Trading Observations

• China continues to rally

• PCE light, paves way for talk of another 50bps coming in Nov

• Not sure it gets there today, but above 5780 brings negative dealer gamma and additional buying

• Oscillators still overbought but getting closer to neutral

• 5690 first support...   

• Put buying subdued - 2nd consecutive day with total put/call under 0.80

Upgrades – BMEA, SNAP, WYNN

Downgrades – AGIO, ASC, BMBL, CLDX, DG, HPQ, STNG, SMAR, SMMT, UDMY, VIPS

Key upcoming events - 1) US PCE for Aug (Fri 9/27); 2) CCL earnings (Mon 9/30 BMO); 3) Powell’s speech at the NABE conf. (Mon 9/30); 4) Eurozone CPI for Sept (Tues 10/1); 5) US manufacturing PMI (Tues 10/1); 6) NKE earnings (Tues 10/1 AMC); 7) VP debate between Walz and Vance (Tues 10/1); 8) US jobs report for Sept (Fri 10/4); 9) FOMC minutes (Wed 10/9); 10) US CPI for Sept (Thurs 10/10); 11) TSLA’s robotaxi product launch event (Thurs 10/10); 12) the start of CQ3 earnings (JPM unofficially kicks off the season Fri 10/11 BMO).

Futures

DOW +76

S&P +8

Nasdaq +25

10-Year Yield

Gold

BITCOIN

Consumer/Financial Healthcare

US ETF Assets hit $10T, up $691B this year. Vanguard took 32% of that number. There are now 3800 total ETFs.

Trading Glitch in China – After two huge rally rays on stimulus, hedge funds and the exchange were said to have some sort of glitch, causing the inability to cover shorts. – Bloomberg

COST – Down 1% on earnings. Revenue missed by 2%, but all else looks solid. Valuation at 55x P/E seems very stretched here as they just raised membership so that’s already expected. One would have to think digital sales ramp nicely from here to pay this price in our opinion.

Visa – Announced a $1.5B litigation escrow account and a purchase of AI fraud player Featurespace, which is a tiny revenue player.

• VISA/MA: headlines for Visa espc cont to deteriorate - Europe’s Banks are launching Wero, a payments network they hope will allow them to dislodge the dominance of Visa and Mastercard (Bloomberg)

Addidas – Baird raising to short-term positive trading view on a potential positive pre-release in October.

SBUX – Analysts out saying 3-4% unit growth in the US is doable.

50% of the US population visited a casino in the past year, which is a record and +800 bps y/y.

BMY – Up 4% on a “clean label” for their Schizophrenia drug.

Novo Nordisk – Down 4.6% on a call Wegovy sales will underwhelm.

MELI: RayJ new bull - see room for structural share gains in commerce enabled by fulfillment/loyalty/AI investments and an early stage advertising and credit card cross-sell oppty more than offsetting Latam macro softness

LULU – Baird Contrarian Long Idea - Analyst Day on Horizon (10/9) - As China tries to stimulate their economy I can’t help but flag Lululemon as someone who would benefit from a stronger China consumer.

20% of sales is currently Int’l with China the KEY DRIVER of int’l growth over the next 5 yrs.

BBY – To profit on pent-up replacement demand – JPM

Technology

INTC headlines: (1)rejected a takeout approach for its product business from ARM (Arm) (Bloomberg) ... (2)INTC and the US gov’t are racing to finalize $8.5B in Washington funding for the ailing chip maker before the end of the year (FT)

HPQ: -2.5% BofA downgrade - has been “over earning” in Print, and margin erosion in this unit will offset upside from Personal Systems. Will be difficult for the company to be able to drive any major upside to ests

AD SPENDING (hit late Thurs): Amazon source says the company has won >$1.8bn in upfront ad-spending commitments for video-streaming, includes ads on the company's live sports broadcasts, and have exceeded the company's goal for the coming year. (The Information)

SMCI FALLOUT? controversies could impact the whole AI ecosystem if customers lose confidence in its products at a time when the industry is supply constrained (competitors like Dell and HPE may not be able to meet demand from any customers that abandon Supermicro)

OpenAI is “tearing itself apart” as it becomes a for-profit company, with the firm seeing a slew of high-profile departures while it loses ground to others in the industry - WSJ

Industrials 

Oil prices were hurt on Thurs by the FT report about Saudi Arabia shifting its focus away from $100 Brent and toward higher output/market share (in addition, Libyan output should return to normal as the central bank-related dispute heads toward a resolution). 

BA received safety warning from NTSB over rudder hazard on 737s.

LUV – Elliott published a statement Thurs afternoon that was highly critical of the current mgmt. team and skeptical of its ability to execute on the strategy outlined at the analyst meeting (Elliott says it remains “determined to call a special shareholders meeting”).

Aramark (ARMK) – stock trading +7% on report that Sodexo considering a possible acquisition of ARMK.

Baird NDRs Today: Hannon Armstrong (HASI) & Novanta (NOVT)