Cabrera Capital Daily Game Plan

Wednesday March 22, 2023                                                        Trading Desk: (312) 236-8907

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

DATA/HEADLINES    2:00ET FOMC Rate Decision; 2:30ET Fed Chair Powell’s press conference

Treasury, Fed, FDIC officials brief Senate Banking Committee on bank failures

TODAY’S HIGHLIGHTS:  

• Janet Yellen to appear at Senate subcommittee hearing
  
• A bomb cyclone slammed into Northern California, causing power outages and grounding flights
  
• China approved its first independently developed mRNA Covid vaccine
  

Global markets were cautiously higher as investors brace for the US policy decision this afternoon. Focus will be on the Fed as Chair Jerome Powell tries to balance
his campaign to conquer inflation against a sudden banking crisis. The complexities confronting global central banks were underscored by data from the UK showing inflation unexpectedly accelerated in February, surpassing all economists’ forecasts on the eve
of a rates decision from the BOE. Data showing British inflation unexpectedly rose to 10.4% in February boosted expectations for a quarter point rate hike at Thursday’s Bank of England meeting. Meanwhile, ECB President Christine Lagarde said the central bank
will take a “robust” approach that allows it to respond to inflation risks as needed but also aid financial markets if threats emerge.                                             

EQUITIES: 

US equity futures steadied as investors prepared for the Federal Reserve’s much-anticipated interest-rate decision. Sentiment improved following comments from Treasury Secretary Janet
Yellen, who said the US government could intervene if the stability of smaller lenders is threatened.        

Futures ahead of the bell: E-mini S&P -0.05%, Nasdaq -0.2%, Russell 2000 -0.1%, Dow -0.1%. 

In pre-market trading, Virgin Orbit Holding (VORB) gained 63% after the satellite launch company said it was resuming some operations. GameStop reported a surprise
profit in the fourth quarter and beat analysts’ estimates for revenue, sending the shares soaring about 50%, heading for its biggest move in two years. Nike slipped over 1% as profitability trailed consensus on markdowns and increased costs. First Republic
Bank (FRC US) shares slipped 5% as all eyes remained on how talks aimed at shoring up the midsize lender were progressing. Krispy Kreme (DNUT) gains about 3% after Truist upgraded the donut-maker to buy, fueled by expectations of a further roll-out of test
sales at McDonald‘s stores in the US. Ollie’s Bargain Outlet Holdings (OLLI) rises 11% after the discount retailer forecast year adjusted earnings per share that beat the average analyst estimate. Petco (WOOF) falls 6% after reporting 4Q adjusted earnings
per share that missed estimates. Winnebago Industries (WGO) rises 5% after posting 2Q adjusted earnings per share that beat.

European stocks rose slightly as investors weighed sticky UK inflation and an impending rate decision by the Federal Reserve, The Stoxx Europe 600 Index was slightly
higher, with banks leading gains as fears about the financial system eased. European investors were focused on UBS after the bank said Wednesday it wanted to buy back some of its euro-denominated senior unsecured bail-in notes in the wake of its rescue of
Credit Suisse. UBS fell after erasing almost all of the losses made during the recent banking rout. Moody’s said none of Europe’s 11 remaining mega-banks, including Deutsche Bank and BNP Paribas, show the credit profile weaknesses that led to loss of confidence
in Credit Suisse. Goldman’s European strategists said the region’s banks have never been cheaper and offer “good asymmetry to the upside.”  UK inflation accelerated for the first time in four months after food and drink prices soared at the fastest pace in
45 years.  Stoxx 600 +0.25%, DAX +0.55, CAC +0.3%, FTSE 100 +0.1%. Retail +1.3%, Banks +1.3%, Autos +1%, Food & Bev +0.9%. REITs -3%, Basic Resources -0.5%.

Shares in Asia gained with the region’s financial shares making its biggest advance in more than two months, as concerns over a global banking crisis abated. The
MSCI Asia Pacific Index climbed 1.4% as firms including Mitsubishi UFJ and Commonwealth Bank of Australia jumped. The Hang Seng Index was among the top gainers in Asia, boosted by tech names, while indices in Japan rose in catch-up trade after a holiday. Shares
of Japanese banks including Mitsubishi UFJ and Sumitomo Mitsui rebounded as some analysts said they see AT1 bond issuance risk as limited in the country as capital ratios meet the minimum requirement.  LG Energy and other Asia suppliers of battery materials
advanced after Tesla shares soared overnight and Nomura made a bullish call on the sector.  China automakers rose after Beijing released guidelines to encourage auto consumption. Nikkei 225 +1.9%, Hang Seng Index +1.7%, Taiwan +1.6%, Kospi +1.2%, Vietnam +0.8%,
CSI 300 +0.4%, Sensex +0.25%.

FIXED INCOME: 
 

Treasury yields fluctuated after a surge on Tuesday that added 19 basis points to the two-year yield and 12 basis points to the 10-year yield. Traders placed greater
odds that the Fed will raise interest rates 25 basis points after market pricing was split between a hike and a pause earlier in the week. The belly outperforms, steepening 5s30s and unwinding a portion of Tuesday’s sharp flattening move. US 10-year yields
around 3.62%, slightly richer on the day. 2 year yield ~4.3%. 2/10 curve flattens by 5bps.         

METALS: 

Gold steadied and copper gained before a highly anticipated Federal Reserve rate decision that will likely provide fresh direction to metals. The collapse of three
US regional banks and the turmoil at Credit Suisse Group AG saw bullion surge 6.5% last week on haven demand but has eased back this week. Attention now turns to a key Fed rate decision, as it attempts to balance the need to rein in inflation with the sudden
banking crisis.  Meanwhile copper inventories have continued to drop recently, a sign the market could be tightening. Stockpiles in Shanghai fell 15% last week, while those immediately available to withdraw from the London Metal Exchange are down more than
quarter since Friday. Spot gold is flat, silver +0.1%.             

ENERGY:      

Oil prices were slightly lower as investors awaited an official reading on US inventories after industry data showed a rise in crude stocks and stood by for a Federal
Reserve interest rate decision. API reported a 3.3 million barrel rise in US crude inventories last week. WTI traded near $69 a barrel after rising almost 4% over the previous two sessions.  Meanwhile, Russia has decided to keep its output at a reduced level
through June.  WTI and Brent are down ~0.5%.      

CURRENCIES:               

The pound rallied to a six-week high after a surprise rise in UK inflation increased pressure for action from the Bank of England. Sterling extended gains as traders
firmed up bets on a quarter-point hike on Thursday. US $ Index traded near its weakest level in a month as traders pared back expectations for a hawkish Federal Reserve decision this week following the banking sector turmoil.  The Aussie$ rose against all
its Group-of-10 peers amid the risk-on mode. US$ Index -0.2%, GBPUSD +0.45%, USDJPY +0.3%, AUDUSD +0.25%, EURUSD +0.2%, EURJPY +0.5%.         

Bitcoin +0.2%%, Ethereum -0.7%.

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:

• Disney (DIS) raised to buy at Fubon; PT $126
• DoubleVerify (DV) raised to overweight at KeyBanc; PT $30
• Enphase Energy (ENPH) raised to positive at Susquehanna; PT $275
• Krispy Kreme (DNUT) raised to buy at Truist Secs; PT $20
• Meta Platforms (META) raised to overweight at KeyBanc; PT $240
• Nike (NKE) raised to overweight at Barclays; PT $154
• PulteGroup (PHM) raised to outperform at Wolfe; PT $64
• Roper (ROP) raised to neutral at JPMorgan; PT $420
• Ross Stores (ROST) raised to buy at Loop Capital; PT $115
• Semtech (SMTC) raised to buy at B Riley; PT $52
• So-Young ADRs (SY) raised to buy at Citi; PT $3
• Spotify (SPOT) raised to buy at Guggenheim; PT $155
• Transocean (RIG) raised to buy at Clarksons Platou; PT $7.50
• Warner Music (WMG) raised to buy at Guggenheim; PT $36

DOWNGRADES:

• Altimmune (ALT) cut to neutral at Goldman; PT $6
• Apple Hospitality (APLE) cut to neutral at Compass Point; PT $17
• Cyxtera Technologies (CYXT) cut to market perform at Raymond James
• D.R. Horton (DHI) cut to peerperform at Wolfe
• Host Hotels (HST) cut to neutral at Compass Point; PT $18
• Invitation Homes (INVH) cut to neutral at Mizuho Securities; PT $32
• Lufax ADRs (LU) cut to add at Citic Securities; PT $2.10
• Luminar (LAZR) cut to sell at Goldman; PT $5
• Sunstone Hotel (SHO) cut to sell at Compass Point; PT $9

INITIATIONS:

• Academy Sports & Outdoors (ASO) rated new outperform at Baird; PT $80
• EPR Properties (EPR) rated new market perform at JMP
• Howmet Aerospace (HWM) rated new buy at Jefferies; PT $50
• Intuitive Surgical (ISRG) rated new outperform at Daiwa; PT $267
• Live Nation (LYV) rated new neutral at Roth MKM; PT $72
• MoonLake Immunotherapeutics (MLTX) rated new outperform at Wedbush
• NYCB US (NYCB) reinstated strong buy at Raymond James; PT $13
• Open Text (OTEX CN) reinstated equal-weight at Barclays; PT $41
• Procore Technologies (PCOR) rated new buy at DA Davidson; PT $72
• TFF Pharmaceuticals (TFFP) rated new buy at JonesTrading; PT $7
• Tricon (TCN CN) rated new buy at Mizuho Securities; PT C$12.36
• Verrica Pharma (VRCA) rated new buy at Jefferies; PT $10

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC