Cabrera Capital Daily Game Plan

Friday March 17, 2023                                                        Trading Desk: (312) 236-8907

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

DATA/HEADLINES    9:15ET Industrial Production, Cap Utilization; 10:00ET Leading Indicators, UMichigan Sentiment

TODAY’S HIGHLIGHTS:  

• Xi Jinping will visit Russia next week
  
• SVB Financial files for Chapter 11 Bankruptcy
  

Global stocks are trying to hold onto gains after a $30 billion lifeline for First Republic Bank calmed market fears about an imminent banking collapse. The package
came less than a day after Swiss bank Credit Suisse clinched an emergency central bank loan of up to $54 billion to shore up its liquidity.  Analysts said authorities appear eager to quickly deal with systemic risks but worry the potential for a banking crisis
is far from over. Data showed overnight that banks sought record amounts of emergency liquidity from the Federal Reserve over recent days, underscoring the scale of stress in the financial system. Global money market funds attracted the largest inflows since
April 2020 in the week through March 15, BofA said, citing EPFR Global. Meanwhile, Turkey is nearing ratification of Finland’s accession into NATO. President Erdogan is meeting Finland’s head of state today.                                      

EQUITIES:  March 2023 Quarterly Rebalance is effective at the close today

US equity-index futures fluctuated as investors settle in for quadruple witching and quarterly rebalance to end a tumultuous week that saw a brewing banking crisis send bond yields plunging.
An estimated $2.7 trillion of derivatives contracts tied to stocks and indexes will expire today.  Futures on the Nasdaq 100 were flat as the rates-sensitive gauge heads for its best week since November amid expectations the Federal Reserve will temper its
tightening path. As many as 11 US banks including JPMorgan Chase will deposit as much as $30 billion into First Republic Bank.  However, First Republic shares fell as much as 17% in after-market trading after the bank said it would suspend its dividend and
disclosed its cash position and just how much emergency liquidity it needed. Focus now swings to the Fed’s policy decision next week and whether it will stick with its aggressive interest rate hikes.   

Futures ahead of the bell: E-mini S&P -0.3%, Nasdaq +0.1%, Russell 2000 -0.8%, Dow -0.4%. 

In pre-market trading, FedEx jumped more than 12% after the courier boosted its profit outlook. US Steel (X) shares rise 5% after first-quarter earnings guidance was much better than
anticipated. Cryptocurrency-exposed stocks rose after Bitcoin extended its gains; Hive Blockchain (HIVE) climbed 8%, Hut 8 Mining (HUT) +7%, Marathon Digital (MARA) +9%, Riot Platforms (RIOT) +8%, Stronghold Digital (SDIG) +13%. Bumble (BMBL) rises 1.7% after
being initiated with a buy recommendation at Citi. First Republic Bank (FRC) shares fell 12% on Friday, set for their worst week ever. Nvidia Corp. (NVDA) gains 2% after being upgraded to overweight from equal-weight at Morgan Stanley. Sarepta Therapeutics
(SRPT) slumps 17.5% after the FDA requested an advisory committee meeting for the biotech’s investigative drug, SRP-9001 for Duchenne muscular dystrophy. Warner Bros Discovery (WBD) rises 4.5% after Wolfe Research and Wells Fargo Securities raised their recommendation
on the stock.

European indices reversed an early advance with banking stocks heading for a drop of almost 9% this week as yet another early rally lost steam. Shares in the troubled
Swiss lender Credit Suisse resumed a decline as the idea of a forced combination with UBS Group was shot down. The stock had rallied almost 20% Thursday after the Swiss central bank stepped in with support. Energy and technology stocks lead today’s European
equity gains as easing concerns over financial stability allows the market to trim weekly losses. European logistics and freight stocks gain, after US peer FedEx’s results beat expectations. Stoxx 600 -0.1%, DAX -0.15%, CAC -0.3%, FTSE 100 is flat. Utilities
-1%, Financial Services -1%, Insurance -0.7%, REITs -0.7%, Food & Bev -0.5%. Technology +1.1%, Energy +1%. 

Asia stocks rebounded, led by Hong Kong-listed shares as risk appetite was helped by a rescue package for First Republic Bank. The MSCI Asia Pacific Index gained
1.4% after coming close to entering correction territory on Thursday. Shares in Taiwan, South Korea and the tech hardware sector “have over-delivered” this year and are looking particularly vulnerable to shockwaves from the US banking stress, according to
Goldman Sachs. South Korean chipmakers rallied while their suppliers at home and in Japan also advanced as the two countries’ leaders pledged to end a long-simmering dispute that had hurt security and caused a trade rift. Baidu surged more than 13% after brokerages
tested the company’s just-unveiled ChatGPT-like service and granted it their preliminary approval. Chinese shares rose after data showed that housing prices in China eked out a more decisive gain in February, confirming an economic recovery. The PBOC cut the
amount of money banks have to keep in reserve in an effort to stimulate the economy. Hang Seng Tech Index +4.4%, Hang Seng Index +1.6%, Taiwan +1.5%, Nikkei 225 +1.2%, Kospi +0.75%, Shanghai Composite +0.7%, Sensex +0.6%, ASX 200 +0.4%.

FIXED INCOME: 
 

Treasuries have recouped some of Thursday’s losses, led by bunds and gilts as euro-zone money markets trim rate-hike premium for May after Thursday’s post-ECB selloff.
Intermediate sectors lead a limited advance. US two-year yields have whipsawed at least 20 basis points a day for six straight sessions through Thursday as traders re-calibrated rate-hike bets. Bond traders are turning their focus to next week’s pivotal Federal
Reserve meeting after what has been the most volatile five days in US debt markets in more than a decade. Overnight indexed swaps are now pricing for an 80% probability of a quarter-percentage point Fed rate hike next week. The widely watched MOVE index, which
measures implied volatility in Treasuries, topped out at 199 points on Wednesday, the highest level since the global financial crisis in 2008. 10-year yields around 3.5%, 2 year yield ~4.1%. 

METALS: 

Gold rose and is headed for its biggest weekly gain since November after attracting haven demand due to banking turmoil in the US and Europe. Gold exchange-traded
fund holdings rose for four straight days through Thursday and are now at a three-week high. Focus will turn to the Federal Reserve’s March 21-22 meeting, with speculation that the central bank will pause its hiking campaign having dissipated since Wednesday.
Market participants are largely expecting the US central bank to raise rates by 25 bps. Spot gold rose 0.7%, silver +0.8%.     

ENERGY:      

Oil edged higher but is still headed for the biggest weekly loss this year. The US said it won’t rush to replenish its strategic reserve even after the recent decline
in crude prices. It previously laid out a plan to refill the SPR at around $70. China’s demand indicators remain broadly positive, forming a strong fundamental backdrop for prices.  Any further oil-price drop may nudge OPEC+ to consider even more cuts at its
April 3 monitoring committee meeting. WTI +0.3%, Brent +0.05%.  Both WTI and Brent tested key technical support at their 200 week moving averages.    

CURRENCIES:               

The dollar weakened against all its Group-of-10 peers as haven bids waned after a US bank rescue plan calmed global jitters.  The Japanese yen and New Zealand dollar
are the best performers. Attention is turning to next week’s Federal Reserve decision, with traders reinstating bets for a quarter-point hike at the meeting, after the European Central Bank delivered a planned 50-basis point increase on Thursday. China’s move
to lower the reserve requirement ratio for banks is a measure aimed at shoring up growth that’s unlikely to have much impact on the local currency, according to analysts. The cut came as a gauge of short-term funding costs soared toward a two-year high, a
sign that a liquidity squeeze is emerging in China’s financial markets. US$ Index -0.15%, GBPUSD +0.1%, EURUSD +0.1%, USDJPY -0.9%, AUDUSD +0.6%, NZDUSD +0.7%.    

Bitcoin +8.6%, Ethereum +6%.

Bitcoin rose to the highest level since June amid a broad rally in cryptocurrencies. Other tokens such as Ether, Solana and Polkadot surged as well.

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:

• Alphabet (GOOGL) raised to outperform at Exane; PT $123
• American Air (AAL) raised to peerperform at Wolfe
• Applied Industrial Tech (AIT) raised to outperform at Baird; PT $160
• Chubb (CB) raised to overweight at JPMorgan; PT $239
• Columbia Banking (COLB) raised to overweight at Piper Sandler
• FMC Corp (FMC) raised to buy at Redburn
• Fidelity National (FIS) raised to outperform at KBW; PT $70
• GDS Holdings ADRs (GDS) raised to buy at Deutsche Bank; PT $20
• LivePerson (LPSN) raised to neutral at Credit Suisse; PT $5
• Nvidia (NVDA) raised to overweight at Morgan Stanley
• SAP ADRs (SAP GR) raised to outperform at Exane; PT $143
• Seacoast Banking (SBCF) raised to outperform at Hovde Group; PT $33
• Sterling Bancorp (SBT) raised to overweight at Piper Sandler; PT $6
• Synchrony Financial (SYF) raised to outperform at Oppenheimer; PT $35
• Vale ADRs (VALE3 BZ) raised to outperform at Itau BBA; PT $18
• Warner Bros Discovery (WBD) raised to outperform at Wolfe; PT $20
• Warner Bros Discovery (WBD) raised to overweight at Wells Fargo
• Whirlpool (WHR) raised to buy at CFRA

DOWNGRADES:

• Bread Financial Holdings (BFH) cut to market perform at KBW; PT $35
• CareMax Inc (CMAX) cut to market perform at Cowen; PT $4
• Cerevel Therapeutics (CERE) cut to neutral at JPMorgan; PT $29
• Cresco Labs (CL CN) cut to hold at Echelon Wealth; PT C$3
• Emergent Bio (EBS) cut to underweight at JPMorgan; PT $9
• Honest Co. (HNST) cut to market perform at Telsey; PT $2
• MacroGenics (MGNX) cut to neutral at Guggenheim
• Novocure (NVCR) cut to underweight at JPMorgan; PT $50
• Qualtrics (XM) cut to neutral at Exane; PT $18.20
• Ree Automotive (REE) cut to neutral at Cantor; PT $1
• RingCentral (RNG) cut to perform at Oppenheimer
• Synchrony Financial (SYF) cut to market perform at KBW; PT $32
• Terex (TEX) cut to neutral at BofA

INITIATIONS:

• Achilles Therapeutics ADRs (1447978DLN) rated new buy at Bryan Garnier; PT $8
• Atour Lifestyle ADRs (ATAT) rated new buy at Citi; PT $28.30
• Autolus Therapeutics ADRs (AUTL) rated new buy at Bryan Garnier; PT $5
• BILL Holdings Inc (BILL) rated new neutral at Baird; PT $86
• Bumble (BMBL) reinstated buy at Citi; PT $24
• Cellectis ADRs (ALCLS FP) rated new buy at Bryan Garnier; PT $6
• Centessa Pharmaceuticals ADRs (CNTA) rated new outperform at SVB; PT $6
• Churchill Downs (CHDN) rated new buy at Truist Secs; PT $300
• Crispr Therapeutics (CRSP) rated new buy at Bryan Garnier; PT $70
• FactSet (FDS) rated new outperform at CICC; PT $500
• Galecto (GLTO) rated new overweight at Cantor; PT $16
• Hershey (HSY) rated new buy at William O’Neil
• Inventiva SACA ADRs (IVA FP) rated new buy at Stifel; PT $27
• Iqvia (IQV) rated new buy at Truist Secs; PT $265
• Okta (OKTA) rated new buy at WestPark Capital; PT $120
• PTC Therapeutics (PTCT) rated new market perform at SVB; PT $48
• Shopify (SHOP CN) resumed hold at Stifel; PT $45
• Viking Therapeutics (VKTX) rated new buy at Stifel; PT $22
• Zscaler (ZS) rated new equal-weight at Capital One; PT $125

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC