Cabrera Capital Daily Game Plan

Thursday February 2, 2023                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES  
8:15ET ECB raises rates 50bps; 8:30ET Weekly Jobless Claims, Productivity and Labor Costs first estimate; 10:00ET Factory Orders, Durable Goods Orders

TODAY’S HIGHLIGHTS:  

• February 2, 1887 was the first Groundhog Day
  
• Kevin McCarthy said talks with Joe Biden on raising the debt ceiling
  went better than expected, though the administration insisted limits be increased without being contingent on spending cuts
• ECB hikes rates 50bps, as expected, and promises more in March

Global markets climbed, building on Wall Street’s advance after Federal Reserve Chair Jerome Powell said policy makers had
made progress in the battle against inflation, raising hopes the central bank is nearing the end of its rate-hike cycle. This morning the Bank of England raised rates 50bp, saying inflation persistence would require further tightening. However, the bank now
sees a shallower recession than their November outlook. Seven officials endorsed the hike, while two voted for no change. The ECB is set to hike by 50 bps today and investors will focus on how hawkish Christine Lagarde sounds. Brazil’s central bank held its
benchmark rate at 13.75% and signaled it may stay on hold longer than markets anticipate.                    

EQUITIES: 

S&P and Nasdaq futures extended their post-Fed rise, helped by a rally in Meta after earnings were announced late yesterday. The tech-heavy Nasdaq
is outperforming after Wednesday’s 2.2% surge to a four-month high.  Meta Platforms soared as much as 20% in US premarket trading after the social-media giant reported fourth-quarter revenue that beat expectations and announced plans to rein in costs and a
new $40 billion share buyback. Fed Chair Powell’s comment on Wednesday that the “disinflation process has started” suggested that the aggressive tightening cycle is starting to reduce the pace of price growth.  The Fed chair forecast a “couple” more hikes
but suggested officials are open to adjusting their plans if price pressures cool quickly.                     

Futures before the bell: E-mini S&P +0.5%, Nasdaq +1.5%, Russell 2000 +0.1%, Dow -0.3%. 

In pre-market trading, Carvana (CVNA) jumped as much as ~31%, putting the used car dealer on course for its sixth straight
day of gains amid the rally in riskier assets. Honeywell slumped over 4% after lowering its guidance. Align Technology (ALGN) rallied 15% after the US medical devices company snapped five straight quarters of flat and declining trends in revenues. Estee Lauder
(EL) shares falls 3.9% after the beauty products maker cut its year EPS and organic sales forecasts. Harley-Davidson (HOG) gains 6% after it reported fourth-quarter profit and revenue that beat. Hanesbrands (HBI) tumbles 19% after the maker of Hanes underwear
and Champion athletic apparel provided weaker-than-expected sales and profit forecasts for the current year and eliminated its quarterly dividend.

After the close, Qualcomm may report a 10% revenue drop and a steeper decline for the current period, analysts said. Apple
is poised for its first revenue decline since 2019 with iPhone 14 sales in focus.  Amazon may reveal its slowest sales growth in more than two decades. 

European indices are giving back some of their early gains as the rate rise was in line with expectations but the comments
from BOE officials were pretty hawkish. Governor Bailey and his colleagues predict the economy will not recover to pre-pandemic levels of output until at least 2026, and 500,000 more workers will lose their job as unemployment hits 5.25% in 2025. Focus shifts
to the ECB rate decision at 8:15ET and President Christine Lagarde’s press conference. The European Central Bank joined the tightening party, lifting its benchmark rate by 50 basis points as expected and saying it will review its path after a similar increase
in March. The Stoxx Europe 600 Index added about 0.5%. Technology stocks led the advance, buoyed by an upbeat outlook from German chipmaker Infineon Technologies (+7%). Ferrari (RACE IM +2.7%) raised its outlook after beating on operating profit and sales.
Shell (SHEL LN +2.2%) announced a further $4 billion buyback after a big beat on gas. Annual profit was a record $39.9B. European stocks’ outperformance against their US peers could last for years, according to Goldman Sachs strategists. DAX +1.2%, CAC +0.2%,
FTSE 100 +0.6%. Tech +3.3%, Real Estate +3.3%, Retail +2.2%, Travel +2%. Food & Beverage underperforms, down 0.7%.

Shares in Asia were mostly higher with the MSCI Asia Pacific Index climbing as much as 1% before paring more than half of
the advance. Interest-rate sensitive tech stocks led gains, with TSMC, Samsung and Baidu giving among the biggest boost. However, the continued selloff in Adani Group stocks in India weighed on the region, with four of the conglomerate’s firms being among
the top 10 losers, after the flagship firm abruptly scrapped a record domestic share offering.  Japan was mixed as the yen strengthened. Chinese brokerages were mostly down, with brokers dragging on the benchmark CSI 300, even with proposed IPO reforms that
would make it easier for companies to list onshore. MSCI Asia Pacific Index +0.3%, Taiwan +1.1%, Kospi +0.8%, Sensex +0.4%, ASX 200 +0.15%, CS_ 300 -0.35%, Hang Seng -0.5%.

