Daily Game Plan

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

DATA/HEADLINES   8:30ET Chicago Fed Nat Activity Index

TODAY’S HIGHLIGHTS:  

• California Governor Gavin Newsom is in China for weeklong trip
  
• Nine Republicans are running for House speaker
  
• 3 Chinese firms used parts of leopards and pangolins as ingredients in medicine products

Global stocks broadly retreated after the US 10-year Treasury yield topped 5%, fueling concern that soaring borrowing costs will erode economic growth. The combination
of higher yields and risk of a wider conflict in the Middle East soured sentiment at the start of a week full of mega-cap earnings and key data pushed global shares down to seven-month lows. Adding to anxiety, the Philippines reported that a Chinese coast
guard ship collided with one of their vessels calling China the “aggressor”. Meanwhile, Israel says it struck 320 targets in Gaza in the last 24hrs while air strikes hit southern Lebanon. Western countries intensified efforts to stop the Israel-Hamas war from
spreading, with President Biden talking with leaders from Canada, France, Germany, Italy and the UK to strengthen coordination.               

EQUITIES:

US equity futures are lower as the speed and severity of the bond selloff is capturing Wall Street’s attention, just as earnings season gets underway. With US data
continuing to show a strong economy and Federal Reserve speakers reinforcing the need to keep interest rates high, many investors are adopting a bearish stance on risk assets. The recent surge in bond yields has tightened monetary conditions without the central
banks having to do anything, allowing the Federal Reserve to signal it will likely stay on hold at its policy meeting next week. Chevron agreed to buy Hess for $171 per share, in a deal worth $53 billion, the latest major consolidation in the US oil industry.
Mega caps Microsoft, Alphabet, Amazon and Meta Platforms all report earnings this week, along with IBM and Intel. In other news. Americans are falling behind on their car loans at the highest rate on record, according to Fitch.                

Futures ahead of the bell: E-Mini S&P -0.3%, Nasdaq -0.3%, Russell 2000 -0.4%, Dow -0.4%.

In pre-market trading, Hess (HES) shares rose 2.4% after Chevron (CVX US) agreed to buy the energy company. Pinterest (PINS) climbed 2.5% after Stifel raised its rating to buy from hold.
Farfetch (FTCH US) rose 2.5% as the European Commission unconditionally cleared the acquisition of a 47.5% stake in YOOX NET-A-PORTER (YNAP) from Richemont. Textainer Group (TGH US) shares soared 42% after Stonepeak Partners agreed to buy the container leasing
firm in a deal valued at around $7.4 billion. Walgreens Boots Alliance (WBA) rose 3.5% as JPMorgan raised the drugstore chain rating to overweight from neutral.

European gauges fell to the lowest level since early January as the spike in US 10-year Treasury yields to 5% fueled worries about higher-for-longer interest rates from the Federal Reserve. 
Weaker earnings also hurt sentiment to start the week. Volkswagen AG fell almost 3% after earnings missed expectations and Royal Philips NV lost 4% after reporting a drop in order intake. The UK’s Vistry Group Plc tumbled after announcing hundreds of job cuts.
Adevinta fell over 10% after people familiar said a group led by Permira and Blackstone is reconsidering its pursuit of the online classifieds firm. Europe’s Stoxx 600 index sank as much as 0.8%, reaching the lowest intraday level since March and reducing
year-to-date gains to just 1.2%.  REITs and miners lead losses, while retail and travel & leisure outperform. The energy sector slipped as Israel held off on its ground invasion of Gaza amid diplomatic efforts to secure the release of more hostages. Stoxx
600 -0.6%, DAX -0.7%, CAC -0.1%, FTSE 100 -0.6%.  REITs -2.1%, Basic Resources -1.7%, Telecom -1.2%. Travel & Leisure +0.4%, Retail +0.4%.     

Shares in Asia extended losses from last week as risk sentiment remained weak amid concerns over the conflict in the Middle East.  The MSCI Asia Pacific Index fell 0.7%, for a fourth
day of declines, with technology the worst performing sector.  Apple supplier Hon Hai fell the most in three months after Chinese regulators reportedly launched a probe into parent Foxconn over taxes and land use. A gauge of Chinese tech stocks slumped to
the lowest since its inception more than three years ago, as investor demand evaporates in the face of higher global rates. China’s CSI 300 Index slid to its lowest level since early 2019 while the Hong Kong market was shut for a holiday. Indonesia -1.6%,
Shanghai Composite -1.5%, Vietnam -1.3%, Sensex -1.25%, Taiwan -1.1%, CSI 300 -1%, Kospi -0.75%. 

FIXED INCOME: 
 

Treasuries are cheaper by 4bp-8bp across the curve, holding a bear-steepening move that saw 2/10 spread reach -11bps, its least inverted since July 2022.  The 10-year
Treasury yield rose as much as 11 basis points, crossing 5% for the first time since 2007, propelled by expectations the Federal Reserve will maintain elevated interest rates and that the government will further boost bond sales to cover widening deficits.
The yield has jumped more than 40 bps this month as some Fed officials sound hawkish in the face of stronger-than-expected US data. 10-year Treasuries above 5% are a buy for Morgan Stanley Investment Management.  The Fed is reducing its bond holdings via quantitative
tightening, while the holdings of foreign governments such as China’s are also waning. In Europe, core 10yr yields are higher by 7.5bps while yield curves in Germany, the US and the UK are steeper. The EU auctioned 7yr and 15yr and the results were on the
weak side. US Treasury auction cycle begins Tuesday with $51b 2-year note sale, followed by 5- and 7-year auctions Wednesday and Thursday.                      

METALS: 
   

Gold edged lower while fears of a spiraling conflict in the Middle East receded. Still, Israel has stepped up air raids on Gaza in preparation for the “next phase” of its conflict with
Hamas, while also warning that Hezbollah risks dragging Lebanon into a wider regional war.  Gold -0.1%, Silver -0.7%.  

ENERGY:  

Oil edged lower after two weeks of gains, while the Israeli central bank is set to outline the potential economic impact of the war with Hamas. Aid convoys started
to arrive in the Gaza Strip from Egypt over the weekend, as Arab leaders and foreign ministers gathered for a summit in Cairo which was unable to yield a joint statement. Europe is considering whether to extend an emergency gas price cap amid fears that conflicts
and pipeline sabotage may elevate prices this winter, the FT reported.  WTI -0.5%, Brent -0.4%, US Nat Gas -1.1%, RBOB -0.3%.

CURRENCIES:   

G-10 currencies were mostly muted, as USD/JPY remained close to 150.00 and fears of intervention remain intact. BOJ officials are weighing whether to tweak yield-curve
control settings as long-term rates float higher in tandem with those in the US, the Nikkei reported.  Key risk events this week include policy decisions by the Bank of Canada and the European Central Bank; investors are waiting for the release of US data
including the manufacturing PMI due Tuesday, third-quarter GDP Thursday and the Federal Reserve’s favored inflation gauge on Friday.  US$ Index +0.03%. GBPUSD ~flat, USDJPY +0.05, EURUSD +0.1%, AUDUSD -0.1, NZDUSD -0.15%, USDNOK +0.6%.                     

Bitcoin +2.8%%, Ethereum +2.3%.    

TECHNICAL LEVELS: 

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
• (BXSL) Blackstone Secured Lending Fund Raised to Overweight at JPMorgan
• (CFG) Citizens Financial Raised to Peerperform at Wolfe
• (DOCN) DigitalOcean Raised to Neutral at Piper Sandler; PT $22
• (EIX) Edison International Raised to Outperform at Evercore ISI
• (EMR) Emerson Electric Raised to Buy at CFRA; PT $114
• (FLS) Flowserve Raised to Strong Buy at CFRA
• (HBAN) Huntington Bancshares Raised to Peerperform at Wolfe
• (LNN) Lindsay Raised to Buy at Roth MKM; PT $150
• (PINS) Pinterest Raised to Buy at Stifel; PT $32
• (WBA) Walgreens Boots Raised to Overweight at JPMorgan; PT $30
• Downgrades
• (ASAN) Asana Cut to Underweight at Piper Sandler; PT $16
• (AYX) Alteryx Cut to Underweight at Piper Sandler; PT $30
• (BCM CN) Bear Creek Mining Cut to Speculative Buy at Stifel Canada
• (BEAM) Beam Therapeutics Cut to Neutral at Cantor
• (CNE CN) Canacol Energy Cut to Neutral at Eight Capital
• (CNE CN) Cut to Neutral at JPMorgan; PT C$9
• (CRM) Salesforce Inc Cut to Neutral at Piper Sandler; PT $232
• (ELS) Equity LifeStyle Cut to Neutral at BofA; PT $64
• (EOG) EOG Resources Cut to Neutral at Citi; PT $135
• (FANG) Diamondback Cut to Neutral at Citi; PT $170
• (GBIO) Generation Bio Cut to Market Perform at JMP
• (MTTR) Matterport Cut to Neutral at Piper Sandler; PT $2
• (PXD) Pioneer Natural Cut to Hold at Stifel; PT $258
• (RF) Regions Financial Cut to Neutral at Wedbush; PT $15
• (RNG) RingCentral Cut to Neutral at Rosenblatt Securities Inc; PT $35
• (U) Unity Software Cut to Neutral at Piper Sandler; PT $30
• (VTRS) Viatris Cut to Underperform at BofA
• Initiations
• (ATRC) AtriCure Rated New Market Outperform at JMP; PT $60
• (AZTR) Azitra Rated New Buy at ThinkEquity; PT $5
• (BKNG) Booking Rated New Buy at HSBC; PT $3,650
• (CART) Instacart Rated New Neutral at MoffettNathanson LLC; PT $30
• (CELH) Celsius Holdings Rated New Outperform at William Blair
• (CHH) Choice Hotels Rated New Hold at HSBC; PT $131
• (DDOG) Datadog Rated New Neutral at Guggenheim
• (DT) Dynatrace Rated New Buy at Guggenheim; PT $58
• (EXPE) Expedia Rated New Hold at HSBC; PT $114
• (H) Hyatt Rated New Buy at HSBC; PT $133
• (HLT) Hilton Worldwide Rated New Buy at HSBC; PT $191
• (HST) Host Hotels Rated New Buy at HSBC; PT $21
• (LMAT) LeMaitre Vascular Rated New Market Outperform at JMP; PT $60
• (MAR) Marriott Intl Rated New Buy at HSBC; PT $233
• (MGM) MGM Resorts Rated New Buy at HSBC; PT $49
• (NVGS) Navigator Holdings Rated New Buy at Arctic Securities; PT $18
• (PCG) PG&E Reinstated Inline at Evercore ISI; PT $16
• (PK) Park Hotels Rated New Hold at HSBC; PT $13
• (SPOT) Spotify Rated New Market Perform at Cowen; PT $129
• (SVC) Service Properties Rated New Hold at HSBC; PT $8
• (WH) Wyndham Hotels Rated New Buy at HSBC; PT $87
• (WYNN) Wynn Resorts Rated New Buy at HSBC; PT $111

Data sources: Bloomberg, Reuters, CQG