Cabrera Capital Daily Game Plan

Friday February 3, 2023                                                        Trading Desk: (312) 236-8907

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

DATA/HEADLINES   8:30ET Employment Report*; 9:45ET S&P Global US Composite PMI, Services PMI (final);10:00ET ISM
services index; 2:30ET Fed’s Daly speaks on Fox Business

January jobs report estimate a headline print of 188k, down from prior 223k with whisper number at 197k

WE WILL NOT BE PUBLISHIING THIS NOTE ON MONDAY.  DAN AND I ARE BOTH OFF THE DESK

TODAY’S HIGHLIGHTS:  

• More than half of House Democrats sided with Republicans in voting for a GOP resolution denouncing socialism
• Retail participation in the stock market just surpassed the GameStop days
  
• Hong Kong and mainland China’s borders will fully reopen on Monday for the first time in three years
  

The rally in global stocks takes a pause following weak earnings from US tech giants and as US jobs data loomed.  The MSCI World Stock Index is slightly lower but
was still near its highest since August following a sharp rebound in recent weeks on hopes that the phase of rate hikes could be nearing its end. Dollar weakness amplifies the stimulative effect of balance sheet expansion at the People’s Bank of China and
the Bank of Japan, delivering support during a period when the Federal Reserve and European Central Bank are pulling back. Global food costs fell for a 10th month, capping their longest run of monthly declines in at least three decades. Prices slipped 18%
from a record in March.                     

EQUITIES: 

US equity futures dropped after disappointing earnings from Apple, Amazon.com and Alphabet dented post-FOMC optimism ahead of the key jobs report.  US job growth likely remained strong
in January amid a persistently resilient labor market, but an anticipated further slowdown in wage gains should give the Federal Reserve some comfort in its fight against inflation. US tech giants see losses in the pre-market following earnings, AAPL -3.5%,
AMZN -5.7%, GOOG -4.9%. The tech trio showed an economic slowdown is throttling demand for electronics, e-commerce, cloud computing and digital advertising.                    

Futures before the bell: E-mini S&P -0.4%, Nasdaq -0.8%, Russell 2000 -0.1%, Dow -0.2%. 

In pre-market trading, Amazon.com (AMZN) shares decline over 5%, with analysts pointing to a disappointing forecast for the e-commerce firm’s cloud-computing business.
Apple fell 4% after reporting first quarter revenue that missed expectations. Alphabet (GOOGL) shares slide more than 4% as weaker-than-expected advertising at the Google parent disappointed. Qualcomm (QCOM) sank 3% after giving worse-than-expected forecasts
for the second quarter, saying it’s yet to see the benefits of China reopening in smartphone demand. Nordstrom (JWN) jumped as much as 37% on news that meme-stock activist investor Ryan Cohen is building a large stake in the department store operator. Gilead
(GILD) rose over 3% on low volumes after the company reported 4Q results.  Starbucks (SBUX) shares fall 2% after the coffee chain delivered results that showed weakness in China. Atlassian (TEAM) slid 12% after a second consecutive cloud guidance cut and weaker
trends in its customer base. Bill.com (BILL) shares drop 20% as the back-office software firm’s quarterly results showed surprising levels of macro-driven weakness in its customer base. Ford posted fourth-quarter profit that fell short of estimates, blaming
poor execution and continued supply shortages.

European bourses trade mostly lower, with little in terms of news flow as participants look ahead to the US jobs number. Positive sentiment from the latest European
Central Bank meeting was overshadowed by weaker results from US tech giants. The Stoxx 600 has recouped its early weakness heading into the US session with healthcare leading gains. The FTSE 100 Index is an outperformer in the region, trading within 1% of
a record high. Real estate retreated following strong gains Thursday. Among individual movers, Sanofi slumped after it forecast a slowdown in profit growth this year. Meanwhile, Citigroup strategists said European equities remain undervalued relative to US
stocks. Money continues to flow into European equities. The region’s stock funds posted a third week of inflows through Wednesday, according to Bank of America, citing EPFR Global data. Stoxx 600 is flat, DAX -0.5%, FTSE 100 +0.4%, CAC -0.1%. Healthcare +1.1%,
Food & Bev +0.7%. Banks -1.5%, Real Estate -0.8%, Technology -0.8%.   

Shares in Asia were mixed as the rally in Chinese equities paused. The MSCI Asia Pacific Index declined as much as 0.6% on Friday, with declines in heavyweights Alibaba
and BHP helping to offset gains in tech stocks in Japan and South Korea. Key gauges for Hong Kong and mainland China were major drags. Equities in Japan posted moderate gains as investors digested corporate earnings reports. The latest data show foreign investors
last week bought the most Japanese stocks and futures in more than four years. Stocks linked to Adani Group extended their slide.  MSCI Asia Pacific Index down 0.3%, Hang Seng -1.3%, China’s CSI 300 -0.95%.  Sensex +1.5%, ASX 200 +0.6%, Singapore +0.6%, Kospi
+0.5%, Nikkei 225 +0.4%.

FIXED INCOME: 
 

Treasuries slightly richer across the curve, holding Thursday’s drop with bunds lagging in the sector. European core and semi-core yields have risen 7bps after yesterday’s
historic plunge on the ECB and BoE hiking rates 50bps. US 10-year yields around 3.39% as investors await key jobs data. The January jobs report is likely to show a slowdown in hiring, but the pace will still be too fast for a labor market that policymakers
are trying to steady. Another soft reading on average hourly earnings could extend the post-FOMC market rally. As part of the release, BLS will publish the annual benchmark to the establishment-survey employment data, which realigns the March 2022 nonfarm-payroll
data to population counts. A preliminary estimate of the benchmark revision suggests an upward change of 462,000, suggesting the labor market in the year leading up to March 2022 was tighter than real-time data showed.  

METALS: 
                       

Gold steadied after its biggest slump since July as investors took profits ahead of a key US labor market report.  The metal is now headed for its first weekly decline
in seven, following a long rally on expectations the Federal Reserve will switch to cutting rates this year. Spot gold +0.15%, silver is flat.                      

ENERGY:      

Oil fluctuated, headed for a second weekly drop as optimism over a recovery in Chinese demand dimmed and US stockpiles kept rising. Russia sees no reason for a sharp
reduction in its oil-processing volumes and petroleum-product output when the European embargo on imports enters into force this weekend, according to Tass. Meanwhile, the Energy Department wants Congress to halt the sales of 26 million more barrels from the
nation’s emergency supply of oil mandated for this fiscal year as it seeks to refill the Strategic Petroleum Reserve. WTI +0.2%, Brent +0.2%.

CURRENCIES:                        

Group-of-10 currencies traded in tight ranges as markets await key US jobs data for insight into the Federal Reserve’s next move. Traders’ attention is focused on
the nonfarm payrolls report Friday after assets from stocks to bonds rallied this week on bets the Fed is near the end of its tightening cycle. Payrolls growth is forecast to have slowed to 189,000 in January from 223,000 in December, while unemployment may
have ticked up to 3.6% from 3.5%. The pound and the euro pared Thursday’s declines, sparked by traders’ focus on the impending end to rate-hike cycles. US$ Index -0.15%, GBPUSD +0.2%, EURUSD +0.25%, USDJPY -0.25%, AUDUSD -0.3%.     

Bitcoin +0.3%, Ethereum +1%.   

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:

• Cardinal Health (CAH) raised to outperform at Baird; PT $94
• Cemex ADRs (CEMEXCPO MM) raised to neutral at On Field; PT $6.60
• Erasca (ERAS) raised to overweight at Morgan Stanley
• Esperion Therapeutics (ESPR) raised to equal-weight at Morgan Stanley
• HB Fuller (FUL) raised to buy at Citi; PT $85
• Lundin Mining (LUN CN) raised to overweight at Morgan Stanley; PT C$12.80
• Meta Platforms (META) raised to hold at DZ Bank; PT $180
• Neurocrine Bio (NBIX) raised to overweight at Morgan Stanley

DOWNGRADES:

• Aptiv (APTV) cut to peerperform at Wolfe
• Bill.com (BILL) cut to market perform at BMO; PT $128
• Boeing (BA) cut to sector perform at RBC; PT $225
• C.H. Robinson (CHRW) cut to hold at Stifel; PT $99
• Camden Property (CPT) cut to neutral at Piper Sandler; PT $136
• Cognizant (CTSH) cut to neutral at Baird; PT $68
• Cyteir Therapeutics (CYT) cut to underweight at Morgan Stanley
• First Foundation (FFWM) cut to neutral at Piper Sandler; PT $16
• Focus Financial (FOCS) cut to market perform at BMO; PT $53
• Ford (F) cut to sell at Deutsche Bank; PT $11
• Generac (GNRC) cut to neutral at Guggenheim
• Hexcel (HXL) cut to neutral at BofA; PT $70
• Hilton Grand Vacations (HGV) cut to hold at Jefferies; PT $52
• Immuneering (IMRX) cut to underweight at Morgan Stanley; PT $5
• Lightspeed Commerce Inc (LSPD CN) cut to neutral at CIBC; PT C$27
• Lightspeed Commerce Inc (LSPD CN) cut to neutral at Credit Suisse
• Meta Platforms (META) cut to reduce at HSBC; PT $110
• Nutrien (NTR CN) cut to market perform at Raymond James; PT $90
• Repare Therapeutics (RPTX) cut to equal-weight at Morgan Stanley
• SLM (SLM) cut to equal-weight at Wells Fargo; PT $16
• Spirit Aero (SPR) cut to sector perform at RBC; PT $36
• Starbucks (SBUX) cut to neutral at Fubon; PT $122
• Travel + Leisure Co (TNL) cut to hold at Jefferies; PT $49
• Upstart (UPST) cut to hold at Loop Capital; PT $24

INITIATIONS:

• Agios (AGIO) rated new overweight at Piper Sandler; PT $41
• C3.ai (AI) rated new buy at DA Davidson; PT $30
• Day One Biopharma (DAWN) rated new market perform at Oppenheimer
• Enphase Energy (ENPH) rated new neutral at Janney Montgomery; PT $238
• Privia Health (PRVA) rated new buy at Goldman; PT $32
• Relay Therapeutics (RLAY) rated new outperform at Oppenheimer; PT $33
• Tyra Biosciences (TYRA) rated new outperform at Oppenheimer; PT $17

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC