Cabrera Capital Daily Game Plan

Thursday May 4, 2023                                                       Trading Desk: (312) 236-8907

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

DATA/HEADLINES    8:15ET ECB rate decision; 8:30ET Trade Balance, Weekly Jobless Claims, Nonfarm Productivity, Unit
Labor Costs; 8:45ET ECB’s Lagarde speaks

ECB RAISES DEPOSIT FACILITY RATE BY 25BPS TO 3.25%; EST. 3.25%

TODAY’S HIGHLIGHTS:  

•  US government agencies are reviewing Goldman’s role in SVB’s attempt to raise funds
  

Global shares are on the defensive a day after the US Federal Reserve raised interest rates but indicated that it could hold off on further hikes. Today, the ECB
is expected to slow the pace of rate increases after its preferred measure of inflation dipped for the first time in 10 months. Economists expect the ECB to raise its borrowing rates for a seventh meeting in a row, although the consensus is for a smaller quarter-point
move rather than the half-point jumps it has been favoring recently.  Norway’s central bank raised its benchmark interest rate by 25 basis points to 3.25%, as expected, and added it was likely to hike again in June. China’s economic recovery showed further
signs of imbalance, with manufacturing activity contracting for the first time in months while a surge in holiday travel fueled consumer spending. Unemployment, especially among young people, remains high while households are still boosting savings.  

EQUITIES: 

US equity futures are lower as focus remains on regional banks with PacWest slumping ~38% in the premarket amid reports they are weighing their strategic options, including a sale.  PacWest
said its deposits rose since March and confirmed it’s talking with potential investors in a bid to calm markets. Western Alliance was down 22%, though it claimed it hasn’t seen unusual deposit flows. The Fed hinted that the latest hike could be the last one
in its policy decision Wednesday, although pushed back against market expectations of rate cuts this year. Fed chair Powell suggested officials may pause their tightening campaign in June to assess how the US economy is responding to tighter credit conditions
resulting from higher interest rates and recent stress in the banking sector. He pushed back strongly against market expectations that the Fed will be cutting rates by year-end.  Also, in focus this week are first quarter earnings reports and Friday’s jobs
report for April.         

Futures ahead of the bell: E-Mini S&P -0.35%, Nasdaq -0.1%, Russell 2000 -0.8%, Dow -0.3%  

 In pre-market trading, First Horizon (FHN) fell over 42% after TD scrapped its planned $13.4 billion acquisition of the Memphis-based bank, citing uncertainty over a regulatory approval
timeline. TD will fork out $200 million in cash to First Horizon. Arconic (ARNC) shares rise 28%; private equity firm Apollo Global Management nears a deal to buy the industrial-parts manufacturer, WSJ reports. Cognizant Technology Solutions (CTSH) shares
are up 3.6%, after the IT services company reported first-quarter results that beat expectations. Sensus Healthcare Inc. (SRTS) sinks 48% after the medical device company swung to a net loss in the 1Q and posted revenue that fell 67% from the year-ago period.
SolarEdge Technologies (SEDG), jumps as much as 12%, after its first-quarter profit and revenue topped estimates.  Upwork (UPWK) shares drop as much as 14%, set to hit a three-year low, after the online recruitment company cut its full-year revenue forecast.
Apple’s sales may have dropped for a second quarter when it reports post-market, though share buybacks may hold up. Analysts see revenue down 5% year on year.  

European stocks fell as investors waited for another European Central Bank rate rise after the US Federal Reserve signaled that its marathon hiking run might finally
have hit pause. The Stoxx 600 is down 0.8% with most industry groups in the red.  Media, real estate and autos are the worst-performing sectors. Energy names outperform, led higher by Shell, who maintained the pace of share buybacks after quarterly profit
topped estimates.  Outperformers: Anglo-Eastern Plantations +2.9%, Next +2.4%, Pendragon +1.8%.  Underperformers: Asos -5.5%, Currys -3.3%, Hilton Food -2.9%. DAX -0.8%, CAC -1%, FTSE 100 -0.8%. Media -3.8%, REITs -1.7%, Technology -1.6%, Autos -1.4%. Energy
+0.3%.   

Asian stocks were mostly higher as the dollar weakened on bets the Federal Reserve will pause interest-rate hikes. The MSCI Asia Pacific Index gained 0.5% with energy
shares leading the advance.  China’s benchmark CSI 300 index opened weaker as mainland markets returned after their May Day holidays but rebounded to end broadly unchanged. Concerns remain about the pace of China’s economic rebound despite strong holiday spending
figures, as data showed factory activity struggled in April. China Caixin PMI-manufacturing missed 49.5 vs 50 expected, pointing to a contraction in factory output for the first time since January.  Hong Kong led gains in the region, rising more than 1%. Hang
Seng Index +1.3%, Philippines +1.2%, Sensex +0.9%, Shanghai Composite +0.8%, Taiwan +0.35%, Kospi -0.02%, ASX 200 -0.05%, Vietnam -0.8%. Japan was close for holiday.

