Daily Game Plan

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

TODAY’S ECONOMIC DATA:  
10:00ET Wholesale Trade Sales, Wholesale Inventories; 11:00ET NY Fed 1-Yr Inflation Expectations

Highlights and News:  

• Optimism Grows on Sino-US Trade Talks
  
• XINHUA SAYS CHINA’S REGULATION OF RARE EARTH EXPORTS IS LEGAL, NOT COUNTERMEASURE, DON’T TARGET SPECIFIC NATIONS
  
• China’s US Exports Plunge Ahead of Trade Talks
  
• Newsom accused Trump of acting like a “dictator” by sending the National Guard into LA to quell protests
• HASSETT: US TO RELEASE EXPORT CONTROLS IF CHINA TALKS GO WELL
• HASSETT: US-CHINA MEETING TODAY TO BE SHORT, BUT BEAR RESULTS

Global stocks nudged higher as the US and China are set to resume high level trade negotiations in London to defuse tensions. The talks aim to resolve issues such
as rare-earth exports, tariffs, and restrictions on advanced technology. China is sharply shifting its trade away from the US, data for May showed. Chinese exports to the US fell by more than a third compared with the year before. However, exports to other
regions continued to show solid growth on the month. Analysts were upbeat about the prospects for the superpowers’ negotiations, pointing to Beijing’s decision to loosen controls on rare earths as a positive signal. China said Saturday it approved some applications
for rare-earth exports, without specifying which countries or industries were involved. A gauge for emerging-market equities are set for its highest close in more than three years.

EQUITIES: 

US equity futures are higher, led by small caps, as investors set out to monitor trade talks between the US and China. Kevin Hassett, head of the National Economic Council at the White
House, said he is absolutely expecting progress from today’s talks. US expectation is that “after the handshake” between the US and China officials in London, any export controls from the US will be eased, Hassett told CNBC. A US trade team currently in India
for trade discussions has extended its stay, a sign talks are progressing ahead of a July deadline, sources said. Wall Street strategists, including those at Morgan Stanley and Goldman Sachs, are growing optimistic about US stocks, citing resilient economic
growth and improved earnings outlook. Citi’s equity strategists have raised their year-end S&P 500 target to 6,300, citing a structural bullishness on US large cap stocks and a more constructive fundamental view. Morgan Stanley’s Michael Wilson reiterated
a 12-month price target of 6,500.

Futures ahead of the bell: E-Mini S&P %, Nasdaq %, Russell 2000 +0.6%, DJI +0.3%.

In pre-market trading, Tesla (TSLA) is down 2.3% after Baird downgraded the stock to neutral, noting that the recent share price rally followed a fundamentally poor
quarter for the EV maker. Air mobility stocks are set to extend gains after President Donald Trump signed an executive action establishing an electric “Vertical Takeoff and Landing” integration pilot program, according to a White House fact sheet. Archer Aviation
(ACHR) +9%, Joby Aviation (JOBY) +9%, Vertical Aerospace (EVTL) +7%. EchoStar (SATS) falls 9% after the Wall Street Journal reported the company is weighing a potential chapter 11 bankruptcy filing. Etoro Group (ETOR) rises 3.3% after Mizuho, Jefferies and
Citizens initiate the investment platform with a buy-equivalent rating. Grab Holdings Ltd. (GRAB) inches 1% lower after the company said it isn’t in talks to acquire Southeast Asia internet peer GoTo Group “at this time.”  Opendoor Technologies (OPEN) drops
13% after the company announced plans to seek holder permission for a reverse stock split between 1-for-10 and 1-for-50 at its special meeting on July 28. Robinhood (HOOD) falls 4% and AppLovin (APP) is down 4% after S&P Dow Jones Indices left the S&P 500
unchanged in its latest round of quarterly rebalancing on Friday. Sunnova Energy International Inc. (NOVA), one of the largest US rooftop solar companies, falls 33% after filing for bankruptcy in Texas following struggles with mounting debt. Warner Bros Discovery
(WBD) rises 4% after saying it will separate the company into two publicly traded businesses, splitting its streaming and studios business and its TV networks operations by the middle of next year.

European gauges are lower as investors awaited the US and China trade negotiations in London. The Stoxx 600 is slightly lower with Aero & Defense and Technology sectors
leading losses while Real Estate outperforms. Alphawave IP Group Plc advanced as much as 22% after Qualcomm Inc. agreed to buy the London-listed semiconductor company for about $2.4 billion in cash. L’Oreal SA slipped after it agreed to buy a majority stake
in the UK company Medik8 as the French cosmetics group strengthens its presence in the booming skincare market. Recent developments in Germany have been incrementally positive, Citi says, recommending to keep an overweight stance on the country’s stocks. Stock
markets in Denmark, Greece, Hungary, Norway, Switzerland and Turkey are closed today. Stoxx 600 -0.3%, DAX -0.8%, CAC -0.4%, FTSE 100 -0.3%. Aero & Defense -1%, Tech -0.8%, Basic Resources -0.6%. Real Estate +0.6%, Food & Bev +0.3%.

