Cabrera Capital Daily Game Plan

Monday June 5, 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 Services PMI, Composite PMI; 10:00ET Factory Orders, Durable Goods Orders,
ISM Services

TODAY’S HIGHLIGHTS:  

• Apple’s set to announce its new $3,000 mixed-reality headset at WWDC today 

Global shares nudged higher to start the week, as investors bet the Federal Reserve would pause its rate hikes this month after a mostly encouraging US jobs report. 
Meanwhile, Fitch Ratings said the United States’ “AAA” credit rating would remain on negative watch, despite the debt agreement. Euro zone business activity was shored up last month by its dominant services industry offsetting a deepening decline in the manufacturing
sector, according to a survey which also showed overall price pressures had diminished.  Morgan Stanley strategists wrote in a note that they’re bullish on equities in Japan, Taiwan, and South Korea, but anticipate a sudden pullback in corporate earnings will
slam the brakes on US stocks. US corporate earnings will fall 16% this year, Morgan Stanley forecast. In geo-political news, the US and China clashed over key issues, especially Taiwan, at the Shangri-La Dialogue. That came as a Chinese vessel harassed a US
warship transiting the Taiwan Strait.                          

EQUITIES: 

US equity futures fluctuated after last week’s sharp rally, which took the S&P 500 to the brink of a bull market. A cascade of new US debt is coming, starting with
auctions of $173 billion of bills today. JPMorgan says the liquidity drain will compound the effect of QT on stocks and bonds, knocking almost 5% off their combined performance this year. Citi sees a median drop of 5.4% in the S&P over two months. Large lenders
in the US may face a 20% increase in capital requirements — a revision that could be proposed as early as June, according to the Wall Street Journal. 

Futures ahead of the data: E-Mini S&P +0.05%, Nasdaq -0.15%, Russell 2000 -0.25%, Dow is flat.  

In pre-market trading, Apple rose 0.6%, on track to reach a new record high. The company is expected to launch a mixed-reality headset at the Worldwide Developers Conference today, marking
its most significant product launch in nearly a decade.  Oil-related stocks rise after Saudi Arabia announced it would scale back oil output. Palo Alto Networks (PANW) shares gain 5%, following a Friday announcement that the stock is set to replace Dish Network
in the S&P 500.  Bellerophon Therapeutics (BLPH) shares slid 74% after the company said its phase 3 rebuild study of INOpulse to treat fibrotic interstitial lung disease failed to meet its primary endpoint.  Day One Biopharmaceuticals (DAWN) gained as much
as 35% after the biotech company provided updated data for its drug for the treatment of pediatric low-grade brain tumors. Epam Systems (EPAM) falls 14% after the IT services company cut its adjusted earnings per share forecast. ImmunoGen (IMGN) shares gain
as much as 19% after the biotech company provided full results from its late-stage trial for its treatment of ovarian cancer.

European indices were little changed after a slew of European economic activity data left markets unmoved. The euro-area services PMI for last month was revised down, reflecting downgrades
from the flash estimates in both Germany and France. The composite gauge for the bloc was also revised lower. Compounding a downbeat morning for data, the Sentix investor confidence gauge for the euro area fell to -17 this month from -13.1 in May.  The commodity-heavy
FTSE 100 Index outperforms, rising 0.5%, while other major country indexes were flat to slightly lower. Telecoms lead gains as shares of Deutsche Telekom AG and other operators rose, bouncing back from Friday’s selloff after reports that Amazon is planning
to provide low-cost mobile phone service to Prime members in the US. Among single stocks, Viaplay Group AB slumped after it slashed forecasts and replaced its CEO. UBS Group AG shares ticked higher as it expects to complete its acquisition of Credit Suisse
Group AG as early as June 12.  Morgan Stanley analysts said European stocks are likely to underperform in the short-term, sliding by 8% to 10% over the summer months due to slowing economic growth and the renewed outperformance of growth stocks. DAX +0.1%,
CAC -0.1%, Stoxx 600 +0.1%. REITs +1.1%, Energy +0.9%, Telecom +0.9%. Travel & Leisure -0.7%, Food & Bev -0.55.

