Daily Game Plan

by Contributor
on January 27, 2025

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

TODAY’S ECONOMIC DATA:   8:30ET Chicago Fed Nat Activity Index; 10:00ET New Home Sales; 10:30ET Dallas Fed Mfg Activity;
11:00ET 2-Year Note Auction; 1:00ET 5-Year Note Auction

Highlights and News:  

  • China’s DeepSeek roils markets after it rolled out a free AI assistant that it says uses lower-cost chips and less data; becomes #1 on US Apple App Store
  • Hamas says eight of 26 hostages to be freed are dead
  • Trump to Hold Off on Colombia Tariffs After Deal on Migrants
  • Israel started allowing Palestinians to return to northern Gaza

 

Global stocks slumped after Chinese artificial intelligence startup DeepSeek’s launch of a free AI app rocked global technology stocks. Buzz grew over the weekend
about the company’s latest AI model being cost-effective while running on less-advanced chips, raising questions about the high valuations of current leaders in the space. DeepSeek’s model, built with open-source technology, questions the belief that China’s
AI technology is years behind the US, and casts uncertainty about the investment case for the entire AI supply chain. Little is known about the small startup behind DeepSeek, but its assistant leapfrogged rival ChatGPT to become the top-rated free application
on Apple’s App Store in the United States on Monday.     

 

EQUITIES:  

US equity futures tumbled amid concerns that DeepSeek’s AI models may disrupt US technological leadership. China’s DeepSeek rolled out a free AI assistant that it says uses lower-cost
chips and less data, casting doubt over America’s technological dominance. Nasdaq futures fell about 4%, putting broader tech stocks on track for a $1.2 trillion wipeout. DeepSeek says that it can deliver what ChatGPT can deliver today at a fraction of the
cost. This marks a significant challenge to the already established AI leaders such as OpenAI, Google, and Microsoft. Shares of AI-bellwether Nvidia, which accounted for almost half the S&P 500’s gains last year, were down over 11% in pre-market trade. Investors
now await a Federal Reserve decision later this week, in which the US central bank is widely expected to hold interest rates. Big Tech earnings this week may add to worries, with profit growth projected to come in at the slowest pace in almost two years.

Futures ahead of the bell: E-Mini S&P -2%, Nasdaq -3.5%, Russell 2000 -0.9%, DJI -0.7%.

 

In pre-market trading, AI stocks slump amid concern that AI models from Chinese firm DeepSeek could disrupt US technological leadership. C3.ai (AI) -6%, Palantir (PLTR)
-6%, Super Micro Computer (SMCI) -9%. AI infrastructure-related stocks trade lower: Amphenol (APH) -11%, ARM Holdings (ARM) -10%, Oracle (ORCL) -7%. hip-related stocks decline: Broadcom (AVGO) -12%, Lam Research (LRCX) -5%, Marvell Technology (MRVL) -14%. 
SoFi Technologies (SOFI) tumbles 13% after the fintech company’s first quarter and full-year forecasts trail consensus expectations.  AT&T (T) shares gained 2% after earnings beat, buoyed by seasonal promotions and bundled product offerings. Akero Therapeutics
(AKRO) surges 110% after the drug developer gave promising results from a mid-stage trial of its experimental treatment for patients with cirrhosis. company for $14.30 per share.

European gauges are lower as tech stocks led market losses, with shares of chip equipment maker ASML Holding NV down as much as 11%. Electrification stocks including
ABB Ltd and Legrand SA fell, as well as Siemens Energy AG (-19%), which was the biggest drag on the wider benchmark, due to their data-center exposure. Utilities and real estate gained as traders expect the European Central Bank to cut interest rates at this
week’s meeting.  Among other single stocks, SGS SA rose while Bureau Veritas SA fell after the pair ended talks of a potential merger. Ryanair Holdings Plc rose after the budget airline reported earnings that beat estimates. Earnings will likely be the main
driver as the week progresses, with major earnings from big cap tech due this week. Stoxx 600 -0.5%, DAX -0.9%, CAC -0.6%, FTSE 100 -0.2%. Technology -4.2%, Industrials -2.8%, Energy -1.8%, Basic Resources -1.8%. Chemicals +1.9%, Utilities +1.8%, Real Estate
+1.7%, Telecom +1.6%, Food & Beverage +1.5%.

Shares in Asia were mixed, with the MSCI Asia Pacific Index giving up early gains to trade flat. Chinese stocks in Hong Kong led gains at the start of a shortened trading
week, with tech firms linked to DeepSeek rallying as investors assessed the Chinese AI app’s popularity. Mainland-listed Merit Interactive Co. was among those surging by their daily limits.  Data centers and related companies took a hit, with Malaysia’s utility
conglomerate YTL Power falling ~9%. Elsewhere, Japan’s Topix index climbed, as market participants breathed a sigh of relief that the Bank of Japan’s interest-rate hike last week passed without turmoil. Indian stocks fell on concerns over an economic slowdown.
Meanwhile, data showed China’s economic activity unexpectedly weakened to start the year, breaking the momentum of a recovery sparked by stimulus measures. Markets in Australia, South Korea, Indonesia, Taiwan and Vietnam were closed for a holiday. Hang Seng
Index +0.7%, Topix +0.25%. CSI 300 -0.4%, Nikkei 225 -0.9%, Thailand -1%, Sensex -1.1%, Philippines -1.6%.

FIXED INCOME: 
 

Treasuries lead a rally in global government bonds, with US 10-year yields falling as much as 12 bps to ~4.50%, as risk-off sentiment swept through markets. 2s10s
curve is flatter by 2bps. The US session includes 2- and 5-year note auctions, an accelerated schedule that concludes with 7-year notes Tuesday, before Wednesday’s FOMC policy announcement.  Today’s auctions include $69b 2-year note sale at 11:30am, $70b 5-year
at 1pm EST.  IG dollar new-issue slate blank so far, though dealers project around $25b of offerings this week. Regionals banks are expected among them.

 

 

METALS: 

Gold pared some of its earlier losses after a Chinese AI startup shook investor confidence in US technology giants, boosted demand for haven assets and pushed the
US dollar lower. The precious metal has rallied around 5% this year, helped by a falling dollar. Spot gold -0.3%, Silver -0.2%, Copper -1%.

 

 

ENERGY:   

 

Oil prices traded slightly lower after President Trump paused steep retaliatory tariffs that he had threatened against Colombia, a key source of US crude imports.
Sanctions could have a significant effect on the oil supply as Columbia sent around 41% of its seaborne crude exports to the US, Reuters reported. Goldman predicts US sanctions won’t significantly impact Russian oil production because of high freight rates
and cheap supply. Non-sanctioned ships are filling the gap left by blacklisted tankers. WTI -0.6%, Brent -0.7%, US Nat Gas -4%, RBOB -0.2%.

 

CURRENCIES: 

In currency markets, the Japanese yen climbs to the top of the G-10 FX leader board, rising more than 1% against the greenback on safe-haven appeal. The dollar dipped
as broad US import tariffs remained on the back burner. Haven dynamics were boosted after President Trump threatened to impose tariffs on Colombia over a dispute about deported migrants; he later withdrew the threat after reaching a deal with Colombia. Australia
and New Zealand’s currencies, both sensitive to economic developments in major trading partner China, declined. China’s factory activity unexpectedly slowed and the services sector cooled, data showed today, in signs that stronger fiscal stimulus is needed
even after a recent stimulus push.  US$ Index -0.3%, GBPUSD +0.2%, EURUSD +0.1%, USDJPY -1.25%, AUDUSD -0.2%, NZDUSD -0.2%, USDCHF -0.8%.   

 

 

Spot Bitcoin -4.6%, Spot Ethereum -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
    • 1st Source (SRCE) Raised to Overweight at Piper Sandler; PT $72.50
    • Aptiv (APTV) Raised to Outperform at Baird; PT $82
    • Burke & Herbert Financial Services (BHRB) Raised to Outperform at KBW
    • Cascades (CAS CN) Raised to Sector Outperform at Scotiabank; PT C$15.50
    • Dana (DAN) Raised to Equal-Weight at Wells Fargo; PT $16
    • Exelixis (EXEL) Raised to Overweight at Morgan Stanley; PT $40
    • GDI Integrated (GDI CN) Raised to Buy at TD Cowen; PT C$50
    • Interpublic (IPG) Raised to Overweight at JPMorgan; PT $39
    • Kinross Gold (K CN) Raised to Buy at BofA
    • Portillo’s (PTLO) Raised to Buy at Stifel; PT $16
    • Qorvo (QRVO) Raised to Overweight at Piper Sandler; PT $110
    • Redwire (RDW) Raised to Buy at B Riley; PT $27
    • Safe Bulkers (SB) Raised to Buy at DNB Markets; PT $4.20
    • SouthState Corp (SSB) Raised to Buy at Citi; PT $128
    • State Street (STT) Raised to Peerperform at Wolfe
    • Titan Machinery (TITN) Raised to Outperform at Baird; PT $25
    • Twilio (TWLO) Raised to Buy at Goldman; PT $185
    • WM (WM) Raised to Sector Outperform at Scotiabank; PT $250
  • Downgrades
    • Ameren (AEE) Cut to Equal-Weight at Barclays
    • Barrick Gold (ABX CN) Cut to Neutral at BofA
    • Fannie Mae (FNMA) Cut to Underperform at KBW; PT $4
    • Freddie Mac (FMCC) Cut to Underperform at KBW; PT $4.50
    • Intellia Therapeutics (NTLA) Cut to Equal-Weight at Morgan Stanley
    • PSEG (PEG) Cut to Equal-Weight at Barclays
    • Ralph Lauren (RL) Cut to Market Perform at Raymond James
    • RingCentral (RNG) Cut to Equal-Weight at Barclays
    • RLI (RLI) Cut to Underperform at Jefferies; PT $61
  • Initiations
    • American Tower (AMT) Rated New Market Outperform at JMP; PT $225
    • Bitdeer Technologies Group (BTDR) Rated New Outperform at KBW
    • CleanSpark (CLSK) Rated New Outperform at KBW; PT $19
    • Coca-Cola (KO) Rated New Neutral at Haitong Intl; PT $59.60
    • Core Scientific (CORZ) Rated New Outperform at KBW; PT $22
    • Crown Castle (CCI) Rated New Market Outperform at JMP; PT $115
    • Digital Realty (DLR) Reinstated Market Outperform at JMP; PT $220
    • DigitalBridge Group Inc (DBRG) Rated New Market Outperform at JMP
    • Equinix (EQIX) Rated New Market Outperform at JMP; PT $1,200
    • GDS Holdings (GDS) ADRs Rated New Market Outperform at JMP; PT $35
    • GFL Environmental (GFL CN) Rated New Buy at Citi; PT C$76.09
    • Marvell Technology (MRVL) Rated New Buy at Melius; PT $188
    • Mural Oncology (MURA) Rated New Buy at Jones; PT $16
    • Plaza Retail REIT (PLZ-U CN) Rated New Buy at Paradigm Capital; PT C$4.30
    • Sagimet Biosciences (SGMT) Rated New Buy at Jones; PT $42
    • SBA Comms (SBAC) Rated New Market Outperform at JMP; PT $250
    • Vital Farms (VITL) Rated New Outperform at Telsey; PT $52
    • XTI Aerospace Inc (XTIA) Rated New Buy at ThinkEquity; PT $15

 

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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