Shares in Asia rose, helped by gains in Hong Kong megacaps amid investor optimism over trade talks between China and the US. The MSCI Asia Pacific Index advanced 1.1%,
with Chinese tech names Alibaba and Meituan among the biggest boosts. AI and chip stocks also advanced after news of Meta Platforms’ potential multibillion-dollar investment into artificial intelligence startup Scale AI. The Hang Seng China Enterprises Index
outperformed the region Monday, jumping 1.7%.  China’s export growth slowed more than expected to 4.8% year on year in May, down from 8.1% YoY in April. Exports to the US surprisingly decelerated despite the trade war reprieve, sliding -34.5% YoY in May to
$28.8B. Meanwhile, imports slowed to -3.3% YoY, the third straight month of negative growth. The Kospi was near the top of the leaderboard as Goldman Sachs strategists raised their recommendation on South Korean stocks to overweight. Hang Seng Index +1.6%,
Kospi +1.5%, New Zealand +1.3%, Nikkei 225 +0.9%, Taiwan +0.6%, Philippines +0.5%, Sensex +0.3%, CSI 300 +0.3%, Singapore +0.05%. Thailand -0.1%, Vietnam -1.4%. Markets were closed for holiday in Australia and Indonesia.

FIXED INCOME: 
 

US treasuries are mixed, lagging behind their euro-area counterparts ahead of the sale of 3-, 10- and 30-year Treasuries later this week.  10-year yield eases half
a basis point to 4.50%. 30-year bond +1bp; 2-year note 1bp lower.  5s30s curve by about 1.5bp; 2s10s steeper by 0.5bp. Treasury auctions include $58 billion 3-year new issue Tuesday and $39 billion 10-year and $22 billion 30-year reopenings Wednesday and Thursday.
Thursday’s $22 billion offering will be particularly scrutinized given the recent volatility in long-dated global bonds.  

METALS: 

Gold inches higher, supported by a weaker US dollar ahead of US-China trade talks aimed defusing the trade dispute between the two superpowers. China’s central bank
continued its seven-month streak of increasing gold reserves in May, according to official data. Market attention will turn to US CPI data, due on Wednesday, for further clues on the Fed’s monetary policy path. Spot gold +0.15%, Silver +1.1%, Copper +0.6%.

ENERGY:   

Oil moves up ahead of renewed US-China trade talks on hope that a deal could boost the global economic outlook and subsequently fuel demand. Brent is trading above
$66 a barrel after adding 4% last week. Today’s talks could dampen the impact on prices of a slew of Chinese data releases. The data also showed that China’s crude oil imports declined in May to the lowest daily rate in four months as state-owned and independent
refiners began planned maintenance. Iran will send a counteroffer “in the coming days” via Oman in response to a US proposal on Tehran’s nuclear program, a Foreign Ministry spokesman said. WTI +0.6%, Brent +0.6%, US Nat Gas -1.6%, RBOB +0.5%. 

CURRENCIES: 

In currency markets, the dollar drifts lower against all currency majors ahead of US-China trade talks today. US payroll data on Friday was consistent with slowing
in real economy and should weigh on the dollar over time, Goldman Sachs strategists write in a note. Offshore yuan is little changed after China’s trade surplus grows amid lower imports. Aussie and kiwi dollars top G-10 leaderboard. The yen firms as data showed
Japan’s economy contracted at a slower-than-expected pace in the January-March period. Gross domestic product shrank at an annualized pace of 0.2% in Q1. The next Bank of Japan meeting is scheduled for June 16-17. The euro edged up as markets continued to
price-in the ECB’s hawkish monetary policy outlook issued last week. US$ Index -0.2%, GBPUSD +0.25%, EURUSD +0.2%, USDJPY -0.3%, AUDUSD +0.45%, NZDUSD +0.6%, USDCHF -0.2%, USDCAD -0.1%, USDSEK -0.4%, USDNOK -0.3%.

Bitcoin +1.5%, Ethereum +0.3%.  

