Cabrera Capital Daily Game Plan

Wednesday June 15, 2022                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES  
8:30ET  Retail Sales, Import Price Index, Empire State Manufacturing; 10:00ET Business Inventories, NAHB Home Builders Index; 12:20ET ECB’s Lagarde speaks; 2:00ET FOMC Statement; 2:30ET Fed Chair’s news conference

US consumer health probably faltered in May. Consensus shows retail sales probably rose 0.1%, month on month, compared with a 0.9% gain in April.
Core sales growth, stripping out the most volatile components, may have slowed to 0.4% from 1%.  

TODAY’S HIGHLIGHTS:   

• Goldman Sachs Set To Offer FX Prices That Lasts For Days
• Sam Zell tell CNBC that the Fed’s credibility has been lost

World shares are staging a recovery on positive data from China and news that the ECB is discussing a broader crisis strategy to protect the
integrity of the euro region as well as PEPP reinvestments. The worry for policymakers is the very rapid repricing of euro-area financial assets is causing an unjustified widening of borrowing costs. Focus will be on Italy’s 10-year yield to see if results
from this meeting will be enough to temper the recent blowout in spreads. China’s economy had a mixed recovery in May as Covid restrictions gradually eased, with industrial production unexpectedly increasing 0.7% while consumer spending and the property market
continuing to contract. The recovery in industrial output was helped by a rebound in the car sector as auto production centers reopened. Chinese aluminum output hit an all-time high and steel production rose to its strongest in a year. Brazil’s central bank
is expected to raise the Selic rate by 50 bps to 13.25%.                                                

US EQUITIES: 

US index futures are posting gains before a crucial Federal Reserve policy decision later today. It’s been decades since a market selloff has
been met with higher rates.  Morgan Stanley cut its price target on Apple and other consumer hardware stocks due to risks related to a potential slowdown in consumer spending.                          

E-mini S&P futures +0.75%, Nasdaq +0.95%, Russell 2000 futures +0.9%, Dow futures +0.65%.

In pre-market trading, Chinese tech stocks listed in the US are higher with education shares continuing their winning streak.
Roblox drops 8% after reporting May key metrics. Hertz Global Holdings (HTZ) climbs 7% after the company announces that its Board of Directors approved a new $2 billion share repurchase program.  Spotify gains 3% on an upgrade from Wells Fargo. Revlon (REV)
shares are surging in 28% after the cosmetics retailer sank 30% in five days amid news of plans to file for Chapter 11 bankruptcy. Snowflake analysts (SNOW) were optimistic after management’s comments on potential market expansion and its new software capabilities
during its investor day. Shares gain 5%.

The traditional 60/40 mix in equities and bonds have been getting hurt and the 50/200dma cross, seen as a technical downside
predictor, is near. However, the last time this death cross occurred was in March of 2020, right at the bottom.               

European markets rallied on Wednesday on news the European Central Bank would hold an emergency meeting on the recent bond
market sell-off. Officials will discuss a crisis strategy and the reinvestment of bond purchases conducted under the now-halted pandemic emergency program. Italy’s stock market outperformed, jumping 2.8% as its banks surged +6%.  Yields on Italian 10-year
notes fell as much as 38 basis points. The Stoxx Europe 600 index jumped more than 1%, snapping a six-day losing streak, while the euro strengthened and the region’s bonds advanced.  Euro-area industrial production expanded 0.4% in April, less than expected
but rebounding from a revised 1.4% contraction the month before. Stoxx 600 +1.15%, CAC +1%, DAX +1.2%, FTSE 100 +1.2%. Bank sector +3.4%, travel +3%, insurance +3%, autos +2.5%, energy -0.7%.

Indices in Asia were mixed, with Chinese shares rising after domestic economic data showed pockets of recovery. South Korea
and the Philippines led declines, while Japanese stocks fell ahead of a central bank policy meeting this week. Gains in China and Hong Kong helped offset losses elsewhere as data showed the country’s industrial production unexpectedly increased in May. Meanwhile
the nation’s central bank kept a key policy rate unchanged, avoiding further policy divergence as the US Federal Reserve tightens.  Chinese financial stocks including Everbright Securities jumped after state-run Economic Daily said in a commentary that the
investment value of the nation’s equities remains intact. Korean carmakers and logistics firms advanced after truckers ended their weeklong strike. Japan’s Nikkei lost 1.1%, though sentiment was helped by a survey showing an improvement in confidence among
Japanese manufacturers. The Hang Seng Index gained 1.15%, CSI 300 +1.3%, Singapore +0.9%. Philippines fell 2.4%, Kospi -1.8%, Vietnam -1.3%, ASX 200 –1.25%, Taiwan and India fell 0.3%.

FIXED INCOME: 
                                        

Treasuries rallied in Asia and early European sessions, leaving yields richer by as much as 12.5bp across the front-end
leading into the US session.  The curve steepens as long-end lags front-end while some rate hike premium eases out the swaps market ahead of the Fed policy decision. 10-year yields around 3.375%, richer by 10bp on the day while front-end outperformance steepens
2s10s, 5s30s spreads by 3bp and 6.5bp respectively. The Fed is expected to raise the key rate 75bp and focus will be on comments from the Fed Chair about a possible similar move next month. Meanwhile, DoubleLine Capital CEO, Jeffrey Gundlach said the Fed funds
target rate should be raised to 3% from 1% now.          

METALS: 
                               

Gold advanced from a four-week low as the dollar and bond yields retreated ahead of Wednesday’s Federal Reserve meeting,
where officials could deliver a hefty interest-rate increase to contain inflation. Higher rates would damp the appeal of non-interest bearing gold, although concerns over them hurting the economy are providing some support to the haven asset.                         

ENERGY:     

Oil fluctuated ahead of a Federal Reserve meeting that’s expected to see further monetary tightening to combat rising US
inflation. WTI futures traded lower after swinging between gains and losses. Joe Biden told oil refiners unprecedented profit margins are unacceptable and demanded action to improve capacity as soaring gasoline prices feed inflation and fears of a recession.
Biden said he’s prepared to take any “reasonable and appropriate” steps that would help companies increase output.  Biden has been intensifying attacks against oil companies in recent days as US gas prices raced to record highs above $5 per gallon.  Global
oil supply will struggle to meet rising demand next year, the IEA said in its first outlook for 2023.  The agency also warned that if OPEC+ producers want to help, they’ll need to deplete spare production capacity. US natural gas rose after tumbling more than
16% yesterday on news the Freeport plant outage will be far longer than expected.  WTI -0.45%, Brent -0.25%.                                  

CURRENCIES:                      

The US Dollar Index halted a five-day winning streak as the euro rose ahead of the European Central Bank’s ad-hoc meeting,
where officials are expected to discuss how to react to a surge in Italian bond yields. The spread between Italian and German 10-year yields, a closely-watched gauge of risk, tightened by around 27 basis points. US$ Index -0.5%, GBPUSD +0.8%, EURUSD +0.3%,
AUDUSD +0.9%, USDJPY -0.65%.    

Bitcoin -6%, Ethereum -9%. Bitcoin tumbled to a new 18-month low. It has lost around 28% since Friday and more than half
of its value this year. Since its record high of $69,000 in November, it has slumped about 70%. Seven of the world’s richest crypto founders have lost a combined $114 billion since November as digital-asset values crumble. The value of the global crypto market
has fallen under $900 billion, CoinMarketCap data shows, down from a peak of $2.97 trillion in November.    

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:

• Arcos Dorados (ARCO) raised to outperform at Bradesco BBI; PT $12
• Armstrong World (AWI) raised to buy at Loop Capital; PT $95
• Aura Minerals (ORA CN) raised to outperform at Itau BBA; PT C$13
• Coveo Solutions (CVO CN) raised to sector outperform at Scotiabank
• Cullen/Frost (CFR) raised to overweight at JPMorgan; PT $155
• Digital Realty (DLR) raised to buy at Deutsche Bank; PT $144
• ERO Copper (ERO CN) raised to outperform at CIBC; PT C$21
• Hello Group ADRs (MOMO) raised to buy at China Renaissance; PT $11.70
• Liberty Formula One (FWONA) raised to overweight at Morgan Stanley
• PrairieSky Royalty (PSK CN) raised to outperform at CIBC; PT C$26
• Snowflake (SNOW) raised to buy at Canaccord; PT $185
• Southwestern Energy (SWN) raised to buy at Benchmark; PT $14
• Spotify (SPOT) raised to equal-weight at Wells Fargo; PT $124
• Tapestry (TPR) raised to buy at Jefferies
• Teck Resources (TECK/B CN) raised to outperform at CIBC; PT C$70

DOWNGRADES:

• Blackline Safety (BLN CN) cut to speculative buy at Canaccord; PT C$6
• Cano Health (CANO) cut to neutral at BofA
• Community Health (CYH) cut to neutral at BofA
• Comtech Telecom (CMTL) cut to hold at Jefferies; PT $10
• Continental Resources (CLR) cut to equal-weight at Wells Fargo; PT $82
• Continental Resources (CLR) cut to hold at Stifel; PT $70
• Copper Mountain Mining (CMMC CN) cut to neutral at CIBC; PT C$3.50
• First Quantum Minerals (FM CN) cut to neutral at CIBC; PT C$40
• Freehold Royalties (FRU CN) cut to neutral at CIBC; PT C$19
• Guru Organic Energy (GURU CN) cut to neutral at CIBC; PT C$10
• Largo Inc (LGO CN) cut to neutral at CIBC; PT C$13
• Oak Street Health (OSH) cut to underperform at BofA; PT $18
• Oscar Health (OSCR) cut to underperform at BofA; PT $4.50
• Robinhood (HOOD) cut to underweight at Atlantic Equities; PT $5
• Sonos (SONO) cut to equal-weight at Morgan Stanley; PT $28
• Surgery Partners (SGRY) cut to neutral at BofA

INITIATIONS:

• Couchbase (BASE) rated new buy at DA Davidson; PT $21
• Else Nutrition (BABY CN) rated new corporate at Edison Investment Research
• Jack Henry (JKHY) reinstated equal-weight at Morgan Stanley; PT $190
• NGEx Minerals (NGEX CN) rated new buy at Pareto Securities; PT C$3.70
• Oncorus (ONCR) rated new buy at Chardan Capital Markets; PT $5
• Rezolute (RZLT) rated new overweight at Cantor; PT $9
• Tenaya (TNYA) rated new buy at HC Wainwright; PT $25
• Terran Orbital Corp (LLAP) rated new buy at BofA; PT $9
• Wheels Up Experience (UP) rated new buy at Goldman; PT $5

David Wienke

Cabrera Capital Markets, LLC