Daily Game Plan

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

DATA/HEADLINES:   8:30ET CPI*, Weekly Jobless Claims; 11:40ET Fed’s Mester speaks on BTV; 12:40ET Fed’s Barkin speaks;
1:00ET 30 Year Auction

TODAY’S HIGHLIGHTS and News:  

• Chinese migrants lured to Oklahoma are victims of labor, sex trafficking, official says
  SCMP
• At $34 trillion, we are spending over $1 trillion per year on interest to service the national debt
• US regulators for the first time approved exchange-traded funds that invest directly in Bitcoin
  
• Bill Belichick and the New England Patriots are parting ways after 24 years

Global shares edged higher as investors brace for a closely-watched US inflation report and amid widespread excitement in the crypto world after the United States
approved the first exchange-traded funds to track bitcoin. Risk appetite was dented after an oil tanker was seized by an armed group off the coast of Oman, and appeared to have changed course towards Iran, according to UK maritime sources. It is the same ship
that was seized by the US in a sanctions enforcement operation last year.    

EQUITIES: 
 

US equity futures nudge higher as all eyes are now on the upcoming consumer price report for December, which will shape views on how soon the Federal Reserve might cut interest rates.
Core CPI is forecast to remain unchanged at 0.3% from the month before, while year-on-year inflation is expected to slow to 3.8% from November’s 4%. Investor focus will also be on the US earnings season, with banking giants JPMorgan Chase, Bank of America,
Citigroup and Wells Fargo all due to report earnings on Friday. Growth stocks carry much lower macroeconomic risk exposures, according to Citigroup quantitative strategists, who also suggest slowly “leaning into” value shares. Google announced hundreds of
job cuts, a day after a similar move by Amazon, as the tech industry rejigs to focus on profit. Chesapeake will buy rival Southwestern for $7.4 billion in a deal that will create one of the largest US natural gas producers.      

Futures ahead of the data: E-Mini S&P +0.15%, Nasdaq +0.4%, Russell 2000 +0.4%, Dow +0.02%.

In pre-market trading, crypto stocks got a boost after the SEC gave regulatory approval for US spot bitcoin ETFs to begin trading today, seen as a game-changer for the sector. Coinbase
(COIN) +5.3%, Marathon Digital (MARA) +5.9%, Riot Platforms (RIOT) +5.3%, Terawulf (WULF) +10%.  Citigroup (C) slips 1.3% after the bank said in a filing that it would set aside a $1.3 billion reserve build covering risk in both Argentina and Russia. KB Home
(KBH) falls 3%, extending declines from Wednesday’s post-market session, after the homebuilder reported a year-over-year drop in its average 4Q selling price for the fourth quarter and forecast weaker housing revenue in 2024. Lyft (LYFT) shares fall as much
as 1.8% after a downgrade at Goldman Sachs. Chewy (CHWY) gains 2.2% after Barclays raises the online pet supplies retailer to overweight. Hertz (HTZ) gains 1.4% after deciding to sell about 20,000 electric vehicles from its US fleet. Southwestern Energy (SWN)
slips about 3% after agreeing to be bought by rival Chesapeake Energy CHK gains 1.2%.

European gauges are slightly higher, although they have given up most of their earlier gains. The Stoxx Europe 600 remains in positive territory as autos and retail sectors counter balance
losses in bank shares.  Antofagasta leads miners higher after RBC upgraded the stock to outperform, saying that the company is a key beneficiary of the rapid tightening in expected copper supply. Tesco Plc shares gained after it raised its profit guidance,
but shares have since turned negative after warning that Red Sea shipping disruption could lead to inflation on consumer goods. Marks & Spencer sank at the open after the retailer beat estimates but anticipate higher prices ahead.  Stoxx 600 +0.1%, DAX +0.2%,
CAC +0.1%, FTSE 100 -0.15%. Autos, Industrial, Travel, Retal +0.65%.  Banks -0.6%, Food & Bev -0.25%.

Asian shares advanced, led by Japan and Hong Kong, while China had a rare up day. The MSCI Asia Pacific Index rose 1.2%, with Toyota Motor and Tencent among the biggest contributors to
gains. Japanese benchmarks extended their rallies, hitting fresh three-decade highs. Stocks linked to Huawei’s operating system rose after the Chinese tech firm said it inked a partnership with JD.com on application development. Nikkei 225 +1.8%, Hang Seng
Index +1.3%, Philippines +1%, Singapore +0.7%, CSI 300 +0.6%, ASX 200 +0.5%, Taiwan +0.5%, Sensex +0.1%. Kospi -0.1%.  

FIXED INCOME: 
 

US Treasury yields are lower as 10yr yield dropped by ~5bps before CPI data set to add to Fed confidence that disinflation is making progress. The Fed may end up
cutting rates more than it’s signaling, driving a rally in shorter-maturity Treasuries, JPMorgan Asset Management said. Treasury yields are richer by 2bp to 5bp across the curve with front-end lagging slightly, flattening 2s10s by 2bps. Ahead of CPI data,
investors this week have been targeting SOFR March options, hedging a full 25bp rate cut to be priced into the March 20 policy meeting. This week’s auction cycle concludes with $21b 30-year bond reopening.         

METALS: 
   

Gold is higher ahead of a crucial US inflation report, with markets tempering expectations for Federal Reserve rate cuts early this year. Spot gold +0.4%, silver
+0.7%.  

ENERGY:  

Oil prices rose after an oil tanker, previously seized by the US for carrying illicit Iranian supply, was boarded by an armed group in Oman, raising the prospect
of escalating conflict in the Middle East. Yesterday, Yemen-based Houthis mounted their largest attack yet on commercial shipping lanes in the Red Sea and Israeli strikes in Gaza also intensified. The United States and Britain hinted they would take further
measures if the attacks continued. Meanwhile, Chinese refiners asked for less Saudi crude oil in February despite the world’s top oil exporter announcing its biggest price cut in 13 months. China’s customs administration will release December trade data on
Friday, giving a full-year picture of overall demand.  WTI +2%, Brent +1.9%, US Nat Gas -1.5%, RBOB +2.3%.

CURRENCIES:   

In currency markets, the dollar inched lower for a second day of losses ahead of the US inflation report. The Aussie Dollar rose due to Australia’s strong trade surplus
in November. Overnight volatility in major currencies shows the release will make for wider weekly ranges, although it’s not seen as an absolute game-changing moment. But what it may establish is a reversal of the latest pattern in FX volatility that focuses
more on the long term, with only tactical trades going through in the front-end. US$ Index -0.2%, GBPUSD +0.15%, USDJPY -0.3%, EURUSD +0.1%, AUDUSD +0.2%, USDNOK, -0.4%, NZDUSD +0.4%.             

Bitcoin +3%, Ethereum +5%. Bitcoin rose, trading around its highest level since March 2022 after US regulators approved the first US-listed exchange traded funds
to track the cryptocurrency, in a landmark move that could broaden its appeal to investors. The SEC said on Wednesday it approved 11 applications, including from BlackRock, Ark Investments/21Shares, Fidelity, Invesco and VanEck. Three of the ETFs, including
BlackRock’s, were trading by 4:30EST Thursday, with more expected to begin later in the day. Ethereum jumped amid bets the second-biggest token is next to get the ETF green light.

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
• Alamos Gold (AGI CN) Raised to Outperform at RBC; PT C$21.39
• American Air (AAL) Raised to Buy at Jefferies; PT $18
• Appian (APPN) Raised to Buy at Citi; PT $45
• Chewy (CHWY) Raised to Overweight at Barclays; PT $30
• Cognizant (CTSH) Raised to Buy at Jefferies
• Fiserv (FI) Raised to Outperform at Oppenheimer; PT $168
• Franklin BSP Realty (FBRT) Raised to Market Outperform at JMP; PT $15
• Greif (GEF) Raised to Overweight at Wells Fargo; PT $75
• Juniper (JNPR) Raised to Equal-Weight at Morgan Stanley; PT $40
• L3Harris (LHX) Raised to Overweight at JPMorgan; PT $240
• Mastercard (MA) Raised to Outperform at Oppenheimer; PT $510
• Salesforce Inc (CRM) Raised to Outperform at Baird; PT $300
• Sealed Air (SEE) Raised to Overweight at Wells Fargo; PT $43
• Sempra (SRE) Raised to Outperform at BMO; PT $84
• Smartsheet (SMAR) Raised to Buy at Citi; PT $63
• Southern Co (SO) Raised to Outperform at BMO; PT $77
• Westinghouse Air Brake (WAB) Raised to Buy at Jefferies
• Williams-Sonoma (WSM) Raised to Outperform at Wedbush; PT $230
• Willis Towers (WTW) Raised to Overweight at Wells Fargo; PT $288
• Zegna Group (ZGN) Raised to Buy at Goldman; PT $18.70
• Downgrades
• Aclaris (ACRS) Cut to Neutral at BTIG
• Albemarle (ALB) Cut to Hold at Deutsche Bank
• Alliant Energy (LNT) Cut to Market Perform at BMO; PT $55
• American Electric Power (AEP) Cut to Neutral at Mizuho Securities
• Blackstone (BX) Cut to Perform at Oppenheimer
• Epam Systems (EPAM) Cut to Hold at Jefferies
• Equifax (EFX) Cut to Neutral at Redburn; PT $272
• Expeditors (EXPD) Cut to Underperform at BNPP Exane; PT $116
• Hamilton Lane (HLNE) Cut to Perform at Oppenheimer
• Hayward (HAYW) Cut to Hold at Jefferies; PT $14
• Juniper (JNPR) Cut to Hold at Jefferies; PT $40
• Cut to Market Perform at Raymond James
• KB Home (KBH) Cut to Neutral at Seaport Global Securities
• Lithium Americas Argentina Corp (LAAC) Cut to Hold at Deutsche Bank
• Louisiana-Pacific (LPX) Cut to Hold at TD; PT $75
• Lyft (LYFT) Cut to Neutral at Goldman; PT $15
• Paramount Global (PARA) Cut to Sell at Redburn; PT $11
• Plug Power (PLUG) Cut to Neutral at Susquehanna; PT $4.50
• Range Resources (RRC) Cut to Hold at Benchmark
• Seagate (STX) Cut to Underperform at BNPP Exane; PT $65
• SilverBow Resources (SBOW) Cut to Sector Weight at KeyBanc
• SQM (SQM/B CI) ADRs Cut to Hold at Deutsche Bank
• SunPower (SPWR) Cut to Neutral at Susquehanna; PT $4
• Warner Bros Discovery (WBD) Cut to Neutral at Redburn; PT $11
• Weibo (WB) ADRs Cut to Underperform at BofA; PT $10
• WestRock (WRK) Cut to Equal-Weight at Wells Fargo; PT $45
• Yum (YUM) Cut to Equal-Weight at Wells Fargo
• Initiations
• Amprius Technologies (AMPX) Rated New Buy at Roth MKM; PT $10
• Baidu (BIDU) ADRs Reinstated Outperform at Macquarie; PT $150
• Cloudflare (NET) Rated New Market Perform at CICC; PT $74.20
• FTAI Aviation (FTAI) Rated New Overweight at Morgan Stanley; PT $58
• Hagerty (HGTY) Rated New Neutral at JPMorgan; PT $9
• nCino (NCNO) Rated New Buy at William O’Neil
• NCR Atleos (NATL) Rated New Outperform at Wolfe; PT $30
• Netease (NTES) ADRs Reinstated Outperform at Macquarie; PT $126
• Netflix (NFLX) Rated New Add at Citic Securities; PT $485
• Skyward Specialty Insurance Group (SKWD) Rated New Outperform at Wolfe
• Third Coast (TCBX) Rated New Outperform at KBW; PT $26
• Vestis (VSTS) Rated New Outperform at Wolfe; PT $24

Data sources: Bloomberg, Reuters, CQG