Cabrera Capital Daily Game Plan

Monday May 1, 2023                                                       Trading Desk: (312) 236-8907

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

DATA/HEADLINES    9:45ET S&P Global US Manufacturing PMI; 10:00ET Construction Spending MoM, ISM Manufacturing

TODAY’S HIGHLIGHTS:  

• JPMORGAN TO MAKE PAYMENT OF $10.6B TO FDIC ON FIRST REPUBLIC
  

Global markets were muted as trading was closed in many major European and Asian markets for a holiday. China’s manufacturing activity unexpectedly shrank in April,
official data showed on Sunday. The official manufacturing purchasing managers’ index declined to 49.2 from 51.9 in March and marked the first contraction since December.  Focus this week will be on the Fed, which meets on May 2-3, and is expected to increase
interest rates by another 25 basis points. The ECB is also expected to raise interest rates by 25bps this week.

EQUITIES: 

US equity futures are slightly lower in cautious trade, as investors assessed JPMorgan’s winning bid to acquire First Republic Bank in an emergency government-led intervention.  JPMorgan
and the Federal Deposit Insurance Corp., which orchestrated the sale, agreed to share the burden of losses, as well as any recoveries.  The deal, announced early today by regulators who said they had seized First Republic, will see the banking giant take $173
billion of loans, $30 billion of securities and $92 billion of deposits of the failed lender. The FDIC estimated in a statement that the cost to the Deposit Insurance Fund would be about $13 billion. The failed bank’s 84 offices will reopen as branches of
JPMorgan Chase Bank from Monday. Meanwhile, investors are anticipating the US central bank to hike interest rates for a 10th consecutive time on Wednesday as it combats still-stubborn inflation.      

Futures ahead of the bell: E-Mini S&P -0.1%, Nasdaq -0.15%, Russell 2000 -0.2%, Dow is flat.  

In pre-market trading, shares in First Republic bank tumbled 45% and has lost 97% of its value this year. JPM gained 3.5%. JPMorgan said it expected to achieve a one-time, post-tax gain
of approximately $2.6 billion after the deal which did not reflect an estimated $2 billion dollars of post-tax restructuring costs likely over the next 18 months. Chinese online brokerage Top Financial Group (TOP) pulls back 38% after rallying more than 1,500%
over the last two trading sessions. Cryptocurrency-exposed stocks slip as Bitcoin drops after climbing for four months through April, the longest streak since March 2021. Marathon Digital (MARA) -3.6%, Riot Platforms (RIOT) -3%. Drugmaker Iveric Bio (ISEE)
jumps 18% after Japan’s Astellas Pharma agrees to buy it for about $5.9 billion. Carvana (CVNA) shares rise as much as 18% after Bloomberg reported late Friday that the online auto retailer’s creditors, who hold about 90% of CVNA’s bonds, have been pitching
to the company ways to pare down debt and improve liquidity. General Motors (GM) shares rise as much as 2.9% Monday after the carmaker was upgraded to overweight from equal-weight at Morgan Stanley.  

The Stoxx 600 is roughly flat, looking at cues after last week’s GDP figures and corporate earnings. All eyes are on the major central bank policy decisions this
week. The vast majority of European markets are closed today due to Labor Day holiday. Energy +0.05%, Utilities +0.05%, Insurance -0.05%. 

Asian stocks rose as benchmarks in Japan and Australia climbed, while most equity markets in the region were closed for holidays. The MSCI Asia Pacific Index gained
0.2%, with Japanese technology names NEC and Keyence among the top contributors to gains. NEC surged 14% on strong results, helping boost the Topix to its highest since September 2021 even as Sony fell following disappointing guidance. Shares in Australia
rose amid expectations the central bank will keep interest rates on hold when it meets tomorrow.  Chinese stocks listed in Hong Kong will be in focus when trading resumes Tuesday, after data showing consumer spending surged while the housing market continued
to rebound. Still, an unexpected contraction in manufacturing activity in April confirmed that the broader economic recovery remains uneven. Onshore markets will be shut through Wednesday. Topix +1%, ASX 200 +0.35%.

FIXED INCOME: 
 

US treasury yields are cheaper by up to 7bp across front-end of the curve with 2s10s, 5s30s spreads flatter by ~3.5bp and ~2.5bp on the day. Cash bond trading was
closed in Europe for the May Day holiday.  10-year yield is around 3.46%, near middle of last week’s range. The prospect of higher rates helped lift 10-year yields after they plunged last week amid worries about the health of the economy. Today’s focal points
include PMI and ISM manufacturing data. Ahead of Wednesday’s policy announcement, Fed-dated OIS firms slightly to price in around 24bp of hike premium for the meeting, up from 22bp at Friday’s close.      

METALS: 

Gold reversed early losses, pressured by rising Treasury yields and a stronger dollar, as the Federal Reserve looks set to raise interest rates again this week. On
Friday, US data showed labor costs had accelerated more than forecast, underlining the persistence of inflationary pressures in the economy. That keeps the Fed on course to raise interest rates at its May 2-3 meeting by a quarter point to 5.25%, a level not
seen since 2007. Gold is flat, silver +1.4%.       

ENERGY:  

Oil fell as concern over the economic impact of the US Federal Reserve potentially raising interest rates and weaker Chinese manufacturing data outweighed support
from new OPEC+ supply cuts taking effect this month. Brent and WTI fell by more than 2% each after rallying on Friday.  However, crude oil prices could recover and reach much higher levels given major oil companies’ optimistic short-term outlooks, OANDA analyst
Edward Moya said in a note over the weekend.  A record 19.7 million rail trips were made in China on Saturday, the first day of a five-day holiday, local media The Paper reported. WTI -2.2%, Brent -2%.     

CURRENCIES:         

The yen weakened while the greenback and the Australian dollar strengthened.  The Japanese currency has fallen to a two-month low against the dollar amid the central
bank’s decision to keep its main stimulus measures unchanged. Focus turns to the key rate decisions with RBA on Tuesday, Fed on Wednesday and ECB on Thursday. US$ Index +0.15% GBPUSD -0.3%, USDJPY +0.4%, EURUSD -0.1%, AUDUSD +0.3%, USDNOK +0.5%.                                       

Bitcoin -2.8%, Ethereum -2.5%.  Bitcoin climbed for a fourth month in April, the longest such stretch since a six-month advance through March 2021. In the past decade,
four-month winning runs foreshadowed an average surge of 260% over the subsequent year.   

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:

• Alignment Healthcare (ALHC) raised to outperform at Raymond James
• Allbirds (BIRD) raised to outperform at Telsey; PT $1.50
• Argo Blockchain ADRs (ARB LN) raised to buy at HC Wainwright; PT $2.50
• AvalonBay (AVB) raised to neutral at Piper Sandler; PT $193
• Biogen (BIIB) raised to buy at Guggenheim; PT $350
• Canfor Pulp Products (CFX CN) raised to outperform at CIBC; PT C$3.50
• Canopy Growth (WEED CN) raised to market perform at BMO; PT C$1.70
• Carter Bankshares (CARE) raised to outperform at Raymond James; PT $17
• Columbia Banking (COLB) raised to overweight at Stephens; PT $30
• Comcast (CMCSA) raised to buy at BofA; PT $49
• Essex Property (ESS) raised to overweight at Piper Sandler; PT $271
• General Motors (GM) raised to overweight at Morgan Stanley; PT $38
• Iamgold (IMG CN) raised to outperform at BMO; PT C$4.41
• Manitowoc Co (MTW) raised to equal-weight at Wells Fargo; PT $17
• Otis Worldwide (OTIS) raised to equal-weight at Wells Fargo; PT $88
• Scotts Miracle-Gro (SMG) raised to buy at Stifel; PT $80
• Teradata (TDC) raised to buy at Guggenheim; PT $62

DOWNGRADES:

• Doximity (DOCS) cut to equal-weight at Wells Fargo; PT $37
• Exxon (XOM) cut to neutral at Goldman; PT $125
• Iveric bio (ISEE) cut to neutral at Guggenheim
• SQM ADRs (SQM/B CI) cut to sector perform at Scotiabank; PT $86
• South Atlantic Bancshares (SABK) cut to neutral at Janney Montgomery
• Valley National (VLY) cut to market perform at Raymond James

INITIATIONS:

• Coherus Bio (CHRS) rated new buy at Truist Secs; PT $24
• Danaher (DHR) rated new outperform at SVB; PT $300
• Edgewise Therapeutics (EWTX) rated new buy at Truist Secs; PT $25
• Endeavor Group (EDR) rated new buy at Guggenheim; PT $33
• Invivyd Inc (IVVD) rated new buy at HC Wainwright; PT $5
• Kineta Inc (KA) rated new buy at HC Wainwright; PT $8
• Kinetik (KNTK) rated new peerperform at Wolfe
• Linde (LIN) rated new outperform at BNPP Exane; PT $398
• MoonLake Immunotherapeutics (MLTX) rated new buy at Guggenheim; PT $51
• Reunion Neuroscience Inc (REUN CN) rated new buy at ThinkEquity; PT C$6.79
• TD SYNNEX (SNX) reinstated buy at Goldman; PT $101
• Treace Medical (TMCI) rated new buy at Truist Secs; PT $33

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC