Daily Game Plan

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

DATA/HEADLINES:   8:30ET PPI; 10:00ET Fed’s Kashkari speaks

TODAY’S HIGHLIGHTS and News:  

• The Fed balance sheet expanded last week by $5.7BN – the most since March’s SVB crisis
• US, UK Launch Airstrikes on Houthi Rebels After Red Sea Attacks
• HOUTHIS: RESPONSE OF YEMEN IS IMMINENT
  
• Hunter Biden pleads not guilty to tax fraud charges
  
• Thousands to rally for Taiwan election, China vows to ‘smash independence plots’

Global markets were muted at the end of a volatile week that featured unexpectedly fast inflation data and rising geopolitical tensions. The threat of a wider war
in the Mideast and new hotspots of political turmoil in Ecuador and Poland are complicating the outlook for markets in 2024. Shipping stocks advanced after the US and UK launched more than 60 airstrikes on Houthi targets in Yemen early on Friday in an attempt
to stop the Iran-backed group’s shipping attacks in the Red Sea. The Houthis vowed to continue targeting commercial vessels and threatened a “big” response to the attacks “very soon.”  Tens of thousands of people are expected to rally ahead of Saturday’s Taiwan
election; China vowed to ‘smash independence plots.’      

EQUITIES: 
 

US equity futures extended modest declines as traders digested quarterly earnings from major US banks after Thursday’s hotter-than-expected inflation report.  JPMorgan and Bank of America
saw a mixed reaction to Q4 earnings this morning. Bank of America slid as trading revenue was hit by continued high interest rates and geopolitical tensions. Wells Fargo slipped after net charge-offs that came in at more than double the level from a year earlier.
JPMorgan Chase reversed a pre-market decline to climb 2% after forecasting more growth in net interest income.  JPMorgan closed out the most profitable year in US banking history with its seventh consecutive quarter of record net interest income. Cash had
its strongest start to year on record after a second week of inflows, BofA said. BlackRock agreed to buy Global Infrastructure Partners in its biggest deal in more than a decade     

Futures ahead of the bell: E-Mini S&P -0.25%, Nasdaq -0.3%, Russell 2000 +0.05%, Dow -0.4%.

In pre-market trading, Bank of America (BAC) slips 2% after earnings fell short of expectations and the firm’s fixed-income traders posted a surprise drop in revenue. Wells Fargo & Co.
(WFC) slips 1% as fourth-quarter costs came in higher than expected. Citigroup reported revenue for the fourth quarter that missed the average analyst estimate and expects headcount reduction of 20k in the medium term. Shares rose 2%.  Tesla (TSLA) shares
drop 3.2% after cutting prices again in China and said its lone European factory will be disrupted by unrest in the Red Sea. Cryptocurrency stocks extended declines after the first US exchange-traded funds for Bitcoin went live on Thursday. International Flavors
& Fragrances (IFF) shares rise 4% after it was raised to buy from hold at Jefferies.  Twilio (TWLO) gains 2.4% after it was raised to overweight from neutral by Piper Sandler. Delta Air Lines (DAL) falls 5.2% after the company backed away from its 2024 profit
target. UnitedHealth Group Inc. (UNH) tumbles over 5% after the health insurer reported higher fourth-quarter medical costs than analysts expected, even as overall results beat. 

European gauges rallied as investors focused on reassuring messages from ECB President Christine Lagarde that interest rates will fall once inflation is under control.  Speaking in an
interview with France 2 TV on Thursday, Lagarde said Europe isn’t in a serious recession and that the worst of the fight against inflation is over. Europe’s Stoxx 600 climbed as much as 1%, buoyed by energy companies as crude oil rose. UK GDP rose 0.3% month
on month in November, faster than expectations of 0.2%. Burberry Group slumped over 8% to lowest since 2020 after it slashed its profit forecast. Stoxx 600 +0.6%, DAX +0.6%, CAC +0.7%, FTSE 100 +0.6%.  Energy +1.5%, Media +1.2%, Retail +1.1%. Autos -1.2%. 

Asian stocks were mostly higher as a rally in Japan extended and investors took hotter-than-expected US inflation data in stride. The MSCI Asia Pacific Index climbed 0.6%, with Infosys
and Fast Retailing among the biggest boosts after earnings reports. Benchmarks in Japan had their best week in almost two years. China and Hong Kong gauges capped a second straight week of declines as data showed the world’s second-largest economy continues
to struggle with deflation, after consumer prices dropped for a third-straight month. China’s exports grew at a faster pace in December, while deflationary pressures persisted, keeping alive expectations for more policy easing measures. Exports grew 2.3% from
a year earlier in December, compared with a 0.5% increase in November. Nikkei 225 +1.5%, Sensex +1.2%, Philippines +0.45%, Thailand +0.4%. ASX 200 -0.1%, Taiwan -0.2%, Singapore -0.3%, CSI 300 -0.3%, Hang Seng Index -0.3%, Kospi -0.6%, Vietnam -0.6%.    

FIXED INCOME: 
 

Treasuries are cheaper by 2bp to 3bp across the curve with spreads broadly within one basis point of Thursday session close: 10-year yields around 3.99%, 2 year yield
~4.27%.   US session focus includes December PPI data. Monday is a holiday in the US with Treasury supply in 20yr bonds on Wednesday and 10yr TIPS on Thursday.

METALS: 
   

Gold gained as US-led airstrikes on Houthi rebel targets in Yemen boosted haven demand.  The strikes mark a significant escalation of fighting in the Middle East
and could push bullion higher if the conflict spreads.  The Houthi rebel group vowed to continue targeting Israeli ships and any vessels heading toward the country. All US and UK interests are now “legitimate targets,” according to the Houthi supreme ruling
political council. Spot gold +0.9%, silver +1.3%.   

ENERGY:  

Oil prices jumped as oil tankers diverted course from the Red Sea following overnight air and sea strikes by the United States and Britain on Houthi targets in Yemen.
Brent crude rose 4% with both benchmarks on course for a second straight weekly rise. A Houthis spokesperson said the group would continue to target shipping heading towards Israel. Citi Research lowered its Brent price forecasts for this year and 2025, citing
oversupply concerns but expects prices holding above $70 per barrel in 2024. WTI +3.5%, Brent +3.4%, US Nat Gas +4.4%, RBOB +3%.

CURRENCIES:   

In currency markets, the US$ sees modest gain ahead of PPI data.  Commodity currencies climbed as crude oil prices edged higher amid escalating tensions in the Middle
East. The yen fluctuates after Bank of Japan officials were said to be discussing cutting their forecasts for inflation and economic growth. Pound Sterling slips after mixed UK factory data. US$ Index +0.25%, GBPUSD -0.3%, EURUSD -0.3%, USDJPY +0.1%, AUDUSD
-0.1%, USDCAD -0.2%, USDCHF +0.4%, USDSEK +0.4%. 

Bitcoin -0.7%, Ethereum +2%. 

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
• Autoliv (ALV) Raised to Buy at Berenberg; PT $120
• Cascades (CAS CN) Raised to Outperform at CIBC; PT C$17
• CF Industries (CF) Raised to Equal-Weight at Barclays; PT $85
• Chesapeake Energy (CHK) Raised to Buy at Mizuho Securities
• Raised to Buy at Citi; PT $95
• Ciena (CIEN) Raised to Outperform at Evercore ISI; PT $57
• Cleveland-Cliffs (CLF) Raised to Overweight at JPMorgan; PT $23
• Coca-Cola Europacific (CCEP) Raised to Outperform at BNPP Exane; PT $79
• CSN (CSNA3 BZ) ADRs Raised to Market Perform at Itau BBA; PT $4
• International Flavors (IFF) Raised to Buy at Jefferies; PT $112
• Live Nation (LYV) Raised to Buy at Roth MKM; PT $114
• Mercer International (MERC) Raised to Neutral at CIBC; PT $9
• Mohawk Industries (MHK) Raised to Sector Perform at RBC; PT $101
• Pegasystems (PEGA) Raised to Equal-Weight at Barclays; PT $52
• Pentair (PNR) Raised to Outperform at RBC; PT $79
• Potbelly (PBPB) Raised to Buy at Benchmark; PT $15
• Pros Holdings (PRO) Raised to Overweight at KeyBanc; PT $43
• Qualcomm (QCOM) Raised to Buy at Citi; PT $160
• Regeneron (REGN) Raised to Outperform at RBC; PT $1,076
• Taylor Morrison (TMHC) Raised to Outperform at RBC; PT $57
• Tenable (TENB) Raised to Buy at WestPark Capital; PT $65
• Twilio (TWLO) Raised to Overweight at Piper Sandler; PT $82
• Downgrades
• 89bio (ETNB) Cut to Sector Perform at RBC; PT $15
• Axonics Inc (AXNX) Cut to Neutral at Piper Sandler; PT $71
• Cut to Market Perform at Leerink; PT $71
• Barnes & Noble Education (BNED) Cut to Hold at Needham
• Cogeco Communications (CCA CN) Cut to Hold at Desjardins; PT C$70
• Elastic (ESTC) Cut to Equal-Weight at Barclays; PT $110
• First Financial Northwest (FFNW) Cut to Neutral at DA Davidson; PT $22
• Jamf Holding (JAMF) Cut to Equal-Weight at Barclays; PT $20
• Johnson Controls (JCI) Cut to Underperform at RBC; PT $50
• Lundin Mining (LUN CN) Cut to Hold at Canaccord; PT C$11.50
• Nevro (NVRO) Cut to Sector Perform at RBC; PT $20
• Outset Medical (OM) Cut to Sector Perform at RBC; PT $6
• Snowflake (SNOW) Cut to Equal-Weight at Barclays; PT $198
• Summit Materials (SUM) Cut to Sector Perform at RBC; PT $38
• Vulcan Materials (VMC) Cut to Sector Perform at RBC; PT $236
• WalkMe (WKME) Cut to Underweight at Barclays; PT $10
• ZoomInfo (ZI) Cut to Equal-Weight at Barclays; PT $18
• Initiations
• JBS (JBSS3 BZ) ADRs Rated New Buy at Truist Secs; PT $14
• RPM International (RPM) Rated New Buy at Mizuho Securities; PT $128
• Tko Group (TKO) Rated New Market Perform at Cowen; PT $92

Data sources: Bloomberg, Reuters, CQG