Asian equities gained overnight, led by Japanese stocks, as easing global-recession concerns and the potential for a pause in Federal Reserve rate hikes fueled risk-on
sentiment in the region. Japanese stocks continued to storm higher with the Nikkei 225 adding 2.2% to its highest since July 1990, as investors bet that the weak yen will boost corporate profits. The MSCI Asia Pacific Index rose 0.6%, driven by gains in the
industrial and financial sectors. Australia and Hong Kong were the best performers after Japan, while mainland China shares dropped. China’s targeted steps to help specific sectors like property and manufacturing suggest broader stimulus measures such as rate
cuts may be off the table for now. Morgan Stanley lowered its targets for offshore-centric Chinese indexes, citing a delayed earnings recovery, weaker currency outlook and geopolitical uncertainties. Malaysia, Thailand, and New Zealand were closed for holidays.
Topix +1.7%, ASX 200 +1%, Hang Seng +0.85%, Singapore +0.7%, Vietnam +0.6%, Kospi +0.5%. China’s CSI 300 -0.45%.   

FIXED INCOME: 
 

Treasuries are cheaper across the curve, extending Friday’s drop, when data showed an unexpected surge in payrolls.  10-year yields around 3.76%, two year yield ~4.56%. 
While there’s increasing speculation that the Federal Reserve plans to keep interest rates steady in June, options are open for later hikes.              

METALS: 

Gold edged lower after Friday’s decline as the US resolved its debt-default saga. The dollar and Treasury yields ticked higher on Monday, putting pressure on gold. 
Spot gold declined 0.3%, silver -0.6%.      

ENERGY:  

Oil advanced after Saudi Arabia pledged to shave an extra 1 million barrel-a-day from its production in July, taking output to the lowest level in years. Both Brent
and WTI jumped almost 5% early in the session before paring gains as Saudi Energy Minister Prince Abdulaziz bin Salman said he would do “whatever is necessary to bring stability to this market” following a tense OPEC+ meeting over the weekend. Iraq is in talks
with Turkey to resume oil exports via Ceyhan. Venezuela boosted crude output to 860,000 barrels a day, it’s oil minister said.  WTI +2.5%, Brent +2.3%, US Nat Gas +2.6%.

CURRENCIES:         

The dollar gained along with Treasury yields as investors looked ahead to US ISM services numbers for May. The Swedish krona fell 0.6% and 1% against the euro and
dollar respectively.  The currency has fallen amid fears of a recession in Sweden and expectations the nation’s central bank is close to wrap up its year-long interest-rate hiking cycle. Aussie$ saw long liquidations ahead of Tuesday’s RBA decision; some respite
after better-than-expected China services PMI print proved short-lived. US$ Index +0.25%, GBPUSD -0.5%, USDJPY +0.2%, AUDUSD -0.1%, EURUSD -0.2%, USDSEK +0.9%.   

Bitcoin -1.7%, 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:

• Blackbaud (BLKB) raised to outperform at Raymond James; PT $88
• Clipper Realty (CLPR) raised to outperform at Raymond James; PT $7
• DigitalBridge Group Inc (DBRG) raised to outperform at KBW; PT $17.50
• Dominion Energy (D) raised to buy at Seaport Global Securities
• Equitrans (ETRN) raised to overweight at Morgan Stanley; PT $14
• Equity Residential (EQR) raised to market perform at BMO; PT $64
• Fiera Capital (FSZ CN) raised to outperform at BMO; PT C$8.50
• Lululemon (LULU) raised to outperform at CICC; PT $454.57
• RBC (RY CN) raised to buy at Fundamental Research; PT C$134.43
• Valley National (VLY) raised to overweight at JPMorgan; PT $10

DOWNGRADES:

• Blueprint Medicines (BPMC) cut to underperform at SVB; PT $43
• Dollar General (DG) cut to equal-weight at Morgan Stanley; PT $180
• Estee Lauder (EL) cut to market perform at Oppenheimer
• PROG Holdings (PRG) cut to hold at Loop Capital; PT $34
• Rain Oncology Inc (RAIN) cut to neutral at Mizuho Securities; PT $1
• Richelieu Hardware (RCH CN) cut to neutral at CIBC; PT C$46
• Salesforce Inc (CRM) cut to accumulate at Phillip Secs; PT $226
• Target (TGT) cut to sector weight at KeyBanc
• Vitesse Energy (VTS) cut to inline at Evercore ISI; PT $25
• Zhihu Inc. ADRs (ZH) cut to add at GuoSen; PT $1.59

INITIATIONS:

• Axcelis Technologies (ACLS) rated new outperform at William Blair
• GoDaddy (GDDY) rated new sector perform at RBC; PT $80
• Liberty Formula One (FWONA) rated new outperform at Cowen; PT $90
• NEXTracker (NXT) rated new outperform at Haitong Intl; PT $50
• RPM International (RPM) rated new hold at Deutsche Bank; PT $90

Data sources: Bloomberg, Reuters, CQG

David Wienke

Head Trader, Americas

Cabrera Capital Markets, LLC