Cabrera Capital Daily Game Plan

Friday July 1, 2022                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES  
9:45ET Manufacturing PMI (final); 10:00ET ISM manufacturing index, Construction Spending

TODAY’S HIGHLIGHTS:   

• Kohl’s is no longer for sale
• Biden will meet virtually w/ 6 Dem Govs Friday to hear their perspective following SCOTUS ruling on Roe v. Wade

Another bout of risk aversion rippled across global markets on Friday, as surveys showed that global factory growth stalled in June. Asia’s manufacturing
activity slowed as supply disruptions caused by China’s COVID-19 lockdowns hit many companies. South Korean exports, seen as a proxy for global trade, grew at their slowest pace in 19 months. India’s PMI showed factory output expanded at its slowest pace in
nine months.  New orders in the UK contracted at the fastest rate in two years, adding to signs of a stalling economy. On a positive note, China’s Caixin/Markit manufacturing PMI rose to 51.7, its first expansion in four months and well above expectations. 
Stock markets globally have just experienced one of their worst six months on record as stubbornly high inflation and hawkish central banks raised the specter of a sharp economic slowdown. Euro-area inflation surged to a fresh record, surpassing expectations
and bolstering calls for the kind of aggressive interest-rate increases being deployed by central banks across the world.                                                                      

EQUITIES: 

US equity futures are on the defensive again, with the S&P 500 set to extend declines when trading opens following its biggest first-half drop
in over 50 years.  The S&P 500 Index had its worst first-half performance since 1970, losing over $8 trillion in market capitalization. The risk of a renewed selloff in equity markets is still high as investors are only pricing a mild recession, according
to Goldman Sachs strategists.        

E-mini S&P futures -0.4%, Nasdaq -0.5%, Russell 2000 futures -0.45%, Dow futures -0.4%. 

In pre-market trading, Kohl’s (KSS) falls over 15% after terminating talks for a deal with Franchise Group. Micron (MU)
shares are down more than 4% after the company issued a weak forecast for the current quarter due to lower demand for phones and computers. Shares of other semiconductor companies are also down. Endo International (ENDP) falls 8% after the company said results
of phase 2 study are not statistically significant. Accolade (ACCD) shares rise 2% as analysts are positive on the health care services company after it reported quarterly results that beat.

SPY vs TLT (simple asset allocation model) continues to hold key Fibonacci support.

European equities resumed their drop as investors look ahead to a busy month of earnings amid concerns over a slowing economy.
After posting its worst first-half performance since 2008, the Stoxx Europe 600 Index fell 0.6% with tech, miners and travel shares leading the decline. Retail, utilities and energy are higher. European chipmakers were weaker after US firm Micron Technology
gave a fourth-quarter outlook that fell short of analyst expectations.  Fresh data on Friday showed euro zone inflation hit another record high in June, while separate statistics showed manufacturing production in the bloc fell for the first time in two years.
S&P Global’s final manufacturing Purchasing Managers’ Index (PMI) fell to 52.1 in June from May’s 54.6, its lowest since August 2020.  CAC -0.1%, DAX -0.25%, FTSE 100 -0.3%. Tech -2.25%, basic resources -2%, travel -1.3%. Utilities +1.65%, energy +0.45%, retail
+0.4%. 

Asian stocks declined for a third day, as traders assessed recession risks in the global economy after weak US consumer
spending and soft factories data from the region.  Surveys showed China’s factory activity recovering in June, though showed a slowdown in Japan and South Korea, as well as a contraction in Taiwan, highlighted the strain from supply disruptions and rising
costs. China’s manufacturing activity expanded at its fastest pace in over a year, after COVID lockdowns were lifted. The MSCI Asia Pacific Index slid as much as 1.1%, weighed down by tech and consumer discretionary stocks. Taiwan’s tech-heavy benchmark was
again the region’s biggest loser, down 3.25%.  Hong Kong was closed for a holiday as its new chief was sworn in by Chinese President Xi Jinping. Nikkei 225 -1.7%, Kospi -1.15%, CSI 300 -0.4%, Sensex -0.2%, Vietnam and Philippines edged slightly higher.    

FIXED INCOME: 
                                        

The Treasuries curve is extending Thursday’s bull steepening move, with front-end and belly dropping over 10bp from prior
day’s close. Ten-year yields are falling further to below 3%, breaching the 50-day moving average. Belly and front-end outperformance causing a steepening of 5s30s curve by 6bp on the day and 2s10s by 3bps. Eurodollar strip continues to bull flatten as rate
hike premium is eased out of next year.     

METALS: 
                               

Gold fell below $1,800 an ounce for the first time in six weeks as an increase in import taxes in India, the world’s No.
2 consumer, compounded concerns about higher interest rates.  Bullion fell almost 7% last quarter, the most in more than a year, as central bankers globally raised borrowing costs to bring down inflation. Gold headed for a third weekly decline after India
unexpectedly increased its import tax on the metal after a ballooning trade gap pushed the currency to a record low. Spot gold -1%, silver underperforms, falling 3.2%.               

ENERGY:     

Oil prices are rising over 2%, recouping most of the previous session’s declines, as supply outages in Libya and expected
shutdowns in Norway outweighed expectations that an economic slowdown could dent demand.  Libya’s National Oil Corporation declared force majeure on Thursday at the Es Sider and Ras Lanuf ports as well as the El Feel oilfield. WTI crude futures gain 2.6% and
Brent crude is up 2.7%. Both contracts fell about 3% on Thursday, ending the month lower for the first time since November. Yesterday, OPEC+ agreed to stick to its output strategy after two days of meetings. However, they avoided discussing policy from September
onwards.

Putin signed a decree to transfer the Sakhalin-2 natural gas plant to a new Russian entity, a move that could force companies
to exit their investment in the key energy project. Sakhalin-2 accounts for about 4% of the world’s liquefied natural gas production.  The move threatens to unsettle an already tight LNG market. August Natural Gas futures are +5.7%.

CURRENCIES:                      

Concerns about prospects for the global economy lifted the safe-haven dollar and pressured risk-sensitive currencies like
the Australian and New Zealand dollars which hit their lowest levels in two years. Worries over domestic growth are also growing as New Zealand economy’s unexpectedly contracted in the first quarter. Investors reeling from the brutal emerging markets selloff
over the past six months again fled the rupee as India’s currency hit new lows, prompting the government to curb gold imports and oil exports to arrest a widening deficit. The pound slumped as global currency markets adopt a risk-averse tone amid recession
fears and ahead of a holiday weekend in the US. The UK prime minister’s office proposed a cut in the Value Added Tax to curb inflation, The Times reports.  US$ Index +0.4%, GBPUSD -1.15%, EURGBP +0.8%, AUDUSD -1.7%, NZDUSD -1.3%, USDJPY -0.3%, EURJPY –0.75%.

The current phase of deleveraging in cryptocurrencies is at an advanced state and may not last much longer, according to
JPMorgan Chase. “The current deleveraging cycle may not be very protracted,” the strategists said, given “the fact that crypto entities with the stronger balance sheets are currently stepping in to help contain contagion” and that venture-capital funding,
“an important source of capital for the crypto ecosystem, continued at a healthy pace in May and June.”  Bitcoin +2%; Ethereum +3.2%.

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:

• Coupang (CPNG) raised to outperform at Credit Suisse
• First Republic (FRC) raised to overweight at Atlantic Equities
• Sitio Royalties Corp (STR) raised to outperform at RBC; PT $43

DOWNGRADES:

• Duck Creek (DCT) cut to neutral at BofA; PT $16
• FedEx (FDX) cut to hold at Berenberg; PT $275
• HBT Financial (HBT) cut to underweight at JPMorgan; PT $19
• Huntington Bancshares (HBAN) cut to neutral at JPMorgan; PT $14.50
• Live Oak Banc (LOB) cut to neutral at JPMorgan; PT $41
• Micron (MU) cut to neutral at BofA; PT $62

INITIATIONS:

• Alvotech (ALVO) rated new hold at Deutsche Bank; PT $10
• Comcast (CMCSA) rated new outperform at Daiwa; PT $43
• Cousins Properties (CUZ) rated new peerperform at Wolfe
• Harley-Davidson (HOG) rated new neutral at DA Davidson; PT $35
• Paramount Global (PARA) rated new neutral at Daiwa; PT $26
• SoundHound AI (SOUN) rated new neutral at Cantor; PT $3
• VectivBio Holding (VECT) rated new overweight at Piper Sandler; PT $23

David Wienke

Cabrera Capital Markets, LLC