Cabrera Capital Daily Game Plan

Monday February 27, 2023                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES 
 8:30ET Durable Goods; 10:00ET Pending Home Sales; 10:30ET Dallas Fed Mfg Activity, Fed’s Jefferson speaks

Durable goods orders probably fell 4% in January after climbing 5.6% in December

TODAY’S HIGHLIGHTS:  

• A Covid lab leak due to a mishap is viewed as more likely by the
  US Energy Department – WSJ
• US report on ‘Covid lab leak’ slammed by Beijing
  
• Rishi Sunak arrives in Winsor to meet Ursula von der Leyen ahead
  of Northern Ireland Protocol talks

Global shares are higher after skimming six week lows after another round of data last week forced investors to prepare
for higher interest rates in the United States and Europe and there could be more figures to support that argument this week. Investor attention this week will be on a slate of inflation figures from across the euro zone. A 50-bp ECB rate hike looks increasingly
certain for next month. Christine Lagarde told India’s Economic Times there’s “every reason to believe” it’ll happen. “After that, we’ll see. We’re data dependent.”  Also, China has manufacturing surveys and the National People’s Congress kicks off at the
weekend when will see new economic policy targets. The MSCI All-World index of global shares nudged higher, having posted its largest weekly decline last week since late September, dropping 2.6%, thanks to a rally in the US dollar.                      

EQUITIES: 

US equity futures rose, following Wall Street’s worst week of the year, after the central bank’s preferred inflation gauge unexpectedly accelerated
in January.  Cheaper valuations are enticing investors back to US stocks, after three straight weeks of declines. A more optimistic outlook for earnings estimates is helping ease fears that inflation will remain entrenched even as growth slows. Meanwhile,
JPMorgan strategists said they see a dimmer outlook for cheaper, value stocks over the short term following a strong outperformance last year.  Morgan Stanley’s Michael Wilson said “March is a high risk month for the next leg lower in stocks.” Credit Suisse
also said it’s cautious on equities and recommends selling into rallies.

Futures ahead of the bell: E-mini S&P +0.5%, Nasdaq +0.7%, Russell 2000 +0.65%, Dow +0.5%.  Nasdaq futures lead after holding the key
200dma
support.

In pre-market trading, Seagen rose about 18% on a report that Pfizer is in early-stage talks to acquire the cancer therapy
developer. JPMorgan initiates coverage of two US online real estate firms — Zillow Group (Z +~2%) at overweight and Redfin at neutral — as it forecasts a recovery in the property market. Tegna (TGNA) shares slump as much as 24% after the FCC shelved Standard
General’s proposed $5.4 billion buyout of the broadcaster. XPeng (XPEV) gained as much as 6% after the Chinese electric-vehicle maker is included in the Hang Seng China Enterprises Index. Fisker (FSR) climbs 7.8% after the carmaker posted 4Q results. FuboTV
(FUBO) rises 8% after posting 4Q revenue that beat. Focus Financial Partners (FOCS) shares are halted after the company agreed to be acquired by affiliates of CD&R for $53 per share. Enphase Energy (ENPH) is up 2% after Janney Montgomery upgraded the company
to buy, citing attractive valuation. Li-Cycle shares (LICY) rise 8% after the firm announced that one of its US subsidiaries had been granted a $375 million loan offer from the Biden administration. Range Resources (RRC) sank 7% after Pioneer Natural Resources
said it was not “contemplating a significant business combination or other acquisition transaction.”  Union Pacific (UNP) shares climb 10% after the rail freight company said it was looking for a new CEO following pressure from a hedge fund.

European stocks bounced back as investors are tempted by lower prices following the largest weekly selloff since December.
The Stoxx 600 Index is higher by more than 1%, as banks and retailers are pacing gains and all industry groups are in the green. Euro-area economic confidence unexpectedly slowed this month, defying expectations of a continued rebound. Among individual movers
today, Primark owner Associated British Foods gained after the UK budget clothing chain boosted its operating profit margin forecasts following higher-than-expected sales. PostNL NV slumped after its fourth-quarter revenue missed. Stoxx 600 +1.1%, DAX +1.5%,
CAC +1.5%, FTSE 100 +0.7%, Banks +2.5%, Retail +2%, Technology +1.7%, Travel +1.7%.  

Asian stocks declined on worries about the prospect of further interest rate increases by the Federal Reserve after an unexpected
acceleration of US inflation. Investors were also cautious ahead of a key political meeting in China. The MSCI Asia Pacific Index dropped 0.5%, led by technology shares. Australia and South Korea were among the worst-performing markets, while Japan bucked
the region’s trend following a pledge from the Bank of Japan governor nominee to maintain ultra-loose monetary policy. Chinese and Hong Kong benchmarks edged lower as investors eyed the National People’s Congress meeting starting this weekend. They are showing
a preference for onshore stocks over Hong Kong peers amid expectations that more pro-growth policies will be announced. Chinese steel and coal stocks rose on expectations that supply restrictions due to pollution ahead of major political meetings will lift
commodity prices. Vietnam -1.75%, Philippines -1.3%, ASX 200 -1.1%, Kospi -0.9%, CSI 300 -0.4%, Sensex -0.4%, Hang Seng -0.3%, Topix +0.2%.

FIXED INCOME: 
 

Treasuries are slightly cheaper across the curve, following wider drop across German bonds as traders wager that the European
Central Bank will extend its rate-hiking cycle further into 2024.  The yield on Germany’s 10-year bond rose Monday to the highest level since 2011.  US Treasury prices traded in tight range after Friday’s sell-off with the yield curve slightly flatter as the
front-end under performed. Fed futures now have rates peaking around 5.4%, implying at least three more hikes from the current 4.50% to 4.75% band, and some chance of 50 basis points in March. 10 year yield ~3.95%.        

METALS: 
                       

Gold steadied after declining to the lowest level in two months after an acceleration in the Federal Reserve’s preferred
inflation gauge dashed hopes for an imminent pause in monetary-tightening. The personal consumption expenditures price index unexpectedly accelerated in January and consumer spending surged after a year-end slump, adding pressure on policymakers to hike up
interest rates. International Monetary Fund Managing Director Kristalina Georgieva urged central banks to “stay the course until we are comfortable that price stability is returning,” as inflation wasn’t yet declining fast enough. Gold +0.02%, silver -0.5%.  
   

ENERGY:      

Oil steadied as traders weighed the prospects for tighter US monetary policy against optimism for a demand recovery in China
and supply disruption in Europe. Russia halted oil flows to Poland via the Druzhba link after pipeline operator Transneft didn’t receive supporting documents for the shipment. The market’s prospects will come into focus over the coming days as traders congregate
in London for International Energy Week, one of the industry’s marquee events. Vitol Group Chief Executive Officer Russell Hardy said oil prices could return to triple digits later this year as consumption climbs and the market tightens. Inventory levels look
“reasonable” over the next months but should tighten after that, he said. WTI  and Brent are down 0.5%.

CURRENCIES:  
                    

The dollar drifted lower after four weeks of gains, while traders await US durable goods and home sales data for more clues
on the Federal Reserve’s rate-hike trajectory. The New Zealand dollar underperformed Group-of-10 peers after Reserve Bank of New Zealand chief economist Paul Conway said demand in the economy is starting to soften. Sterling inched up as UK Prime Minister Rishi
Sunak and European Commission President Ursula von der Leyen prepared to announce a new Brexit deal for Northern Ireland on Monday if the two can agree final details.  USD/JPY fell 0.2% after hitting its highest level since December 20. Japan’s exporters sold
dollar-yen to capitalize on Friday’s spike to top up month-end hedging needs, according to Asia-based FX traders. Meanwhile, Bank of Japan Governor nominee Kazuo Ueda said underlying inflation needs to show a major shift to change the course of monetary policy.
US$ Index -0.1%, GBPUSD +0.3%, EURUSD +0.1%, AUDUSD -0.15%, NZDUSD -0.5%, USDBRL -0.5%.               

Bitcoin -0.7%, Ethereum -0.2%.     

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:

• Baozun ADRs (BZUN) raised to accumulate at CLSA; PT $7
• C4 Therapeutics (CCCC) raised to neutral at Credit Suisse; PT $10
• Frontier Airlines (ULCC) raised to outperform at Raymond James; PT $15
• Lundin Gold (LUG CN) raised to buy at SpareBank; PT C$14.90
• Nomad Foods (NOMD) raised to buy at Goldman; PT $21
• Omnicell (OMCL) raised to buy at Benchmark; PT $68
• Pennant Group (PNTG) raised to buy at Stifel; PT $16
• Pulmonx (LUNG) raised to overweight at Wells Fargo; PT $15
• Shell ADRs (SHEL LN) raised to buy at Goldman; PT $85
• State Street (STT) raised to overweight at Wells Fargo; PT $98
• Universal Insurance (UVE) raised to overweight at Piper Sandler
• Willis Towers (WTW) raised to buy at Goldman; PT $290

DOWNGRADES:

• ACM Research (ACMR) cut to underperform at Jefferies; PT $8
• American Well (AMWL) cut to neutral at Piper Sandler; PT $3.50
• Best Buy (BBY) cut to market perform at Telsey; PT $83
• Coursera (COUR) cut to hold at Truist Secs; PT $12
• Cresco Labs (CL CN) cut to neutral at Piper Sandler; PT C$2.72
• Femsa ADRs (FEMSAUBD MM) cut to neutral at Bradesco BBI; PT $100
• Opendoor Technologies (OPEN) cut to market perform at Oppenheimer
• Sono Group (SEV) cut to neutral at Cantor; PT $1
• VFF US (VFF) cut to market perform at Raymond James; PT $2.50
• Westlake Corp (WLK) cut to sector perform at RBC; PT $128
• Wingstop (WING) cut to neutral at Northcoast

INITIATIONS:

• Autohome ADRs (ATHM) rated new buy at Citic Securities; PT $46
• Chipotle (CMG) rated new hold at Baptista Research; PT $1,630
• Coca-Cola (KO) rated new outperform at Baptista Research; PT $70.30
• Intuitive Machines (LUNR) rated new buy at Canaccord; PT $35
• KE Holdings ADRs (2423 HK) rated new buy at Daiwa; PT $25
• Live Oak Banc (LOB) rated new market perform at Raymond James
• MVB Financial (MVBF) rated new overweight at JPMorgan; PT $35
• Payoneer Global (PAYO) rated new buy at Jefferies; PT $7
• Redfin (RDFN) rated new neutral at JPMorgan; PT $8
• Rxo (RXO) rated new market perform at Cowen; PT $22
• Western Alaska Minerals (WAM CN) rated new buy at Roth MKM; PT C$5.25
• Zillow (ZG) rated new overweight at JPMorgan; PT $48

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC