Cabrera Capital Daily Game Plan

Wednesday August 3, 2022                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES  
7:30ET Fed’s Bullard speaks; 9:45ET S&P US Services PMI (final); 10:00ET ISM services index, Factory orders; 10:30ET Fed’s Harker speaks; 11:15ET Fed’s Daly speaks; 11:45ET Fed’s Barkin speaks; 2:30ET Fed’s Kashkari speaks  

TODAY’S HIGHLIGHTS:   

• China’s official statement on Pelosi’s visit to Taiwan –
  China Ministry of Foreign Affairs
  
• China to launch ‘targeted’ military operations –
  Nikkei
  Asia
  
• Fed’s Bullard says the US is not in a recession now
  
• Pelosi hinted gender is the real reason China is mad at the Taiwan
  trip

World stocks steadied as markets weighed risks from House Speaker Nancy Pelosi’s visit to Taiwan and comments from Federal
Reserve officials talking up the chance of aggressive interest rate hikes. Although China kicked off a burst of military activity in Taiwan’s surrounding waters, investors took some comfort in expectations that Beijing’s actions would remain demonstrative.
China will be holding military drills inside Taiwan’s territory this week that are larger and closer to the island then they were during the last Taiwan Strait crisis in 1996. Pelosi pledged that the US wouldn’t abandon Taiwan, reaffirming American support
despite threats of fresh trade curbs and military actions by Beijing. China is suspending imports of citrus fruits, chilled white striped hairtail and frozen horse mackerel from Taiwan, starting today.                                                                                              

EQUITIES: 

US stock futures climbed as some of the anxiety over tense US-China ties eased. Equity futures reversed earlier overnight losses, following the
S&P 500’s 0.7% drop yesterday where all eleven sub-sectors declined.   

E-mini S&P futures +0.5%, Nasdaq +0.6%, Russell 2000 futures +0.8%, Dow futures +0.55%. 

In premarket trading, PayPal Holdings jumped 13% after the payments giant announced a new $15 billion share buyback program
and said activist investor Elliott Investment Management is now among its biggest shareholders. Chipmaker AMD drops 6% after issuing a lukewarm forecast for the current period as a slump in demand for PCs threatens sales. Airbnb fell after the home-rental
company missed estimates on bookings. Match Group sank after giving a weak revenue forecast. CVS Health rose 2% after beating analysts’ expectations and raised its outlook for the year, helped by over-the-counter Covid-19 tests. Robinhood said it is eliminating
almost a quarter of its workforce and shuttering offices. Shares are up 2%. Atlas Air (AAWW) shares rise 12% amid a report that an investor group led by Apollo has agreed to acquire the airfreight company for ~$102.50/share. Cognex fell 12% (CGNX) after results
and revenue outlook came in significantly lower than expected. SoFi Technologies (SOFI) shares jump 11% after the company’s second-quarter revenue and Ebitda beat. SolarEdge (SEDG) fell 12% as analysts said the solar power firm’s quarterly results were “messy”
and missed expectations.       

The STOXX 600 index recovered from early losses after data showed business activity in the euro zone contracted slightly
in July for the first time since early last year as consumers reined in spending. Tech and bank stocks outperformed, while telecom and auto stocks lagged. Beats from BMW, HUGO BOSS, SOC GEN and INFINEON were the standouts from the majors with SIEMENS HEALTHINEERS
and HISCOX were among the standout misses. Societe Generale rallied 4% as the French lender outlined new revenue targets and pledged higher profitability. BMW AG dropped over 5% after cutting its delivery outlook due to ongoing supply-chain issues.  Avast
shares jump as much as 43%, the most on record, after the UK’s Competition and Markets Authority provisionally cleared its acquisition by NortonLifeLock. Auto1 shares jump 17% after reporting strong quarterly revenue performance. JDE Peet’s rose as much as
12% after reporting an earnings beat. Stoxx 600 +0.2%, CAC +0.35%, FTSE 100 +0.05%, DAX +0.25%. Tech +1.7%, Insurance +1.35%, Banks +1.35%. Autos -1%, Telecom -0.8%.   

Asian stocks pared losses as investors monitored China’s response to US House Speaker Nancy Pelosi’s Taiwan trip along with
the latest corporate results. Benchmarks in Hong Kong and Taiwan fluctuated before closing slightly higher while equities in mainland China declined.  Alibaba was among the biggest gainers, +3.8%, and also lifted Hong Kong shares ahead of its earnings report
on Thursday.  Semiconductor firms in China including SMIC, +6.7%, jumped after Pelosi’s trip to Taiwan. Japan’s Nikkei rose 0.5%, rebounding from Tuesday’s two-week closing low, while Hong Kong’s Hang Seng added 0.4% and Taiwan’s TAIEX index rebounded from
earlier losses to gain 0.2%. China’s benchmark CSI 300 Index ended the day 1% lower. Hang Seng Tech Index +1.25%, Kospi +0.9%, Vietnam +0.65%, ASX 200 -0.3%    

FIXED INCOME: 
                                        

Treasuries extended a slide sparked by hawkish Federal Reserve comments as the entire US treasury yield decline of last
week has been reversed. Several Fed policymakers signaled on Tuesday that there would be no letup in the tightening campaign. San Francisco Fed President Mary Daly said she was “puzzled” by bond market prices that reflect investor expectations for the central
bank to shift to rate cuts in the first half of next year. She said her expectation is the Fed will keep raising rates for now and then hold them there “for a while,” remarks that triggered a wave of selling in US treasuries. Fed’s Mester said she is looking
for compelling evidence inflation has peaked and is moving down. Chicago Fed President Evans said 50bps at the September meeting is reasonable but 75bps could be ok. US session focus on busy data and Fed speaker slate. Yields cheaper by up to 4bp across front-end
and belly of the curve, flattening 5s30s by 1.5bps. 10-year yield is around 2.78%, cheaper by 2.5bp on the day. Treasury quarterly refunding announcement is due at 8:30ET, where dealers forecast more cuts to issuance with particular emphasis on the 20-year
sector.

METALS: 
                               

Gold is modestly higher with investors assessing US-China tensions and an apparent hawkish turn from the Federal Reserve. 
Bullion has been drawing some haven support amid the ongoing geopolitical risks. While anxiety has eased slightly in markets, traders are still monitoring the latest developments as China halted some trade with Taiwan. Bullion dropped 0.7% on Tuesday as Fed
officials pushed back against a narrative in financial markets over the past week that the central bank is likely to pivot away from tightening to prevent a sharp slowdown.  Spot gold +0.25%, silver +0.4%.                               

ENERGY:     

Oil futures erased an earlier decline as an OPEC+ committee approved an output increase of as little as 100k b/d for September,
the smallest hike in OPEC history. The API reported a build in US crude inventories, ahead of EIA figures due later today. China’s announcement of military drills around Taiwan as US House Speaker Nancy Pelosi visits the island is creating ripple effects across
global supply chains, prompting detours and delaying energy shipments. WTI +1.6%, Brent +1.3%. Both are holding just above their key 200 day moving averages.          

CURRENCIES:                      

The yen swung between gains and losses as traders assessed rising US yields and China’s sanctions against Taiwan.  USD/JPY
is up 0.25% on the day after snapping four days of losses on Tuesday. The dollar’s better performance versus the yen followed comments by Fed officials that pushed back against the narrative that policy makers will slow down on rate hikes. US$ Index -0.05%,
EURUSD +0.25%, GBPUSD +0.2%, AUDUSD +0.3%, EURJPY +0.5%, USDNOK -0.9%, EURCHF +0.35%.             

Bitcoin +1.6%;  Ethereum %. Hackers targeted the Solana ecosystem early Wednesday with thousands of wallets affected in
the latest hit to the cryptocurrency market. MicroStrategy co-founder Michael Saylor gave up his chief executive officer title and said he’ll focus more on Bitcoin after the enterprise-software maker reported a loss of more than $1 billion related to the second-quarter
plunge in the price of the cryptocurrency.

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:

• AMD (AMD) raised to outperform at KGI Securities; PT $125
• Apollo Investment (AINV) raised to overweight at Wells Fargo; PT $13.50
• Atlas Air (AAWW) raised to peerperform at Wolfe
• CF Industries (CF) raised to buy at Citi; PT $117
• Clearwater Paper (CLW) raised to outperform at RBC; PT $45
• Cognex (CGNX) raised to outperform at Bernstein; PT $65
• Mosaic (MOS) raised to buy at Citi; PT $61
• Sealed Air (SEE) raised to outperform at RBC; PT $70
• Uber (UBER) raised to outperform at Raymond James; PT $38
• Xylem (XYL) raised to neutral at Credit Suisse; PT $96

DOWNGRADES:

• Cognex (CGNX) cut to equal-weight at Stephens; PT $45
• Esperion Therapeutics (ESPR) cut to underperform at Credit Suisse
• Gibson Energy (GEI CN) cut to market perform at Raymond James; PT C$26.50
• Harmony Biosciences (HRMY) cut to hold at Jefferies; PT $57
• Hydrofarm (HYFM) cut to neutral at JPMorgan
• Incyte (INCY) cut to neutral at Guggenheim
• Knowles (KN) cut to neutral at Roth Capital; PT $17
• Olaplex (OLPX) cut to equal-weight at Barclays; PT $16
• Owens Corning (OC) cut to neutral at Longbow
• Sierra Wireless (SW CN) cut to hold at Canaccord; PT C$39.79

INITIATIONS:

• FiscalNote Holdings Inc (NOTE) rated new buy at DA Davidson; PT $8.50
• ImmunityBio Inc (IBRX) rated new buy at Jefferies; PT $8
• ModivCare Inc (MODV) rated new overweight at Stephens; PT $145
• Valneva ADRs (VLA FP) rated new buy at HC Wainwright; PT $34

David Wienke

Cabrera Capital Markets, LLC