in October after five months of contraction, the
NBS said. Japanese stocks fell on earnings disappointments from some major companies and as the Bank of Japan kept its monetary policy unchanged. Japan’s industrial production rose 1.4% in September, beating estimates. Markets in Taiwan, Singapore and Malaysia
were closed for holidays. Thailand +1.3%, Vietnam +0.5%, Shanghai Composite +0.4%, CSI 300 +0.05%. ASX 200 -0.25%, Topix -0.3%, Hang Seng Index -0.3%, Sensex -0.7%, Kospi -1.5%, Philippines -1.9%.

FIXED INCOME: 
 

Treasuries advance across the curve in a moderate bull-flattening move, with 5s30s spread back to tightest level since July. Treasuries sharply outperform gilts as
UK financial markets absorb Labour government’s plans for increased borrowing and fiscal stimulus. US yields richer by as much as 3bp across the curve with 2s10s, 5s30s spreads flatter by 1bp and 2bp on the day; curve flattening also has support from anticipation
of long-end buying related to month-end index rebalancing. 10-year near 4.28% is ~2bp richer on the day. The US session includes employment cost index, weekly jobless claims and PCE price indexes.

 

 

METALS: 

Gold edged down slightly, after hitting a fresh record high as investors scrambled to hedge potential risks linked to the upcoming US election. Bullion earlier reached
$2,790.10 an ounce, narrowly eclipsing the previous day’s peak, before heading lower. Investors are waiting for US core personal consumption index, the US Federal Reserve’s preferred gauge, and the US non-farm payrolls. Both reports are due out on Friday.
Spot gold -0.3%, Silver -0.5%, Copper is flat.

 

 

ENERGY:   

 

Oil prices edge higher, boosted by positive signs on US fuel demand and news reports that indicated the Organization of the Petroleum Exporting Countries might delay
a plan to scale back production cuts. WTI hovered around $69 a barrel as US inventories of crude, gasoline, and distillates declined last week, providing some support to the market amid ongoing geopolitical tensions in the Middle East. Analysts caution that
the recent geopolitical relief may be premature, as looming events such as the upcoming US elections and an OPEC+ decision on December output could significantly influence market direction. WTI +0.8%, Brent +0.7%, US Nat Gas -1.4%, RBOB +0.4%.

 

 

CURRENCIES:   

In currency markets,  the Japanese yen tops the G-10 FX leader board after the BOJ left rates on hold and maintained it’s on track to achieve its inflation target.
Governor Kazuo Ueda said the current political situation in Japan wouldn’t stop him from lifting rates if prices and the economy stay in line with the central bank’s forecasts.  The dollar slipped slightly, though it remains on pace for its best month in more
than two years as investors trimmed bets on Fed policy easing after robust economic-growth and jobs data Wednesday. The euro is on track for its longest winning streak in two months, rising against the dollar as euro-area inflation accelerated to 2% in October,
matching the ECB’s target and exceeding expectations. US$ Index -0.02%, GBPUSD +0.15%, EURUSD +0.15%, USDJPY -0.5%, AUDUSD +0.03%, NZDUSD +0.1%, USDCHF -0.15%.

 

 

 

Spot Bitcoin -0.8%, 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
    • Alphabet (GOOGL) Raised to Buy at China Renaissance; PT $212
    • Aritzia (ATZ CN) Raised to Outperform at RBC; PT C$56
    • Banc of California (BANC) Raised to Overweight at Barclays
    • Capital Power (CPX CN) Raised to Sector Outperform at Scotiabank; PT C$60
    • Daqo New Energy (DQ) ADRs Raised to Buy at ICBC Research; PT $30
      • ADRs Raised to Outperform at Daiwa; PT $25
    • Electronic Arts (EA) Raised to Buy at DZ Bank; PT $177
    • Envista Holdings (NVST) Raised to Market Perform at Leerink; PT $23
    • KLA Corp (KLAC) Raised to Outperform at Oppenheimer; PT $850
    • L3Harris (LHX) Raised to Buy at BofA; PT $300
    • Meritage Homes (MTH) Raised to Buy at Goldman; PT $235
    • Omega Healthcare (OHI) Raised to Outperform at BNPP Exane; PT $49
    • Regions Financial (RF) Raised to Outperform at KBW; PT $28
    • Remitly (RELY) Raised to Equal-Weight at Wells Fargo; PT $18
    • Smurfit WestRock (SW) Raised to Outperform at RBC; PT $58
    • Valley National (VLY) Raised to Equal-Weight at Barclays
    • Wingstop (WING) Raised to Buy at Benchmark; PT $340
      • Raised to Buy at BTIG; PT $370
  • Downgrades
    • Altair Eng (ALTR) Cut to Hold at Needham
      • Cut to Hold at Loop Capital; PT $113
      • Cut to Market Perform at William Blair
    • ARM Holdings (ARM) ADRs Cut to Underperform at Bernstein; PT $100
    • Biogen (BIIB) Cut to Equal-Weight at Morgan Stanley; PT $204
    • Blackbaud (BLKB) Cut to Neutral at Baird; PT $80
    • Brinker (EAT) Cut to Market Perform at BMO; PT $105
      • Cut to Neutral at JPMorgan; PT $100
    • First Interstate Banc (FIBK) Cut to Underweight at Barclays
    • FirstEnergy (FE) Cut to Neutral at Seaport Global Securities
    • Meta Platforms (META) Cut to Hold at Punto Casa de Bolsa; PT $619.30
    • Microsoft (MSFT) Cut to Hold at Punto Casa de Bolsa; PT $444.65
    • Monolithic Power (MPWR) Cut to Neutral at Rosenblatt Securities Inc
    • NFI Group (NFI CN) Cut to Market Perform at BMO; PT C$19
    • O-I Glass (OI) Cut to Sell at CFRA
    • Omnicell (OMCL) Cut to Neutral at BofA
    • Option Care Health (OPCH) Cut to Hold at Jefferies; PT $26
    • TE Connectivity (TEL) Cut to Reduce at HSBC; PT $137
    • Trane Technologies (TT) Cut to Hold at HSBC; PT $405
  • Initiations
    • Alumis (ALMS) Rated New Outperform at Baird; PT $25
    • Braze (BRZE) Rated New Neutral at Macquarie; PT $30
    • Elicio Therapeutics Inc (ELTX) Rated New Buy at JonesTrading; PT $9
    • Enliven Therapeutics (ELVN) Rated New Buy at JonesTrading; PT $36
    • Klaviyo (KVYO) Rated New Neutral at Macquarie; PT $36
    • MDA Space (MDA CN) Rated New Buy at Desjardins; PT C$26
    • ORIC Pharma (ORIC) Rated New Overweight at Wells Fargo; PT $20
      • Rated New Buy at JonesTrading; PT $17
    • Terns Pharma (TERN) Rated New Outperform at Oppenheimer; PT $17

 

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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