Cabrera Capital Daily Game Plan

Tuesday October 5, 2021                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES  
8:30ET  Trade deficit;  9:45ET  Markit services PMI (final);  10:00ET ISM services index, Senate Facebook hearing begins; 1:15ET Fed’s Quarles speaks; 3:30ET Biden to speak on infrastructure and social spending plan

TODAY’S HIGHLIGHTS:   

• Fed’s internal watchdog will examine whether trading activity by senior officials complied with ethics rules and the law  
• Biden says he expects social spending bill would eventual fall in the range of $1.9T to $2.2T
• SPAC boom has House Democrats considering a ban on marketing to retail investors
• The UK held talks today with Afghanistan’s Taliban

Global equity gauges are putting in a mixed performance today, but performing better after the Asian session. Calm in global markets has been
fractured by a growing wall of worry spanning a debt crisis in China, elevated inflation on the back of commodity supply shocks, fading economic recovery and US political bickering. Data today showed prices paid by customers in the UK services sector rose
at the fastest pace on record last month. Yesterday’s failure by developer, Fantasia Holdings Group, to repay a $205 million bond has reignited fears of widespread defaults among Chinese developers. China’s junk bond market is seeing its biggest selloff in
over eight years, with the closure of Chinese markets for a week-long holiday exacerbating liquidity problems in the sector. Fantasia was cut to restricted default by Fitch.                                                                                

EQUITIES: 
 

US equity futures bounced overnight even as the broader market sentiment remained impaired on inflation and growth risks. Facebook was up 1.5%
following Monday’s 5% slump after it blamed a global service outage that kept its social media apps offline for much of yesterday on a problem with its network configuration, adding that it found no evidence that user data was compromised.  A Facebook whistle-blower
is set to testify to the Senate today. Lordstown Motors (RIDE) declined as much as 4.6% in premarket trading after being downgraded to underweight by Morgan Stanley. Comtech Telecom (CMTL) slid more than 7% post-market after it reported adjusted earnings below
analyst estimates. PepsiCo boosted its organic revenue view for the year as sales and EPS beat. PEP rose 1%.    

E-mini S&P futures +0.5%, Nasdaq +0.5%, Russell 2000 futures +0.5%, Dow futures +0.5%.       

Nasdaq 100 futures have fallen 8.5% from the September all-time highs while SPX fell 5.8%.

European stocks advanced, with banks and technology shares contributing the most to index gains. Business growth across Europe remained strong
last month but elevated inflationary pressures put a dent in demand while ongoing supply issues constrained activity, a survey showed. The technology sector in Europe’s benchmark Stoxx 600 advanced for the first time in eight days. The Stoxx 600 is up 0.6%
with Novo Nordisk contributing the most to the index gain, increasing 1.8%. Bakery firm Greggs had the largest increase, rising 9.8% on strong performance helped by the “staycation” effect. Prosus NV rose as much as 2.9% after getting regulatory approval to
raise its stake in Delivery Hero SE. Grenke declines nearly 9% in Frankfurt, after the lease financing firm cut its FY guidance. GN Store Nord slides as much as 8.8% after the company cut 2021 outlook for its hearing unit, citing delivery issues. Bank sector
leads gains up 2.2%, Tech +1.1%, Media +1%. The construction sector underperforms, down 0.4%. CAC +0.8%, FTSE 100 +0.6%, DAX +0.3%.     

Asian stocks slipped, led by Singapore, Japan and Korea, as surging commodity prices fueled concerns about global inflation. The MSCI Asia Pacific
Index lost as much as 1.7% in its third day of declines, with technology stocks contributing most to the weakness. Nikkei 225 lost 2.2%, its seventh consecutive losing session, as Prime Minister Fumio Kishida’s proposal to raise tax on capital gains also undermined
sentiment.  South Korea’s Kospi fell 1.9%, entering a technical correction. Korean travel and retail stocks rallied, defying the market’s broader rout, on expectations consumer spending will improve as health authorities consider adopting a “living with Covid-19”
policy later this month. Australia’s ASX200 fell 0.4%, while the Reserve Bank of Australia left its monetary policy unchanged as widely expected.  Hong Kong stocks nudged higher as energy firms gained with PetroChina jumped over 7.5%. Chinese markets were
closed for a public holiday.                

FIXED INCOME: 
                                       

Treasuries are under pressure with yields near session highs as the US day begins, cheaper by up to 2.5bp across belly of
the curve. 10 year yield is holding around 1.5%. Traders are now turning their attention to Friday’s nonfarm-payrolls data to gauge the timing of the Fed’s taper. In the latest Fed comments, St. Louis President James Bullard said elevated price pressures may
be changing the mentality of businesses and consumers by making them more accustomed to higher inflation.   

METALS: 
                         

Gold snapped a three-day gain, with spot down 0.8%, as the dollar and Treasury yields edged higher.  Gold is facing headwinds
as the Federal Reserve signaled it could start dialing back stimulus, causing investor demand to wane. The monthly U.S. jobs data due Friday will be closely watched to gauge the strength of the labor market and potential impact on the Fed’s monetary policy
path.           

ENERGY:                            

Oil prices reached a three-year peak after OPEC+ confirmed it would stick to its current output policy as demand for petroleum
products rebounds, despite pressure from some countries for a bigger boost to production. Both WTI and Brent are up another 1% today.  Higher demand is being fueled worldwide by the sharp recovery in reopening economies, with producers struggling to keep pace.
Low inventories in Europe contribute to the crunch and a partial switch of some power plants from natural gas to oil contribute to price tensions. European natural gas contracts jumped 10% to an unprecedented $106.70 per megawatt-hour, as the continent prepared
for a winter crunch in energy supply. 

CURRENCIES:  

The dollar gained against all its Group of 10 peers except the British pound, which is up only slightly. Sterling rose to
a three-week high against the euro, recovering from a sharp sell-off last week as traders turn their attention back to the prospect of interest rate rises in Britain. The Aussie Dollar is slightly lower as Australia’s central bank kept its monetary settings
unchanged.     

Bitcoin extended its recovery and is trading above $50,000 as Bank of America strategists threw their weight behind crypto
as a new asset class. The universe of digital assets is “too large to ignore,” wrote strategists from the bank. “Our view is that there could be more opportunity than skeptics expect.” In the eyes of Bank of America, more regulation could be a positive for
crypto in the long run. Once rules are established, the uncertainty over how to invest in crypto will be lifted, the strategists wrote.

Three reports will provide a road map for the broader financial community on how the Fed and Biden administration see the
dollar’s crypto future playing out. First, the Federal Reserve Board will release a paper as soon as this month on the U.S. payments system that’s expected to provide direction on whether the country should issue a so-called central bank digital currency.
Soon after, the Fed Bank of Boston will publish long-awaited research and open-source computer code on technology that could underpin a digital dollar. Finally, the President’s Working Group on Financial Markets is set to issue policy recommendations on how
to regulate stablecoins, which are in effect digital dollars created by private companies.

TECHNICAL LEVELS: 
(futures)    

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:

• A O Smith Corp (AOS) raised to outperform at Baird; PT $85
• Athabasca Oil (ATH CN) raised to buy at Desjardins; PT C$1.25
• Bloom Energy (BE) raised to strong buy at Raymond James; PT $29
• Comerica (CMA) raised to outperform at Wolfe; PT $101
• Crew Energy (CR CN) raised to buy at Desjardins; PT C$4
• Sun Life Financial (SLF CN) raised to outperform at CIBC; PT C$74
• Transocean (RIG) raised to neutral at SpareBank

DOWNGRADES:

• Air Canada (AC CN) cut to sector perform at RBC; PT C$25
• Albertsons Cos (ACI) cut to underperform at BMO; PT $26
• Atea Pharmaceuticals (AVIR) cut to equal-weight at Morgan Stanley
• Chart Industries (GTLS) cut to market perform at Raymond James
• Columbia Sports (COLM) cut to neutral at BofA
• CommScope (COMM) cut to neutral at Credit Suisse; PT $12
• Digital Realty (DLR) cut to neutral at Credit Suisse; PT $150
• Equinix (EQIX) cut to neutral at Credit Suisse; PT $731
• Lordstown Motors (RIDE) cut to underweight at Morgan Stanley; PT $2
• Sprouts Farmers (SFM) cut to underperform at BMO; PT $19
• Teekay LNG Partners (TGP) cut to hold at Stifel; PT $17
• Truist Financial (TFC) cut to underperform at Wolfe; PT $65

INITIATIONS:

• Bed Bath & Beyond (BBBY) reinstated underperform at BofA; PT $14
• Boat Rocker Media (BRMI CN) rated new buy at Canaccord; PT C$12
• Check Point Software (CHKP) rated new equal-weight at Wells Fargo
• Cloudflare (NET) reinstated equal-weight at Wells Fargo; PT $122
• Coherent (COHR) reinstated hold at Stifel; PT $270
• Colgate-Palmolive (CL) reinstated neutral at BofA
• CyberArk Software (CYBR) rated new equal-weight at Wells Fargo; PT $165
• Cybin (CYBN CN) rated new outperform at Oppenheimer; PT $7
• Dow (DOW) rated new neutral at Redburn
• Estee Lauder (EL) reinstated buy at BofA
• Fortinet (FTNT) reinstated overweight at Wells Fargo; PT $380
• LyondellBasell (LYB) rated new buy at Redburn
• Microchip (MCHP) rated new buy at President Capital Management; PT $185
• N-Able (NABL) rated new market perform at BMO
• Origin Materials (ORGN) rated new neutral at BofA
• P&G (PG) reinstated buy at BofA
• Ping Identity (PING) reinstated overweight at Wells Fargo; PT $32
• Prometheus Biosciences (RXDX) rated new outperform at Oppenheimer
• ReNew Energy Global (RNW) rated new overweight at Morgan Stanley
• Revolve Group (RVLV) rated new outperform at Wedbush
• Roth Ch Acquisition III (ROCR) rated new buy at DA Davidson; PT $13
• Sailpoint Technologies (SAIL) rated new overweight at Wells Fargo
• Schwab (SCHW) rated new overweight at Atlantic Equities; PT $95
• Shift Technologies (SFT) rated new overweight at JPMorgan; PT $12
• Steven Madden (SHOO) rated new outperform at Wedbush
• Tenable (TENB) rated new overweight at Wells Fargo; PT $60
• Under Armour (UAA) rated new outperform at Wedbush
• Varonis Systems (VRNS) rated new equal-weight at Wells Fargo; PT $165
• Vista Oil & Gas ADRs (VISTAA MM) rated new buy at Grupo Santander; PT $18.80

David Wienke

Cabrera Capital Markets, LLC