Cabrera Capital Daily Game Plan

Tuesday September 6, 2022                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES  
9:45ET Services PMI (final); 10:00ET ISM services index

TODAY’S HIGHLIGHTS:  

• Ultra-processed foods linked to cancer and early death study shows
• Liz Truss becomes UK prime minister after meeting the Queen

Global shares are recovering from yesterday’s slide as European governments are pushing through multi-billion-euro packages
to prevent utilities from collapsing and protect households amid soaring energy costs.  Gas prices in Europe jumped as much as 35% on Monday after Russia’s state-controlled Gazprom said it would indefinitely extend a shutdown to the major Nord Stream 1 gas
pipeline. Finland and Switzerland provided billions in financial support to power companies on Tuesday, as Europe scrambles to secure energy supplies. The focus turns next to the ECB, with economists at some top banks expecting it to announce a hike of 75
basis points on Thursday. Meanwhile, the People’s Bank of China has moved in the opposite direction, most recently cutting its key policy rate by 10 basis points.  On Monday, China said it’s “crucially important” for the country to adopt supportive policies
this quarter as it tries to recover from pandemic-related losses.      

EQUITIES: 

US stocks look set to open higher after Monday’s Labor Day holiday as moves to mitigate the impact of Europe’s energy crisis helped lift the
mood.  California narrowly avoided implementing rotating outages on Monday while officials warned that the state’s power grid will face a bigger test today amid a record-breaking heat wave. Power demand is forecast to reach an all-time high today as business
and schools reopen after the long holiday weekend. A surge in US electricity prices has made about 1 in 6 homes fall behind on their utility bills.  Morgan Stanley strategist Michael Wilson cut his expectations for earnings-per-share growth for the year, saying
that a slowing economy is now likely to be a bigger concern for stocks, rather than scorching inflation and a hawkish Federal Reserve.     

E-mini S&P futures +0.65%, Nasdaq +0.06%, Russell 2000 futures +0.8%, Dow futures +0.7%. 3902 is key Fibonacci support in ES.

In premarket trading, Bed Bath & Beyond dropped as much as 25% after CFO Gustavo Arnal fell to his death Friday from a Manhattan
skyscraper. Digital World Acquisition Corp. fell 33% after the blank-check firm that is set to merge with former President Trump’s social media group reportedly failed to get enough shareholder support to extend the deadline to complete the deal. Alibaba (BABA)
slumps 2% while other US-listed Chinese stocks slide as lockdowns hit more cities amid an increase in Covid cases.
In other news, State Farm confirms its plan to invest $1.2B in ADT. EQT Corp., the largest US natural gas producer, is in advanced
talks to acquire THQ Appalachia I LLC to expand in the Marcellus shale. Shares are down 4%.

European stock markets are moving higher as previously surging gas prices slipped back 10% on reports that incoming UK Prime
Minister Liz Truss drafted plans to fix annual electricity and gas bills for a typical UK household at or below their current level. European shares tumbled on Monday after Russia extended a halt on gas flows down the Nord Stream 1 pipeline to Europe, spurring
governments to announce emergency measures. France will send gas to Germany if needed while Germany stands ready to provide it with electricity. The euro zone is almost certainly entering a recession, with surveys on Monday showing a deepening cost of living
crisis and a gloomy outlook for the region. An article this morning from MNI talking about how ECB president Christine Lagarde prefers a 50bp hike rather than 75bps ahead of the ECB on Thursday, is aiding sentiment. Gains in retailers, autos and travel shares
lifted the Stoxx Europe 600 Index, while energy underperformed as a rally in oil cooled. Stoxx 600 +0.5%, DAX +0.8%, CAC +0.3%, FTSE 100 +0.2%. Retail +2.2%, Travel +2%, Autos +1.8%, Banks +1%. Energy -1.7%, Utilities -0.5%.    

Shares in Asia nudged higher, though the impact of Europe’s energy crisis kept risk appetite in check. Stocks in China rebounded
after several days of losses, while Hong Kong equities lagged in the region. Australian stocks declined after the central bank raised its key rate by 50 basis points. Indonesia’s benchmark narrowly missed a fresh record high. Japanese drugstore operators fell
after Nikkei reported Amazon is considering starting online sales of prescription medicine in the nation. Shanghai Composite +1.35%, Philippines +0.5%, Kospi +0.25%, Taiwan +0.1%. Topix -0.1%, Hang Seng -0.1%, Sensex -0.1%, ASX -0.35%.

FIXED INCOME: 
                                        

Treasuries dipped, led by shorter maturities, taking the two-year yield to 3.46%. Treasury yields are cheaper by 5bp to
8bp across the curve in a bear-flattening move, lagging gains in bunds and gilts after dovish comments from ECB policy makers. 10-year yield is around 3.25%, cheaper by ~6bp vs Friday’s close.          

METALS: 
                               

Gold traded little changed for a second day as the dollar steadied and markets awaited an expected European Central Bank
interest-rate hike. Spot gold is up 0.1%, silver +0.5%.                                                                 

ENERGY:     

Oil fluctuated after a two-day rally as concern returned about weaker demand and the prospect of more interest rate hikes
weighed against OPEC+’s decision on Monday to cut their October output target by 100,000 barrel per day.  The move was seen as largely symbolic.  OPEC+ likely based their decision on the view that the market is likely to experience an oversupply of about 400,000
bpd this year, before moving to a small deficit of about 300,000 bpd in 2023. The first OPEC+ oil supply cut in more than a year shows the group is serious about managing global crude markets and willing to take preemptive action, said group leader Saudi Arabia.
Europe’s regional energy prices surged after Russia’s Gazprom halted its key gas pipeline indefinitely. Germany — the nation most affected by the Nord Stream pipeline cutoff — unveiled a $65 billion package to protect consumers. WTI +0.2%, Brent -2.6%.

CURRENCIES:                      

China’s yuan clawed off a more than two-year low in Asia after Beijing’s latest stimulus effort had cut FX reserves requirements.
The yen was the worst performer among G-10 currencies, falling 0.9% against the dollar. Japan’s finance minister reiterated that sharp yen moves were “undesirable” and that he was watching rising volatility in the exchange market with a “great sense of urgency”
as the currency hit a fresh 24-year low.  The Aussie dollar was little changed after the Reserve Bank of Australia lifted its interest rate by another 50 basis points and signaled more were to come. The euro dropped below 99 US cents for the first time in
20 years on Monday after Russia said gas supply down its main pipeline to Europe would stay shut indefinitely. The pound rebounded as traders assessed the agenda of incoming Prime Minister Liz Truss. The new leader is finalizing plans for a £40 billion ($46
billion) support package to lower energy bills for businesses. US$ Index +0.35%, USDJPY +0.95%, GBPUSD +0.5%, EURUSD -0.1%, AUDUSD -0.3%, EURJPY +0.85%.            

Bitcoin %;  Ethereum %. Trading in ether derivatives soared in August as traders bet on the Ethereum blockchain’s impending
move from proof of work to proof of stake – a transition dubbed The Merge.  Open interest in ether options surpassed bitcoin open interest for the first time in August,  as ether hurtled past $8 billion to an all-time high.  Most of the responses to the Biden
Executive Order on cryptocurrency are coming due this week, if not today.  The responses expected from the Treasury and Justice Departments will hold particular sway over the future of crypto policy in the US.

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:

• Bank of Nova Scotia (BNS CN) raised to buy at Fundamental Research
• Ecolab (ECL) raised to buy at Northcoast; PT $188
• Frontline (FRO) raised to buy at Jefferies; PT $16
• Greif (GEF) raised to market perform at BMO; PT $70
• Inter&Co (INTR) raised to neutral at Goldman; PT $5
• Jefferies (JEF) raised to outperform at KBW; PT $38
• Mettler-Toledo (MTD) raised to buy at Stifel; PT $1,500
• Nordic American Tankers (NAT) raised to buy at Jefferies; PT $4
• Organon (OGN) raised to overweight at Piper Sandler; PT $34
• PPG Industries (PPG) raised to buy at Redburn
• Perrigo (PRGO) raised to overweight at Wells Fargo; PT $54
• Rollins (ROL) raised to outperform at RBC; PT $40
• TD Bank (TD CN) raised to buy at Fundamental Research; PT C$100.62
• Tesla (TSLA) raised to outperform at Wolfe; PT $360
• Toro (TTC) raised to buy at Northcoast; PT $99
• Transocean (RIG) raised to buy at BTIG; PT $8
• Tsakos Energy (TNP) raised to buy at Jefferies; PT $25
• W R Berkley Corp (WRB) raised to outperform at KBW; PT $80

DOWNGRADES:

• Alvotech (ALVO) cut to sell at Citi; PT $5
• Apollo Commercial (ARI) cut to underweight at JPMorgan; PT $11
• Carlyle Secured Lending (CGBD) cut to neutral at JPMorgan; PT $14.50
• Ciena (CIEN) cut to neutral at JPMorgan; PT $45
• Claros Mortgage Trust (CMTG) cut to underweight at JPMorgan; PT $17
• Discover Financial (DFS) cut to neutral at JPMorgan; PT $113
• Enact (ACT) cut to neutral at JPMorgan; PT $27
• FedEx (FDX) cut to neutral at Citi; PT $225
• Greif (GEF) cut to equal-weight at Wells Fargo; PT $71
• LegalZoom (LZ) cut to market perform at JMP
• PolyPid (PYPD) cut to outperform at Raymond James; PT $4
• Rocket Cos. (RKT) cut to neutral at JPMorgan; PT $8.50
• Shockwave Medical (SWAV) cut to underperform at Oppenheimer; PT $165
• Signify Health (SGFY) cut to neutral at Baird; PT $30.50
• Signify Health (SGFY) cut to neutral at JPMorgan; PT $30.50
• StoneCo (STNE) cut to sell at Goldman; PT $7.80
• WhiteHorse Finance (WHF) cut to underweight at JPMorgan; PT $14

INITIATIONS:

• Akili (AKLI) rated new outperform at Cowen
• Arrow Exploration (AXL CN) rated new buy at Canaccord
• Cathedra Bitcoin Inc (CBIT CN) rated new neutral at HC Wainwright
• Core Scientific (CORZ) rated new buy at HC Wainwright; PT $5
• Day One Biopharma (DAWN) rated new buy at JonesTrading; PT $40
• Dropbox (DBX) rated new buy at BofA; PT $34
• Entera Bio (ENTX) rated new buy at HC Wainwright; PT $10
• Fortress Transportation (FTAI) reinstated buy at Deutsche Bank
• Mesoblast ADRs (MSB AU) rated new overweight at Piper Sandler; PT $7
• Olin (OLN) rated new underperform at Credit Suisse; PT $51
• Procore Technologies (PCOR) rated new market outperform at JMP; PT $70
• Stagwell (STGW) rated new buy at Needham; PT $9
• Stronghold Digital (SDIG) rated new buy at HC Wainwright; PT $3
• Sun Country Airlines (SNCY) rated new outperform at Cowen; PT $25
• Westlake Corp (WLK) rated new outperform at Credit Suisse; PT $120
• Yum China (YUMC) rated new buy at President Capital Management; PT $55

David Wienke

Cabrera Capital Markets, LLC