Cabrera Capital Daily Game Plan

Tuesday March 21, 2023                                                        Trading
Desk: (312) 236-8907

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

DATA/HEADLINES 
  8:30ET Philly Fed; 10:00ET Existing Home Sales, Janet Yellen speaks at ABA event;
1:00ET $12 billion 20-year bond auction  

TODAY’S HIGHLIGHTS:  

• Blinken says the US is opposed to any peace deal China has to propose
  to Ukraine and Russia
• Chinese President Xi Jinping invited Putin to travel to China for
  the third Belt and Road Forum
• Barclays, JPMorgan Pull Deals as Angst Freezes Junk-Debt Market
  
• Yellen Says US Will Intervene If Needed to Protect Smaller Banks
  

Global shares rose as steps to shore up the financial system helped restore confidence, but signs of stress are making investors
wonder how central banks might respond if another lender may deliver a nasty surprise. San Francisco lender First Republic is emerging as the next pressure point, with shares losing nearly half of their value on Monday. A systemic credit event is the key risk
to markets, according to BofA’s latest global survey of fund managers. The most likely source of a credit event is US shadow banking, followed by US corporate debt and developed-market real estate, the study showed. Investors are now the most overweight eurozone
stocks relative to US shares since October 2017, BofA said. For now, focus will be on the US Fed and Bank of England policy decisions this week. China’s Xi Jinping continues talks with Vladimir Putin in Moscow, while Japanese Prime Minister Kishida will visit
Ukraine today to meet Volodymyr Zelenskiy.                                            

EQUITIES: 

US equity futures extended yesterday’s climb after a report that US officials are studying ways to temporarily guarantee all bank deposits. Treasury
Department staff are reviewing whether federal regulators have enough emergency authority to temporarily insure deposits greater than the current $250,000 cap on most accounts without formal consent from Congress.  Appetite for risk is also being fueled by
expectations that the Federal Reserve may adopt a more cautious policy approach when it decides on interest rates on Wednesday.  The Federal Reserve begins a two-day meeting today, while interest rate futures pricing implies that a peak in rates is either
imminent or has already been reached.       

Futures ahead of the bell: E-mini S&P +0.9%, Nasdaq +0.6%, Russell 2000 +1.5%, Dow +0.9%. 

In premarket US trading, First Republic Bank rose as much as 27% after a proposal from JPMorgan to help the struggling lender, while shares in
other regional lenders also edged higher. The bounce in FRC to $15 a share still leaves the stock down 88% from its price before the SVB news came out. Shares in fellow regional banks also gain on Tuesday, with Western Alliance (WAL) +3.9%, PacWest Bancorp
(PACW) +4.9%.  Meta rises 2.7% after Morgan Stanley raised its recommendation to overweight from equal-weight. First Majestic Silver (AG) drops 16% after saying it’s temporarily suspending all mining activities and reducing its workforce at Jerritt Canyon
effective immediately. Altimmune (ALT) plunges 38% after the clinical-stage company gave results from a mid-stage trial. Harmonic (HLIT) shares jump 8.6% after Charter Communications picked the fiber-optic-systems maker to be its strategic technology partner.
Peloton Interactive (PTON) shares are up 2% as JMP Securities sees signs of strong sales for the subscription fitness company on Amazon.   

European equities were set for the biggest two-day gain since early January as worries around the banking sector eased and
focus switched to this week’s rate decisions.  European banking stocks, which are heading for their biggest one-month slide in three years, rose by more than 4%. Banks’ Additional Tier 1 bonds rebounded in Europe and Asia after euro-zone and UK regulators
gave reassurances on the risky debt category, which seized up after Credit Suisse shareholders took precedence over the holders of over $16 billion of the AT1s. Investors will be focused on the potential replacement of AT1s with CET1s, which will lead to a
required capital build, as well as higher funding costs, according to Goldman Sachs. UBS relies more on AT1 bonds for its capital than any other major lender in Europe. UBS Group rose 4% despite having its credit outlook lowered by S&P Global Ratings and Moody’s
Investors Service, while Credit Suisse Group AG shares were steady above the offer price.  Germany’s March ZEW survey fell more than expected to 13 from 28.1. Stoxx 600 +1.5%, DAX +1.7%, CAC +1.6%, FTSE 100 +1.5%. Banks +4.4%, Financial Services +3%, Insurance
+2.5%, Energy +2.4%.  

Asian stocks gained as concerns of an escalation in the banking crisis eased, with financial shares helping drive the advance.
Sentiment was helped by a rebound in riskier Additional Tier 1 bonds sold by banks in the region, along with news that US officials are studying ways to temporarily guarantee all bank deposits if the turmoil expands. Benchmarks in Hong Kong and China were
at the top of the leader board, gaining more than 1%, while the Hang Seng Tech Index gained 2.5% as Tencent climbed ahead of its earnings release. Korean gauges rose after China approved more foreign online game titles, fueling a rally among related stocks. 
Japan was closed for a holiday.  Hang Seng +1.35%, Philippines +1.25%, Indonesia +1.2%, CSI 300 +1.1%, Vietnam +0.9%, ASX 200 +0.8%, Sensex +0.75%, Taiwan +0.6%. 

FIXED INCOME: 
 

The improving market sentiment dented government bonds, with 10-year Treasury yields rising around five basis points, while
the two-year yield rose 12bps, extending Monday’s 14 basis-point climb.  Losses are led by an aggressive bear-flattening move in bunds, with 2-year German yields nearly 20bp higher on the day. US session includes a 20-year bond auction. Cash trading was closed
in Tokyo for a Japanese holiday. The market sees a roughly 80% chance of a 25 basis point increase at the Fed’s meeting this week.  10-year yields around 3.535%, 2 year yield ~4.11%.     

METALS: 

Gold extended a decline for a second day as fears of a full-blown banking meltdown eased and attention turned to a Federal
Reserve rate decision on Wednesday. According to the CME FedWatch tool, markets are pricing in a 16.6% chance that the Fed will stand pat at the end of its March 21-22 meeting, with a 83.4% chance of a 25 basis points (bps) hike. Gold may surpass the record
set during the pandemic if the ongoing banking turmoil persists and central banks downshift their rate-hiking cycle, according to Sprott, a top investor in the bullion industry. Spot gold -0.5%, silver -0.3%.            

ENERGY:      

Oil reversed earlier losses as Goldman Sachs predicted the banking crisis will eventually be bullish for the market because
it will hit supply harder than demand. Russia overtook Saudi Arabia to became China’s top oil supplier, shipping about 2 million barrels a day. Saudi flows slipped to the lowest since June, down 29% from January. In other news, French oil major TotalEnergies
is halting the nation’s biggest refinery as strike action over the government’s pension reforms escalates. WTI +1.3%, Brent +1.3%.  Brent held its key 200 week moving average support yesterday.     

CURRENCIES:               

US Dollar Index inched lower, after holding steady earlier in the session with support from recovering US Treasury bond
yields. The dollar dipped, extending a three-day losing streak ahead of tomorrow’s FOMC decision. The euro has put together a 3-day rally and was up again.  Market calm was further restored by limited takeup in daily dollar funding operations from the European
Central Bank and the Bank of England, introduced to ease strains in the global financial system.
The EU ZEW economic sentiment index declined sharply in March while construction output rebounded in January, data released earlier
Tuesday showed. ECB President Christine Lagarde is scheduled to speak at 8:30 am ET, followed by appearances by ECB member Andrea Enria at 9:30 am ET and again at 11:30 am ET.  The Norwegian krone outperformed Group-of-10 currencies, with USD/NOK falling as
much as 1.2%. AUD/USD fell as much as 0.7% in reaction to the dovish RBA meeting minutes.  The RBA will consider pausing its policy tightening cycle next month given rates are already restrictive and the economic outlook remains uncertain, minutes of its March
meeting showed. US$ Index -0.2% GBPUSD -0.2%, USDJPY +0.7%, EURUSD +0.6%, AUDUSD -0.5%, EURJPY +1.2%, NZDUSD -0.75%, USDNOK -1.17%.        

Bitcoin +0.1%, Ethereum +0.3%.

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:

• Assurant (AIZ) raised to outperform at KBW; PT $152
• Boston Properties (BXP) raised to neutral at Goldman; PT $56
• Emerson Electric (EMR) raised to overweight at Morgan Stanley; PT $96
• Filo Mining (FIL CN) raised to buy at Roth MKM; PT C$27
• FleetCor (FLT) raised to outperform at Raymond James; PT $254
• Foot Locker (FL) raised to buy at Citi; PT $50
• Harley-Davidson (HOG) raised to overweight at Morgan Stanley
• Meta Platforms (META) raised to overweight at Morgan Stanley; PT $250
• New York Community Bancorp (NYCB) raised to buy at DA Davidson
• Tanger (SKT) raised to buy at Goldman; PT $22
• Vornado Realty (VNO) raised to neutral at Piper Sandler; PT $16

DOWNGRADES:

• Adobe (ADBE) cut to accumulate at Phillip Secs; PT $402
• Agree Realty (ADC) cut to market perform at JMP
• Armstrong World (AWI) cut to hold at Deutsche Bank; PT $77
• Athenex (ATNX) cut to neutral at Ladenburg Thalmann
• Electrameccanica (SOLO) cut to hold at Stifel; PT 60 cents
• First Industrial Realty (FR) cut to sell at Goldman; PT $48
• Hudson Pacific (HPP) cut to sell at Goldman; PT $5.50
• Oak Street Health (OSH) cut to peerperform at Wolfe
• Profound Medical (PRN CN) cut to hold at Jefferies; PT C$13.69
• SL Green (SLG) cut to sell at Goldman; PT $18

INITIATIONS:

• Alphabet (GOOGL) resumed buy at Stifel; PT $130
• Conmed (CNMD) rated new equal-weight at Wells Fargo; PT $96
• Nvidia (NVDA) rated new buy at Phillip Secs; PT $315
• O’Reilly Automotive (ORLY) rated new hold at Baptista Research; PT $865
• Park Lawn (PLC CN) reinstated buy at Stifel Canada; PT C$34
• Ventyx Bio (VTYX) rated new overweight at Wells Fargo; PT $77
• Vulcan Materials (VMC) rated new hold at Baptista Research; PT $181
• Williams-Sonoma (WSM) rated new hold at Baptista Research; PT $131.50

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC