Cabrera Capital Daily Game Plan

Wednesday May 11, 2022                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES   
8:30ET Consumer Price Index, Core CPI; 1:00ET 10 Year Auction

The dollar erased losses while the 2-year Treasury yield surged as much as 10 bps after U.S. CPI for April came in hotter than expected at 8.3%,
compared to 8.1% consensus.    

TODAY’S HIGHLIGHTS:   

• Today’s CPI Report Includes A Methodology Change To New Vehicle Prices

Global shares are higher and bond yields slipped further as investors look to US inflation data for clues on the pace and size of future Fed
interest rate hikes in the world’s biggest economy.  Sentiment increased as Shanghai reported a 51% drop in new coronavirus infections and zero community transmission, a key metric to end a punishing lockdown that’s snarled global supply chains and left tens
of millions of people stuck inside their homes for about six weeks. Still, it’s uncertain if the city can hit the three-day target required before restrictions can be eased. Adding to sentiment, President Biden said he was considering eliminating Trump era
tariffs on China. Morgan Stanley forecasts this year’s global economic growth to be less than half of 2021 at 2.9%, down from a previous estimate of 3.2%.

US EQUITIES: 

US equity futures erased earlier gains after April’s hotter-than-expected CPI. CPI (YOY) ACTUAL: 8.3% vs 8.5%.  Analysts expected the Consumer
Price Index to rise an annual 8.1% rate in April, compared with 8.5% in March. Analysts are slashing price targets for S&P firms at the fastest pace since the pandemic crash in 2020. Together, their projected price level for the index fell 11 weeks in a row,
the longest stretch in a decade.

E-mini S&P futures +1.1%, Nasdaq +1.5%, Russell 2000 futures +1.4%, Dow futures +0.9%.

In pre-market trading, US-listed Chinese stocks rallied after China reported easing Covid cases. Coinbase Global sank 18% after the largest US
cryptocurrency exchange warned of lower trading volume. Occidental Petroleum gained after posting record profits. Array Technologies (ARRY) shares are down 15% after cutting full year outlook. Peloton shares (PTON) are up 4% after closing at its lowest level
since going public in September 2019. Veru (VERU) surges 23% as it gets FDA agreement to submit request for emergency use authorization for its Covid treatment.       

European stocks extended their bounce from two-month lows as Covid cases in China eased. The Stoxx Europe 600 Index is up
1.25%, extending a rebound from a four-week long slump. Consumer products and mining stocks led the gains, while health care stocks underperformed as Roche Holding slumped over 7% as its cancer medicine failed in a study. Compass shares gain as much as 12%
after an earnings beat and announced a buyback.  European tobacco stocks rise after Philip Morris offered to buy smokeless tobacco company Swedish Match. European luxury stocks outperform as investors anticipate improving demand from easing virus cases in
China. HomeServe rises 15% after a report that Brookfield Asset Management is near a $5 billion deal for the firm. Bayer falls over 7%, Evotec Alstom declines 11% and K+S falls 7%. CAC +2%, DAX +1.35%, FTSE 100 +1.1%. Autos +3.7%, Basic Resources +3%, Tech
+2.7%, Healthcare -1.3%.

Asian equities reversed early losses, halting a seven-day slide, as declining virus cases in China boosted sentiment. China’s
CSI 300 Index led gains in the region after Shanghai reported zero cases were found in the community.  China’s factory-gate inflation eased to a one-year low in April as state-driven production efforts supported supply and COVID lockdowns cooled demand, giving
policymakers headroom for more stimulus. The Philippines benchmark was the worst performer, down 1.25%, as investors wait for Ferdinand Marcos Jr to speak on his plans for boosting economic growth.  Topix -0.6%, Sensex -0.5%, Hang Seng +1%, CSI 300 +1.4%.

FIXED INCOME: 
                                       

Treasuries hold gains led by belly of the curve as investors await April CPI data. 10-year yields are around 2.915%, down
7bps. Front-end lags with 2-year yields richer by ~3bp on the day, flattening 2s5s, 2s10s spreads by ~3bps.  The US auction cycle resumes with $36b 10-year auction at 1pm ET, following a well-bid 3-year Tuesday. 
US Two-Year Yield Surges More Than 10 Basis Points After CPI.

METALS: 
                               

Gold rose from near a three-month low as the dollar declined with Treasury yields ahead of closely-watched US inflation
data.  US inflation figures due today may provide more clues on the pace of the Fed’s interest-rate path. A lower than expected reading may soften concerns about an aggressive hiking cycle, which have hurt gold in recent weeks. Spot gold is up 0.6%, silver
+2.25%.    

ENERGY:     

Oil rose over 4% after plunging nearly 10% in the last two sessions, buoyed by supply concerns as the European Union works
on gaining support for a Russian oil embargo and flows of Russian gas to Europe through a key transit point in Ukraine dried up. Fewer Covid cases in China also lifted sentiment. US retail gasoline and diesel prices climbed further to fresh records, AAA data
showed.      

CURRENCIES:   
 

The dollar snapped a four-day rally ahead of the US inflation reading. The US dollar spot index extends Asia’s weakness,
dropping 0.3%. AUD, SEK and NOK are the best performers in G-10. EUR underperforms despite hawkish comments from ECB policymakers. AUDUSD +1.1%, USDNOK -0.8%, USDSEK -0.9%, USDJPY -0.45%.       

Bitcoin erased earlier losses to climb back above $31,000, up over 2%;  Ethereum +4.5%.  Bitcoin held a partial rebound
from this week’s selloff amid steadier sentiment in global markets and expectations of help for a stablecoin whose struggles have cast a cloud over the cryptocurrency sector.  All eyes are on TerraUSD, an algorithmic stablecoin that should maintain a one-to-one
ratio to the dollar. Do Kwon, founder of Terraform Labs — which powers the Terra blockchain — is moving to shore up the stablecoin. He said on Twitter that a recovery plan is close to being unveiled. Treasury Secretary Janet Yellen said TerraUSD’s de-pegging
highlighted the need for a regulatory framework for stablecoins.

TECHNICAL LEVELS: 
  

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:

• 8×8 (EGHT) raised to buy at B Riley; PT $13.50
• Arcturus Therapeutics (ARCT) raised to neutral at Baird; PT $18
• Arrowhead Pharma (ARWR) raised to outperform at Baird; PT $60
• Cronos Group (CRON CN) raised to outperform at CIBC; PT C$5.87
• Duke Realty (DRE) raised to buy at Edward Jones
• Grocery Outlet (GO) raised to buy at Deutsche Bank; PT $40
• HF Sinclair (DINO) raised to outperform at Cowen; PT $52
• Novanta (NOVT) raised to outperform at William Blair
• Peloton (PTON) raised to market outperform at JMP; PT $25
• Planet Fitness (PLNT) raised to overweight at JPMorgan; PT $90
• Rackspace Technology (RXT) raised to outperform at Raymond James
• Trex (TREX) raised to neutral at Credit Suisse; PT $65
• TriCo Bancshares (TCBK) raised to overweight at Stephens; PT $48

DOWNGRADES:

• AlerisLife Inc (ALR) cut to neutral at B Riley; PT $1.50
• Array (ARRY) cut to neutral at Roth Capital; PT $7
• Avaya Holdings (AVYA) cut to underweight at JPMorgan; PT $7
• Biohaven Pharma (BHVN) cut to market perform at SVB; PT $150
• Carvana (CVNA) cut to hold at Stifel; PT $40
• Corning (GLW) cut to equal-weight at Barclays; PT $38
• Jounce Therapeutics (JNCE) cut to neutral at Baird; PT $7
• Katapult (KPLT) cut to hold at Loop Capital; PT $1
• LoanDepot (LDI) cut to market perform at JMP
• LoanDepot (LDI) cut to neutral at Piper Sandler; PT $3.50
• LoanDepot (LDI) cut to sell at Citi; PT $2
• Pegasystems (PEGA) cut to hold at Truist Secs; PT $60
• Peloton (PTON) cut to hold at Stifel; PT $14
• Rocket Cos. (RKT) cut to neutral at Citi; PT $8
• Unity Software (U) cut to neutral at Daiwa; PT $34
• Upstart (UPST) cut to neutral at Atlantic Equities; PT $45

INITIATIONS:

• Academy Sports & Outdoors (ASO) rated new buy at Truist Secs; PT $53
• Affirm Holdings (AFRM) rated new neutral at JPMorgan; PT $30
• Bausch + Lomb (BLCO CN) rated new outperform at Cowen
• Equity LifeStyle (ELS) rated new buy at Truist Secs; PT $78
• Sun Communities (SUI) rated new buy at Truist Secs; PT $185
• Tesla (TSLA) rated new add at CTBC Securities; PT $880

David Wienke

Cabrera Capital Markets, LLC