Cabrera Capital Daily Game Plan

Friday May 26, 2023                                                                      Trading Desk:
(312) 236-8907

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

DATA/HEADLINES   8:30ET Personal Spending, Personal Income, PCE Deflator, Wholesale Inventories, Advance Goods Trade
Balance, Durable Goods; 10:00ET UofMich Sentiment

TODAY’S HIGHLIGHTS:  

• Norway’s wealth fund will side with climate activists against Exxon and Chevron in an attempt to force changes
  on emissions policy – FT
• Golfer John Daly spent almost $450 at Taco Bell in a single order this week
  

Global stock markets were steady as investors waited for further news on whether US lawmakers will manage to reach a debt agreement. Next week will see the release
of key China PMI data, which are expected to show the manufacturing sector continuing to shrink and growth at service businesses losing steam. Thailand’s central bank will announce its monetary policy decision, while India and South Korea report GDP. Investors
continued to pile into cash in the week through May 24, driven by redemptions in the US and Europe, BofA said, citing EPFR Global data. Equity flows are now flat year to date. Meanwhile, Citigroup Inc. global asset allocation strategists have gone underweight
EU equities as a weaker China will have an impact on the European business cycle.                       

EQUITIES: 

US equity futures fluctuated while Republican and White House negotiators are reportedly moving closer to an agreement to raise the debt limit, while also awaiting
a key inflation reading. The White House and congressional Republicans are putting the final touches on a deal that will raise the US government’s $31.4 trillion debt ceiling for two years while capping spending on everything but military and veterans, according
to a US official. However, items including work requirements for recipients of federal aid were still holding up the deal, the official said. The White House is considering scaling back its plan to boost funding at the IRS to hire more auditors and target
wealthy Americans. Sources said the deal would include a measure to upgrade the electric grid for renewables, while speeding up permits for pipelines and GOP-favored fossil fuel projects. The agreement would leave many details to be sorted out in the weeks
and months ahead. Meanwhile, investors await the Commerce Department’s personal consumption expenditures (PCE) price index figures for April, considered to be the Federal Reserve’s preferred inflation gauge.      

Futures ahead of the bell: E-Mini S&P +0.25%, Nasdaq +0.45%, Russell 2000 +0.2%, Dow +0.2%  

The tech-heavy Nasdaq 100 Index is up 27% in one of the world’s top performances and set for its best start to a year since 1998.  

In US premarket trading, Marvell Technology (MRVL) soared 17% after the chipmaker projected a big increase in revenue from artificial intelligence technologies. Other tech names such
as Salesforce, Advanced Micro Devices and Intel rose more than 1%. Nvidia (NVDA) shares were little-changed, following yesterday’s 24% surge. Tilray Brands (TLRY) plunged 19% after the cannabis producer priced an offering of $150m of unsecured convertible
senior notes. Gap (GPS) shares jump 11% after the apparel retailer produced better-than-expected earnings for the first quarter. Domo (DOMO) shares dropped more than 5% in post-market trading after the application software company’s guidance for 2Q revenue
missed estimates. Workday (WDAY) gained 9% in extended trading, after the software company narrowed its subscription revenue forecast for the year.
PDD Holdings (PDD) shares jump as much as 16% after the e-commerce firm reported higher earnings and lower operating expenses than expected. RingCentral (RNG) is up 4.8% after
Needham upgraded the cloud-based business communications software company to buy from hold. Ulta Beauty (ULTA) falls 9% after the beauty products retailer tempered its annual operating margin outlook.

European indices fluctuated as investors assess progress in the ongoing US debt ceiling negotiations. The Stoxx 600 is making back early gains with a rally in miners and technology countering
losses in bank and telecommunication stocks. Mining stocks jumped the most as metal prices trimmed weekly declines and Rio Tinto rallied ~4% following a ratings upgrade from Morgan Stanley. Tech stocks rose for a second day adding to Thursday’s boost from
Nvidia Corp.’s upbeat outlook. UK stocks are trying to hold onto gains after data showed retail sales unexpectedly rose in April, highlighting resilience in consumer spending despite elevated inflation. Retail sales volumes rose 0.5% in April after a 1.2%
fall in March. Stoxx 600 +0.5%, DAX +0.3%, CAC +0.5%, FTSE 100 +0.3%. Basic Resources +2.7%, Technology +1.3%, Autos +0.7%, Travel +0.6%. Retail -0.4%, Telecom -0.3%, Banks -0.1%.

Shares in Asia advanced, as investors continue to snap up Asian chip names amid hopes that PC demand will begin picking up and strong demand for AI applications will
help offset weakness in other areas.  Hong Kong was closed for a holiday after sliding earlier this week. The tech rally rippled across Asia, lifting companies such as Japan’s Screen Holdings, South Korea’s SK Hynix and Taiwan Semiconductor. The MSCI Asia
Pacific Index rose 0.5% while Taiwan’s benchmark led gains around the region. Japan’s Nikkei 255 rose back toward 33-year highs after the yen weakened, as concerns eased on progress in US debt-ceiling talks. Taiwan +1.3%, Sensex +1%, Nikkei 225 +0.4%, Shanghai
Composite +0.35%, Kospi +0.15%, CSI 300 was flat. Philippines -0.45%, Vietnam -0.1%.    

FIXED INCOME: 
 

Treasuries are richer across the curve with gains led by front-end, steepening spreads from Thursday’s close. Two-year yields are falling 4bps after rising for 10
straight sessions. 10-year yields around 3.78%, 2 year yield ~4.5%. Money markets price in a 50% chance for a 25 basis-point hike by the Fed next month and a 90% chance for such a move in July.  The US session focus includes a flood of economic data, headed
by PCE deflator at 8:30ET.         

METALS: 

Gold gained, helped by a weaker dollar but is still poised for a third straight weekly drop as aggressive remarks by Federal Reserve officials bolstered the case
for a 25-bps rate hike at the June policy meeting. Spot gold +0.6%, silver +1.9%.  

ENERGY:  

Oil prices were stable as the market weighed conflicting messages on supply from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting and worries of weaker-than-expected demand
growth. On Thursday, Russia’s deputy prime minister, Alexander Novak, appeared to pour cold water on prospects for further reductions in remarks to a Russian newspaper. OPEC+ ministers are slated to meet June 4 in Vienna. Oil futures for immediate delivery
continue to command a premium across the forward curve, a condition known as backwardation that usually signifies tight supply.  Meanwhile, European natural gas dropped in the longest run of weekly losses since 2007. WTI +1%, Brent +0.7%, US Nat Gas -1.3%.

CURRENCIES:         

The dollar slipped after four straight days of gains but still remained near a two-month high, buoyed by expectations that US interest rates could remain higher for
longer. In Britain, the pound strengthened after a strong reading of UK retail sales bolstered expectations that interest rates will continue to rise. The Swedish krona is the best performer among the G-10’s. US$ Index -0.3% GBPUSD +0.5%, USDJPY -0.2%,  EURUSD
+0.2% , AUDUSD +0.5%, NZDUSD +0.5%, USDSEK -1%. 

Bitcoin -0.2%, Ethereum =0.1%.     

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:

• Diamond Offshore (DO) raised to buy at Pareto Securities; PT $17
• Guardant Health (GH) raised to buy at Citi; PT $40
• Materialise ADRs (139427Z BB) raised to buy at Kepler Cheuvreux; PT $11
• New Relic (NEWR) raised to outperform at RBC; PT $95
• Nvidia (NVDA) raised to buy at First Shanghai; PT $400
• Paramount Global (PARA) raised to hold at Loop Capital
• RingCentral (RNG) raised to buy at Needham; PT $42
• UWM Holdings (UWMC) raised to buy at Jefferies; PT $7

DOWNGRADES:

• 9 Meters Biopharma Inc (NMTR) cut to hold at Brookline Capital
• Apple (AAPL) cut to hold at First Shanghai; PT $190
• Atlantica Sustainable (AY) cut to sector perform at National Bank
• Linde (LIN) cut to underperform at Oddo BHF; PT $339
• MongoDB (MDB) cut to sell at Guggenheim; PT $210
• Snowflake (SNOW) cut to peerperform at Wolfe

INITIATIONS:

• American Public (APEI) rated new hold at Truist Secs; PT $6
• CVS (CVS) reinstated overweight at Piper Sandler; PT $85
• Clear Secure (YOU) reinstated hold at Stifel; PT $28
• Integer (ITGR) rated new equal-weight at Wells Fargo; PT $87
• Madison Square Garden Entertainment (MSGE) rated new neutral at Goldman
• Physicians Realty (DOC) rated new market outperform at JMP; PT $15.50
• Strategic Education (STRA) rated new hold at Truist Secs; PT $85
• Uber (UBER) rated new strong buy at President Capital Management
• UnitedHealth (UNH) rated new overweight at Piper Sandler; PT $580
• Vertex Pharmaceuticals (VRTX) rated new hold at WestPark Capital

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC