Cabrera Capital Daily Game Plan

Thursday December 8, 2022                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES   
8:30ET Weekly Jobless Claims

China PPI, aggregate financing, money supply, new yuan loans: US PPI, wholesale inventories, University of Michigan consumer sentiment, Friday

TODAY’S HIGHLIGHTS:  

• WNBA STAR GRINER RELEASED FROM RUSSIA IN PRISONER SWAP
  
• Used-car prices across the US fell 12.4% in November; sales declined
  10%
• Exxon Expands Share Buyback Program to Up To $50B Thru 2024
  
• Celine Dion reveals incurable neurological disorder diagnosis
  

World stocks struggled to pull out of a four-day slide as deeply inverted bond yield curves and choppy currency markets
underscored the simmering concerns among investors about economic stagnation next year. Traders were also on guard after Russian President Vladimir Putin warned that the threat of nuclear war in the world is rising. Today’s data showed that Japan’s economy,
the world’s third-largest, shrank less than initially estimated in Q3, bolstering a view that it is slowly recovering from COVID-19 doldrums even as major export markets show further signs of weakening.  With relatively few economic announcements today, attention
is likely to turn to producer prices and consumer sentiment data from the US tomorrow. The Fed, Bank of England and the European Central Bank will announce their final rate decisions of this year next week.                             

EQUITIES: 

US equity futures are grinding higher after a five-day rout, as the S&P 500 posted its longest stretch of down days to begin a month since 2011. 
In corporate news, Alphabet, Oracle, Microsoft and Amazon will all build the Pentagon a cloud system as part of a contract worth up to $9 billion. Unilever is weighing the sale of a portfolio of US ice cream brands that may be valued at up to $3 billion.  
Exxon Mobil raised employee salaries by ~9% and expanded its share-buyback program to $50 billion through 2024, compared with a previous plan to spend $30 billion through 2023, the company said. Elon Musk’s bankers are considering providing him with new margin
loans backed by Tesla stock to replace some of the high-interest debt he layered on Twitter. Earnings today includes Broadcom, Costco, Lululemon, Chewy, DocuSign and Manchester United.                     

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

In pre-market trading, Shares of US-listed Chinese internet firms and casinos that operate in Macau gain on more signs that
China is accelerating the pivot away from its zero-tolerance stance on Covid. Alibaba (BABA) +3.7%, Baidu (BIDU) +4%, Bilibili (BILI) +11%, Li Auto (LI) +5.4%, Las Vegas Sands (LVS) +4.3%, Melco Resorts (MLCO) +8.5%. Carvana (CVNA) shares jump as much as 7.6%,
set to rebound after yesterday’s record 43% plunge as the online car dealer consults with lawyers and bankers regarding options for managing its debt load.

European indices extended a four-day slide as investors assessed the economic outlook ahead of next week’s central-bank
decisions. The Stoxx Europe 600 fell 0.3% with real estate and telecommunications firms pacing declines while energy companies and miners outperform as the demand outlook for commodities from China improved.  ASML Holding NV dropped on a report that Dutch
officials are planning new controls on exports of chipmaking equipment to China. British American Tobacco also declined after saying US consumers are increasingly switching to lower-priced cigarette brands. Frasers Group drops over 9% after the owner of Sports
Direct and other retail brands reported higher first-half profit, though margins fell and it didn’t declare an interim dividend. Airline stocks rose after Bank of America upgraded IAG and Wizz Air. Stoxx 600 -0.2%, DAX -0.2%, FTSE 100 and CAC are flat.  

Shares in Asia were mixed although news reports that China & Hong Kong are easing Covid restrictions sent the Hang Seng
Index higher by 3.4%. Reopening stocks including airlines, casinos, restaurants and retailers led gains on a report that the government is considering scrapping its outdoor mask mandate and easing testing rules for arrivals.   The MSCI Asia Pacific Index reversed
early losses, rising 0.6%, driven by gains in Chinese tech names including Tencent and Alibaba, both up over 5%. Investors have been bullish on Chinese equities of late, with JPMorgan saying that earnings downgrades are “very close to the bottom”.   Positive
views have helped lift sentiment on Asia broadly, with Nomura upgrading its outlook for Hong Kong and South Korea stocks. Hang Seng Tech +6.6%, Vietnam +0.9%, Sensex +0.25%, China’s CSI 300 was flat. ASX 200 -0.7%, Taiwan -0.5%, Kospi -0.5%, Japan’s Topix
-0.35%.            

FIXED INCOME: 
                                        

Treasuries halted a rally that had sent the 10-year yield to an almost three-month low as investors braced for an economic
downturn. Treasuries are mixed with belly of the curve underperforming, where 5- to 7-year yields are cheaper by as much as 3.5bp. Long-end outperforms, with yields slightly richer on the day, leaving 5s30s spread flattest since Oct. 20.  2s10s spread around
-83bp and steeper by 1.5bp on the session after reaching a new cycle low -85.2bp Wednesday.  10-year yields are !3.445%. Traders now await Friday’s US producer price report and the Consumer Price Index print to get a read on how effective Fed policy has been
to quell inflation, and whether the central bank will be able to notch down its aggressive campaign.    

METALS: 
                               

Gold fluctuated after failing to follow-through to the upside, following yesterday’s strong performance. The price action
suggests investors are waiting for a catalyst before deciding whether to chase the market higher.  On Friday, investors will get the opportunity to react to the US Producer Price Index (PPI), the Preliminary University of Michigan Consumer Sentiment and the
Preliminary University of Michigan Inflation Expectations reports. Spot gold +0.1%, silver +0.5%.   

ENERGY:      

Oil snapped a four-day drop as an outage on a major US oil pipeline and optimism over China’s reopening propelled prices
higher.  WTI climbed as much as 3.9%, rising toward $75 a barrel after plunging more than 11% over the previous four sessions. The Keystone oil pipeline, which can haul more than 600,000 barrels a day of crude from Canada into the US, was halted after a leak
in Nebraska. That compounded positive signals from China, which is rolling back Covid restrictions, brightening the prospects for demand.  A backlog of tankers at the Turkish straits continues to build, as talks failed to produce a solution to an insurance
glitch caused by sanctions on Russian crude. Meanwhile, the price ceiling on Russian oil exports isn’t low enough to take a big bite out of the Kremlin’s revenues next year and economists say even if it does lead to a drop in crude production, Putin still
has plenty of cash for his war effort.  WTI +3.2%, Brent +1.8%.           

CURRENCIES:  
                     

The US Dollar erased earlier gains as geopolitics-driven appetite for haven investments faded. The British pound underperformed
Group-of-10 peers as traders curbed bets on Bank of England rate hikes. The Brazilian real fell as Brazil’s central bank showed concern about inflation, saying uncertainties related to public spending in the next government are “high.”  While data flow today
may be limited, traders are bracing for a host of risk events next week including US CPI and the Federal Reserve rate decision. US$ Index is flat, GBPUSD -0.1%, USDJPY flat, AUDUSD +0.35%, USDCAD -0.4%, EURUSD +0.1%.                                

Bitcoin is flat;  Ethereum +0.4%.       

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:

• American Homes (AMH) raised to buy at Goldman; PT $39
• Apartment Income REIT (AIRC) raised to buy at Goldman; PT $43
• Arch Biopartners (ARCH CN) raised to buy at Industrial Alliance; PT C$6
• Avrobio (AVRO) raised to buy at BTIG; PT $4
• BWX Technologies (BWXT) raised to equal-weight at Barclays; PT $64
• DTE Energy (DTE) raised to outperform at Wolfe; PT $125
• Huntington Ingalls (HII) raised to overweight at Barclays; PT $270
• Mid-America (MAA) raised to buy at Goldman; PT $194
• Nubank (NU) raised to neutral at JPMorgan
• Vulcan Materials (VMC) raised to overweight at JPMorgan; PT $200

DOWNGRADES:

• AppLovin (APP) cut to neutral at BTIG
• AvalonBay (AVB) cut to neutral at Goldman; PT $187
• Bradesco ADRs (BBDC4 BZ) cut to neutral at Grupo Santander; PT $4.30
• Casey’s (CASY) cut to neutral at Northcoast; PT $247
• Descartes Systems (DSG CN) cut to peerperform at Wolfe
• Fulgent Genetics (FLGT) cut to neutral at Piper Sandler
• Inter&Co (INTR) cut to neutral at Grupo Santander; PT $2.80
• Intercorp Finl (IFS) cut to neutral at Grupo Santander; PT $29
• Invitation Homes (INVH) cut to neutral at Goldman; PT $35
• KVH Industries (KVHI) cut to market perform at Raymond James
• Lumos Pharma (LUMO) cut to hold at Jefferies; PT $7
• Maple Leaf Foods (MFI CN) cut to market perform at BMO; PT C$26
• Mercer International (MERC) cut to sector perform at RBC; PT $14
• Mirati Therapeutics (MRTX) cut to market perform at BMO; PT $59
• Mirati Therapeutics (MRTX) cut to neutral at JPMorgan; PT $65
• Polaris (PII) cut to market perform at BMO; PT $110
• Principal Financial (PFG) cut to underperform at Credit Suisse; PT $86
• Salesforce Inc (CRM) cut to neutral at Baird; PT $150
• Sinclair Broadcast (SBGI) cut to underweight at JPMorgan; PT $16
• Tricon (TCN CN) cut to neutral at Goldman; PT C$13
• Unity Software (U) cut to neutral at BTIG
• Vivint Smart Home (VVNT) cut to neutral at JPMorgan; PT $12
• Wolverine World Wide (WWW) cut to hold at Williams Trading; PT $13

INITIATIONS:

• Ballard Power Systems (BLDP CN) rated new market perform at BMO; PT C$7.53
• Bank of America (BAC) rated new neutral at Piper Sandler; PT $36
• Bumble (BMBL) rated new neutral at UBS; PT $24
• Cemex ADRs (CEMEXCPO MM) rated new neutral at Redburn
• Churchill Downs (CHDN) reinstated neutral at JPMorgan; PT $243
• Citigroup (C) rated new neutral at Piper Sandler; PT $48
• DigitalOcean (DOCN) rated new buy at Needham; PT $36
• Frequency Therapeutics (FREQ) rated new buy at Chardan Capital Markets
• Full House Resorts (FLL) rated new market outperform at JMP; PT $13
• General Dynamics (GD) reinstated buy at Citi; PT $298
• Gracell Biotech ADRs (GRCL) rated new buy at HC Wainwright; PT $6
• GreenLight Biosciences Holdings PBC (GRNA) rated new buy at Canaccord
• JPMorgan (JPM) rated new overweight at Piper Sandler; PT $150
• L3Harris (LHX) reinstated neutral at Citi; PT $238
• Leidos (LDOS) reinstated buy at Citi; PT $130
• Lockheed (LMT) reinstated buy at Citi; PT $558
• Northrop Grumman (NOC) reinstated neutral at Citi; PT $544
• Omega Therapeutics (OMGA) rated new buy at HC Wainwright; PT $11
• Opthea ADRs (OPT AU) rated new buy at HC Wainwright; PT $14
• Perfect (PERF) rated new outperform at Oppenheimer; PT $10
• Raytheon Technologies (RTX) reinstated neutral at Citi; PT $104
• Science Applications (SAIC) reinstated buy at Citi; PT $141
• Shopify (SHOP CN) rated new equal-weight at Capital One; PT C$58.76
• Shopify (SHOP CN) rated new sell at UBS; PT $30
• Slate Grocery REIT (SGR-U CN) reinstated buy at Industrial Alliance
• Staar Surgical (STAA) rated new hold at Stifel; PT $60
• Western Energy Services (WRG CN) rated new hold at Stifel Canada

David Wienke

Cabrera Capital Markets, LLC