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LeveFields Weekly Newsletter Example. 11 Dec. 2022

The week ahead is a treacherous one. On Tuesday, the U.S. government releases the Consumer Price Index (CPI) report at 8:30am. The report will provide another look into the inflation rate. If it shows inflation rising, markets will pull back. Last week's U.S. PPI report showed inflation rising more than expected in November, at .3%.

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Markets Get Sober

After a bit of lag time, U.S. indexes pulled back -3% in the past week following last week's jobs report that showed the U.S. economy added 63,000 more jobs in November than was expected and wages increased at twice the rate (.6%) than expected for the month.

We shared with our members that we opened up a position in the SQQQ last week in response to the report. That short position is up 10% in one week and the safe bet is to close it out ahead Tuesday.  

The week ahead is a treacherous one. On Tuesday, the U.S. government releases the Consumer Price Index (CPI) report at 8:30am. The report will provide another look into the inflation rate. If it shows inflation rising, markets will pull back. If it shows inflation falling rapidly, it will most likely lead to a rally.

Last week's U.S. PPI report showed inflation rising more than expected in November, at .3%. At 7.4 percent, it was the lowest year over year increase since May 2021. And the report contained some additional good news about airline ticket prices coming down almost 6 percent.

A Big Day Wednesday

The U.S. Federal Reserve meets again this week to discuss and relay their next interest rate hike. The market expects a .5% hike, but is looking for a clear timeline by which the Fed is going to stop hiking. It feels a lot like wondering when the kid behind you on the airplane will stop kicking your seat. We all know it will happen; we're just not sure when and it's really annoying to not know.

The Fed has been very clear in their messaging that they will stay the course until the job is done, and core inflation (which excludes food and energy) is back at 2%.

Last month, core inflation was 5% year over year. Investors are looking for lower levels for the November reading this week. If inflation proves stubborn, the interest rates will remain higher for longer, causing more economic damage.

The Fed continues to state that they will not lower rates until their target inflation rate is stable for an extended period of time. This event, the global slowdown in consumer spending and the depletion of COVID-induced personal savings rate (shown above) are the reasons many economists and market commentators site as reason to believe a recession is coming in 2023.

Goldman Sachs referred to the recession as "the most anticipated recession we've ever had." But knowing you're going to get hit doesn't make the punch sting less.

KNOWLEDGE CORNER: THE RECESSION PLAYBOOK

Wall St. wisdom dictates investors stock up on healthcare, utility, consumer staples, and REITs during recessions. It's also a time when long-dated bonds look safer.

You can see these patterns emerging in our trends sections, where healthcare and utilities outperformed other sectors last week.  REITs have been hammered this year as the real estate market began sliding in step with interest rate increases, and Blackrock is in the midst of a controversy over limiting withdrawals from its REIT that may prove to be a bellweather for other funds.

We're going to spend a lot more time on the typical recession playbook and stocks that are benefiting in our newsletter this week. But our alerts are capturing the breakout performances of certain companies like Campbell Soup and the Quick Sprints scenario.

LET'S TALK ABOUT DRUGS

Pfizer loves to talk about drugs, and is hosting a day on the 12th to talk about its pipeline of them. We've noted a couple of times this year that its next blockbuster is likely going to be approved soon. Its RSV vaccine received Breakthrough Therapy status from the U.S. FDA back in March. It's also developing a COVID/Flu vaccine that is to viruses what a Long Island Iced Tea is to brain cells.

Pfizer's, like many healthcare stocks (sorry TDOC), is surging right now. And the Breakthrough Therapy scenario is a great long-term scenario for finding price catalysts.

Pfizer is likely to get a booster from the publicity and the release of its drugs. The company is in a great financial situation to continue buying small biotechs now that most of them have cratered 75% in price this past year.

The company's business model has survived in three different centuries now. Need we say more?

Pfizer on www.levelfields.ai

THAT'S SO CORNING

Building and energy efficient equipment producer Owens Corning has increased its dividend by 50% and added to its buyback program.

While the stock didn't move much on the news, it's worth pointing out the stock is now positive over the past year, handily outperforming all market indexes.  

The company makes everything from insulation for pipes to roof shingles, and seems diversified enough for its leadership to not be worried as much about a slowing economy.

At the end of 2020, they authorized a new buyback program. The stock has continued moving steadily north since then.

OC wasn't alone in big announcements last week. Lowes announced a monster buyback and reaffirmed their guidance for the year, showing that for now, consumer demand is healthy in the home improvement and repairs space

Key Earnings Announcements This Week

Dec 12:

  • Oracle (ORCL)
  • Prepackaged Software
  • Factors to Watch: Outlook following Oracles' recent $9B cloud contract with the U.S Government, and growth stability in a gloomy tech environment.
  • -22.19% 1YR

Dec 13:

  • Core & Main (CNM)
  • Industrial Distribution (Water)
  • Factors to Watch: Supply chain management, outlook on the coming winter season, and the price of water within a shaky commodity market.
  • -21.61% 1YR

Dec 14:

  • Lennar (LEN)
  • Residential Development
  • Factors to Watch: Outlook on growth taking into account homebuilding material prices, easing mortgage rates, a slowing housing market, and rising interest rates.
  • -24.30% 1YR

Dec 15:

  • Adobe (ADBE)
  • Application Software
  • Factors to Watch: Impact of their updated pricing, growth in the broad digital media sector, and update on an anti-trust lawsuit regarding ADBE's takeover of Figma.
  • -49.48% 1YR

Dec 16:

  • Darden Restaurants  (DRI)
  • Restaraunt Operatror
  • Factors to Watch: The return of Olive Garden's unlimited pasta deal (yum) and the sentiment of value-driven consumers.
  • -6.09% 1YR
  • Winnebago (WGO) - do people still want to sleep on the roadside, or do we like our homes again?

Economic Reports Due:

  • Monday
  • NY Fed Inflation Expectations
  • Tuesday
  • U.S. CPI
  • Wednesday
  • Federal Funds Rate
  • Thursday
  • U.S. Initial Jobless Claims
  • U.S. Retail Sales

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