Calendar

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

Wednesday – Fed Meeting

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

Trading Observations

• All green this morning, up 5-20bp

• 25 or 50?

• Any knee-jerk aside, do equities prefer 25bp?  A positive proxy for growth?  Maintain the carrot of future moves?

• For the soft landers (now ~80% per the BofA FMS)

  • Economic Surprise index to 3M highs

  • Retail Sales pushed Atlanta Fed's GDPNow to 3% [atlantafed.org]

• Performance on decision days under Powell has lagged past Chairs [media.bespokepremium.com] 

• For the bears- Americans are consuming more capital than they produce for only the third time ever (2008, 2020) [substackcdn.com]

Futures

DOW +53

S&P +9

Nasdaq +52

10-Year Yield

Gold

Consumer/Financial Healthcare

Novo, LLY – Negative headlines for Novo are unfounded per JPM as the government plans to push down price for GLP1 drugs in a way that’s more positive for LLY.

Housing Starts and Mortgage Applications were very strong this morning. Housing starts m/m +9.6% and Building permits +4.9%. Mortgage applixations were up 14.2% w/w.

Today’s Fed – As of now, 100% chance of 25 bps, 67% chance of 50 bps is priced into the futures markets. They see 6 cuts of 25 bps net in the next 4 meetings to take the front of the yield curve from 5.3% to 3.8%.

GS – Says to stay selective on hotel brands given the late cycle. They initiated MAR, HLT, and WH at outperform and CHH, HGV and VAC at sell.

Bloomberg – “Restaurant recovery tabled as low-income consumers remain stressed”.

ONON is demonstrating range, according to Stifel as it increases the price target on the Swiss sneaker maker to $59, a Wall Street high, up from $45.

Technology

AI BUILD: Blackrock, Microsoft to launch AI partnership, raising $30B for investment in data centers and other infrastructure (Bloomberg) ... investment vehicle is aimed at addressing the staggering power and digital infrastructure demands of building AI products that are expected to face severe capacity bottlenecks in coming years

CRM/NVDA: Benioff/Jensen on stage last night ... will co-innovate to define the future of enterprise software with Salesforce Agentforce and NVIDIA AI Enterprise platform; CRM expects billions of its Agentforce Agents to be deployed in the years to come, creating new customer and employee experiences on the Salesforce Platform

GOOGL: won a legal fight with the EU over a €1.5 billion fine for preventing rivals from placing online ads

PLTR: -1.3% CEO sold $325mm worth of shrs

SNAP: ugly px action during Day 1 partner summit; shorts pressing during event (debuted upgraded AR Spectacles and Snap OS for AR glasses)

WDAY: Analyst Day focus on AI product innovation; reit LT growth vectors (Int’l, Partners, FINS/Full Suite); maintained recent FY27 tgt with greater pivot to Margin (30% FCF margins in FY27) over subs growth

EA - Electronic Arts says it expects 2Q net bookings on track towards high end of $1.95b-$2.05b, estimate $2.02b.

SMCI gains as much as 1.2% after Needham & Co initiated with a recommendation of buy, saying the chip company has a first-mover advantage thanks to its “design of GPU-based compute systems and liquid cooled rack level solutions.”

Industrials 

Prompt crude futures trade down by ~50c/bbl this morning after the API forecasted that crude inventories in the US rose by ~2 mmbbl last week (Reuters forecasted a 0.5 mmbbl build). Geopolitical developments continue, and last night, thousands of pagers exploded in Lebanon, with both Hezbollah and Lebanon’s government accusing Israel for the event.

Avery Dennison (AVY) hosting an Investor Day today

Notables

Megacap performance since July 1 .. versus SPX up 2.9%