Cabrera Capital Daily Game Plan

Monday March 13, 2023                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES 
  9:00ET Biden to speak on banking system

TODAY’S HIGHLIGHTS:  

• US Treasury announces it will back Silicon Valley Bank deposits
  beyond the federally insured ceiling of $250,000. Shareholders and certain unsecured debt holders will not be protected
  
• China President Xi Jinping plans to travel to Russia to meet with
  Putin as soon as next week
• Putin plans to meet top business leaders in the Kremlin this week
  for the first time since the invasion

Global stock markets fell and bonds surged on a global flight-to-quality as the collapse of Silicon Valley Bank continued
to reverberate even as authorities moved to backstop the banking system. Government bonds across the world staged a historic rally in a rush for havens as investors bet the collapse of three US lenders will compel policymakers to slow the pace of monetary
tightening.  The Fed and US Treasury announced over the weekend a range of emergency measures to stabilize the banking system and said depositors at SVB would have access to their deposits on Monday. Treasury Secretary Janet Yellen said her office would protect
“all depositors” at SVB. The moves came as authorities took possession of New York-based Signature Bank, the second bank failure in a matter of days. Other banks appear to be in a similar situation to SVB and Signature, a Treasury official said. The steps
to protect depositors don’t constitute a bailout, as equity and bondholders of both banks will be wiped out. Joe Biden will outline measures to bolster the banking system this morning.                            

EQUITIES: 

US equity futures initially rallied overnight as regulators took steps to shore up confidence in the banking system, but gave up those gains
as bank stocks resumed declines in US premarket trading. The Fed, in tandem with the Treasury and FDIC, announced a new “Bank Term Funding Program” to offer lenders one-year loans under easier terms and will relax terms for lending through its discount window.
Risk of a banking crisis underscored the tension between the Fed’s efforts to tame inflation and growing concerns that its aggressive rate hikes will spark a recession and a rout in riskier assets.  Economists at Goldman Sachs Group no longer expect a rate
increase from the Fed at its March meeting given stresses in the banking system.  First Republic Bank shares slumped more than 70% pre-market even after it said it had more than $70 billion in unused liquidity to fund operations from agreements that included
the Fed and JPMorgan. Liquidity Group plans to offer about $3 billion in emergency loans to start-up clients. Anxiety is also running high ahead of tomorrow’s consumer price index report.

Futures ahead of the bell: E-mini S&P -0.4%, Nasdaq +0.3%, Russell 2000 -1.3%, Dow -0.5%. 

In pre-market trading, most US banking stocks cede early gains to trade around flat or in the red, as initial optimism fueled
by US authorities’ decisive action on SVB fades and fears mount for the health of the broader financial system.  Among major lenders, Bank of America -5.8%, Comerica -4.8%, Wells Fargo -2%, Goldman Sachs -2.3% and Citigroup -2.4%; Charles Schwab (SCHW US)
-18%, Western Alliance Bancorp (WAL US) -25%, PacWest Bancorp (PACW US) -36%.  US-listed Chinese stocks rise in premarket trading, on track to halt five days of declines, as China’s new premier called for better cooperation between the two countries and signaled
support to the private sector. Cryptocurrency-exposed stocks rose after Bitcoin jumped on US agencies’ pledge to fully protect all Silicon Valley Bank depositors following the lender’s collapse.  Marathon Digital (MARA US) +7.3%, Riot Platforms (RIOT US) +2.8%,
Hut 8 Mining (HUT US) +5.6%, Coinbase (COIN US) +4%. Provention Bio (PRVB US) shares rise as much as 264% to $24.40 after Sanofi agreed to buy the biotech for $25/share in cash. Seagen shares gain 19%  after Pfizer agreed to purchase cancer-drug maker for
an enterprise value of $43B.    

European equities slumped the most since mid-December, extending Friday’s declines, as investors weighed the repercussions
from Silicon Valley Bank’s collapse while also bracing for this week’s key US inflation data.  The Stoxx Europe 600 index tumbled almost 3%, with the bank sector gauge retreating nearly 7%. HSBC will buy the UK arm of SVB for £1, the culmination of a frantic
weekend where ministers and bankers explored various ways to avert the unit’s collapse. Credit Suisse Group AG plunged as much as 15% and Commerzbank shed more than 10%. The European Central Bank meets on Thursday and is still widely expected to lift its rates
by 50 basis points, though it will now have to take financial stability into account. Italy’s FTSE MIB Index underperformed other regional benchmarks due to its large exposure to banks. Bank sector -6.5%, Energy -3.8%, Financial Services -3.7%, Insurance -3.6%,
Travel -3.1%. 

Asian stocks erased earlier declines as bond yields slid after Goldman Sachs economists said the recent stress in America’s
banking system may prompt the Fed to pause its monetary tightening cycle next week.  It also flagged uncertainty about the rate path in the months ahead. “Although we do not think there is any material fundamental impact on Asian stocks, equity investor sentiment
will likely remain fragile for now,” Nomura strategists wrote in a note. The MSCI Asia Pacific Index advanced 0.3%, reversing a loss of up to 0.9%.  Equities in China and Hong Kong rallied the most after Beijing surprised by keeping the head of the central
bank and finance minister in their posts on Sunday. Chinese state-owned enterprises including China Petroleum jumped after the country facilitated a deal between Iran and Saudi Arabia, highlighting Beijing’s growing influence in the Middle East.  Japan’s Nikkei
225 fell as bank stocks took a beating. Hang Seng Index +1.95%, Shanghai Composite +1.2%, Kospi +0.7%, Taiwan +0.2%, Vietnam was flat, ASX 200 -0.5%, Nikkei 225 -1.1%, Sensex -1.5%.

FIXED INCOME: 
 

US Treasury yields tumbled, with the two-year yield dropping as much as 50 basis points to 4.055%, heading for its steepest
three-day decline since Black Monday of October 1987, as traders pared back Fed rate hike expectations for March. The yield has now plunged about 100 bps in three days, surpassing what was seen during the Lehman Brothers collapse of 2008, the pandemic meltdown
of 2021 and the slide when the dot.com bubble burst.  The 10-year yield fell to a one-month low around 3.5%.  The yield on two-year German debt plunged 40 basis points to 2.71%, putting them on course for the deepest two-day fall on record. Fed fund futures
surged to price out any chance of a half-point hike at next week’s policy meeting, compared with around 70% before the SVB news broke last week. Instead, futures implied around a 14% chance the Fed would stand pat. Yields richer by more than 25bp across front-end
of the curve with 2s10s spread steeper by 26bp on the day.  

METALS: 

Gold extended gains as investors flocked to havens following the collapse of SVB. Bullion climbed to a one-month high as
the dollar and Treasury yields slumped on speculation the Fed will slow the pace of interest-rate hikes. The metal surged 2% on Friday after US jobs data pointed to easing inflationary pressures in the labor market. The US consumer price index due Tuesday
may also influence the Fed’s next move.  Spot gold +1.3%, silver +3.9%.                    

ENERGY:      

Crude oil fell with Brent Crude below $80 a barrel for the first time since early February.  Biden is limiting oil leasing
in Arctic waters and sensitive areas of Alaska, even as his administration prepares to approve an $8 billion oil development in the region. He’ll announce steps to rule out the sale of new drilling rights across much of the National Petroleum Reserve in Alaska.
Goldman Sachs further lowered the OECD’s crude demand growth over 2023, citing a structural fall in the oil intensity of GDP. It also cut its guidance for 2024. Many market watchers are still bullish on the longer term outlook, with Saudi Aramco forecasting
consumption will probably hit a record of 102 million barrels a day by the end of 2023.  WTI -5%, Brent -4.8%.         

CURRENCIES:               

The dollar fell for a third session as the collapse of Silicon Valley Bank raised the possibility that the Federal Reserve
may slow the pace and scope of US interest rates rises. In volatile trade, the yen and the Swiss franc rallied on haven demand.  US$ Spot Index pares losses in European trading to 0.4%, after sliding as much as 1% as US Treasuries rallied on speculation that
the Fed may be nearing the end of its rate tightening cycle. Broad gains in the yen pushed USD/JPY down as much as 1.5% to 132.85.  The euro edged up only 0.2% versus the dollar; market pricing shows a lower chance that the European Central Bank will hike
rates by 50 basis points this week. AUD/USD +0.9%, trimming gains after climbing 1.5% in Asian trade.    

Bitcoin +3%, Ethereum +1.7%.  

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:

• Amgen (AMGN) raised to overweight at Wells Fargo; PT $265
• Eli Lilly (LLY) raised to overweight at Wells Fargo; PT $375
• JPMorgan (JPM) raised to overweight at Wells Fargo; PT $155
• Joint Corp (JYNT) raised to neutral at DA Davidson; PT $15
• Moderna (MRNA) raised to outperform at Cowen; PT $180
• PNC Financial (PNC) raised to buy at Citi; PT $175
• PacWest (PACW) raised to buy at DA Davidson; PT $29
• Prosperity Banc (PB) raised to buy at DA Davidson; PT $79
• Sage Therapeutics (SAGE) raised to outperform at RBC; PT $60
• Schwab (SCHW) raised to buy at Citi
• Truist Financial (TFC) raised to market perform at KBW; PT $45
• Truist Financial (TFC) raised to outperform at Baird; PT $53

DOWNGRADES:

• Allbirds (BIRD) cut to market perform at Cowen; PT $1.50
• Apexigen (APGN) cut to hold at Brookline Capital
• Comerica (CMA) cut to hold at Odeon Capital
• Diversey Holdings (DSEY) cut to neutral at Credit Suisse; PT $8.40
• First Republic (FRC) cut to market perform at Raymond James
• First Republic (FRC) cut to peerperform at Wolfe
• Hercules Capital (HTGC) cut to underperform at KBW; PT $10.50
• KeyCorp (KEY) cut to hold at Odeon Capital
• Merck & Co (MRK) cut to equal-weight at Wells Fargo; PT $115
• Petco (WOOF) cut to neutral at Citi; PT $11
• Tesla (TSLA) cut to peerperform at Wolfe
• Trinity Capital (TRIN) cut to underperform at KBW; PT $11
• Under Armour (UAA) cut to neutral at JPMorgan; PT $10
• Wells Fargo (WFC) cut to hold at Odeon Capital

INITIATIONS:

• Amedisys (AMED) reinstated equal-weight at Barclays; PT $93
• GE Healthcare (GEHC) rated new outperform at Evercore ISI; PT $90
• Grab Holdings (GRAB) rated new outperform at Macquarie; PT $4
• Hesai Group ADRs (HSAI) rated new buy at Goldman; PT $31
• Nano One Materials (NANO CN) rated new buy at Roth MKM; PT C$7
• Nikola (NKLA) rated new equal-weight at Morgan Stanley; PT $3

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC