Cabrera Capital Daily Game Plan

Thursday March 1, 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, Import Prices, Housing Starts, Building Permits, Philly Fed Manufacturing;
 9:15ET;  ECB Rate Decision; 9:45ET: Lagarde’s Press Conference; 10:00ET Yellen appears before Senate Finance Committee

TODAY’S HIGHLIGHTS:  

• In testimony before the Senate Finance Committee, Treasury Secretary Janet Yellen will tout the government’s
  “decisive and forceful actions” to shore up confidence in the banking system
  

Global markets are mixed as the cost of insuring the bonds of Credit Suisse against default dropped, though remains in distressed territory. The turmoil on global
financial markets eased after regulators threw a lifeline to Credit Suisse Group, though signs of unrest persisted as volatility gauges remained elevated and overnight gains in US futures evaporated ahead of the European Central Bank’s rate decision. European
regulators are furious with the “total and utter incompetence” of US authorities for their handling of the SVB collapse, the FT reported.  All eyes are now on the ECB as policy makers face a consequential decision on whether market turmoil linked to Credit
Suisse is bad enough to derail a long-touted interest-rate hike.                                    

EQUITIES: 

US equity futures gave up overnight gains ahead of the ECB policy decision as renewed selloff in some regional-bank shares weighed.  After the ECB decision market attention will then
turn to the Federal Reserve’s policy meeting next week, with traders almost evenly split on whether the central bank will increase interest rates. Market pricing now suggests the Fed will soon pivot and will cut rates by as much as 1% by the end of the year.
First Republic Bank, the San Francisco-based lender that was cut to junk by S&P Global Ratings and Fitch Ratings on Wednesday, is exploring strategic options including a sale. Meanwhile, the FDIC asked banks interested in acquiring SVB and Signature Bank to
submit bids by tomorrow. The Fed’s emergency loan program may pump as much as $2 trillion into the system.   

Futures ahead of the data: E-mini S&P -0.05%, Nasdaq +0.3%, Russell 2000 -0.5%, Dow -0.2%. 

In premarket trading, Adobe (ADBE) rose 5% after the software company boosted its full-year earnings forecast. LivePerson (LPSN) plummeted over 40% after analysts
said the company’s results and guidance were disappointing. Social media stocks like Snap (SNAP +6.5%) and Meta (META +1.8%) were trading higher as TikTok’s leadership discusses the possibility of separating from its Chinese parent company ByteDance to help
address concerns about national security risks. After initial gains, shares of regional lenders First Republic Bank (FRC), Western Alliance Bancorp (WAL), PacWest Bancorp (PACW) reversed course to fall 25%, 10% and 16% respectively. Block Inc. (SQ) shares
are up 2.6% after Mizuho upgraded the digital-payments company to buy from neutral. UiPath (PATH) rose as much as 17% after the software company gave a better-than-expected full-year forecast.

European stocks pared their advance after rebounding sharply at the open as investors remained nervous around the turmoil at Credit Suisse ahead of the European Central
Bank’s interest-rates announcement.  Credit Suisse rallied the most in history at the open, as bank and financial services sectors led gains after the embattled Swiss lender arranged to borrow as much as 50 billion francs ($54 billion) from a Swiss National
Bank liquidity facility. It also plans to buy back $3.2 billion worth of debt. The Stoxx 600 Index is 0.25% higher after rising as much as 1.4%. The banking sector climbed 1.6% after slumping to its lowest in over two months on Wednesday on concern about a
looming global banking crisis. Credit Suisse is up 25%. The chairman of the Swiss lender’s top investor, Saudi National Bank, said the bank is generally “sound” and isn’t likely to seek more capital. Meanwhile, JPMorgan Chase analysts said there’s a possibility
that Credit Suisse’s troubles end in a takeover of the bank. DAX +0.5%, CAC +0.9%, FTSE 100 +0.8%. Food & Bev +1.5%, Financial Services +1.2%, Retail +0.8%, Media +0.7%. REITs -1.9%, Energy -1.2%.

Shares in Asia fell as concerns over Credit Suisse triggered a renewed selloff in financial stocks.  The MSCI Asia Pacific Index dropped 1% in a broad selloff, with
financials, energy and materials the biggest drags. Stocks in India reversed and initial drop to close marginally higher. Chinese companies tied to ByteDance dropped after the US government said the Beijing firm must sell its TikTok shares or risk the app
being banned in the US. Baidu shares dove 6.4% in Hong Kong after debuting China’s answer to ChatGPT in a pre-recorded video, disappointing those hoping for a stronger, real-life demo. Japan’s trade deficit narrowed sharply in February from January’s record
shortfall. Australia’s job growth resumed last month, sending unemployment down to 3.5%. The Hang Seng Index led declines in the region, falling 1.7%. ASX 200 -1.45%, Vietnam -1.4%, CSI 300 -1.2%, Topix -1.2%, Taiwan -1.1%, Kospi -0.1%, Sensex +0.15%.

FIXED INCOME: 
 

Treasuries are mixed across the curve, cheaper at front-end. The two-year yield is hovering around 4% after historically steep declines in recent days. Bond across
Europe declined, with the German 10-year yield up 15 basis points. Risk appetite was stoked by SNB’s 50 billion Swiss franc credit line for Credit Suisse. The yield curve is bear flattening following the decision that Swiss National Bank buys back Credit Suisse
debt. 10 year yield ~3.45%, 2 year yield 3.94%.

METALS: 

Gold nudged higher, holding near a six-week high as traders weighed the impact of the woes of Credit Suisse Group AG on the Federal Reserve’s interest-rate path. 
Gold has surged nearly 6% over the past week following the collapse of some US banks, which drove haven demand. Concerns about the global financial system have caused a dramatic shift in expectations for the Fed’s monetary tightening, helping boost non-yielding
assets like gold. Traders are now almost evenly split on whether the central bank will opt for a hike next week.  Meanwhile, the European Central Bank’s policy update on Thursday may offer the first indication of what the banking blowup means for monetary
policy. Spot gold +0.5%, silver +1.1%.   

ENERGY:      

Oil hovered near the lowest close in 15 months after a three-day rout started by the US banking crisis and accelerated by options covering.  WTI’s April options expire
today. Exposure to plummeting oil prices via the options market has forced some financial firms to dump crude futures, accelerating a selloff that has sent prices plunging to the lowest in over a year.  Crude may remain volatile given the dimensions of uncertainties,
Citi said. Prices appear to be realigning themselves to short-term fundamentals, and a sharp drop may be a buying opportunity. Falling crude prices have revived expectations that the US will try once again to replenish its emergency reserves, which currently
stand at a 40-year low. WTI +0.3%, Brent +0.25%. US Nat Gas +2.2%, RBOB +0.2%.    

CURRENCIES:               

The Japanese yen and Swiss franc are among those leading gains against the dollar as traders turn to defensive currencies as they digest the latest developments at
Credit Suisse. The euro is also advancing ahead of the European Central Bank’s closely-watched policy decision. The euro recovered from a two-month low ahead of an expected interest rate increase from the ECB, with investors now positioning for a 25 basis
point move after earlier expectations for 50bps. Even if the ECB does follow through and deliver a 50 basis-point hike, strategists expect President Christine Lagarde to strike a cautious tone on forward rate guidance in response to recent banking concerns,
which could provide limited upside for the euro. The yen has outperformed G-10 currencies in the past week, gaining around 2.5%. US$ Index -0.2%, GBPUSD -0.1%, USDJPY -0.6%, AUDUSD +0.4%, USDCHF -0.6%.

Bitcoin +2%, Ethereum +0.8%. Founders and key employees of FTX firms received $3.2 billion in payments and loans, mainly from Alameda, of which Sam Bankman-Fried
got about $2.2 billion, according to court filings. The figures exclude other payments, such as more than $240 million spent on luxury property in the Bahamas and political and charitable donations, administrators said.

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:

• Block Inc (SQ) raised to buy at Mizuho Securities; PT $93
• Choice Hotels (CHH) raised to outperform at Baird; PT $134
• Endeavour Mining (EDV LN) raised to overweight at Morgan Stanley
• FedEx (FDX) raised to buy at Stifel; PT $222
• Foot Locker (FL) raised to outperform at Telsey; PT $50
• HF Sinclair (DINO) raised to overweight at Wells Fargo; PT $55
• Intel (INTC) raised to neutral at Susquehanna; PT $26
• Jones Lang (JLL) raised to outperform at Wolfe; PT $218
• LexinFintech ADRs (LX) raised to buy at CLSA; PT $3.45
• Mersana Therapeutics (MRSN) raised to overweight at JPMorgan; PT $10
• Motorola Solutions (MSI) raised to overweight at JPMorgan; PT $305
• ORIC Pharma (ORIC) raised to outperform at Oppenheimer; PT $14
• Progressive (PGR) raised to overweight at Wells Fargo
• Qualcomm (QCOM) raised to positive at Susquehanna; PT $140
• Skyworks (SWKS) raised to positive at Susquehanna; PT $135
• TPI Composites (TPIC) raised to buy at Guggenheim; PT $22
• Takeda ADRs (4502 JP) raised to buy at BofA; PT $20
• Transcontinental (TCL/A CN) raised to outperform at CIBC; PT C$16
• UiPath (PATH) raised to buy at Canaccord; PT $19

DOWNGRADES:

• Babylon Holdings/Jersey (BBLN) cut to neutral at BTIG
• Cvent (CVT) cut to neutral at Credit Suisse; PT $8.50
• LivePerson (LPSN) cut to neutral at Roth MKM; PT $6
• MYT Netherlands Parent ADRs (MYTE) cut to market perform at Cowen
• Medical Properties (MPW) cut to neutral at BofA; PT $10
• Olaplex (OLPX) cut to market perform at Cowen; PT $4.50

INITIATIONS:

• Atour Lifestyle ADRs (ATAT) rated new outperform at Haitong Intl
• Centene (CNC) rated new buy at Baptista Research; PT $88.40
• Cerevel Therapeutics (CERE) resumed hold at Berenberg; PT $22
• Enhabit (EHAB) rated new neutral at Goldman; PT $15
• Faraday Copper (FDY CN) rated new speculative buy at Canaccord; PT C$1.50
• Lululemon (LULU) rated new sell at Redburn
• Nike (NKE) rated new sell at Redburn
• Ocean Biomedical (OCEA) rated new buy at Fundamental Research
• Organon (OGN) rated new outperform at Raymond James; PT $33
• Samsara (IOT) rated new neutral at Piper Sandler; PT $21
• Theseus Pharma (THRX) rated new buy at Stifel; PT $24
• Under Armour (UAA) rated new buy at Redburn
• eMagin Corp (EMAN) rated new buy at Ladenburg Thalmann; PT $3

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC