Cabrera Capital Daily Game Plan

Thursday January 6, 2022                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES  
8:30ET  Weekly Jobless Claims, Trade Deficit; 10:00ET ISM services index, Factory orders; 1:15ET Fed’s Bullard speaks on the economy

TODAY’S HIGHLIGHTS:   

• Ghislaine Maxwell to seek new trial after juror’s sexual abuse claim
• North Korea said it test fired a hypersonic missile yesterday for the second time in four months
• Biden will say that Donald Trump had “singular responsibility” for the January 6 attack on the Capitol when he speaks this morning
  

Global markets are in the red with key government bond yields climbing to their highest in years after yesterday’s FOMC minutes signaled faster
rate hikes and stimulus withdrawals. Minutes from the Fed’s December meeting showed officials’ increasing preference for a faster path of rate hikes and a shrinking of the bank’s $8.8 trillion balance sheet which could end the unprecedented policy accommodation
which underwrote asset prices through the worst of the pandemic. One particular statement out of the FOMC minutes that weighed on stocks and treasuries was this:
The staff continued to judge that the risks to the baseline projection for economic activity were skewed to the downside and that the risks around the inflation projection were skewed to the upside. In particular, the possibility
that COVID-19 cases could continue to rise steeply, especially if the Omicron variant proves to be vaccine resistant, was seen as an important source of downside risk to activity, while the possibility of more severe and persistent supply issues was viewed
as an additional downside risk to activity and as an upside risk to inflation.     

US EQUITIES: 
 

The selloff in US equity-indices subsided as several economists predicted that any correction should be short-lived. Futures are mixed, with
selling confined to Nasdaq 100 Index contracts, as investors bet the Federal Reserve’s faster-than-expected policy tightening may crimp highly valued technology stocks but leave opportunities in other equity sectors. The Nasdaq’s 3% drop on Wednesday was its
biggest one-day percentage decline since last February, with nearly $1 trillion in value wiped out this week.  Tech is heavy again ahead of the bell, with AAPL, TSLA, NFLX all lower. Data compiled by Goldman Sachs Group’s prime broker show selling reached
the highest level in dollar terms in more than 10 years.     

E-mini S&P futures +0.1%, Nasdaq -0.35%, Russell 2000 futures +0.35%, Dow futures +0.35%.

In pre-market trading, cryptocurrency-exposed stocks fell as Bitcoin slumped to the lowest level since December’s flash crash. Some small-cap
biotech and pharma stocks rose amid positive trial results and broker upgrades.  Bed Bath & Beyond cut its net sales forecast for the full year and the guidance missed estimates. Walgreens Boots (WBA) is +2.6% after reporting earnings that beat the average
analyst estimate. Allbirds (BIRD) gains 5% after Morgan Stanley upgrades to overweight. ViacomCBS and WarnerMedia are said to be exploring a sale of all or part of the CW TV network. Dick’s Sporting (DKS) gained over 5% after guiding higher.

Value continues to outperform Growth.

European stocks followed Wednesday’s selloff in the US before paring some losses as investors bet the US Federal Reserve’s faster-than-expected
policy tightening will still leave opportunities for equities. Gains in banks and automakers limited losses in Europe’s Stoxx 600 index, which erased off all its gains for the year.  ASML Holding contributed the most to the index decline, decreasing 3%.  The
FTSE 100 is down 0.6%.  Dr. Martens tumbles over 11%. A record numbers of U.K. businesses are worried about inflation and almost 60% plan to raise prices in the next three months, a British Chambers of Commerce poll found.  The DAX is down 1.2%.  German factory
orders rose a better-than-expected 3.7% month on month in November after a revised 5.8% drop in October.  European bank sector is +0.85%, Autos +0.15%. Technology sector declines 3.1%, Retail -1.5%.   

A fresh round of selling hit Asian stocks as the risk of accelerated interest-rate hikes by the Federal Reserve sparked a broad decline from
industrials to the technology sector.  Japan’s benchmark Nikkei 225 slid the most in the region, down 2.9%, its biggest decline since June.  Australian shares slid 2.75% in their biggest daily percentage drop since September 2020. Australia’s daily coronavirus
infections soared to a new record on Thursday, while isolation rules caused labor shortages, putting a strain on supply chains. The Hang Seng Tech Index, which had mimicked the Nasdaq selloff, rebounded late in the session, with Alibaba closing 5.7% higher.
Hong Kong’s Hang Seng Index was up 0.7%. South Korea’s Kospi index fell 1.1% but Korean ship makers rallied, with Daishin Securities saying investors are flocking to the sector amid the tech selloff. India’s Sensex Index slid 1%, China’s blue-chip CSI 300
fell 1%.  China’s Caixin services PMI gained in December to 53.1 versus consensus for a drop.      

FIXED INCOME: 
                                       

Treasury yields continue to push higher across the curve, with 10 year yield adding 3 basis points.  The minutes stated
that “it may become warranted to increase the federal funds rate sooner or at a faster pace” than committee members’ earlier expectations. They went on to add that some members felt that the Fed could start reducing its balance sheet “relatively soon after
beginning to raise the federal funds rate”. Fed officials issued forecasts anticipating three quarter-percentage-point rate increases during 2022.  2 year yield, which is most sensitive to Fed policy expectations, shot to its highest level since March 2020
when the pandemic-fueled crisis was unfolding.  CME Group’s FedWatch tool now has the probability that the Fed will lift rates in March at greater than 70%. Nomura has the 10-year yield rising toward 2% in the second half and sees four rate hikes in 2022. 
Mizuho says sell Treasuries as there’s a risk the 10-year may climb as high as 3%.

METALS: 

Gold prices slid over 1%, to one-week low as rising treasury yields weighed.  The Fed minutes offered more details on the
shift in policy last month, which was taken to counter inflation running at more than twice the central bank’s 2% target. Global food prices declined for the first time in five months in December, sliding 0.9% as costs for vegetable oils and sugar eased. While
levels are still near the all-time high reached in 2011, the halt in the increase may help ease the run-up in inflation that’s stressed global policy makers and sparked turmoil in Kazakhstan.  Silver underperforms, down 3.3%.

ENERGY:     

Oil gained as traders weighed supply constraints from OPEC+ and ongoing concerns about the impact of COVID.  A deep-freeze
in Canada and the northern U.S. is disrupting oil flows, just as American stockpiles are declining. Russia and its allies sent troops to help quell protests in Kazakhstan, although there was no sign of disruption to oil output yet.  China’s worst Covid-19
outbreak since the inaugural flareup in Wuhan is blunting oil demand growth in the world’s largest crude importer.

CURRENCIES:   

Higher US yields continued to support the dollar but G-10 currency markets are surprisingly contained.  The dollar gave
up earlier gains, while the yen caught a bit of a haven bid; USDJPY -0.25%. The Australian Dollar is the weakest of the main currencies, down 0.75% versus the dollar. Emerging market currencies pared earlier losses. Peru’s central bank decision will be closely
watched, with policy makers forecast to raise interest rates for a sixth straight month today as inflation surges.        

Bitcoin is lower by 2% amid growing expectations of rising borrowing rates. Bitcoin is seemingly a risk asset and not the
haven from market turmoil that some supporters suggest.  Other cryptocurrencies also declined with Ether reaching prices not seen since mid-October and tokens of popular DeFi applications including Uniswap and Aave dropping.
Bitcoin mining stocks were also hit with Marathon Digital Holdings down more than 13%. Institutional investors are deterred from
investing in crypto and digital assets by security worries more than volatility and regulations, a survey showed.

MoneyGram (MGI) announced yesterday a minority investment in Coinme, the largest licensed cryptocurrency cash exchange in
the US.  The network’s mining power (or “hashrate”) keeps breaking records as more miners come online in North America following China’s 2021 crypto crackdown. One U.S. mining firm, Marathon Digital Holdings, just spent nearly $900 million on mining rigs.
Meanwhile, the number of addresses holding BTC hit all-time highs of nearly 40 million. Ethereum — driven by interest in NFTs and DeFi— now has a record 71 million addresses.   

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:

• Allbirds (BIRD) raised to overweight at Morgan Stanley; PT $17
• Avis Budget (CAR) raised to hold at Deutsche Bank; PT $210
• C.H. Robinson (CHRW) raised to outperform at Wolfe
• CS Disco (LAW) raised to buy at Jefferies; PT $50
• Canada Goose (GOOS CN) raised to overweight at Barclays; PT C$71.52
• Cigna (CI) raised to overweight at Wells Fargo; PT $278
• Coinbase (COIN) raised to buy at BofA; PT $340
• DTE Energy (DTE) raised to overweight at Morgan Stanley; PT $133
• Exxon (XOM) raised to hold at Truist Secs; PT $65
• Five9 (FIVN) raised to buy at Jefferies; PT $180
• Gitlab (GTLB) raised to overweight at Piper Sandler; PT $100
• Houlihan Lokey (HLI) raised to buy at Goldman; PT $126
• Humana (HUM) raised to overweight at Wells Fargo; PT $529
• L3Harris (LHX) raised to outperform at Baird; PT $248
• Lowe’s (LOW) raised to outperform at Evercore ISI; PT $280
• Magenta Therapeutics (MGTA) raised to buy at Goldman; PT $8
• Moelis & Co (MC) raised to neutral at Goldman; PT $65
• ONE Gas (OGS) raised to equal-weight at Morgan Stanley; PT $80
• Origin Materials (ORGN) raised to buy at BofA
• Procore Technologies (PCOR) raised to buy at Jefferies; PT $110
• RPM International (RPM) raised to neutral at JPMorgan; PT $100
• SimilarWeb (SMWB) raised to buy at Jefferies; PT $22
• Smartsheet (SMAR) raised to overweight at Wells Fargo; PT $95
• TaskUS (TASK) raised to buy at BofA; PT $71
• UiPath (PATH) raised to overweight at Wells Fargo; PT $60
• UniFirst (UNF) raised to outperform at Baird; PT $236

DOWNGRADES:

• ABC Technologies (ABCT CN) cut to sector perform at Scotiabank; PT C$9
• ADT Inc (ADT) cut to sector perform at RBC; PT $10
• Adagio Therapeutics (ADGI) cut to underweight at Morgan Stanley; PT $6
• Akamai (AKAM) cut to neutral at Piper Sandler; PT $127
• Ansys (ANSS) cut to neutral at Baird; PT $405
• Aon PLC (AON) cut to underperform at Evercore ISI; PT $292
• Atea Pharmaceuticals (AVIR) cut to underweight at Morgan Stanley; PT $7
• Berkeley Lights (BLI) cut to hold at Stifel; PT $12
• Bolt Biotherapeutics (BOLT) cut to equal-weight at Morgan Stanley
• Cellectis ADRs (ALCLS FP) cut to equal-weight at Wells Fargo; PT $16
• Ceridian HCM (CDAY) cut to equal-weight at Wells Fargo; PT $100
• Covenant Logistics Group (CVLG) cut to underperform at Wolfe
• Dollar General (DG) cut to equal-weight at Wells Fargo; PT $220
• ECN Capital (ECN CN) cut to sector perform at RBC; PT C$5.50
• Elastic (ESTC) cut to hold at Jefferies; PT $120
• Entergy (ETR) cut to underweight at Morgan Stanley; PT $106
• Evercore (EVR) cut to neutral at Goldman; PT $141
• Forward Air (FWRD) cut to peerperform at Wolfe
• Gilead (GILD) cut to equal-weight at Morgan Stanley; PT $74
• Goldman Sachs (GS) cut to neutral at BofA
• Home Point Capital (HMPT) cut to sell at Goldman; PT $4.50
• Kearny Financial (KRNY) cut to neutral at Piper Sandler; PT $14
• Knight-Swift (KNX) cut to underperform at Wolfe
• Landstar (LSTR) cut to underperform at Wolfe
• Legend Biotech ADRs (LEGN) cut to equal-weight at Morgan Stanley
• Oscar Health (OSCR) cut to equal-weight at Wells Fargo; PT $9
• RPM International (RPM) cut to underperform at BofA
• TFI International (TFII CN) cut to peerperform at Wolfe
• Target (TGT) cut to equal-weight at Wells Fargo; PT $230
• Telus International CDA (TIXT CN) cut to underperform at BofA; PT C$44
• US Xpress Enterprises (USX) cut to underperform at Wolfe
• VF Corp (VFC) cut to equal-weight at Barclays; PT $79
• Vivint Smart Home (VVNT) cut to sector perform at RBC; PT $11
• Western Union (WU) cut to underperform at BofA; PT $20
• Westinghouse Air Brake (WAB) cut to underperform at Wolfe
• Zions (ZION) cut to underperform at BofA

INITIATIONS:

• Advanced Energy (AEIS) rated new buy at Benchmark; PT $110
• BR Malls ADRs (BRML3 BZ) rated new outperform at Grupo Santander; PT $1.98
• Banc of California (BANC) rated new outperform at KBW; PT $26
• Bank of Hawaii (BOH) rated new market perform at KBW; PT $94
• Banner (BANR) rated new market perform at KBW; PT $67
• CVB Financial (CVBF) rated new outperform at KBW; PT $26
• Colfax (CFX) rated new hold at Loop Capital; PT $45
• Community West Bancshares (CWBC) rated new neutral at Janney Montgomery
• CrowdStrike (CRWD) rated new overweight at Wells Fargo; PT $275
• First Hawaiian (FHB) rated new outperform at KBW; PT $33
• Glacier Bancorp (GBCI) rated new market perform at KBW; PT $60
• Heritage Financial (HFWA) rated new outperform at KBW; PT $30
• Illumina (ILMN) resumed equal-weight at morgan Stanley; PT $425
• Lincoln Electric (LECO) rated new buy at Loop Capital; PT $170
• Marqeta (MQ) rated new market perform at KBW; PT $17
• Microsoft (MSFT) rated new outperform at Industrial Securities
• Multiplan Corp (MPLN) rated new outperform at Grupo Santander; PT $4.87
• Nautilus Biotechnology (NAUT) rated new equal-weight at Morgan Stanley
• Okta (OKTA) rated new overweight at Wells Fargo; PT $275
• Palo Alto Networks (PANW) reinstated overweight at Wells Fargo; PT $700
• Radius Global Infrastructure (RADI) rated new buy at Berenberg; PT $23
• Territorial Bancorp (TBNK) rated new market perform at KBW; PT $31
• TriCo Bancshares (TCBK) rated new market perform at KBW; PT $51
• Vacasa (VCSA) rated new market outperform at JMP; PT $12
• Vistas Media Acquisition (VMAC) rated new buy at Benchmark; PT $17
• Washington Federal (WAFD) rated new outperform at KBW; PT $42
• Westamerica BanCorp (WABC) rated new market perform at KBW; PT $65
• Winc (WBEV) rated new buy at Canaccord; PT $14
• Zscaler (ZS) rated new overweight at Wells Fargo; PT $400

David Wienke

Cabrera Capital Markets, LLC