FIXED INCOME: 
 

Treasuries are richer across belly of the curve, broadly holding Wednesday’s post-Fed move.  Positioning in US swaps markets
assumes the Fed is getting closer to cutting rates as traders bet that economic conditions are likely to keep it from the additional rate increases that policy makers still anticipate. The gap between US and German 10-year yields hit its smallest since September
2020 as bond market borrowing costs continued to sink. 10 year yield ~3.9%.  

METALS: 
                       

Gold is slightly higher after rising to a nine-month high yesterday as comments from the Federal Reserve suggested its aggressive
cycle of rate hikes could be coming to an end.  The precious metal has rallied for three straight months through January, the longest such sequence since the middle of 2020, largely on signs the Fed was getting less hawkish. Spot gold +0.2%, silver +1.7%.
                       

ENERGY:      

Crude oil drifts lower after ending the previous session at roughly a three week low following data that showed a continued
build in crude inventories. US inventories rose by 4.1 million barrels last week, far exceeding analyst estimates and marking the sixth straight weekly rise. Product inventories also rose. Reports pointing to continued strength in Russian exports ahead of
a price cap on Russian oil product exports that’s due to take effect on Feb. 5 have helped soothe supply worries, analysts said. Colder weather in key markets will spur crude demand, lifting prices, Goldman Sachs analysts said. Venezuelan oil exports rebounded
in January after Chevron resumed operations in the country. WTI -0.4%, Brent -0.5%.

CURRENCIES:  
                     

The US dollar hovered around the lowest level since April as global investors position for a potential peak in US interest
rates.  A 50 basis-point hike from the BOE wasn’t fully priced in, so that offers some support to sterling. Yet it’s mostly the comments on inflation persistence and the vote split that sent the UK currency lower on knee-jerk flows.  US$ Index -0.05%, GBPUSD
-0.55%, USDJPY -0.4%, EURUSD +0.02%, USDBRL +0.8%.   

Bitcoin +0.5%, Ethereum +2.3%.  Bitcoin hit the highest since August as investors envisioned a less hawkish Fed policy backdrop
in the months ahead. The token rose as much as 2.4% and was trading just under $24,000. A gauge of the top 100 digital assets has added 37% this year.

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:

• FedEx (FDX) raised to buy at Citi; PT $240
• Graco (GGG) raised to buy at Seaport Global Securities; PT $82
• Ingevity (NGVT) raised to buy at Loop Capital; PT $100
• Meta Platforms (META) raised to buy at BofA; PT $220
• Meta Platforms (META) raised to overweight at Piper Sandler; PT $215
• O-I Glass (OI) raised to outperform at RBC; PT $34
• Okta (OKTA) raised to buy at Needham; PT $90
• TC Energy (TRP CN) raised to outperform at CIBC; PT C$62

DOWNGRADES:

• Ashland Inc (ASH) cut to underweight at JPMorgan; PT $105
• Atlas Technical (ATCX) cut to hold at Lake Street; PT $12.25
• First Solar (FSLR) cut to neutral at BofA; PT $195
• Fortinet (FTNT) cut to market perform at BMO; PT $57
• Fortune Brands Innovatio (FBIN) cut to hold at Loop Capital; PT $65
• GXO Logistics (GXO) cut to underperform at Exane; PT $40
• Grab Holdings (GRAB) cut to underweight at JPMorgan; PT $2.80
• Match Group (MTCH) cut to market perform at Oppenheimer
• Peloton (PTON) cut to market perform at JMP
• Peloton (PTON) cut to underperform at Exane; PT $8
• Qualtrics (XM) cut to hold at Deutsche Bank; PT $19
• RCM (RCM) cut to hold at Truist Secs; PT $15
• Spotify (SPOT) cut to accumulate at Phillip Secs; PT $128
• Taysha Gene (TSHA) cut to neutral at BTIG
• Varonis Systems (VRNS) cut to hold at Needham

INITIATIONS:

• Accolade (ACCD) rated new outperform at Raymond James; PT $15
• Darden (DRI) rated new buy at Guggenheim; PT $170
• Everest Re (RE) rated new outperform at Raymond James; PT $385
• Globant (GLOB) reinstated buy at HSBC; PT $240
• MoonLake Immunotherapeutics (MLTX) rated new buy at Bryan Garnier

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC