Calendar

This Week – It’s all the Fed. 100% chance of 25bps, 70% chance of 50 bps as of this morning.

Monday – Empire Manufacturing –

Tuesday – Retail Sales

Wednesday – Fed Meeting

Thursday – Jobless Claims, Philly Fed, Existing Home Sales, DRI, FDX, LEN Earnings

Upgrades – ACRV, AEE, BNTX, BLDR, GTLS, CHCT, CMPX, DK, ORCL, EGP, ENTG, KMI, OKE, SPG, SLG, SFM ZG

Downgrades – ALLY, CL, ENLC, KNSL, MKSI, NVMI, REG, RVNC, SO, SUI, SYF, WES, WKC

Trading Observations

• Mixed this morning.  Smalls up 50bp+, Tech in the red (iPhone preorders), S&P500 flattish

• We mark time and wait for the Fed on Wed - Mkts now pricing a 50 bp cut as more probable than not

• Hard to argue much difference between a 50 or 25 w a dovish tone - Sell the news event?

• Soft China data garnering attention on a slow morning. As a reminder, the S&P500 only generates ~4% of revs from China

• NVIDIA'S WORLD AND EVERYONE JUST LIVING IN IT: “I went to dinner with Elon Muck, Jenson Huang … and I would describe the dinner as me and Elon begging Jensen for GPUs. Please take our money. No, no take more of it. You’re not taking out enough. We need you to take more of our money please.” – Larry Ellison, Oracle

• Regardless of the Fed, bulls suggest more gains [x.com] after the big breadth day to close last week, ~7:1 upside, major outperformance from the Russell2K

Futures

DOW +99

S&P -5

Nasdaq -100

10-Year Yield

Oil

Gold

Consumer/Financial Healthcare

Bill Dudley – The fed should go big now and I think it will – Bloomey

JPM – Out saying they expect a 50bp cut. The futures market has a 70% chance of said 50bps, which is usually the tipping point for yes or no on a tweener Fed call. The market now expects as many as 5 25 bps cuts by December.

Baird on Banks – Like regionals better than Mega-Caps – KEY, CMA, CFG, MTB, PNC, SYF is their list.

SCHW – Up 2% - Announced August AUM of $9.74T including $32.8B in new assets, up 13% m/m and slightly better than expected.

UPST – Down 8% on a $300MM convertible offering (that’s a big offering for a ~$4B company).

LEN earnings in focus this week… analyst say Lennar is financially ready for a demand rebound…

Technology

AAPL -2% leading semis lower ..... Ming-Chi Kuo: "experiencing lower than anticipated demand for its iPhone 16 Pro and Pro Max models during the first weekend of pre-orders ... reported on Sunday that the initial pre-order sales for the iPhone 16 series have reached ~37 million units. However, the Pro series has not met expectations"

Semis/SOX: weak start for chips on neg iPhone checks + double downgrade of Hynix impacting Micron

GOOGL: will not receive an a break-up order from EU antitrust officials, but the company is likely to be called on to make changes to its adtech business (Reuters)

INTC: +2% back above $20 level; has qualified for as much as $3.5B in grants from the US govt as part of a program to make chips for the Pentagon (Bloomberg)

TikTok – the Court of Appeals for the District of Columbia will hold oral arguments in TikTok’s challenge to a US law mandating ByteDance sell or shutter the platform as soon as Jan 19

Industrials 

AeroVironment (AVAV) discloses protest to $990M Army contract award - 8-K - A protest has been filed with the U.S. Government Accountability Office (GAO) challenging the U.S Department of the Army's decision on 27-Aug-24 to award an indefinite delivery, indefinite quantity contract with a ceiling value of $990.0M on a sole source basis to AeroVironment, Inc. related to the company's Switchblade systems

Builders FirstSource (BLDR) upgraded to buy from hold at Truist

Chart Industries (GTLS) upgraded to overweight at Morgan Stanley

Mosaic (MOS) provides updates on potash and phosphate operations - The company announced Potash and Phosphate operations sustained operational challenges that are expected to reduce production volumes and shipments in Q3 of 2024

BA – union leader Jon Holden warned that the strike “could go on for a while” 

SLB: is mentioned positively in Barron’s – the valuation is extremely cheap while the company’s dominant oil services business will wind up being more durable than many fear 

Notables

Small Cap had a good week… with cuts looming, the 200d proving to be another good entry point… if that were a stock you’d have bought it… could well be the performance that many seek into year-end