Cabrera Capital Daily Game Plan

Wednesday March 1, 2023                                                        Trading Desk: (312) 236-8907

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

DATA/HEADLINES   9:45ET S&P Global US Manufacturing PMI;  10:00ET Construction Spending, ISM Manufacturing

GERMANY PRELIM FEB. HARMONIZED CPI RISES 9.3% Y/Y: EST. +9.0%

TODAY’S HIGHLIGHTS:  

• Tesla investor day today
• Lori Lightfoot became the first Chicago mayor to lose a reelection bid in 40 years
• FBI Director Christopher Wray said the Covid-19 virus most likely originated from a “potential lab incident”
  in Wuhan

Global markets rebounded after China’s manufacturing activity expanded at the fastest pace in more than a decade. Services and construction activity also improved
more than expected. Meanwhile, stronger-than-expected inflation numbers out of Germany stoked fears that the European Central Bank would need to raise rates further. UK shop prices rose last month at the fastest rate since at least 2005. Food price increases
hit 14.5%.  Brazil unveiled plans to tax oil exports to raise $1.3 billion in an effort to balance the budget and help the BCB to lower interest rates. Australian inflation decelerated more than expected to 7.4% year on year in January. Fourth-quarter GDP
growth eased to 2.7% year on year from 5.9% in the prior period.                     

EQUITIES: 

US equity futures gained slightly as data showed a strong recovery in China’s economy outweighed concerns about sticky inflation keeping the Federal Reserve on its hawkish path. Today’s
data on construction spending, ISM manufacturing, and light vehicle sales will be watched closely by investors for further signs that the Federal Reserve might need to extend high interest rates for longer. Corporate earnings have proved more resilient than
expected, but traders now question how long this can be sustained, given rising costs and the recessionary backdrop.  

Futures ahead of the bell: E-mini S&P +0.2%, Nasdaq +0.25%, Russell 2000 +0.25%, Dow +0.15%. 

In pre-market trading, US-listed Chinese stocks stage a strong rally; Alibaba (BABA) +6%, Baidu (BIDU) +6.8%, JD.com (JD) +4.9%, Bilibili (BILI) +9%, Nio (NIO) +6%,
XPeng (XPEV) +7.4%. Covid-19 vaccine maker Novavax lost a quarter of its value premarket after warning there’s “substantial doubt” about its ability to stay in business through next year. Reata Pharmaceuticals surged over 175% after winning FDA approval for
a new drug.  Kohl’s falls 10% as it posts a loss and warns of profit shortfall. Rivian (RIVN) fell 8.1% after the electric-truck maker’s 2023 production forecast fell short of expectations amid supply-chain snags. Monster Beverage (MNST) slipped 3.8% after
the energy drink maker reported fourth-quarter results.  B&G Foods (BGS) climbs 12% after the Crisco and Green Giant food maker reported 4Q earnings per share that nearly doubled estimates.  Tupperware (TUP) tumbles 28% after posting a big miss.   

European indices rose, with investors weighing a rush of corporate earnings and a strong recovery in China’s economy against inflation worries. The Stoxx Europe 600
Index is up 0.2%, with miners and autos leading gains.  Real estate stocks dropped, led lower by Inmobiliaria Colonial Socimi SA after its guidance fell short of expectations. Frankfurt-listed shares of COVID-19 vaccine maker Novavax fell 26% after the company
raised doubts about its ability to remain in business. Among other notable moves, ASM International slid as analysts said guidance from the semiconductor-equipment maker implies downside to elevated expectations. Puma SE declined after forecasting slower profit
growth. Kuehne + Nagel soared 8% on optimism over 2026 targets, while Atos SE shares gained 9% after earnings beat. Earnings season is entering its final days, with overall results being better than expected. DAX +0.5%, CAC +0.7%, FTSE 100 +0.8%. Basic Resources
+2.8%, Autos +2%, Technology +1.2%. REITS -2.1%, Utilities -1.3%, Banks -0.7%.

Asian stocks were broadly higher after China’s factory activity topped a decade high, spurring investor optimism ahead of an upcoming meeting of the nation’s political
leaders. The Hang Seng rallied 4.2% while the CSI 300 rose 1.4% on stronger PMI data. China Caixin Manufacturing PMI came in strong at 52.6 versus 50.6 expected and Non-Manufacturing PMI at 56.3 vs 54.9 expected. The MSCI Asia Pacific Index rose 1.5%, lifted
by communication and consumer discretionary shares. Macau casino stocks gained after gaming revenue climbed 33% in February in a sign that the sector’s recovery is lingering beyond the initial boost from China’s rapid reopening.  Taiwan advanced after traders
returned from a two-day break, while Japan also edged higher. South Korean market was shut for a holiday. Hang Seng Tech Index +6.6%, Vietnam +1.5%, Sensex +0.75%, Taiwan +0.6%, Topix +0.2%, ASX 200 -0.1%. 

FIXED INCOME: 
 

Treasury futures are narrowly mixed after paring losses during the European morning, following wider gains across gilts where front-end outperforms. The curve extends
Tuesday’s flattening move post month-end. 10-year yield is little changed around 3.93%. Gilts outperform following comments from BOE Governor Andrew Bailey, who said Wednesday that “nothing is decided” on the future path of rates.            

METALS: 
                       

Gold rose as strong Chinese economic data dented the dollar and drove some bets for better physical demand from the top bullion consumer. Gold recorded its worst
month since June 2021 in February after a slew of U.S. data pointed to a resilient economy and a tight labor market, sparking fears that the Federal Reserve would deliver more rate hikes to curb inflation. Gold +0.6%, silver +0.8%.  

ENERGY:      

Oil reversed earlier gains even amid signs of robust demand from India. Domestic refined product sales surged in February, with double-digit rises for gasoline, diesel
and jet fuel. In addition, Indian buyers are joining Chinese consumers to take oil cargoes from Russia’s Far East. Imports of cheap oil from the country hit another record last month.  WTI dropped below $76.50, having earlier reached $77.74 after China and
India released strong manufacturing and oil-sales data. In the US, commercial stockpiles have expanded significantly in recent months, signaling ample crude supply in the world’s largest economy. Inventories increased by 6.2 million barrels last week, API
data indicated, in what would be a 10th straight gain if confirmed by the EIA later. In fuel markets, gasoline and distillate stockpiles both eased. Goldman Sachs has “quite high confidence” that there will be an oil price spike in the next 12 to 18 months,
according to its head of commodities research. WTI -0.7%, Brent -0.5%. US Nat Gas +0.3%.

CURRENCIES:                       

In currency markets, the dollar stumbled broadly after Chinese factory data for February exceeded economists’ forecasts and added to the view that the world’s No.
2 economy will recover this year. This lifted commodity-linked currencies including the Australian dollar, while the euro was also boosted by strong German inflation figures. Chinese yuan gains broadly, USD/CNH falls as much as 1.2%. AUD/USD climbed as much
as 0.7%, recovering from an earlier fall to a near two-month low following slower-than-expected local inflation numbers. The euro climbed over 1% versus the dollar, after German regional CPI figures showed that price pressures remain stubbornly high, raising
expectations for more European Central Bank rate rises in the next year. US$ Index -0.7%, GBPUSD +0.3%, USDJPY -0.5%, AUDUSD +0.7%, NZDUSD +1.4%, EURUSD +1%, USDBRL -0.7%.              

Bitcoin +2.3%, Ethereum +2.8%.     

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:

• Applied Materials (AMAT) raised to outperform at KGI Securities
• Baytex Energy (BTE CN) raised to outperform at ATB Capital; PT C$8
• Coupang (CPNG) raised to buy at Deutsche Bank; PT $20
• Interface (TILE) raised to buy at Longbow; PT $18
• Kontoor Brands (KTB) raised to buy at Stifel; PT $63
• Lam Research (LRCX) raised to outperform at KGI Securities; PT $600
• MKS Instruments (MKSI) raised to buy at Benchmark; PT $125
• Netease ADRs (NTES) raised to overweight at JPMorgan; PT $100
• Ormat (ORA) raised to buy at UBS; PT $105
• Permian Resources (PR) raised to outperform at Cowen; PT $15
• Red Robin (RRGB) raised to buy at Benchmark; PT $14
• Sarepta (SRPT) raised to overweight at Morgan Stanley; PT $187
• Spotify (SPOT) raised to buy at Redburn
• TransUnion (TRU) raised to outperform at Exane; PT $80

DOWNGRADES:

• Aptinyx (APTX) cut to market perform at SVB; PT 50 cents
• Bank of Nova Scotia (BNS CN) cut to hold at Canaccord; PT C$74
• Builders FirstSource (BLDR) cut to market perform at BMO; PT $92
• First Advantage (FA) cut to sector perform at RBC; PT $15
• GAP Airports ADRs (GAPB MM) cut to hold at HSBC; PT $205
• KLA Corp (KLAC) cut to neutral at KGI Securities; PT $400
• Marqeta (MQ) cut to neutral at JPMorgan; PT $6
• New York Mortgage Trust (NYMT) cut to hold at JonesTrading
• Oak Street Health (OSH) cut to hold at Stifel; PT $39
• Olaplex (OLPX) cut to neutral at Goldman; PT $6
• SM Energy (SM) cut to market perform at Cowen; PT $35
• Silvergate Capital (SI) cut to market perform at KBW; PT $16
• iHeartMedia (IHRT) cut to underweight at JPMorgan; PT $5

INITIATIONS:

• ANI Pharma (ANIP) rated new buy at Guggenheim; PT $55
• Aerovate Therapeutics (AVTE) rated new buy at Guggenheim; PT $36
• American Lithium (LI CN) rated new buy at B Riley; PT C$6.81
• BDGI CN (BDGI CN) reinstated buy at Stifel Canada; PT C$44
• Calliditas Therapeutics ADRs (CALTX SS) rated new neutral at Guggenheim
• Chinook Therapeutics (KDNY) rated new buy at Guggenheim; PT $43
• Columbia Banking (COLB) rated new overweight at Wells Fargo; PT $37
• DICE Therapeutics (DICE) rated new outperform at Cowen
• Dream Industrial REIT (DIR-U CN) rated new outperform at BMO; PT C$17
• Eve Holding (EVEX) rated new overweight at JPMorgan; PT $8
• Gossamer Bio (GOSS) rated new neutral at Guggenheim
• Greenland Resources (MOLY CN) rated new speculative buy at Canaccord
• Palantir (PLTR) rated new neutral at DA Davidson; PT $8
• Scynexis (SCYX) rated new buy at Guggenheim; PT $8
• Talos Energy (TALO) reinstated buy at Roth MKM; PT $28
• Travere Therapeutics Inc (TVTX) rated new buy at Guggenheim; PT $37
• VAALCO Energy (EGY) rated new buy at Stifel; PT $9.54
• West High Yield (WHY CN) rated new buy at Fundamental Research; PT C$1.95

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC