Daily Game Plan

by Contributor
on February 3, 2025

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

TODAY’S ECONOMIC DATA:   9:45ET S&P Global US Manufacturing PMI; 10:00ET Construction Spending, ISM Mfg, ISM New
Orders, ISM Employment, ISM Prices Paid; 12:30ET Fed’s Bostic speaks

Highlights and News:  

  • Musk Says DOGE Halting Some Treasury Payments to US Contractors
  • China Prepares Trade Deal for Trump to Avoid Tariffs, WSJ Says
  • UK Wants to Build on Trading Relationship with the US; Committed to Open Trade: Pares
  • OPEC+ COMMITTEE WON’T MAKE CHANGES TO OUTPUT POLICY: DELEGATES

 

World shares are broadly lower after a hectic weekend that saw prospects for a global trade war turn into reality, as President Trump ramped up his tariff threats.
Trump plans to hold calls with Canadian and Mexican leaders but expects no dramatic outcome and says 25% tariffs will take effect Tuesday without a deal. Trump also threatened the EU with tariffs, citing large trade deficit and lack of US exports to the bloc,
but didn’t specify a level or timeline. Both Canada and Mexico have pledged to retaliate, with Canada’s Trudeau pledging 25% retaliatory tariffs on $106 billion worth of US goods. China, which is also due to be hit with a 10% levy, has vowed “corresponding
countermeasures.” Trump has said he may escalate US tariffs further in response to any retaliations. China has prepared an initial proposal for trade talks with the Trump administration that will include a renewed pledge not to devalue the yuan to support
its exports, according to the Wall Street Journal. An offer being discussed in Beijing will center on restoring a trade agreement known as the Phase One deal, which China signed with the US in early 2020 but didn’t implement.

 

EQUITIES:  

US equity futures are sharply lower, but well off the overnight lows, after a report that China has prepared an initial proposal for trade talks with the Trump administration. Trump said
he would speak with Canadian Prime Minister Justin Trudeau today, opening the prospect of a last-minute deal. North American stocks most exposed to tariffs, autos, chipmakers and energy lead the decline. Goldman Sachs strategists said there’s a risk of a 5%
slump in US stocks because of the hit to corporate earnings, while RBC Capital Markets estimated the range at 5% to 10%.

Futures ahead of the bell: E-Mini S&P -1.5%, Nasdaq -1.8%, Russell 2000 -2.1%, DJI -1.3%.

In pre-market trading, Becton Dickinson (BDX) climbs 2%; the medical device maker is considering a potential separation of its life sciences segment, which could be
valued at about $30. Shares in automakers, chipmakers and energy companies decline. General Motors (GM) -7.3%, Ford Motor (F) -4.2%, Tesla -3%, Nvidia (NVDA) -3%, Broadcom (AVGO) -3%, Constellation Energy (CEG) -4%, Oklo (OKLO) -8%. Stratasys (SSYS) rises
10% after Fortissimo Capital agreed to buy 14% of the 3D printing company. Triumph Group (TGI) jumps 34% after private equity firms Warburg Pincus and Berkshire Partners agreed to take the aircraft parts and services supplier private for about $3 billion.

European gauges tumbled as investors brace for the region to be the next target of President Trump’s trade tariffs. Inflation in the euro area unexpectedly picked up
speed, backing the ECB’s strategy of carefully managing interest rate reductions while the already struggling economy faces intensifying trade threats from the US. Core inflation stayed higher than anticipated at 2.7%, while price gains in the closely-watched
services sector dipped a touch. Today’s data also showed inflation accelerations in Italy and Spain. The Stoxx 600 dropped more than 1%, led lower by declines in auto shares, with Volkswagen AG and Stellantis NV shedding more than 5%. Stoxx 600 -1.4%, DAX
-1.8%, CAC -1.8%, FTSE 100 -1.4%. Autos -3.7%, Technology -2.3%, Banks -2.1%, Basic Resources -1.8%, Telecom -0.1%.

Shares in Asia fell across the board due to US President Trump’s tariffs on top trading partners, including China, sparking fears of a negative spillover into the region.
The MSCI Asia Pacific Index fell 2.8%, its biggest drop since early August. Some markets saw outsized moves following the Lunar New Year holiday, with Taiwan’s Taiex index briefly down more than 4%. Taiwan’s government pledged to help companies with Mexico
operations such as iPhone maker Foxconn Technology Group shift production lines and investment as needed to deal with higher US tariffs. Japanese automakers and South Korean car, steel and battery companies that supply the US from plants in Mexico and Canada
found themselves caught in the middle after Trump imposed 25% tariffs on the nations. Japanese stocks plunged, with both major benchmarks falling the most since September, while South Korea’s Kospi Index dropped 2.5%.  Stocks in Hong Kong finished flat upon
reopening from Lunar New Year holidays. Mainland Chinese markets resume trading on Wednesday. Taiwan -3.5%, Nikkei 225 -2.7%, Kospi -2.5%, ASX 200 -1.8%, Indonesia -1.1%, Singapore -0.8%, Sensex -0.4%, Hang Seng Index -0.05%. Philippines +0.35%.

FIXED INCOME: 
 

Treasuries are mixed with the yield curve notably flatter as 2-year yields are ~4bp cheaper on the day after President Trump again threatened tariffs on top trading
partners over the weekend. Long-end yields are ~5bp richer, flattening the curve, spurred by stagflation fears. 2-year yield rose as much as 8bp, remaining inside its January range; long end declined as much as 6bp, approaching last month’s low; 2s10s curve
is ~6bp flatter on the day, 5s30s curve ~5bp flatter, both near session lows. 10-year yield is down 3bps ~4.5%.

 

METALS: 

Gold edged higher, with a surging dollar somewhat outweighing haven demand as the world braces for trade wars. Spot gold traded just above $2,800 an ounce, close
to a record high reached on Friday. The inflationary impact of tariffs between the world’s biggest economies may keep borrowing costs elevated, a headwind for gold. If trade tensions intensify with more tit-for-tat measures, then we may start to see demand
for gold pick up again. Ottawa unveiled a 25% counter-tariff on US goods, Mexico pledged retaliatory actions and Beijing issued a statement vowing “corresponding countermeasures.”  Spot gold +0.35%, Silver +0.1%, Copper -0.6%.

 

 

 

ENERGY:   

 

Oil advanced as President Trump placed hefty tariffs on a range of imports, including energy from Canada and Mexico. WTI jumped as much as 3.7% before paring about
half of those gains to trade near $74 a barrel. It dramatically outpaced gains in the global Brent benchmark, underscoring the risk to domestic US supplies. WTI’s nearest time spread more than doubled at the open, touching a backwardation of more than $1,
indicating tight supplies. Energy from Canada faces a reduced levy of 10%, which includes roughly 4 million barrels a day of crude flows. The US also imports about 500,000 barrels a day of crude from Mexico. President Trump also demanded that OPEC+ lower oil
prices. Ministers from the producer group meet virtually today and are expected to proceed with plans to hike output gradually from April. WTI +2.6%, Brent +1.8%, US Nat Gas +9%, RBOB +4.3%.

 

 

CURRENCIES: 

In currency markets,  the peso fell to its lowest level against the dollar in almost three years and the Canadian dollar sank to its weakest since 2003. The euro
dropped on fears Europe may be next on the tariff list while the US dollar gained against all G-10 currencies except the yen. The yen reversed an earlier fall to trade higher against the greenback on haven flows. The pound fell after Trump told reporters on
Sunday that while the country was “out of line” when it came to trade, it may be able to avoid tariffs. Trump also told reporters he had ordered a freeze on aid to South Africa; the rand fell nearly 2%. US$ Index +0.8%, GBPUSD -0.4%, EURUSD -0.9%, USDJPY -0.4%,
AUDUSD -1%, NZDUSD -1.3%, USDCAD +1%, USDMXN +1.8%, USDCHF +0.4%.

 

 

 

Spot Bitcoin -6.3%, Spot Ethereum -11%. Crypto was hammered as Ether plunged nearly 25% over the weekend in a broad move away from risky assets.  $800 BILLION of
market cap was lost in a matter of hours and total liquidations hit $2 billion. The biggest 1-day liquidation in crypto history.

 

 

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
    • Booz Allen (BAH) Raised to Outperform at Raymond James; PT $150
    • Dexcom Inc (DXCM) Raised to Buy at Redburn; PT $115
    • Financial Institutions (FISI) Raised to Outperform at KBW; PT $34
    • Great-West Lifeco (GWO CN) Raised to Sector Outperform at Scotiabank
    • Northrop Grumman (NOC) Raised to Peerperform at Wolfe
    • Qorvo (QRVO) Raised to Buy at Arete; PT $128
    • ShaMaran Petroleum (SNM CN) Raised to Buy at SpareBank
    • SS&C (SSNC) Raised to Buy at Jefferies; PT $94
    • Zillow (ZG) Raised to Overweight at KeyBanc; PT $100
  • Downgrades
    • Alterity Therapeutics (ATH AU) ADRs Cut to Hold at Benchmark; PT $2.46
    • Aptiv (APTV) Cut to Market Perform at Raymond James
    • Brighthouse Financial (BHF) Cut to Hold at Jefferies; PT $64
    • BRP Inc. (DOO CN) Cut to Neutral at Citi; PT C$70
    • Canadian National (CNR CN) Cut to Sell at Loop Capital; PT C$123
    • Canadian Pacific Kansas (CP CN) Cut to Sell at Loop Capital; PT C$70
    • Canfor (CFP CN) Cut to Sector Underperform at Scotiabank; PT C$15
    • Cloudflare (NET) Cut to Neutral at Baird; PT $140
    • Comcast (CMCSA) Cut to Sector Perform at Scotiabank; PT $44.50
    • Constellation Brands (STZ) Cut to Neutral at Piper Sandler; PT $200
    • CrowdStrike (CRWD) Cut to Neutral at Baird; PT $430
    • CSX (CSX) Cut to Hold at Loop Capital; PT $34
    • Cullen/Frost (CFR) Cut to Neutral at DA Davidson; PT $143
    • Danaher (DHR) Cut to Market Perform at Raymond James
    • Ensign Energy Services (ESI CN) Cut to Hold at TD Cowen; PT C$3
    • FedEx (FDX) Cut to Hold at Loop Capital
    • Fortinet (FTNT) Cut to Neutral at Baird; PT $112
    • GXO Logistics (GXO) Cut to Hold at Loop Capital; PT $49
    • Hologic (HOLX) Cut to Hold at Needham
    • iA Financial (IAG CN) Cut to Sector Perform at Scotiabank; PT C$143
    • Iqvia (IQV) Cut to Neutral at BTIG
    • Lennox (LII) Cut to Underweight at Wells Fargo; PT $580
    • Lifetime Brands (LCUT) Cut to Neutral at DA Davidson; PT $6.75
    • Materialise ADRs Cut to Accumulate at KBC Securities; PT $10
    • MGM Resorts (MGM) Cut to Neutral at BTIG
    • Norfolk Southern (NSC) Cut to Hold at Loop Capital; PT $256
    • Precision Drilling (PD CN) Cut to Hold at TD Cowen; PT C$100
    • Prologis (PLD) Cut to Market Perform at Raymond James
    • PVH (PVH) Cut to Equal-Weight at Wells Fargo; PT $105
    • Sapiens (SPNS) Cut to Hold at Jefferies; PT $28
    • UMB Financial (UMBF) Cut to Neutral at Citi; PT $127
    • Union Pacific (UNP) Cut to Sell at Loop Capital
    • US Steel (X) Cut to Equal-Weight at Morgan Stanley; PT $39
    • XPLR Infrastructure LP (XIFR) XPLR Infrastructure Cut to Underweight at Morgan Stanley; PT $13
  • Initiations
    • Crescent Energy Co (CRGY) Rated New Buy at SWS; PT $21
    • Crispr Therapeutics (CRSP) Rated New Buy at HC Wainwright; PT $65
    • GoDaddy (GDDY) Rated New Equal-Weight at Wells Fargo; PT $198
    • Medirom Healthcare Technologies (MRM) US Rated New Buy at ThinkEquity; PT $5
    • Payoneer Global (PAYO) Rated New Buy at Deutsche Bank; PT $13
    • Quanta Services (PWR) Rated New Market Perform at BMO; PT $338
    • Samsara (IOT) Rated New Hold at Berenberg; PT $57
    • Shift4 Payments (FOUR) Rated New Hold at Deutsche Bank; PT $120
    • Wix.com (WIX) Rated New Underweight at Wells Fargo; PT $208
    • Zspace (ZSPC) Rated New Buy at Roth Capital Partners; PT $20

 

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

David Wienke

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