Cabrera Capital Daily Game Plan

Monday March 6, 2023                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES 
 10:00ET Factory Orders, Durable Goods

US factory orders probably fell 1.8% in January after rising that much in December

TODAY’S HIGHLIGHTS:  

• Chinese researchers found organic reefs that date back to around
  390 million years ago
• Tesla to cut prices on Model S and Model X to boost sales in US

World shares and bonds edged up as investors assessed a revised lower growth target from China, highlighting a diminished
likelihood of more stimulus. Beijing chose to lowball its growth outlook with a target of 5%, rather than the 5.5%-plus many analysts had expected.  Attention this week will center on Fed Chairman Powell’s testimony to Congress on Tuesday and Wednesday, and
policy decisions from Japan, Australia and Canada. In an interview released over the weekend, ECB President Christine Lagarde said it was “very likely” they would raise interest rates by 50 basis points this month and the bank had more work to do on inflation.
In other news, Taiwan’s defense minister warned today that the island has to be on alert this year for a “sudden entry” by the Chinese military into Taiwan’s contiguous zone amid rising military tensions across the Taiwan Strait.                       

EQUITIES: 

US equity futures are struggling to build on Friday’s rally as investors assessed the potential impact of China’s modest new economic growth
target and waited to see if Treasury yields would extend their declines off recent highs. Investors are awaiting Fed Chair Jerome Powell’s testimony this week to the Senate and House committees to see if it echoes recent hawkish comments from other Fed officials.
 Morgan Stanley’s Michael Wilson, one of Wall Street’s most bearish strategists, said he’s expecting stocks to rally in the short term if Treasury yields and the dollar continue to decline.  He said markets have further to fall in the medium term, as fundamentals
continue to deteriorate, especially on the earnings front.  S&P 500 Index earnings per share shrank 2.3% in the fourth quarter from a year earlier. 

Futures ahead of the bell: E-mini S&P +0.1%, Nasdaq +0.3%, Russell 2000 +0.05%, Dow -0.05%. 

In pre-market trading, Apple gained 1.2% after Goldman rated it a buy, citing the potential for its user base to underpin
its services business growth. Apple is gearing up to launch its next slate of laptops and desktops, including a new iMac. NEXTracker (NXT) rises 4% after being initiated at five brokerages. Silvergate (SI) falls 7% after the bank closed its flagship crypto
payments network and Moody’s cut its ratings on the company. Vir Biotechnology (VIR) gains 7.7% after JPMorgan upgraded the biotech to overweight from neutral on the potential of the company’s flu shot and HBV therapies. Bridgebio Pharma Inc. (BBIO) shares
gain 57% after a mid-stage study showed that high doses of its experimental therapy infigratinib spurred increased effects in children with achondroplasia, a genetic cause of dwarfism. Ciena (CIEN) rose 10% after an earnings beat.

European stocks were subdued as investors weighed the outlook for rate hikes. The Stoxx 600 Index reversed small, early
gains with travel and leisure and retail sectors rising, while miners slumped with metals after China set a cautious economic growth target and didn’t announce any major new stimulus. Data today showed Euro zone retail sales rebounded 0.3% month-on-month in
January, much less than expected and still 2.3% lower than a year earlier, underlining the weakness of consumer demand and the broader economic slowdown. Euro-area investor confidence fell to -11.1 this month from -8 in February, the Sentix gauge showed. 
Optimism was also tempered by a fresh slide in the shares of embattled Credit Suisse Group AG, after news that Harris Associates had sold its entire stake in the lender after about two decades of ownership. The CAC 40 briefly hit a record high as LVMH extended
a frenzy in luxury stocks. The FTSE 100 is down 0.6% with Rio Tinto contributing the most to the index decline, falling 3.2%. Stoxx 600 -0.1%, DAX +0.35%, CAC +0.3%, FTSE 100 -0.6%. Travel +1.6%, REITs +1%, Retail +0.75%, Technology +0.5%. Basic Resources
-2.7%.

Shares in Asia were mostly higher amid lower bond yields. Chinese stocks dropped, as the country’s annual parliamentary
meetings entered their second day. China’s closely watched growth outlook, announced on Sunday, was its lowest gross domestic product growth target in decades. The government reiterated it wants to boost growth by raising domestic consumption.  The MSCI Asia
Pacific Index climbed 0.9%, with tech-heavy gauges in South Korea and Taiwan higher. Japan’s Nikkei 225 touched a three-month high. Meanwhile, Vietnam was higher after developers jumped on news that companies will be allowed to use other assets to make principal
and interest payments on bonds. Thailand was closed for a holiday. Kospi +1.25%, Nikkei 225 +1.1%, Taiwan +1%, Sensex +0.7%, ASX 200 +0.6%, Vietnam +0.25%, Hang Seng +0.2%. China’s CSI 300 -0.5%, Indonesia -0.1%.

FIXED INCOME: 
 

Government bond prices rallied, with the US 10-year yield down ~6 basis points to 3.9%, following last week’s spike above
4%. Treasuries advance across the curve, following wider gains across bunds. However comments from ECB’s Holzmann trimmed gains for bunds. Holzmann said he expects four or more half-point rate hikes. US 2s10s spread flattens by 2bp on the day. Treasury auctions
resume Tuesday with 3-year note sale, followed by 10- and 30-year sales Wednesday and Thursday.                 

METALS: 

Most metals declined as China hasn’t announced any major new stimulus at the NPC.  Gold slipped from near a two-week high
as the dollar strengthened after China set a more modest growth target than expected for 2023.  The metal is finding its feet after a sharp drop in February as hot inflation and US jobs data saw traders price in more Federal Reserve interest-rate hikes. Spot
gold -0.2%, silver -0.5%.       

ENERGY:      

Oil prices slipped, feeling the heat from China’s new growth target and as investors cautiously awaited Fed Chairman Jerome
Powell’s testimony this week. Both crude benchmarks settled more than $1 higher on Friday after sources said a report that the United Arab Emirates was considering leaving OPEC was inaccurate. Saudi Arabia signaled it sees oil demand picking up in Asia and
Europe by raising most prices for crude shipments to the regions. Goldman Sachs expects oil to grind higher this month ahead of the market’s anticipated return to deficits in June. Russia’s seaborne crude exports fell back sharply from the previous weeks’
highs, with Moscow unable to maintain record flows from the country’s Pacific ports. US natural gas futures slumped 12% on the outlook for milder-than-expected weather. WTI and Brent are down 1.4% after gaining more than 4% last week.    

CURRENCIES:               

The dollar erased an earlier drop to rise 0.1% as China’s cautious growth target  for the year weighed on risk sentiment.
The Swiss franc was the best performer in Group-of-10 currencies after February’s inflation came in faster than expectations, suggesting the central bank will need to continue hiking borrowing costs.  The Aussie slipped as concerns over China’s economy damped
the region’s stocks and commodity prices. Meanwhile, the Reserve Bank of Australia is due to deliver an interest-rate hike on Tuesday, may provide some support.  European Central Bank will probably need to raise borrowing costs again after an increase already
penciled in for next week, according to Chief Economist Philip Lane. US$ Index +0.05%, GBPUSD -0.25%, USDJPY +0.05%, EURUSD +0.1%, AUDUSD -0.5%, NZDUSD -0.5%.                  

Bitcoin -0.3%, Ethereum -0.4%.  

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:

• Enerflex (EFX CN) raised to outperform at RBC; PT C$16
• HashiCorp (HCP) raised to buy at Needham; PT $39
• Meritage Homes (MTH) raised to overweight at JPMorgan; PT $129
• Monster Beverage (MNST) raised to buy at Redburn
• REV Group (REVG) raised to outperform at Baird; PT $16
• Ternium ADRs (TX) raised to overweight at Morgan Stanley; PT $52
• Vir Biotechnology (VIR) raised to overweight at JPMorgan; PT $34

DOWNGRADES:

• Bilibili ADRs (BILI) cut to accumulate at Guosheng Securities; PT $24
• D.R. Horton (DHI) cut to neutral at JPMorgan; PT $102.50
• Embark Technology (EMBK) cut to hold at Vertical Research; PT $4
• Energy Vault (NRGV) cut to neutral at Guggenheim
• KB Home (KBH) cut to underweight at JPMorgan; PT $32.50
• Praxis Precision (PRAX) cut to market perform at William Blair
• Secure Energy Services (SES CN) cut to sector perform at National Bank
• Secure Energy Services (SES CN) cut to speculative buy at Canaccord
• Silvergate Capital (SI) cut to underperform at Wedbush; PT $4

INITIATIONS:

• Avid Technology (AVID) rated new buy at Truist Secs; PT $45
• Bristol-Myers (BMY) rated new hold at Jefferies; PT $62
• Chinook Therapeutics (KDNY) rated new overweight at Piper Sandler
• Eli Lilly (LLY) rated new hold at Jefferies; PT $290
• Enphase Energy (ENPH) rated new outperform at Haitong Intl; PT $304
• Merck & Co (MRK) rated new buy at Jefferies; PT $125
• NEXTracker (NXT) rated new buy at Mizuho Securities; PT $40
• NEXTracker (NXT) rated new buy at Truist Secs; PT $40
• NEXTracker (NXT) rated new neutral at Citi; PT $36
• NEXTracker (NXT) rated new overweight at Barclays; PT $42
• NEXTracker (NXT) rated new overweight at JPMorgan; PT $42
• NEXTracker (NXT) rated new sector weight at KeyBanc
• Oncolytics Biotech (ONC CN) rated new overweight at Cantor; PT C$9
• Pfizer (PFE) rated new hold at Jefferies; PT $43
• ShiftPixy (PIXY) rated new buy at Ascendiant Capital Markets; PT $6
• SolarEdge (SEDG) rated new sector weight at KeyBanc

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC