Daily Game Plan

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

DATA/HEADLINES:   10:00ET Leading Index

TODAY’S HIGHLIGHTS and News:  

• DeSantis Backs Trump After Campaign Flops
• Rout in Chinese stocks intensified
  
• Morgan Stanley analysts expect downside surprises in US data in coming weeks
• TCI, Citadel Lead $218 Billion Year of Profits for Hedge Funds
  
• Reese Witherspoon eats snow, and some people aren’t happy –
  
  SKY News

World stocks climbed after three of the major US indices hit record highs on Friday and ahead of a week packed with central bank meetings, major economic data and
corporate earnings. Investor attention is turning to meetings at the Bank of Japan on Tuesday and the European Central Bank on Thursday, with both likely to leave policies unchanged. Italy’s yield premium over Germany, a key measure of risk in the region,
shrank to its narrowest since April 2022 as investors rushed to lock in some of the region’s highest rates before the ECB embarks on easing monetary policy later this year. Meanwhile, the Gaza war rages on while the US struck another anti-ship missile preparing
to launch into the Gulf of Aden by Yemen’s Houthi militants on Saturday.  Benjamin Netanyahu rejected a new hostage deal with Hamas. Hurricane-force winds brought by Storm Isha are disrupting travel across northern Europe and leading to power cuts in some
areas.              

EQUITIES: 
 

US equity futures are higher as tech shares lead pre-market winners, led by Western Digital and PayPal Holdings, ahead of this week’s earnings releases from Netflix. Tesla and Intel.
So far, results from a majority of S&P 500 companies have surprised positively during the latest earnings season. Investors will be watching out for the US flash PMI report on Wednesday, fourth-quarter advance GDP estimates due on Thursday and personal consumption
expenditures data on Friday for more cues on interest rates.          

Futures ahead of the bell: E-Mini S&P +0.4%, Nasdaq +0.7%, Russell 2000 +0.6%, Dow +0.2%.

In pre-market trading, B. Riley (RILY) slumped as much as 21% as the SEC is investigating deals with a key client linked to a securities fraud. Boeing (BA) fell 2% after the FAA recommended
airlines inspect the mid-exit door plugs of Boeing 737-900ER aircraft.  ADM fell more than 13% after the firm placed its CFO on leave and lowered its earnings outlook pending an investigation into the agricultural trading giant’s accounting practices.  Algoma
(ASTL) drops 5% after saying there was a collapse of a structure supporting utilities piping at a coke-making plant. Macy’s (M) gains 3% after rejecting a bid from Arkhouse Management and Brigade Capital Management to take over the retailer. Digital World
Acquisition (DWAC), the blank-check firm seeking to take Donald Trump’s media company public, climbs 12% after Ron DeSantis dropped out of the 2024 US presidential race and endorsed Trump. NuStar Energy gained 25% after Sunoco announced today that the parties
have entered into a definitive agreement whereby Sunoco will acquire NuStar in an all-equity transaction valued at approximately $7.3 billion. 

NVDIA is up another 1% pre-market and more than 52% from its October low. 

European gauges opened sharply higher before paring some gains. The Stoxx 600 is down 1.6% year-to-date in sharp contrast with Wall Street’s S&P 500 index, which hit fresh all-time highs.
Banks, industrial goods, tech firms and travel and leisure shares led the opening rally, with each sector up nearly 1.5%. Main stock moves were driven by M&A, with Swedish online gambling firm Kindred Group jumping 19% after La Francaise des Jeux SA offered
to buy it for $2.7 billion. Worldline SA rose as much as 6% after Credit Agricole acquired a 7% stake in the payments firm. ASML rises to a two-year high after a Bernstein upgrade. Alphawave IP shares soar as much as 13% after the connectivity specialist reported
significantly higher-than-anticipated bookings in the final quarter of the year. Stoxx 600 +0.4%, DAX +0.4%, CAC +0.3%, FTSE 100 is flat. Technology +1.8%, Industrials +1.2%, Banks +1%. Basic Resources -0.9%, Utilities -0.9%. 

Shares in Asia were mostly higher but a selloff in Chinese shares worsened, with investors uneasy over a lack of fresh stimulus for the country’s economy. The MSCI Asia Pacific Index
rose just 0.1%. Technology shares helped send the Nikkei 225 to a fresh 34-year peak and brought gains for January to more than 9%. Chinese shares traded in Hong Kong dropped towards a 2005 low.  Mainland China indexes also fell as banks kept lending rates
unchanged after the central bank refrained last week from cutting borrowing costs. Some of Hong Kong’s major indexes have lost more than 12% so far this year, making them the world’s worst performers.  After the close in Asia, China’s cabinet said it will
take more forceful and effective measures to stabilize market confidence, according to state media. Nikkei 225 +1.6%, Philippines +1.2%, Taiwan +0.75%, ASX 200 +0.75%, Vietnam +0.1%. Kospi -0.3%, CSI 300 -1.55%, Hang Seng Index -2.3%, Shanghai Composite -2.7%.
India’s market was closed for a holiday.

FIXED INCOME: 
 

Treasuries richer on the day from belly out to long-end of the curve amid steeper gains core European rates. Yields 2bp-4bp lower on the day from 5-year to 30-year
with front-end little changed, flattening 2s10s spread by around 5bp; 10-year is around 4.09%.  Most Treasury yields reached their highest levels of the year on Friday, after a week of robust data that are reducing likelihood of an imminent loosening of monetary
policy. Swaps markets are pricing in a 46% chance of a cut in March, down from almost 70% a week ago. Morgan Stanley and JPMorgan said buy the dip in five-year notes after last week’s rout. Treasury auction cycle for 2-, 5- and 7-year notes begins Tuesday,
and Fed officials are in self-imposed quiet period ahead of Jan. 31 policy decision.    

METALS: 
   

Gold slipped further after last week’s slide as markets continued to dial back expectations on how soon the Federal Reserve will pivot to interest-rate cuts. Traders
are awaiting key US economic data and major central bank policy meetings this week. Spot gold is down 0.1% after falling 1% last week, its biggest weekly decline in six: silver -1.8%.       

ENERGY:  

Oil prices fluctuated as economic headwinds pressured the global oil demand outlook countering  geopolitical concerns in the Middle East and an attack on a Russian
fuel export terminal over the weekend.  Russian producer Novatek, said on Sunday it had been forced to suspend some operations at the Baltic Sea terminal because of a fire. Russia blew past Saudi Arabia to become the biggest source of Chinese oil imports last
year, highlighting the ineffectiveness of Western sanctions. Separately, production at Libya’s Sharara oilfield restarted on Sunday. Macquarie strategists said they do not expect current Mid East tensions to reduce crude supply, “even with large changes to
normal shipping routes already underway”. US Natural Gas fell sharply, reflecting cautious market sentiment influenced by both domestic and global economic factors. WTI +0.15%, Brent +0.1%, US Nat Gas -6.3%, RBOB +1%.

CURRENCIES:   

In currency markets,  China’s major state-owned banks moved to support the yuan on Monday, tightening liquidity in the offshore foreign exchange market while actively
selling US dollars onshore as equities slid. The goal was to prevent the yuan from falling too fast as China’s A shares plunged, sources said. The dollar is mixed against its Group-of-10 peers and within tight ranges, with the media blackout ahead of the Federal
Open Market Committee meeting next week. The yen rebounds from near its lowest level since late Nov. against the dollar as investors await Bank of Japan’s monetary policy decision due tomorrow. US$ Index -0.1%, GBPUSD +0.2%, EURUSD is flat, USDJPY -0.25%,
AUDUSD -0.05%, NZDUSD is ~flat, USDSEK -0.4%.   

Bitcoin -2.5%, Ethereum -4%. 

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
• Agree Realty (ADC) Raised to Market Outperform at JMP; PT $71
• Allete (ALE) Raised to Neutral at Guggenheim; PT $58
• American Air (AAL) Raised to Outperform at Wolfe
• Avista (AVA) Raised to Neutral at Guggenheim; PT $34
• Digital Realty (DLR) Raised to Sector Outperform at Scotiabank
• Edison International (EIX) Raised to Buy at Guggenheim; PT $84
• Eversource (ES) Raised to Buy at Guggenheim; PT $72
• Fastly (FSLY) Raised to Neutral at Citi; PT $20
• International Flavors (IFF) Raised to Overweight at Morgan Stanley
• Mullen Group (MTL CN) Raised to Outperform at RBC; PT C$17
• Norfolk Southern (NSC) Raised to Outperform at Bernstein; PT $272
• Northwestern (NWE) Raised to Neutral at Guggenheim; PT $47
• Nuveen Arizona Quality Municipal Income Fund (NAZ) US Raised to Buy at Stifel
• Nuveen Virginia Quality Municipal Income Fund (NPV) US Raised to Buy at Stifel
• PagSeguro (PAGS) Raised to Neutral at Goldman; PT $13.80
• Pimco California Municipal Income Fund (PCQ) Raised to Buy at Stifel
• Pinnacle West Capital (PNW) Raised to Buy at Guggenheim; PT $78
• Plymouth (PLYM) Raised to Market Outperform at JMP; PT $27
• SentinelOne (S) Raised to Buy at BTIG; PT $30
• Shoals Technologies (SHLS) Raised to Equal-Weight at Barclays; PT $15
• StoneCo (STNE) Raised to Buy at Goldman; PT $21
• TFI International (TFII CN) Raised to Sector Outperform at Scotiabank
• Union Pacific (UNP) Raised to Outperform at Bernstein; PT $280
• Downgrades
• Aclaris (ACRS) Cut to Neutral at HC Wainwright
• Afya (AFYA) Cut to Equal-Weight at Morgan Stanley; PT $23
• AMD (AMD) Cut to Market Perform at Northland
• American Electric Power (AEP) Cut to Neutral at Guggenheim; PT $81
• Archer-Daniels-Midland (ADM) Cut to Neutral at Goldman; PT $67
• Cut to Neutral at Baird; PT $61
• Array (ARRY) Cut to Equal-Weight at Barclays; PT $15
• ASML (ASML NA) ADRs Cut to Hold at Aletheia Capital; PT $750
• Cadre Holdings (CDRE) Cut to Market Perform at Raymond James
• CAE (CAE CN) Cut to Sector Perform at Scotiabank; PT C$31
• Carrols Restaurant (TAST) Cut to Hold at Truist Secs; PT $9.55
• Comerica (CMA) Cut to Market Perform at Raymond James
• CommScope (COMM) Cut to Underperform at BofA; PT $2
• D.R. Horton (DHI) Cut to Neutral at Seaport Global Securities
• DTE Energy (DTE) Cut to Neutral at Guggenheim; PT $111
• Elf Beauty (ELF) Cut to Equal-Weight at Morgan Stanley; PT $168
• EPR Properties (EPR) Cut to Market Perform at JMP
• Evergy (EVRG) Cut to Neutral at Guggenheim; PT $52
• Home Depot (HD) Cut to Market Perform at Oppenheimer; PT $345
• Idacorp (IDA) Cut to Neutral at Guggenheim; PT $93
• LCI Industries (LCII) Cut to Underperform at BMO; PT $100
• Linde (LIN) Cut to Hold at Stifel
• Lowe’s (LOW) Cut to Market Perform at Oppenheimer; PT $230
• Lululemon (LULU) Cut to Hold at HSBC; PT $500
• McCormick (MKC) Cut to Equal-Weight at Consumer Edge Research
• Meritage Homes (MTH) Cut to Neutral at Seaport Global Securities
• NuScale Power (SMR) Cut to Neutral at Guggenheim
• Playtika (PLTK) Cut to Hold at HSBC; PT $8
• PSEG (PEG) Cut to Neutral at Guggenheim; PT $61
• Taylor Morrison (TMHC) Cut to Neutral at Seaport Global Securities
• Toll Brothers (TOL) Cut to Neutral at Seaport Global Securities
• Tricon (TCN CN) Cut to Market Perform at BMO; PT C$15.15
• Vita Coco (COCO) Cut to Market Perform at William Blair
• Well Health Technologies (WELL CN) Cut to Neutral at CIBC; PT C$4.75
• Initiations
• Allegro MicroSystems (ALGM) Rated New Buy at Baptista Research
• Braze (BRZE) Rated New Buy at Baptista Research; PT $69.30
• COMSovereign Holding Corp (COMS) Rated New Buy at ThinkEquity; PT $3
• Confluent (CFLT) Rated New Buy at Citic Securities; PT $28
• Eyepoint (EYPT) Rated New Overweight at JPMorgan; PT $35
• Instacart (CART) Rated New Buy at Benchmark; PT $32
• Kyndryl (KD) Rated New Hold at Baptista Research; PT $23
• Tenable (TENB) Rated New Hold at Baptista Research; PT $51
• Teradata (TDC) Rated New Buy at Baptista Research; PT $60.40
• Worthington Enterprises (WOR) Reinstated Sell at Goldman; PT $50
• ZKH Group (ZKH) ADRs Rated New Buy at China Renaissance; PT $19.50

Data sources: Bloomberg, Reuters, CQG