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
• ABM Industries (ABM) Raised to Outperform at Baird; PT $56
• CuriosityStream (CURI) Raised to Outperform at Barrington Research
• Goodyear (GT) Raised to Outperform at BNPP Exane; PT $15
• LPL Financial (LPLA) Raised to Buy at Redburn; PT $460
• Oklo (OKLO) Raised to Buy at Seaport Global Securities
• Performance Food (PFGC) Raised to Buy at Melius; PT $110
• Quaker Houghton (KWR) Raised to Buy at Jefferies; PT $146
• Schwab (SCHW) Raised to Neutral at Redburn; PT $82
• Steven Madden (SHOO) Raised to Buy at Williams Trading; PT $31
• WP Carey (WPC) Raised to Neutral at BNPP Exane; PT $66
• Downgrades
• Apple Hospitality (APLE) Cut to Market Perform at BMO
• Bank of Montreal (BMO CN) Cut to Equal-Weight at Barclays; PT C$144
• Chewy (CHWY) Cut to Neutral at Mizuho Securities; PT $47
• Compass Diversified (CODI) Cut to Hold at Jefferies; PT $7.30
• Conagra (CAG) Cut to Sell at Goldman; PT $21
• Edison International (EIX) Cut to Peerperform at Wolfe
• Equinix (EQIX) Cut to Peerperform at Wolfe
• General Mills (GIS) Cut to Neutral at Goldman; PT $58
• Huize Holding (HUIZ) ADRs Cut to Neutral at Citi; PT $2.30
• Interactive Brokers (IBKR) Cut to Neutral at Citi; PT $215
• InterRent REIT (IIP-U CN) Cut to Sector Perform at RBC; PT C$13.55
• Intuitive Surgical (ISRG) Cut to Sell at Deutsche Bank; PT $440
• LPL Financial (LPLA) Cut to Neutral at Citi; PT $400
• Lululemon (LULU) Cut to Market Perform at CICC; PT $280.49
• Cut to Equal-Weight at Morgan Stanley; PT $280
• McDonald’s (MCD) Cut to Equal-Weight at Morgan Stanley; PT $324
• Mobileye (MBLY) Cut to Neutral at Goldman; PT $17
• Petrobras (PETR4 BZ) ADRs Cut to Neutral at Grupo Santander; PT $13
• Robinhood (HOOD) Cut to Sell at Redburn; PT $48
• Saratoga Investment (SAR) Cut to Neutral at Compass Point; PT $24.25
• Scotts Miracle-Gro (SMG) Cut to Hold at Stifel; PT $71
• Sitio Royalties (STR) Cut to Hold at Texas Capital; PT $20
• Tesla (TSLA) Cut to Hold at Argus
• Cut to Neutral at Baird; PT $320
• Usio Inc (USIO) Cut to Underperform at Barrington Research
• Initiations
• Antalpha Platform Holding (ANTA) Rated New Buy at Compass Point; PT $20
• Arhaus (ARHS) Rated New Market Perform at Raymond James
• Boyd Group Services (BYD CN) Rated New Buy at Paradigm Capital; PT C$255
• Centene (CNC) Rated New Overweight at Morgan Stanley; PT $70
• Coya Therapeutics (COYA) Rated New Buy at Lucid Capital Markets; PT $20
• Crescent Energy Co (CRGY) Rated New Overweight at Piper Sandler; PT $14
• Docebo (DCBO CN) Rated New Overweight at Cantor; PT C$47.85
• EToro Group (ETOR) Rated New Overweight at Cantor; PT $84
• Rated New Neutral at Susquehanna; PT $70
• Rated New Buy at Needham; PT $80
• Rated New Buy at TD Cowen; PT $80
• Rated New Buy at Canaccord; PT $78
• Rated New Neutral at Citi; PT $72
• Rated New Outperform at Mizuho Securities; PT $80
• Rated New Neutral at Redburn; PT $68
• Rated New Market Outperform at Citizens; PT $85
• Rated New Buy at Jefferies; PT $80
• Rated New Buy at Goldman; PT $76
• Rated New Market Perform at KBW; PT $65
• Heron Therapeutics (HRTX) Rated New Buy at HC Wainwright; PT $6
• Hesai Group (HSAI) ADRs Rated New Buy at Jefferies; PT $29.30
• Landstar (LSTR) Rated New Equal-Weight at Barclays; PT $145
• Liberty Energy (LBRT) Rated New Sector Perform at Peters & Co; PT $15
• MeiraGTx (MGTX) Rated New Buy at Lucid Capital Markets; PT $50
• Molina (MOH) Rated New Overweight at Morgan Stanley; PT $364
• Pearl Diver Credit (PDCC) Rated New Buy at Lucid Capital Markets
• Republic Services (RSG) Rated New Hold at Melius; PT $281
• Sandisk (SNDK) Rated New Buy at Arete; PT $63
• Tecnoglass (TGLS) Rated New Buy at William O’Neil
• Waste Connections (WCN CN) Rated New Buy at Melius; PT C$291.28
• WM (WM) Rated New Buy at Melius; PT $263

Data sources: Bloomberg, Reuters, CQG

David Wienke