FIXED INCOME: 
 

Treasuries are slightly cheaper across the curve along with European bond markets ahead of ECB rate decision at 8:15ET.  US yields are higher by less than 2bp across
the curve with spreads mixed after steepening sharply after Wednesday’s Fed rate increase and pause signal; 10-year yields around 3.34%. US Treasury market was closed during the Tokyo session as the Golden week holiday continues.       

METALS: 

Gold steadied after jumping to the highest in more than a year as a combination of the Federal Reserve likely pausing interest-rate hikes and mounting risks in the
US economy spurred demand. Bullion jumped as much as 1.2% to levels not seen since Russia invaded Ukraine in early trading, before paring gains. Spot gold is still within range of its all-time high of $2,075.47 an ounce reached in August 2020 as the coronavirus
wracked the global economy. While Chair Jerome Powell threw cold water on expectations for rate cuts, the shift in tone is fueling bets on potential easing later in the year, supporting gold’s rally. Swaps traders now see the central bank cutting rates as
early as September.  Spot gold +0.2%, silver +0.2%.       

ENERGY:  

Oil moved slightly higher, attempting to snap a three-day losing streak that’s sent the global benchmark to its low of the year amid worries over the economic outlook.
Crude has suffered a rout that’s taken the US benchmark down nearly 11% so far this week and Brent off more than 9% on fears of a collapse in consumer demand given the uncertainties surrounding the banking sector and worries that a recession may be looming.
Doubts about Russia’s commitment to a 500,000 barrel-a-day production cut that it pledged to continue through year-end have also undercut crude prices, analysts said. Russia’s deputy prime minister, Alexander Novak, on Thursday said the country was abiding
by the cut. WTI -0.1%, Brent +0.25%.     

CURRENCIES:         

The dollar edged lower and remained under pressure after the Federal Reserve opened the door to a pause in rate rises. The euro drifted ahead of an expected ECB interest
rate hike. Traders have priced in a 25 basis-point hike by the ECB, with a slim possibility of a bigger increase. Many in the market expect the ECB to signal more tightening may be on its way even as the Fed hinted at a pause. A divergence in policy between
the two central banks could push the euro higher against the dollar in the coming months. US$ Index -0.1% GBPUSD +0.1%, USDJPY -0.2%, EURUSD is flat , AUDUSD +0.1%, NZDUSD +0.6%, USDNOK -0.6%.       

Bitcoin +2.5%, Ethereum 2%.    

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:

• BIP US (BIP) raised to reduce at Veritas Investment Research Co
• Blackbaud (BLKB) raised to outperform at Baird; PT $84
• Builders FirstSource (BLDR) raised to outperform at RBC; PT $135
• Cemex ADRs (CEMEXCPO MM) raised to buy at Goldman; PT $9
• Cerevel Therapeutics (CERE) raised to overweight at Wells Fargo; PT $30
• Design Therapeutics (DSGN) raised to neutral at Goldman; PT $6
• FCR-U CN (FCR-U CN) raised to buy at Veritas Investment Research Co
• Green Brick (GRBK) raised to buy at B Riley; PT $48
• Hersha Hospitality (HT) raised to buy at B Riley; PT $9
• Ionis Pharma (IONS) raised to neutral at Citi; PT $36
• Neurocrine Bio (NBIX) raised to buy at Guggenheim; PT $145
• Qorvo (QRVO) raised to buy at Summit Insights
• Weave (WEAV) raised to outperform at Raymond James; PT $6
• Werner Enterprises (WERN) raised to overweight at Stephens; PT $55
• Wix.com (WIX) raised to outperform at Raymond James; PT $96

DOWNGRADES:

• Builders FirstSource (BLDR) cut to neutral at Baird; PT $96
• DHT Holdings (DHT) cut to hold at Jefferies; PT $10
• Fulcrum Therapeutics (FULC) cut to neutral at Goldman; PT $3
• Hydrofarm (HYFM) cut to hold at Truist Secs
• Iveric bio (ISEE) cut to neutral at Baird
• Revolve Group (RVLV) cut to market perform at Raymond James
• Spirit Aero (SPR) cut to market perform at Cowen; PT $28
• TPVG US (TPVG) cut to equal-weight at Wells Fargo; PT $10
• Upwork (UPWK) cut to neutral at BofA; PT $9
• Wingstop (WING) cut to neutral at Citi; PT $224

INITIATIONS:

• Absci (ABSI) rated new buy at HC Wainwright; PT $4
• ZoomInfo (ZI) rated new buy at DA Davidson; PT $30

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC