Cabrera Capital Daily Game Plan

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

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

DATA/HEADLINES   8:30ET Weekly Jobless Claims, US Productivity/Labor Costs; 2:00ET Fed’s Waller speaks

TODAY’S HIGHLIGHTS:  

• Elon Musk said AI stresses him out and there needs to be a regulatory authority to make sure this “quite dangerous
  technology” is operating in the public interest
• Yosemite shut to the public as extreme snowfall slams the west coast
  
• Credit Suisse is trying to win back clients with deposit rates that are significantly higher than rivals

World stocks sputtered, pressured by a pullback in Chinese stocks and higher US yields amid fears the Federal Reserve and European Central Bank will keep raising
interest rates. ECB President Christine Lagarde told Spanish television earlier today that hikes may need to continue, adding that inflation isn’t on a “stable decline.”  Concern that China’s post-Covid economic recovery could exacerbate global price pressures
is also damping risk appetite. A faster-than-expected recovery in the Chinese economy is seen suggesting that the government may be restrained in rolling out new stimulus measures this year. That’s tempering expectations for more supportive policies from a
meeting of the nation’s top political leaders starting this weekend.  Reuters reports that the US is discussing possible sanctions on China if they were to provide military support to Russia. Additionally, the US has approved $619mm weapons sale to Taiwan
as large scale airspace incursions have happened the last couple of days.                     

EQUITIES: 

US equity futures are mixed as US 10-year yield topped 4% for the first time since November in a sign that the Fed’s warnings of higher-for-longer interest rates are finally sinking in.
Nasdaq futures were off 0.7%, hit by a 6% drop in Tesla shares in after-hours trading after its investor day failed to impress analysts. The company said it will cut vehicle assembly costs by half in future generations of cars, but did not unveil a much-anticipated
small, affordable electric vehicle. The Dow Jones Index is marginally higher only because of a surge in Salesforce.   

Futures ahead of the bell: E-mini S&P -0.4%, Nasdaq -0.6%, Russell 2000 -0.5%, Dow +0.25%. 

In pre-market trading, Salesforce Inc. (CRM) jumped 15% after Q4 results beat and giving a surprisingly upbeat forecast for the coming year while announcing plans
to step up stock buybacks. Shares in Silvergate Capital (SI) plunged by as much as 31% after the cryptocurrency-focused bank said it was delaying its annual report and was evaluating its ability to operate as a going concern. Cano Health (CANO), a health provider
serving the Medicare program, tumbles 15% after providing a 2023 revenue forecast that fell short of estimates. Snowflake (SNOW) fell over 10% after the cloud software company gave a forecast for FY24 product revenue that missed estimates.  American Eagle
Outfitters (AEO) gained 7% in extended trading after the apparel retailer’s earnings beat. Okta (OKTA) climbed 15% after the software company gave a forecast that is much stronger than expected. Veeva Systems (VEEV) gained 6% after Q4 results. Best Buy (BBY)
slips 2.8% after the company predicted that sales will fall a second straight year. Funko (FNKO) tumbles 24% after the toymaker’s revenue and earnings-per-share projections for the current quarter fell short. Macy’s (M) climbed as much as 9% after the retailer
reported 4Q earnings that exceeded expectations. Pure Storage (PSTG) falls 11% after the cloud storage firm gave a revenue outlook for 2024 that disappointed. Wolfspeed (WOL) slips 11% and ON Semiconductor (ON) falls 7% after Tesla said that it found a way
to use less silicon carbide wafer without compromising the efficiency of its cars.

Earnings include Best Buy, Macy’s, Nordstrom, Costco, Broadcom, Kroger, HPE, Dell, TD Bank, VMware

European shares steadied as solid earnings offset stickier-than expected euro zone inflation numbers that justified what is widely expected to be another 50 basis
point hike this month. Europe’s Stoxx 600 index recovered a loss of about 0.5% after euro-area inflation slowed by less than anticipated and the core gauge surged to a new record. February’s headline figure of 8.5% exceeded the 8.3% median estimate, while
core inflation — the key focus right now for policymakers — quickened to 5.6% from 5.3%. Fitch sees recessions in Germany and Italy by the end of this year as they battle to control inflation, though the euro area will avoid one. The DAX underperforms, down
0.45%. Merck KGaA dipped after saying profit could decline in 2023 as demand dries up for Covid products. The Stoxx 600 is flat with construction outperforming, +1%, led by CRH Plc after it reported results that beat expectations and recommended transitioning
to a US primary listing in 2023. Technology is underperforming -1.2%. CAC is flat, FTSE 100 -0.1%.

Asian stocks fell, with a rally in Chinese shares losing steam as traders lowered expectations for further stimulus on signs the nation’s economy is improving. The
MSCI Asia Pacific Index dropped 0.4%, driven by declines in major Chinese internet companies. Hong Kong led losses around the region, while onshore China shares edged lower after gains Wednesday on strong manufacturing data. Rare earth miners in China fell
as Tesla said it plans to abandon use of the minerals in its next-generation motor. South Korean stocks climbed after a holiday. Investors have stayed positive on Asian stocks despite recent weakness, and February’s declines are best viewed as post-rally corrections,
according to Goldman Sachs. Adani Group companies climbed as block trades in some of the conglomerate’s stocks suggested institutional investors were buying after a prolonged rout. Hang Seng Index -0.9%, Sensex -0.8%, Vietnam -0.3%, CSI 300 -0.2%, Topix -0.15%,
ASX 200 +0.05%, Kospi +0.6%.  

FIXED INCOME: 
 

Treasuries are mostly cheaper across the curve led by the long-end, fading portion of prior two-day flattening move. 2s10s, 5s30s spreads steeper by 3bp and 1.5bp
on the day. US 10-year Treasury yield hit a fresh four-month high of 4.034%, while two-year yields also advanced to 4.902%, a fresh 16-year high. Germany’s 2-year government bond yield rose to its highest since October 2008.  The focus now is on how much higher
interest rates might go in the US and eurozone, with swaps markets now pricing a peak Fed policy rate of 5.5% in September. Atlanta Fed President Raphael Bostic wrote in an essay that rates will need to rise to between 5% and 5.25% and then remain there “until
well into 2024.” Bank of Minneapolis President Neel Kashkari said he was concerned there wasn’t much of a sign of Fed rate hikes slowing down the services sector.             

METALS: 

Gold nudged lower, snapping a three-day gain as the metal tracked moves in the dollar.  Bullion traded below a one-week high reached on Wednesday, as the greenback
rose. Spot gold +0.2%, silver -1%, holding below its 200 day moving average.    

ENERGY:      

Crude oil extended recent gains amid optimism over a revival in Chinese demand, even as concerns linger about inflation in the US and Europe. Rising Chinese oil demand
and dwindling spare production capacity around the world may push crude prices higher later this year, according to the head of Chevron Corp. China’s reopening will provide “steady” demand growth through this year and there isn’t much supply outside of OPEC
to match it, CEO Mike Wirth said. The European Union is racing to salvage a plan to effectively ban new combustion-engine cars by 2035 after Germany and Italy threatened to block the agreement. The Biden administration will continue to discuss India’s purchases
of Russian oil with government officials but is satisfied so far that New Delhi is buying the crude well below a western price cap. Meanwhile, US crude exports hit a new record of 5.6 million barrels a day last week with demand rising from Europe and Asia
as WTI fetched a steep discount to Brent. WTI +0.45%, Brent +0.45%. US Nat Gas -2%. RBOB +0.4%.

CURRENCIES:                     

The dollar rose, supported by higher US Treasury yields after Federal Reserve officials said interest rates will need to rise further and stay elevated into next
year to curb US inflation. The euro and pound slipped, as traders brushed off a strong reading of euro zone inflation. The Bank of Japan may hold back from making further tweaks to its super-easy monetary policy at this month’s meeting, its last under Governor
Haruhiko Kuroda, Bloomberg reports. US$ Index +0.25%, GBPUSD -0.3%, EURUSD -0.35%, USDJPY +0.2%, AUDUSD -0.3%, NZDUSD -0.4%.              

Bitcoin -0.6%, Ethereum -0.9%.  

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:

• Aecon Group (ARE CN) raised to buy at Desjardins; PT C$19
• Aecon Group (ARE CN) raised to buy at Industrial Alliance; PT C$16
• Aecon Group (ARE CN) raised to outperform at ATB Capital; PT C$16
• Block Inc (SQ) raised to accumulate at Phillip Secs; PT $91
• DT Midstream (DTM) raised to buy at Mizuho Securities; PT $59
• MarketAxess (MKTX) raised to overweight at Atlantic Equities; PT $403
• Okta (OKTA) raised to outperform at Cowen; PT $100
• PDD Holdings Inc ADRs (PDD) raised to overweight at Morgan Stanley
• Sandstorm Gold (SSL CN) raised to outperform at RBC; PT $6.50
• UWM Holdings (UWMC) raised to market perform at KBW; PT $4
• Weibo ADRs (WB) raised to buy at BOC Intl; PT $25.60

DOWNGRADES:

• Altius Renewable Royalties (ARR CN) cut to sector perform at Peters & Co
• Axon (AXON) cut to neutral at JPMorgan; PT $224
• Dollar Tree (DLTR) cut to neutral at JPMorgan; PT $150
• Enerflex (EFX CN) cut to sector perform at ATB Capital; PT C$11
• Focus Financial (FOCS) cut to market perform at KBW; PT $55
• HF Sinclair (DINO) cut to market perform at Cowen; PT $52
• Montrose Environmental (MEG) cut to neutral at JPMorgan; PT $39
• Myers Industries (MYE) cut to market perform at Cowen; PT $23.75
• NIO Inc. ADRs (NIO) cut to equal-weight at Barclays; PT $10
• NIO Inc. ADRs (NIO) cut to neutral at JPMorgan; PT $10
• ON Semi (ON) cut to market perform at Raymond James
• Silvergate Capital (SI) cut to hold at Canaccord; PT $9
• Silvergate Capital (SI) cut to underweight at JPMorgan
• Stellus Capital (SCM) cut to market perform at Raymond James
• Xometry (XMTR) cut to neutral at JPMorgan; PT $21
• Xometry (XMTR) cut to sector perform at RBC; PT $21

INITIATIONS:

• AMD (AMD) resumed strong buy at Raymond James
• Arht Media (ART CN) rated new speculative buy at Cormark Securities
• Array (ARRY) rated new sector outperform at Scotiabank; PT $26
• Broadcom (AVGO) resumed market perform at Raymond James
• Cheniere Energy (LNG) reinstated sector outperform at Scotiabank
• Columbia Banking (COLB) rated new hold at Truist Secs; PT $33
• Crestwood Equity (CEQP) rated new sector outperform at Scotiabank
• Enphase Energy (ENPH) rated new sector outperform at Scotiabank
• Enterprise Products (EPD) reinstated sector outperform at Scotiabank
• Generac (GNRC) rated new sector perform at Scotiabank; PT $165
• Getaround (GETR) rated new buy at Roth MKM; PT $1.50
• Intel (INTC) resumed outperform at Raymond James
• Kinder Morgan (KMI) reinstated sector perform at Scotiabank; PT $20
• Kinetik (KNTK) rated new sector perform at Scotiabank; PT $34
• Lennar (LEN) rated new market perform at Oppenheimer
• Marvell Technology (MRVL) resumed outperform at Raymond James
• Micron (MU) resumed outperform at Raymond James
• Moderna (MRNA) rated new outperform at RBC
• Nvidia (NVDA) resumed strong buy at Raymond James
• Oneok (OKE) reinstated sector perform at Scotiabank; PT $74
• Qorvo (QRVO) resumed outperform at Raymond James
• Qualcomm (QCOM) resumed market perform at Raymond James
• Skyworks (SWKS) resumed market perform at Raymond James
• SolarEdge (SEDG) rated new sector perform at Scotiabank; PT $345
• Stagwell (STGW) rated new buy at Rosenblatt Securities Inc; PT $10
• SunPower (SPWR) rated new sector perform at Scotiabank; PT $20
• Sunnova Energy (NOVA) rated new sector outperform at Scotiabank; PT $28
• Sunrun (RUN) rated new sector outperform at Scotiabank; PT $40
• Targa Resources (TRGP) rated new sector outperform at Scotiabank
• Western Digital (WDC) rated new outperform at Raymond James

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC