Cabrera Capital Daily Game Plan

Wednesday January 19, 2022                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES  
8:30ET Building Permits, Housing Starts

Fed speakers are in self-imposed quiet period ahead of Jan. 26 policy decision                                                  

TODAY’S HIGHLIGHTS:   

• China’s economy expanded 8.1% in 2021, the fastest in nearly a decade
• The US and UK plan this week to announce the start of talks to ease steel and aluminum tariffs that the Trump administration imposed on national-security
  grounds
• Ray Epps to testify to Jan 6 Committee this Friday
  
• The U.S. Senate could kick off a pair of votes on an election reform bill today

Global markets are mixed with shares falling in Asia while European indices and US equity futures recover some of yesterday’s losses.  Higher
yields have damped investor appetite for global equities, particularly hitting richly valued tech shares. Speculation is growing that the US Federal Reserve may deliver more than a quarter-percentage point interest-rate hike in March, while the Bank of England
may move again next month.  Britain’s inflation rate surged unexpectedly to the highest since 1992 and Germany’s 10-year yield turned positive for the first time since 2019. Still, the yield spike isn’t all bad for stocks, as “the sum total of expected rate
hikes remains low,” BlackRock Investment Institute strategists wrote in a note. In China, where policy is diverging from the U.S., the central bank has pledged to use more monetary policy tools to aid the economy and ease credit stress. Nomura strategists
said in a note that since valuations are currently modest, Asian stocks will not face as significant a de-rating as they did when the Fed tightened in 2017-2018.            

US EQUITIES: 
 

US equity futures reversed early overnight losses as earnings optimism partly offsets concerns about rising bond yields. All eyes are now on
earnings, with Morgan Stanley, Alcoa, United Airlines, Bank of America, Procter & Gamble and UnitedHealth among the companies reporting today. UnitedHealth Group (UNH +0.5%) beat analysts’ highest estimate for fourth-quarter earnings and affirmed its 2022
profit outlook. US Bancorp -2.5% missed Q4 estimates.  Fastenal +1.5% beat. BofA BAC) +3%) got a boost from loan growth and net interest income rose 11%. P&G rose slightly after boosting its organic revenue forecast for the year. State Street reported adjusted
earnings that beat estimates.  Morgan Stanley trades over 3% higher after reporting Q4 net revenue that met estimates; trading revenue beat. SoFi Technologies (SOFI) jumps 18% in premarket trading after the Office of the Comptroller of the Currency granted
it a U.S. banking charter. Cisco Systems falls 2.5% after being downgraded to neutral from buy at Goldman. Orion Energy Systems (OESX US) falls 13% after reducing revenue outlook, citing project delays from customers.

E-mini S&P futures +0.45%, Nasdaq +0.65%, Russell 2000 futures +0.6%, Dow futures +0.3%.

Morgan Stanley has lost over 12% in the last week; a settle today back above the 200dma would be a positive.

European equities reversed early declines to trade slightly higher as investors weighed risks from rising bond yields against encouraging signs
from the first reports of the quarterly earnings season.  Retailers led gains in Europe after Richemont (+10%) and Burberry Group (+6%) beat expectations. The Stoxx 600 Europe Index was up 0.55% after sliding as much as 0.6% at the open. Pearson climbs as
much as 7.2% after raising its full-year profit expectations for 2021.  Adecco gains as much as 4.2% after UBS double-upgrades the stock to buy from sell.  AutoStore drops as much as 6.9%, extending a 14% plunge yesterday. The FTSE 100 is up 0.5% with Unilever
leading gains, up 2.7%. The UK announced the end of most COVID-19 measures to curb the spread of Omicron will take effect next week.  CAC +0.75%, DAX +0.6%. Retail sector +2.7%, Basic Resources +2.35%, Autos +0.8%. Food & Beverage -0.6%.

Asian markets followed the US lower as risk aversion deepened with bond yields remaining elevated.  The MSCI Asia Pacific
Index slid as much as 1.5%, its fifth day of declines, as tech and consumer discretionary stocks extended losses. Sony Group and Toyota Motor were among the biggest drags on the index, while energy shares climbed as the oil rally continued. Sony fell 12.8%
on competition concerns after the Microsoft/Activision Blizzard deal. Toyota fell 5% after warning it expects to miss production targets for this year. Indices in Japan were the worst performers in the region with the Topix down nearly 3% as the nation prepares
to come under a state of quasi-emergency for three weeks starting Friday.  Reuters report in the late afternoon about China slapping new curbs on investment deals for the industry’s largest firms. Losses were relatively limited in mainland China, where the
central bank pledged to use more monetary-policy tools to spur the economy and drive credit expansion. The comments reinforce a clear easing bias to support growth in a year of political transition.  Chinese real-estate developers rallied in late afternoon
trading after Reuters reported that the government is drafting new rules that will let developers access pre-sale funds in escrow accounts. Shanghai Composite -0.3%, Hang Seng Index +0.05%, Taiwan -0.8%, Australia’s ASX 200 down 1%, South Korea’s Kospi index
down 0.75%, India’s Sensex down 1.1%.   

FIXED INCOME: 
                                       

Treasuries continue to slide, with the yield on the 10-year yield testing 1.90% for first time since January 2020.  Yields
were higher by 1bp-2bp across the curve ahead of a 20 year bond auction which follows small tails for last week’s 10 and 30-year auctions. Yields have come off the overnight highs as equities move higher with the 10 year yield at 1.86%. The Fed is slated to
buy $6.025B in 4.5- to 7-year sector at 10:30ET under new purchase schedule; the operation was rescheduled from Tuesday.  Near term sentiment may depend on corporate earnings, while domestic banks are expected to continue to issue bonds following offerings
by Citi and JPMorgan Tuesday.      

METALS: 

Gold rose 0.35% and silver jumped 1.2% as the US dollar weakened and risk sentiment improved across global equities markets.
The yield on 10-year Treasuries spiked to the highest since January 2020, capping gains for non-interest bearing bullion. The market is looking forward to the U.S. Federal Reserve’s policy meeting next week where it is widely expected to raise rates in an
attempt to quell surging inflation.

ENERGY:     

Oil climbed to the highest since October 2014 as the IEA said the market looked tighter than previously thought, with demand
proving resilient to omicron; Turkey reopened a key crude pipeline running from Iraq after it was knocked out by an explosion on Tuesday.  OPEC and its allies are increasing oil production but can’t solve all the sector’s issues alone, the United Arab Emirates’
energy minister said. He added that the industry needs investment, through the involvement of international oil companies, in order to provide adequate supplies. A large contributor to the rally in oil has been the failure of many OPEC+ nations to restore
output halted during the pandemic, as they contend with depressed spending of their own. The group added only 60% of its mandated output boost last month. WTI +0.5%, Brent +0.45%.          

CURRENCIES:   

The US Dollar Index edged 0.15% lower, snapping a three day gain, with the greenback weakening against all of its Group-of-10
peers.  The pound advanced after a higher-than-expected inflation print boosted expectations for a Bank of England rate increase next month, with sterling rising to an almost two-year high versus the euro. GBPUSD +0.25%, EURGBP -0.15%, USDNOK -0.4%, AUDUSD
+0.4%.

Bitcoin reversed overnight losses, but is still down 0.4% although futures are higher. Ethereum is down 1%.

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:

• Akamai (AKAM) raised to overweight at KeyBanc; PT $140
• Arcos Dorados (ARCO) raised to buy at Goldman; PT $7
• Bank of Montreal (BMO CN) raised to overweight at Barclays; PT C$165
• Commercial Metals (CMC) raised to overweight at KeyBanc; PT $42
• Dexcom Inc (DXCM) raised to overweight at Wells Fargo; PT $575
• Electronic Arts (EA) raised to overweight at Atlantic Equities
• Eni ADRs (ENI IM) raised to market perform at Bernstein; PT $33
• Entegris (ENTG) raised to buy at Deutsche Bank; PT $160
• Exxon (XOM) raised to sector perform at RBC; PT $90
• Glaukos (GKOS) raised to equal-weight at Wells Fargo; PT $56
• Hancock Whitney (HWC) raised to buy at Truist Secs; PT $70
• Interactive Brokers (IBKR) raised to outperform at KBW; PT $90
• Mercantile Bank (MBWM) raised to outperform at Raymond James; PT $44
• Oportun Financial (OPRT) raised to overweight at JPMorgan; PT $23
• Rocket Cos. (RKT) raised to overweight at JPMorgan; PT $15
• Tandem Diabetes (TNDM) raised to overweight at Wells Fargo; PT $160
• Under Armour (UAA) raised to neutral at Exane; PT $18

DOWNGRADES:

• Activision Blizzard (ATVI) cut to equal-weight at Wells Fargo; PT $95
• Activision Blizzard (ATVI) cut to hold at Deutsche Bank
• Activision Blizzard (ATVI) cut to hold at Truist Secs; PT $95
• Activision Blizzard (ATVI) cut to neutral at Credit Suisse; PT $95
• Ally Financial (ALLY) cut to neutral at JPMorgan; PT $56
• CIBC (CM CN) cut to equal-weight at Barclays; PT C$169
• Cisco Systems (CSCO) cut to neutral at Goldman
• Coca-Cola Femsa ADRs (KOFUBL MM) cut to neutral at Goldman; PT $59
• D.R. Horton (DHI) cut to sector weight at KeyBanc
• Home Point Capital (HMPT) cut to underweight at JPMorgan
• Installed Building (IBP) cut to sector weight at KeyBanc
• KB Home (KBH) cut to underweight at KeyBanc; PT $38
• Lennar (LEN) cut to underweight at KeyBanc; PT $86
• McCormick (MKC) cut to neutral at Credit Suisse; PT $100
• Mimecast (MIME) cut to equal-weight at Barclays; PT $80
• NeuroPace (NPCE) cut to equal-weight at Wells Fargo; PT $11
• Toll Brothers (TOL) cut to underweight at KeyBanc; PT $56
• TopBuild (BLD) cut to sector weight at KeyBanc
• Truist Financial (TFC) cut to neutral at Piper Sandler; PT $72
• Zimmer Biomet (ZBH) cut to underweight at Wells Fargo; PT $124
• Zynga (ZNGA) cut to equal-weight at Morgan Stanley; PT $10

INITIATIONS:

• Ads-Tec Energy (ADSE) rated new strong buy at Raymond James; PT $14
• Arvinas (ARVN) reinstated buy at Goldman; PT $157
• Brown-Forman (BF/B) rated new market perform at Bernstein; PT $70
• Cameco (CCO CN) rated new outperform at CIBC; PT C$37
• Clover Health (CLOV) rated new market perform at SVB Leerink; PT $3
• Compass Therapeutics (CMPX) rated new buy at B Riley; PT $10
• Design Therapeutics (DSGN) reinstated sell at Goldman; PT $10
• DocGo (DCGO) rated new buy at Stifel; PT $14
• F5 Inc (FFIV) reinstated overweight at KeyBanc; PT $307
• Fastly (FSLY) rated new sector weight at KeyBanc
• Genius Sports (GENI) rated new outperform at Credit Suisse; PT $15
• Goodbody Health (GDBY CN) rated new buy at Arden Partners
• Grab Holdings (GRAB) rated new buy at Loop Capital; PT $8
• Juniper (JNPR) reinstated overweight at KeyBanc; PT $46
• Sea Ltd ADRs (SE) rated new hold at Loop Capital; PT $190
• SoFi Technologies (SOFI) rated new outperform at Wedbush; PT $20
• US Foods Holding (USFD) rated new buy at Deutsche Bank; PT $44

David Wienke

Cabrera Capital Markets, LLC