Cabrera Capital Daily Game Plan

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

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

DATA/HEADLINES   
8:30ET Trade deficit

TODAY’S HIGHLIGHTS:  

• Third Russian Airfield Hit by Drone as Moscow Accuses Ukraine
  
• US & EU weighing new tariffs on Chinese steel and aluminum in a
  bid to fight carbon emissions
• PepsiCo will cut hundreds of jobs
  
• Today’s World Cup action has unexpected group winner Morocco facing
  equally unexpected runner-up Spain

Global markets struggled for direction as traders weighed prospects for a slowdown in the pace of US rate hikes against
data that shows tighter policy may be needed for longer.  Meanwhile, Beijing announced it will scrap Covid testing requirements for most public venues in what is seen as an accelerated move toward the exit of Covid Zero policy. China may announce 10 new easing
measures as early as Wednesday, sources said.  The prospect of a relaxation has sparked optimism among investors that the world’s second biggest economy would regain strength and help to boost global growth. Asia’s drop was limited relative to losses in the
US on Monday, where about 95% of the S&P 500’s companies were in the red.  Australia’s central bank raised interest rates by 25bps to a 10-year high today and stuck with its projection that more hikes are needed to cool inflation.  Chile will deliver a rate
decision at 4pm EST.                                 

EQUITIES: 

US equity futures wavered following a third day of declines for the S&P 500 on Monday after strong services data worried investors about Fed
rate hikes.  A resilient US economy and sticky inflation is countering optimism about a reopening in China, with economists suggesting the Fed will need to push rates to a higher peak than previously expected.  The S&P 500 remains on course for its biggest
fourth-quarter gain since 1999, but gains have been receding in December. Fed officials, now in their pre-meeting blackout, have strongly suggested they would downshift to a half-point move at their Dec. 13-14 meeting, after four straight 75 basis-point increases.
                  

Futures ahead of the open: E-mini S&P -0.2%, Nasdaq -0.1%, Russell 2000 -0.2%, Dow -0.2%. Keeping an eye on the trend lines in S&P for potential
break out momentum…  

Gitlab (GTLB) shares rallied 20% after the software company raised its full-year revenue forecast and reported third-quarter
revenue that beat expectations. JPMorgan (JPM) gains 1.5% as Morgan Stanley double-upgraded it to overweight. General Electric (GE) rises 1.5% after it was upgraded to outperform at Oppenheimer. Herbalife (HLF) tumbled 10% after the company announced a $250
million convertible note offering to repurchase existing debt and for general corporate purposes. Textron (TXT) rallied 9% after the company’s Bell unit won a US Army contract to provide next-generation helicopters. Signet Jewelers (SIG) gained as much as
8% after reporting a profit and revenue beat. Royal Caribbean (RCL) lost 2.5% after a double-downgrade to “underweight” from “overweight” at JPMorgan. NRG Energy (NRG) agreed to buy Vivint Smart Home for $2.8 billion in an all-cash deal, accelerating its consumer-focused
growth strategy. Shares decline 8%. Vivint Smart Home (VVNT) jumped 32%.

European indices turned slightly lower for a third day as a seven-week rally loses steam. The rally in European equities
in November had pushed several indexes, including the DAX, FTSE MIB and Euro Stoxx 50 into bull market territory.  Germany’s factory orders rose 0.8% m/m in October versus revised -2.9% in September; – 3.2% y/y (estimate -4.8%) versus revised -9.8% in September,
according to the German Economy Ministry. Less than three months after a high-profile stock market debut, luxury carmaker Porsche is set to join Germany’s blue-chip DAX index, edging out sports gear maker Puma. The Stoxx Europe 600 Index is down ~0.3% with
energy and retail leading losses while real estate outperforms. DAX -0.2%, CAC -0.2%, FTSE 100 -0.3%. Energy -1.6%, Retail -0.8%, Autos -0.7%. Real Estate +0.6%, Insurance +0.5%, Media +0.5%.

Asian stocks declined as a rebound in Chinese shares lost momentum after unexpectedly strong US economic data renewed concerns
that the Federal Reserve will need to push rates to a higher peak than previously expected. The MSCI Asia Pacific Index dropped as much as 1.2%, with Chinese internet firms and Asian chipmakers contributing the most to the decline. “Near-term earnings downgrades
are likely to persist amid weak macro and industrial data across the region and sectors,” Goldman Sachs strategists said in a note.  Vietnam’s equity benchmark led losses, falling over 4% amid profit taking.  Stocks in Japan edged up as investors weighed dovish
remarks from Bank of Japan Governor Kuroda.  Lenders in the Philippines led gains on prospects the central bank will raise interest rates after November inflation exceeded estimates. MSCI Asia Pacific Index down 0.9%, Taiwan -1.7%, Kospi -1.1%, ASX 200 -0.45%,
Hang Seng -0.4%, Sensex -0.3%. Philippines +3.6%, CSI 300 +0.55%, Nikkei 225 +0.25%, the Shanghai Composite was flat.         

FIXED INCOME: 
                                        

Treasuries slightly richer across the curve, with gains led by front-end and belly following a wider bull-steepening rally
in gilts. Treasury 2s10s spread is roughly flat on the day after hitting new cycle lows below -82bp on Monday. Swaps showed an increase in expectations for where the Fed terminal rate will be, with the market indicating a peak above 5% in the middle of 2023.
The current benchmark sits in a range between 3.75% and 4%. 10-year yields around 3.55%, 2 year yield ~4.36%.

METALS: 
                               

Spot gold is higher by 0.6%, helped by a modest pullback in the US dollar. While both gold and industrial metals like copper
have advanced in recent days, some are worried that rising Treasury yields and a rebound in the dollar, driven by expectations for more interest rises by the Federal Reserve, could help to reverse some of those gains. Spot silver +1%.   

ENERGY:      

Crude oil eased, extending Monday’s decline, as the outlook for interest rate hikes and global growth weighed on prices.
A tanker queue near Turkey — caused by new insurance rules after sanctions on Russia — grew larger.  Chinese state-run refiners are expected to cut run rates in December for first time in four months, OilChem said. The API will release its weekly oil inventory
figures later, while the EIA’s monthly Short-Term Energy Outlook is also due. WTI -1.4%, Brent -1.3%.           

CURRENCIES:  
                     

The dollar pulled back from earlier highs, holding below its key 200 day moving average.  Group-of-10 currencies traded
in narrow ranges, with the Australian dollar among top performers after the nation’s central bank said it expects to hike rates further. The Reserve Bank of Australia raised its key interest rate for an eighth consecutive month. Meanwhile, European Central
Bank Chief Economist Philip Lane said consumer-price growth is probably near its peak, while acknowledging that the ECB will hike rates further.  US$ Index -0.3%, GBPUSD +0.2%, USDJPY -0.5%, AUDUSD +0.6%, USDBRL -1%.                             

Bitcoin +0.2%;  Ethereum -0.2%. Goldman will spend tens of millions of dollars to buy or invest in crypto companies, exploiting
lower valuations after FTX’s collapse, Reuters reported. Elsewhere, bankrupt Celsius Network won court approval to give out bonuses totaling some $2.8 million to keep its remaining 170 workers from quitting while it works to exit Chapter 11.      

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:

• Activision Blizzard (ATVI) raised to buy at Edward Jones
• Estee Lauder (EL) raised to buy at Deutsche Bank; PT $266
• GE (GE) raised to outperform at Oppenheimer; PT $104
• JPMorgan (JPM) raised to overweight at Morgan Stanley; PT $153
• PennyMac (PFSI) raised to overweight at Wells Fargo; PT $75
• PerkinElmer (PKI) raised to outperform at Cowen; PT $164
• Reinsurance Group (RGA) raised to outperform at RBC; PT $170

DOWNGRADES:

• Anavex Life Sciences (AVXL) cut to neutral at Cantor; PT $11
• BNY Mellon (BK) cut to underweight at Morgan Stanley
• Boston Beer (SAM) cut to sell at Deutsche Bank; PT $316
• Conagra (CAG) cut to sell at Deutsche Bank; PT $34
• Edwards Life (EW) cut to hold at Stifel; PT $75
• Equitable Holdings (EQH) cut to sector perform at RBC; PT $33
• Flowers Foods (FLO) cut to sell at Deutsche Bank; PT $27
• General Mills (GIS) cut to hold at Deutsche Bank; PT $88
• Kimberly-Clark (KMB) cut to sell at Deutsche Bank; PT $123
• Kymera (KYMR) cut to neutral at Credit Suisse; PT $32
• MEI Pharma (MEIP) cut to hold at Truist Secs
• MEI Pharma (MEIP) cut to neutral at BTIG
• Molson Coors (TAP) cut to sell at Deutsche Bank; PT $50
• New Gold (NGD CN) cut to reduce at TD; PT 85 cents
• Oncorus (ONCR) cut to neutral at HC Wainwright
• SL Green (SLG) cut to market perform at BMO; PT $41
• SL Green (SLG) cut to sector underperform at Scotiabank; PT $34
• Salisbury (SAL) cut to neutral at Janney Montgomery; PT $33
• Spectrum Brands (SPB) cut to hold at Deutsche Bank; PT $70
• State Street (STT) cut to equal-weight at Morgan Stanley
• VF Corp (VFC) cut to hold at Edward Jones

INITIATIONS:

• Albertsons Cos (ACI) rated new outperform at Bernstein; PT $26
• Array (ARRY) rated new overweight at Wells Fargo; PT $28
• Avis Budget (CAR) rated new neutral at Susquehanna; PT $225
• BrightSpire Capital Inc (BRSP) rated new buy at JonesTrading; PT $11
• Cass Information (CASS) rated new neutral at Piper Sandler; PT $45
• Costco (COST) rated new outperform at Bernstein; PT $586
• Driven Brands (DRVN) rated new outperform at RBC; PT $37
• Enhabit (EHAB) rated new buy at Stifel; PT $17
• Floor & Decor (FND) rated new outperform at Bernstein; PT $112
• Hertz (HTZ) rated new neutral at Susquehanna; PT $18
• Home Depot (HD) rated new market perform at Bernstein; PT $337
• Iqvia (IQV) rated new outperform at Cowen
• Kroger (KR) rated new outperform at Bernstein; PT $58
• Lowe’s (LOW) rated new market perform at Bernstein; PT $237
• Lumen Technologies (LUMN) reinstated neutral at Goldman; PT $6
• P&G (PG) rated new outperform at CICC; PT $166
• Perfect (PERF) rated new neutral at Piper Sandler; PT $7
• RCM (RCM) rated new equal-weight at Morgan Stanley; PT $11
• Rxo (RXO) rated new buy at Jefferies; PT $25
• Target (TGT) rated new outperform at Bernstein; PT $190
• Valvoline (VVV) rated new outperform at RBC; PT $39
• Veeva (VEEV) rated new market perform at Cowen
• Walmart (WMT) rated new market perform at Bernstein; PT $159
• Xencor (XNCR) rated new outperform at Cowen

David Wienke

Cabrera Capital Markets, LLC