Cabrera Capital Daily Game Plan

Friday May 5, 2023                                                       Trading Desk: (312) 236-8907

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

DATA/HEADLINES   8:30ET Employment Report*; 1:00ET Fed’s Bullard, Cook speak

Happy Cinco de Mayo!!

TODAY’S HIGHLIGHTS:  

• US APRIL PAYROLLS INCREASE 253,000; EST. 185,000
• US APRIL UNEMPLOYMENT RATE FALLS TO 3.4% VS 3.5%

Global markets nudge higher as calm is returning to markets as investors scoop up beaten-down shares after days of turmoil in US regional bank stocks. Focus is shifting
to the US jobs report and speculation that the Federal Reserve might start lowering interest rates in response to tighter credit conditions. Swap contracts are now showing around one-in-two odds of a cut as soon as July. Redemptions from global stock funds
reached $6.6 billion in the week through May 3, the most in more than two months, according to EPFR Global data. China’s Caixin services PMI fell more than expected to 56.4 in April, putting the composite gauge at 53.6 and adding to concerns about the recovery.
Indonesia’s GDP rose 5% in the first quarter, in line with consensus. Philippine inflation cooled to a slower-than-expected 6.6% in April. Singapore retail sales rose 4.5% year on year in March, beating estimates for a decline. 

EQUITIES: 

US equity futures rose ahead of key US jobs data as regional banks clawed back some of their recent selloff.  PacWest Bancorp jumped as much as 26% and Western Alliance
Bancorp added 15% in premarket trading. Both companies plunged this week, dragging the S&P 500 down for four straight days and the KBW Bank Index recording an 11% drop this week on fears about mounting stress in the financial system.  In what could come as
a relief for smaller lenders, Bloomberg News reported Thursday that the Federal Deposit Insurance Corp. is poised to exempt them from kicking in extra money to replenish the deposit insurance fund. Those with less than $10 billion in assets wouldn’t have to
pay, the report said. The FDIC is planning to release as soon as next week a highly anticipated proposal for refilling the fund. Strong earnings also lifted investor sentiment as Apple rose after iPhone sales were higher than expected. Still, overall sales
dipped 2.5% and it expects another revenue drop this quarter.

Futures ahead of the jobs data: E-Mini S&P +0.7%, Nasdaq +0.6%, Russell 2000 +1%, Dow +0.5%  

In pre-market trading, PacWest’s shares gained as much as 26%, while peers Western Alliance Bancorp and First Horizon Corp. rose 15% and 7%. DraftKings jumped 12% after the sports-betting
company raised its revenue guidance for the full year. Coinbase Global climbed over 8% after quarterly revenue topped estimates. Carvana surged as much as 40% following earnings that beat estimates. Lyft sank 15% in late trading after its revenue forecast
and active riders missed expectations. DoorDash gained over 4% as sales topped estimates on strong demand for takeout deliveries. Atlassian (TEAM) falls as much as 16% after the software company forecast revenue for the fourth quarter that missed estimates.
Bill Holdings (BILL) shares are up 15% after the financial software company raised its full-year forecast. Block Inc. (SQ) gained as much as 5% after an earnings beat. Trupanion (TRUP) tumbled as much as 47% after the pet-health insurer reported a first-quarter
loss per share that was more than twice the average analyst estimate. Stem Inc. (STEM) rose 11% after the energy storage company reported strong gains in hardware revenue for the first quarter.

European stocks are higher although still on course for their largest weekly fall in seven weeks. The Stoxx 600 is up 0.4% led by outperformance in the energy, mining
and bank sectors. Adidas and IAG rally after profit at both firms topped estimates in the first quarter.  German factory orders fell the most since the pandemic as manufacturing continued to fare worse than other parts, raising risk of recession. Demand declined
11% in March, more than expected, with the slump particularly pronounced in the car and auto parts industry. On Thursday, the European Central Bank delivered the smallest interest-rate increase yet in its battle with inflation and insisted that the move won’t
be the last. DAX +0.8%, CAC +0.6%, FTSE 100 +0.5%. Energy +2%, Banks +1.7%, Autos +1.6%, REITs +1.5%. Food & Bev -0.4%. 

Asian stocks were mixed, with traders shrugging off concerns over further stress among regional US banks. The MSCI Asia Pacific Index rose 0.3%, led by real estate
shares. Some markets in the region, including Japan and South Korea, were shut for holidays. Hong Kong shares outperformed their regional peers, but only up half a percent. Asian lenders have been resilient amid deepening US banking woes, with a regional financials
gauge gaining nearly 1% this week. Chinese financial firms extended recent strength as analysts cited continued optimism from their better-than-expected first-quarter results. Mainland Chinese stocks slipped after latest data showed the pace of expansion in
services activity softened in April, adding to jitters about an uneven economic recovery. The surge in tourism spending during the Golden Week holidays did little to offset the surprise weakness in the manufacturing sector and lackluster earnings. Hang Seng
Tech +1%, Hang Seng Index +0.5%, ASX 200 +0.4%, Taiwan +0.1%, Vietnam flat, CSI 300 -0.3%, Sensex -1.1%.

FIXED INCOME: 
 

Treasuries are slightly cheaper across the curve ahead of April jobs report, as stock futures advance and pare portion of Thursday losses. Treasury yields cheaper
by 2bp to 3bp across the curve with spreads broadly within one basis point of Thursday close: 10-year yields up to around 3.40%, toward top of Thursday range. Headline April payrolls estimate at 185k with whisper at around 190k; risks could be skewed to upside
following blowout ADP report that estimated private payrolls rose 296k in April (vs. consensus 150k).          

METALS: 

Gold prices pulled back after hitting its highest settlement level since August 2020 on Thursday as investors await the latest monthly jobs numbers out of the US.
Investors are likely to favor gold and tech stocks as buffers against the possibility of a US recession, JPMorgan said. Its long duration trade is overweight gold, tech companies and currencies, and short the dollar. The banking crisis has increased demand
for gold as a proxy for lower real interest rates as well as a hedge against a “catastrophic scenario,” the firm said.  Spot gold -0.6%, silver -0.8%.        

ENERGY:  

Oil rose with WTI headed for its first daily advance this week. WTI ended Thursday at its lowest since March 20, with crude continuing to feel pressure from fears
aggressive tightening by the Federal Reserve and other major central banks will spark a steep global downturn, undercutting demand for crude. US crude shipments to China rose to the highest since May 2020 after the country almost tripled purchases in March. 
WTI +2.8%, Brent +2.6%. US Nat Gas is flat.  Brent Crude continues to hold above its key 200 week moving average.    

CURRENCIES:         

The dollar drops versus all Group-of-10 peers except the Swiss franc, which came under pressure after data showed Switzerland’s inflation rate fell to the lowest
in a year. AUD/USD rallied as RBA lowered its forecasts for inflation, wages and broader GDP growth this year, suggesting its 11 interest-rate increases since last May are gaining traction in the economy. US$ Index is flat, GBPUSD +0.3%, USDJPY -0.05%, EURUSD
+0.05%, AUDUSD +0.4%, NZDUSD +0.3%, USDCHF +0.7%.       

Bitcoin +1%, Ethereum +1.8%.    

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:

• Air Canada (AC CN) raised to buy at Citi; PT C$25
• Alnylam (ALNY) raised to outperform at BMO; PT $250
• Altair Eng (ALTR) raised to neutral at Goldman; PT $67
• Avis Budget (CAR) raised to equal-weight at Morgan Stanley; PT $182
• Becton Dickinson & Co (BDX) raised to overweight at Piper Sandler
• Cloudflare (NET) raised to neutral at Guggenheim; PT $7
• Daqo New Energy ADRs (DQ) raised to outperform at Daiwa; PT $45
• Host Hotels (HST) raised to buy at Compass Point; PT $22
• Installed Building (IBP) raised to sector perform at RBC; PT $111
• Kellogg (K) raised to neutral at JPMorgan; PT $72
• Kymera (KYMR) raised to outperform at Raymond James
• Livent (LTHM) raised to outperform at CICC; PT $27.60
• Mueller Water (MWA) raised to outperform at Cowen; PT $19
• NetScout (NTCT) raised to neutral at Piper Sandler; PT $30
• NuStar Energy (NS) raised to outperform at Raymond James; PT $20
• Portillo’s (PTLO) raised to buy at Guggenheim; PT $25
• Redfin (RDFN) raised to neutral at Compass Point; PT $7
• Shopify (SHOP CN) raised to neutral at UBS; PT $64
• SolarEdge (SEDG) raised to buy at Deutsche Bank
• Spin Master (TOY CN) raised to outperform at CIBC; PT C$47
• Travere Therapeutics Inc (TVTX) raised to neutral at Bryan Garnier
• VF Corp (VFC) raised to equal-weight at Wells Fargo; PT $22
• Wesco (WCC) raised to outperform at Baird; PT $180
• Yum China (YUMC) raised to buy at CMB International; PT $76.82

DOWNGRADES:

• Altus Group (AIF CN) cut to sector perform at RBC; PT C$55
• Arconic (ARNC) cut to hold at Benchmark
• Atlassian (TEAM) cut to neutral at Goldman
• AutoCanada (ACQ CN) cut to hold at Canaccord; PT C$18
• Gold Fields ADRs (GFI SJ) cut to underweight at JPMorgan; PT $14
• Ingevity (NGVT) cut to hold at Loop Capital; PT $64
• Intellia Therapeutics (NTLA) cut to market perform at BMO; PT $64
• Iveric bio (ISEE) cut to hold at Stifel; PT $40
• Sapiens (SPNS) cut to underweight at Barclays; PT $24
• SiTime (SITM) cut to equal-weight at Barclays; PT $88

INITIATIONS:

• Bladex (BLX) rated new buy at Nau Securities; PT $37.70
• GeneDx Holdings Corp (WGS) reinstated neutral at Goldman; PT $33
• Lithium Royalty (LIRC CN) rated new outperform at Raymond James
• PLBY Group (PLBY) rated new buy at Jefferies; PT $2.50
• Royal Caribbean (RCL) reinstated outperform at William Blair

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC