Daily Game Plan

by Contributor
on December 20, 2024

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

TODAY’S ECONOMIC DATA:  8:30ET Personal Income, Personal Spending, PCE*, Fed’s Williams speaks; 10:00ET U. of Mich.
Sentiment; 11:00ET Kansas City Fed Services Activity

US NOV. CORE PCE PRICE INDEX RISES 0.1% M/M; EST. +0.2%

Highlights and News:  

  • Fed’s Daly says policy and the economy are in a good place; data on inflation showing slowed progress relative to what we wanted; recalibration phase now over
  • HOUSE COULD VOTE ON TEMPORARY FIX TO SHUTDOWN AT 10AM
  • The union representing Starbucks baristas plans to strike for five days from today in stores across LA, Chicago and Seattle
  • Trump threatened the EU with tariffs if it doesn’t buy more US oil and gas

 

Global stocks broadly fell ahead of a possible US government shutdown, while European shares came under fire after Donald Trump threatened to impose tariffs if consumers
in the region did not increase their purchases of US oil and gas. Meanwhile, French Prime Minister Francois Bayrou is aiming to present a new cabinet over the weekend and deliver a budget by mid-February. In Asia, China’s one-year bond yield slumped to 1%
for the first time since the global financial crisis, as traders ramped up bets on monetary easing. 

 

EQUITIES:   US Quarterly Index rebalance
today and Quadruple Witching Day

US equity futures are sliding, deepening this week’s losses as traders grappled with an increasingly softening outlook for interest-rate cuts and the looming possibility of a US government
shutdown. The Republican-led House rejected a temporary funding plan backed by President-elect Donald Trump on Thursday with just over 24 hours to go before a government shutdown. Government funding is set to lapse at midnight unless a new solution is found.
Today’s personal consumption expenditures data for November, the Fed’s preferred measure of underlying inflation, will offer further clues on next year’s rate path. PCE is expected to cool in November, with the rise in core PCE seen slowing to 0.2% from 0.3%.
The quarterly “triple-witching” today will see some $6.5 trillion worth of options tied to individual stocks, indexes and exchange-traded funds fall off the board.   

Futures ahead of the data: E-Mini S&P -0.9%, Nasdaq -1.4%, Russell 2000 -1.1%, DJI -0.4%.

In pre-market trading, Eli Lilly (LLY) rallies 5% after competitor Novo Nordisk A/S gave data from a highly anticipated trial of its experimental weight loss drug, CagriSema, that fell
short of expectations. FedEx (FDX) rises 6% after the company said it plans to spin off its freight division into a separate publicly traded company. Humacyte (HUMA) jumps 56% after the Food and Drug Administration granted full approval of its bio-engineered
human tissue product for adults with arterial injury. Nike (NKE) falls 7% as management expects revenue in the current quarter to decline in the low double digits. Occidental Petroleum (OXY) rises 2% after Warren Buffett’s Berkshire Hathaway increased its
stake in the energy company. US Steel (X) drops 6% after the steel producer warned its fourth-quarter earnings will be lower than anticipated. Clearwater Paper Corp. (CLW) rises 14% as Brazil’s Suzano SA is exploring an offer for the company. Coinbase (COIN)
drops 6%, down along with other stocks that have exposure to cryptocurrencies, as interest-rate caution from the Fed this week dampens sentiment on speculative investments. Robinhood (HOOD) -6%, MicroStrategy (MSTR) -6%.

European gauges slumped for a second day, on course for the biggest weekly decline since March 2023. Nearly all sectors are in the red, led by a sharp decline in healthcare
stocks following a plunge in obesity treatment drugmaker Novo Nordisk A/S. UK retail sales grew more slowly than expected in November suggesting Christmas shoppers might not boost the economy. Novo Nordisk shares fell by the most on record after patients using
its experimental obesity shot CagriSema lost less weight than predicted in a study. Novo is Europe’s biggest company by market capitalization and the second-heaviest weighted member in the Stoxx 600. The OMX Copenhagen 25 Index tumbled 5%, its worst intraday
drop since May 2022, also hurt by a 20% decline in Zealand Pharma A/S after it said the US Food and Drug Administration failed to approve its new drug application for glepaglutide for treating short bowel syndrome. Stoxx 600 -1.7%, DAX -1.3%, CAC -1%, FTSE
100 -0.8%. Healthcare -4.4%, Technology -1.5%, Insurance -1.5%, Financial Services -1.5%. Real Estate +0.3%.

Shares in Asia declined as traders continued to mull the prospect of a more hawkish Federal Reserve. The MSCI Asia Pacific Index dropped 0.6%, with tech-heavy benchmarks
in South Korea and Taiwan among the region’s worst performers. Japanese stocks were only slightly lower, helped by exporters as the yen weakened during the Asian session amid diminishing bets on Bank of Japan’s interest-rate hike. Japan’s key inflation gauge
strengthened on the waning impact of government energy subsidies. Shares in Indonesia edged higher after the local central bank stepped up defense of its currency. Taiwan -1.8%, Sensex -1.5%, Kospi -1.3%, ASX 200 -1.2%, Singapore -1.1%, Thailand -0.9%, CSI
300 -0.4%, Topix -0.4%, Hang Seng Index -0.15%. Indonesia +0.1%, Philippines +0.2%, Vietnam +0.2%.

FIXED INCOME: 
 

Treasuries are richer across the curve with gains on the day led by the front- and belly, keeping 2s10s and 5s30s spread near Thursday’s session highs. US session
focus includes PCE data due 8:30am EST. Treasury yields richer by 4bp to 1bp across the curve with front-end led gains steepening 2s10s spread by 1bp on the day and 5s30s by 4.5bp; 10-year yields trade around 4.54%, richer by 2bp on the day.

 

 

 

METALS: 

Gold is higher as the dollar pulled back from highs ahead of US Personal Consumption Expenditure data, the Fed’s preferred inflation gauge.  Still, the Fed’s hawkish
interest rate outlook has set bullion on track for a weekly loss. Silver is headed for its worst week since December 2023. Spot gold +0.4%, Silver +0.4%, Copper +0.2%.

 

 

 

ENERGY:   

 

Oil prices fell on worries about demand growth, especially in top crude importer China, putting global oil benchmarks on track to end the week down more than 3%.
Chinese state-owned refiner Sinopec said in its annual energy outlook released on Thursday that China’s crude imports could peak as soon as 2025 and the country’s oil consumption would peak by 2027 as diesel and gasoline demand weaken. JPMorgan sees the oil
market moving from balance in 2024 to a surplus of 1.2 million barrels per day next year. WTI -0.5%, Brent -0.4%, US Nat Gas +2.2%, RBOB -0.01%

 

 

CURRENCIES: 

In currency markets, the dollar eased but is still headed for a third weekly advance. The yen gained after Japan’s key inflation gauge strengthened for the first
time in three months and Finance Minister Katsunobu Kato warned against currency speculation. Kato said that the government was “deeply concerned” about recent currency moves and the government will take “appropriate action” if there are excessive moves in
the currency.  AUD and SEK are the weakest performers in G-10 FX; JPY and CHF outperform. BRL leads gains in EMFX, rising 2.5% with Brazil’s congress inching closer to delivering a diluted spending plan. US$ Index -0.25%, GBPUSD +0.15%, EURUSD +0.3%, USDJPY
-0.4%, AUDUSD -0.1%, USDSEK +0.15%, USDCHF -0.5%,  

 

 

 

Spot Bitcoin -3.5%, Spot Ethereum -5.4%. Bitcoin’s slide extended to more than 10% as a group of US ETFs directly investing in it posted a record outflow.  

 

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 Market Outperform at JMP; PT $78
    • Ares Management (ARES) Raised to Outperform at KBW; PT $202
    • Blackberry (BB CN) Raised to Buy at TD Cowen; PT $4
    • Brinker (EAT) Raised to Equal-Weight at Morgan Stanley; PT $115
    • Brookline Bancorp (BRKL) Raised to Strong Buy at Raymond James; PT $16
    • Camden National (CAC) Raised to Outperform at Raymond James; PT $50
    • DoorDash (DASH) Raised to Buy at Argus
    • Evercore (EVR) Raised to Outperform at KBW; PT $339
    • Federal Realty (FRT) Raised to Overweight at JPMorgan; PT $125
    • FedEx (FDX) Raised to Buy at Loop Capital; PT $365
    • Freyr Battery (FREY) Raised to Buy at BTIG; PT $4
    • Innoviz Technologies (INVZ) Raised to Buy at Rosenblatt Securities Inc
    • Kilroy (KRC) Raised to Overweight at JPMorgan; PT $49
    • Moelis & Co (MC) Raised to Outperform at KBW; PT $86
    • Nike (NKE) Raised to Buy at Fubon; PT $92
    • Spire (SR) Raised to Outperform at Mizuho Securities; PT $76
    • State Street (STT) Raised to Neutral at JPMorgan; PT $95
    • Tradeweb (TW) Raised to Outperform at KBW; PT $150
    • Willis Towers (WTW) Raised to Buy at Jefferies; PT $382
  • Downgrades
    • Biogen (BIIB) Cut to Market Perform at BMO; PT $164
    • Cabaletta Bio (CABA) Cut to Inline at Evercore ISI; PT $6
    • Exelixis (EXEL) Cut to Market Perform at BMO; PT $40
    • Healthcare Realty Trust (HR) Cut to Neutral at JPMorgan; PT $19
    • Hookipa Pharma (HOOK) Cut to Sector Perform at RBC; PT $2
    • Kimco Realty (KIM) Cut to Neutral at JPMorgan; PT $26
    • Lamb Weston (LW) Cut to Neutral at Citi; PT $68
    • Lazard Inc (LAZ) Cut to Market Perform at KBW; PT $57
    • Lennar (LEN) Cut to Neutral at BTIG
    • Lineage (LINE) Cut to Neutral at JPMorgan; PT $75
    • Merck & Co (MRK) Cut to Market Perform at BMO; PT $105
    • Nike (NKE) Cut to Market Perform at Telsey; PT $80
    • PBF Energy (PBF) Cut to Sell at TD Cowen; PT $20
    • RxSight (RXST) Cut to Hold at Stifel; PT $40
    • SoftBank (9984 JP) ADRs Cut to Hold at Jefferies; PT $32.20
    • Spero Therapeutics (SPRO) Cut to Inline at Evercore ISI; PT $5
  • Initiations
    • ADENTRA Inc (ADEN CN) Rated New Strong Buy at Raymond James; PT C$60
    • AirJoule Technologies (AIRJ) Rated New Buy at HC Wainwright; PT $12
    • Applied Digital (APLD) Rated New Overweight at Cantor; PT $15
    • Atara Bio (ATRA) Rated New Buy at Rodman & Renshaw; PT $25
    • Avidity Biosciences (RNA) Rated New Buy at HC Wainwright; PT $72
    • California Resources (CRC) Rated New Neutral at JPMorgan; PT $63
    • Cognex (CGNX) Rated New Overweight at Cantor; PT $49
    • Couche-Tard (ATD CN) Resumed Sector Outperform at Scotiabank; PT C$91
    • Definitive Healthcare (DH) Rated New Equal-Weight at Stephens; PT $5
    • Dianthus Therapeutics Inc (DNTH) Rated New Buy at TD Cowen
    • Doximity (DOCS) Rated New Equal-Weight at Stephens; PT $55
    • Fair Isaac (FICO) Rated New Neutral at JPMorgan; PT $2,150
    • Iqvia (IQV) Rated New Overweight at Stephens; PT $250
    • IREN Ltd (IREN) Rated New Buy at BTIG; PT $22
    • LCNB (LCNB) Rated New Market Perform at Hovde Group; PT $16.25
    • Liquidia (LQDA) Rated New Overweight at Wells Fargo; PT $20
    • MannKind (MNKD) Rated New Overweight at Wells Fargo; PT $9
    • Mind (MNMD) Rated New Buy at Chardan Capital Markets; PT $20
    • Moody’s (MCO) Rated New Buy at Citi; PT $565
    • Motorcar Parts (MPAA) Rated New Overweight at Cantor; PT $14
    • OptimizeRx (OPRX) Rated New Equal-Weight at Stephens; PT $5.50
    • PennantPark Floating (PFLT) Rated New Market Perform at Raymond James
    • Prothena (PRTA) Rated New Buy at Chardan Capital Markets; PT $40
    • Reddit (RDDT) Rated New Buy at Guggenheim; PT $210
    • Rhythm Pharma (RYTM) Rated New Outperform at Oppenheimer; PT $76
    • S&P Global (SPGI) Rated New Buy at Citi; PT $600
    • Savara (SVRA) Rated New Overweight at Wells Fargo; PT $8
    • Stoke Therapeutics (STOK) Rated New Buy at Chardan Capital Markets
    • Valvoline (VVV) Rated New Hold at Stifel; PT $42
    • Veeva (VEEV) Rated New Overweight at Stephens; PT $280
    • Xometry (XMTR) Rated New Outperform at Wedbush; PT $48

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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