Cabrera Capital Daily Game Plan

Monday March 27, 2023                                                        Trading Desk: (312) 236-8907

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

DATA/HEADLINES   8:30ET Dallas Fed Manufacturing Activity; 1:00ET 2 Year Note Auction; 5:00ET Fed’s Jefferson speaks

TODAY’S HIGHLIGHTS:  

• Jack Ma returned to China after more than a year of traveling overseas
  
• The chairman of Credit Suisse’s largest shareholder resigns
• Russia Is Helping Iran with Advanced Digital Surveillance
  

Global shares inched higher after First Citizens BancShares soothed markets on Monday by saying that it would take the deposits and loans of failed Silicon Valley
Bank. The deal offered markets some respite from several weeks of fresh banking collapses. Overall, the mood remained jittery due to concerns about banking stress and the impact on global growth. German business morale unexpectedly rose in March, adding to
signs that Europe’s largest economy is stabilizing despite recent turmoil in the banking sector, a survey showed today.  Meanwhile, the slump in Chinese industrial firms’ profits deepened in the first two months of 2023, data from the National Bureau of Statistics
showed.  Profits sank for 28 of 41 major industrial sectors during the period. Also in focus are renewed geopolitical tensions, with Russia to station tactical nuclear weapons in Belarus.                                          

EQUITIES: 

US equity futures moved higher as the prospect of further support from US authorities eased some concerns over the troubled regional banking sector. First Republic Bank shares jumped
as much as 34%, leading regional peers higher, after Bloomberg reported that US authorities are considering expanding an emergency lending facility that would give the lender more time to boost its balance sheet. First Citizens snapped up SVB in a deal that
includes about $72 billion of assets at a discount of $16.5 billion, the FDIC said. The FDIC will receive equity appreciation rights in First Citizens worth as much as $500 million and hold on to about $90 billion in assets. Earnings guidance looks too high
after banking sector turmoil, Morgan Stanley’s Michael Wilson said.  JPMorgan said this quarter probably marked the high point for stocks this year and it doesn’t expect any big improvement in equities risk-reward until the Fed signals rate cuts.

Futures ahead of the bell: E-mini S&P +0.7%, Nasdaq +0.4%, Russell 2000 +1.2%, Dow +0.7%. 

In pre-market trading, First Citizens BancShares (FCNCA) climbed 24% after it agreed to buy all deposits and loans of SVB.  First Republic (FRC) shares jump 27%, with peers Western Alliance
(WAL) +5.2%, PacWest Bancorp (PACW) +9.1%. KeyCorp (KEY) gains over 9% after the lender is upgraded to buy from neutral at Citi along with peer M&T Bank (MTB +4.4%). Schwab (SCHW) +2.3%, Truist Financial (TFC) +2.0%, JPMorgan (JPM) +2.0%. Silvergate Capital
(SI) +19.8%; Berkshire Grey (BGRY) +18.4% after agreeing to be acquired by Softbank for $1.40/share. Corning (GLW) rose 2.4% on low volumes after it was raised to buy from hold at Deutsche Bank. Iovance Biotherapeutics (IOVA) rises as much as 12% after the
biotech company completed its Biologics License Application submission to the FDA for its cancer treatment lifileucel.  Roku (ROKU) rises 3.4% after Susquehanna Financial raised the recommendation on the streaming-video platform to positive from neutral.

European equities climbed, with a gauge of bank stocks in the green. Deutsche Bank rose and Credit Suisse was steady after last week’s steep losses. Novartis AG surged,
dragging healthcare peers higher, after promising trial results for a cancer drug. Airports and bus and train stations across Germany were at a standstill this morning, causing disruption for millions at the start of the working week during one of the largest
walkouts in decades. Companies are returning to Europe’s bond market in the busiest day for deals since before the collapse of Silicon Valley Bank, with issuers seeking to capitalize on a calmer day amid the recent market turmoil. Stoxx 600 +1.2%, DAX +1.3%,
CAC +1.1%, FTSE 100 +0.9%. Autos +2.1%, Healthcare +1.9%, Travel and Banks +1.7%.  Basic Resources lag, but still up 0.3%.

Shares in Asia were mostly lower as traders continued to monitor the health of the global financial sector, while a slew of lackluster earnings dragged down Chinese
technology firms. The MSCI Asia Pacific Index dropped 0.5%, with Hong Kong leading the decline. Chinese tech shares slid 2.8% after Meituan and Xiaomi’s earnings disappointed. China saw profits for industrial firms shrink 22.9% in the first two months of this
year, as its factories struggled to come out of the COVID-related disruptions. Australian energy stocks fell as the government expects to win approval for its climate policy. Hang Seng Index -1.75%, Indonesia -0.8%, Taiwan -0.5%, CSI 300 -0.35%, Kospi -0.25%.
Vietnam +0.5%, Topix +0.3%, Sensex +0.2%, ASX 200 +0.1%.

FIXED INCOME: 
 

Treasury yields rose across the curve, paring some of last week’s plunge. US 10-year yield rose about nine basis points. Treasuries extend losses into early US session
with front-end leading the move lower, leaving 2-year yields cheaper by 16bp on the day, paced by bear-flattening in core European rates.  Treasury auction cycle beings with 2-year note sale at 1:00ET and 5- and 7-year sales Tuesday and Wednesday.               

METALS: 

Gold slipped after rising last week to a one-year high after surging almost 10% over the previous three weeks. Gold prices fell sharply on Monday and the dollar held
steady after authorities and regulators gave assurances that the broader financial system is sound. The banking crisis has curbed expectations for more rate hikes by the Fed, with swaps traders now pricing in multiple cuts this year.  Data showing the Fed’s
preferred measure of underlying price pressures will be released on Friday and is expected to show inflation remains elevated well above the central bank’s target.   Spot gold -1.3%, silver -1%.          

ENERGY:      

Oil prices climbed while nursing losses of almost 10% for the month as worries about global growth undermine commodities in general.  Russia’s diesel exports are
set to reach a record this month as countries including Turkey and Morocco step up purchases. Apparent crude demand in China may expand by 5.1% in 2023, China National Petroleum said. Saudi Aramco, the world’s biggest oil producer, has agreed to buy a 10%
stake in a giant oil complex in China for $3.6 billion, in a deal that will significantly expand its refining presence in China. Aramco and its Chinese partners agreed to build a complex in China that will include a 300,000 b/d refinery, while Libya signed
a deal with Honeywell to build a 30,000 b/d plant. Meanwhile, the Iraqi federal government and Kurdish officials failed to agree on the resumption of around 400,000 barrels a day of oil exports from a Turkish port. WTI +1.1%, Brent +1.1%.    

CURRENCIES:               

In FX markets, trading was mixed among Group-of-10 currencies. The dollar was steady after the Fed’s Neel Kashkari said bank turmoil increased the risk of a recession.
Kashkari said on Sunday officials were watching “very, very closely” to see if the banking stress led to a credit crunch that threatened to tip the economy into recession.  The euro saw a modest reaction to data showing that Germany’s business outlook unexpectedly
improved to the highest in more than a year.  US$ Index -0.05%, GBPUSD +0.3%, EURUSD +0.15%, USDJPY +0.6%, EURJPY +0.7%, USDCHF -0.4%, AUDUSD is flat.           

Bitcoin +0.5%, 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:

• Conmed (CNMD) raised to overweight at KeyBanc; PT $124
• Corning (GLW) raised to buy at Deutsche Bank; PT $38
• Equinix (EQIX) raised to outperform at BMO; PT $785
• KeyCorp (KEY) raised to buy at Citi; PT $20
• M&T Bank (MTB) raised to buy at Citi; PT $155
• Marqeta (MQ) raised to outperform at Wolfe; PT $5.50
• Regeneron (REGN) raised to outperform at SVB; PT $976
• Roku (ROKU) raised to positive at Susquehanna; PT $75
• Victory Capital (VCTR) raised to overweight at Piper Sandler; PT $35
• Virtus Investment (VRTS) raised to overweight at Piper Sandler; PT $260

DOWNGRADES:

• Caterpillar (CAT) cut to underperform at Baird; PT $185
• Frontier (FYBR) cut to underweight at Morgan Stanley; PT $19
• Leidos (LDOS) cut to hold at Jefferies; PT $95
• Ollie’s Bargain (OLLI) cut to sell at Citi; PT $49
• Remitly (RELY) cut to peerperform at Wolfe
• United Rentals (URI) cut to underperform at Baird; PT $300
• Wingstop (WING) cut to underperform at Jefferies; PT $160

INITIATIONS:

• Atlas Air (AAWW) reinstated market perform at Cowen; PT $102.50
• MDP CN (MDP CN) rated new speculative buy at Echelon Wealth; PT C$3
• Model N (MODN) rated new overweight at Morgan Stanley; PT $43
• Tenable (TENB) rated new hold at WestPark Capital
• iQIYI ADRs (IQ) rated new buy at Western Sec.

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC