Cabrera Capital Daily Game Plan

Wednesday December 7, 2022                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES   
8:30ET Nonfarm Productivity, Labor Costs revisions; 3:00ET Consumer Credit

TODAY’S HIGHLIGHTS:  

• Russia ordered a new batch of weapons from Iran, including hundreds
  of ballistic missiles and drones
• Chinese President Xi Jinping arrived in Riyadh to attend the first
  China-Arab States Summit

Global markets fell overnight as weak Chinese trade data compounded concerns about the health of the global economy.  Both
imports and exports in China suffered their biggest monthly falls since 2020, much worse than market forecasts. Exports contracted 8.7% in November from a year earlier, a sharper fall from a 0.3% loss in October.  Meanwhile, a chorus of Wall Street analysts
warned about a likely recession ahead, tempering optimism about China’s major shift in its tough zero-COVID policy. That sent the MSCI’s benchmark for global stocks down 0.3%. India was the latest central bank to begin slowing the pace of rate increases, with
a hike of its key lending rate by 35 basis points to 6.25%.  Canada is up next with its rate decision at 10:00ET. The Bank of Canada is expected to hike its benchmark overnight rate to its highest level in 14 years as it seeks to tame inflation, and it may
signal its tightening cycle is near an end as the economy begins to slow. Traders are also waiting for rate decisions from Brazil, Poland and Peru. Brazil’s central bank is expected to stand pat at 13.75%, while Peru is seen raising by 25 bps to 7.5%. Poland
will probably hold at 6.75%.                            

EQUITIES: 

US equity futures slipped after the S&P 500 fell Tuesday for a fourth straight day and closed at the lowest level in nearly a month as concerns
over economic growth seem to be overtaking those over inflation. The stock market’s inverse relationship with Treasury yields may be breaking down. A lower 10-year Treasury yield may reflect rising recession risks versus declining inflation pressures. The
yield curve, which keeps inverting further, also indicates recession concerns. Wall Street is loudly warning that next year’s outlook for the US economy and stocks is grim. Goldman Sachs CEO David Solomon cautioned that the economy faces “bumpy times ahead”
and JPMorgan CEO Jamie Dimon expressed a grimmer view that this would be a “mild to hard recession.” Layoffs are also adding to the gloom, with Morgan Stanley announcing it will reduce its global workforce by about 1,600.                   

Futures ahead of the open: E-mini S&P -0.6%, Nasdaq -1%, Russell 2000 -0.4%, Dow -0.3%. 

In premarket trading, Apple dipped as mobile industry bellwether and key supplier Murata Manufacturing expects the firm
to reduce iPhone 14 production plans further in the coming months because of weak demand. MongoDB (MDB) rallied 26%, with the stock set for its best day in more than five years, after reporting results. Tesla shares retreated 2.5% as the EV giant offered another
price incentive in China. Mobileye beat views in its first report since coming public in late October. Pinterest (PINS) gains 1.8% after the social media company added a board seat for Elliott Investment Management. Carvana (CVNA) sinks 24% after Wedbush cuts
to underperform. Sprinklr shares (CXM) fall 8.8% after the software company cut its revenue guidance for the full year.

A weak start across European equity markets set the STOXX 600 index on a path for its fourth straight session of losses.
Energy, miners and technology are the worst-performing sectors, dragging most European stocks lower. Health-care shares gained after a US court ruling boosted the sector. GSK Plc and Sanofi rallied to boost health stocks after a US federal judge rejected the
scientific evidence behind lawsuits claiming heartburn drug Zantac can cause cancer. Among other individual stocks moving, plane-maker Airbus SE fell 3% after cutting its delivery guidance. European luxury stocks were mixed after China eased a range of Covid
restrictions. Euro zone gross domestic product grew by 0.3% in the third quarter, slightly more than initially estimated, data from Eurostat showed.  Meanwhile, UK house prices fell the fastest in 14 years. Stoxx 600 -0.7%, DAX -0.5%, CAC -0.5%, FTSE 100 -0.1%,
FTSE MIB -0.1%. Basic Resources -2%, Energy -1.7%, Technology -1.25%. Healthcare +0.4%, Travel & Leisure +0.1%.

Shares in Asia extended losses in the late afternoon as renewed concerns about China’s growth were revived by weak trade
data, offsetting optimism as the nation moves away from its Covid-Zero policy.  China’s national health authority said today that asymptomatic COVID-19 cases and those with mild symptoms can self-treat while in quarantine at home. The announcement was the
strongest sign so far that China is preparing its people to live with the disease after nearly three years of crippling restrictions that have battered the economy. Market reaction, however, was negative as the focus shifts to how well China can execute its
policy shift.  The MSCI Asia Pacific Index slumped 1.4%, led lower by consumer discretionary and information technology shares. Hong Kong plunged more than 3% in volatile trading as the mainland weak trade data underscored sluggish demand at home and abroad.
Japan’s Topix index down 0.1%; Nikkei 225 -0.7%, China’s CSI 300 -0.25%, Sensex -0.3%, Kospi -0.4%, Taiwan -0.7%, ASX 200 -0.85%, Philippines -2.2%, Hang Seng Index -3.2% after testing its key 200 day moving average.          

FIXED INCOME: 
                                        

Treasuries are mixed with front and long-end yields slightly richer versus Tuesday’s close, the belly is slightly cheaper.
10-year is little changed around 3.54%, 30 year -5.5bps at 3.54%, 2 year yield ~4.36%, 5s30s spread is flatter by ~4bp.  Recession fears were visible in the bond market, where demand for longer-dated bonds drove a yield inversion to a four-decade extreme,
sending 10-year rates below those on 2-year notes by the most since the early 1980s. The Federal Reserve rate decision and inflation data due next week loom as pressure points for a market governed by central banks.  Dollar issuance slate is empty so far;
minimal activity expected for the week with the US calendar for corporate issuance nearly cleared for the year.  

METALS: 
                               

Gold prices are trading sideways, up 0.2%, while spot silver gains 0.75%.  China reported an increase in its gold reserves
for the first time in more than three years, shedding some light on the identity of the mystery buyers in the bullion market.  The People’s Bank of China raised its holdings by 32 tons in November from the month before, according to data on its website. The
gold industry has been rife with speculation over the central banks behind nearly 400 tons of sovereign purchases during the third quarter.  The PBOC’s purchases may be part of a plan to diversify its reserves away from the dollar, according to analysts at
UBS Group.   

ENERGY:      

Oil fluctuated after touching the lowest level since last December on Tuesday as investors pared back crude positions amid
a broader market sell-off. The decline for WTI, which settled near $74 yesterday, erased all of this year’s gains. Warnings from major US banks over a tough 2023 outlook are stoking concerns about the prospects for demand and dented appetite for risk assets
including commodities. At the same time, China’s oil imports jumped last month to the highest since the start of this year, though weakened demand is expected to lead to a slowdown in December. The easing of domestic quarantine measures may help raise domestic
use of oil products in the longer term. Chevron will soon start producing oil in Venezuela and exporting it, Venezuela President Nicolas Maduro said. The EIA weekly report on US oil inventories, supply and demand is due at 10:30ET. US natural gas prices climbed
4%. The US agreed to send more LNG to the UK. WTI +0.15%, Brent +0.1%.          

CURRENCIES:  
                     

Group-of-10 currencies trade in tight ranges with the Japanese yen underperforming.  USD pared earlier gains following a
two-day advance. The Canadian dollar is slightly lower ahead of an expected rate hike from the Bank of Canada later this morning. The Australian dollar was broadly steady despite Australian third-quarter growth coming in a bit below forecasts. Data from the
Australian Bureau of Statistics showed real gross domestic product rose 0.6% in the third quarter, compared with 0.9% the previous quarter. AUD/USD fell 0.2% after climbing as much as 0.4%. GBP/USD advances 0.2%. Halifax said UK house prices fell at the sharpest
pace in 14 years. US$ Index -0.1%, USDJPY +0.4%, USDCAD +0.2%, EURUSD +0.3%, EURJPY +0.7%, USDBRL +0.5%.                             

Bitcoin -1.2%;  Ethereum -2.3%.  INTERCONTINENTAL EXCHANGE INC CEO SAYS THINKS MOST CRYPTO TOKENS WILL BE REGULATED UNDER
EXISTING SECURITIES LAWS FOLLOWING FTX COLLAPSE.     

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:

• InterRent REIT (IIP-U CN) raised to strong buy at Raymond James; PT C$15.75
• MongoDB (MDB) raised to market outperform at JMP; PT $215
• RCM (RCM) raised to buy at Guggenheim; PT $15
• Tradeweb (TW) raised to outperform at Raymond James; PT $74

DOWNGRADES:

• Achilles Therapeutics ADRs (1447978DLN) cut to market perform at Oppenheimer
• Airbnb (ABNB) cut to underweight at Morgan Stanley
• Autoliv (ALV) cut to neutral at UBS; PT $86
• Booking Holdings (BKNG) cut to peerperform at Wolfe
• Carvana (CVNA) cut to underperform at Wedbush; PT $1
• Chewy (CHWY) cut to peerperform at Wolfe
• Comstock Resources (CRK) cut to sell at Citi; PT $14
• Coterra Energy Inc (CTRA) cut to sell at Citi; PT $23
• Dominion Energy (D) cut to equal-weight at Wells Fargo; PT $64
• EQT Corp (EQT) cut to neutral at Citi; PT $40
• Expedia (EXPE) cut to underperform at Wolfe; PT $85
• Gossamer Bio (GOSS) cut to equal-weight at Barclays; PT $2
• Gossamer Bio (GOSS) cut to neutral at SMBC Nikko; PT $3
• Gossamer Bio (GOSS) cut to underweight at JPMorgan
• Kelly Services (KELYA) cut to neutral at Northcoast
• Lilium (LILM) cut to underweight at Barclays; PT $1
• Lions Gate (LGF/A) cut to underweight at JPMorgan; PT $7
• M&T Bank (MTB) cut to market perform at KBW; PT $180
• Ouster (OUST) cut to neutral at Citi; PT $1.70
• PagSeguro (PAGS) cut to equal-weight at Morgan Stanley
• Republic Services (RSG) cut to market perform at BMO; PT $148
• Sema4 (SMFR) cut to neutral at Goldman; PT $1
• Shopify (SHOP CN) cut to peerperform at Wolfe; PT C$66.39
• Signature Bank (SBNY) cut to market perform at Raymond James
• Southwestern Energy (SWN) cut to neutral at Citi; PT $6.50
• Sprinklr (CXM) cut to hold at Stifel; PT $8
• StoneCo (STNE) cut to equal-weight at Morgan Stanley
• TripAdvisor (TRIP) cut to underperform at Wolfe; PT $17
• Versus Systems (VS) cut to neutral at HC Wainwright; PT $2
• Wejo Group (WEJO) cut to neutral at Baird; PT $1.50

INITIATIONS:

• Adagene ADRs (ADAG) rated new buy at HC Wainwright; PT $5
• Applied Materials (AMAT) rated new buy at Loop Capital; PT $125
• Argenx ADRs (ARGX BB) rated new outperform at William Blair
• Bio-Rad (BIO) rated new outperform at RBC; PT $565
• Bio-Techne (TECH) rated new sector perform at RBC; PT $89
• CinCor Pharma (CINC) rated new overweight at Barclays; PT $22
• Global Business Travel Group I (GBTG) rated new neutral at Citi
• Hologic (HOLX) rated new sector perform at RBC; PT $75
• Illumina (ILMN) rated new outperform at RBC; PT $282
• Insmed (INSM) rated new overweight at Barclays; PT $37
• Maravai (MRVI) rated new outperform at RBC; PT $22
• Pliant Therapeutics (PLRX) rated new overweight at JPMorgan; PT $42
• QuidelOrtho (QDEL) rated new outperform at RBC; PT $125
• Repligen (RGEN) rated new sector perform at RBC; PT $190
• Sachem Capital (SACH) rated new hold at JonesTrading
• Softchoice (SFTC CN) rated new outperform at BMO; PT C$20
• Thermo Fisher (TMO) rated new outperform at RBC; PT $661

David Wienke

Cabrera Capital Markets, LLC