Macrosynthesis

Last Week's Recap

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Bull Market Continues

U.S. stocks experienced a strong rally on Friday, with the S&P 500 reaching a record high of 4,839, a 1.2% increase. The Dow Jones climbed 395 points, and the Nasdaq gained 1.7%. The technology sector was a major contributor to the gains, especially chip makers, driven by positive forecasts from Taiwan Semiconductor and AI-related optimism. Notably, Nvidia hit a new high, while Advanced Micro Devices and Texas Instruments also saw significant rises. Travelers Company's stock surged after a profitable quarter, and Fifth Third Bancorp's shares went up following earnings and revenue beats. Additionally, Michigan's consumer sentiment reached its highest point in 2021, with a drop in inflation expectations. Over the week, the S&P 500, Nasdaq, and Dow Jones all posted gains.

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Happy Consumer!

‍In January 2024, the University of Michigan reported a significant rise in U.S. consumer sentiment to 78.8, the highest since July 2021, driven by reduced inflation expectations and improved income prospects. This marks a substantial two-month increase, the largest since 1991.

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Not to Burst the Bubble, But..

‍Since the first quarter of 2023, net saving as a percentage of gross national income in the U.S. has become negative, marking a rare occurrence and only the third time in over 75 years. This trend mirrors the periods leading up to the great recession and the COVID recession, indicating a potential economic downturn and aligning with historical patterns of impending financial crises.

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House Party

‍Congress passed a stopgap bill to prevent a government shutdown, extending funding until early March. The bill, supported mainly by Democrats, now awaits President Biden's signature.

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Home is Where the Heart is?

U.S. existing-home sales declined 1.0% to 3.78 million units in December 2023, the lowest since August 2010 and under the expected 3.82 million. Sales dropped in the Midwest and South but increased in the West, with single-family homes and condos/co-ops sales falling. Overall, 2023 saw the lowest sales in three decades.

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DAVOS

At the 2024 World Economic Forum in Davos, business leaders and experts expressed optimism about avoiding a U.S. recession in 2024, citing potential Fed rate cuts and rising consumer confidence. The Middle East crisis, particularly the Israel-Hamas conflict, was notably absent from discussions, possibly due to the complexity of the issue and the desire to avoid controversy. Artificial Intelligence (AI) dominated conversations, replacing crypto as the main topic, with a generally positive outlook on its impact and potential. Chinese Premier Li Qiang addressed China's economic challenges, including slower GDP growth and a semiconductor trade war with the U.S., emphasizing the need for Chinese outreach to the private sector.

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Commodity Movers

Uranium

+14.59% (1D Chg)

+110.53% (YoY Chg)

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Natural Gas

-6.65% (1D Chg)

-24.01% (1W Chg)

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Potatoes

+13.92% (1W Chg)

+20.81% (YoY Chg)

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Sugar

+9.07% (1W Chg)

+19.07% (YoY Chg)

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Noteworthy Events

Google's Tough Decisions

‍Google, after laying off thousands, plans more cuts, as CEO Sundar Pichai aims to invest in key priorities, requiring tough decisions. These layoffs, though smaller than last year's, continue as Google simplifies and accelerates execution amidst a challenging labor market.

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One Bad Apple

Apple is removing a blood-oxygen sensor from its Apple Watch after the International Trade Commission ruled that the company had violated patents held by Masimo, a medical technology company.  A DOJ antitrust lawsuit against Apple is also expected to come in March, potentially eroding it powerful economic moat in the app store.

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That is the Spirit

Spirit Airlines' stock jumped over 17.2% Friday following an improved fourth-quarter forecast, with expected revenue at the upper end of projections, driven by robust bookings. Despite this, the stock has dropped over 50% this week after a court ruling halted JetBlue's proposed acquisition of Spirit Airlines.

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That's Fair

Wayfair's stock jumped 10.3% Friday following the announcement of a 13% workforce reduction, including 19% of its corporate staff. The move aims to streamline management and cut costs, marking the company's third restructuring since summer 2022 and anticipating savings of approximately $280 million. The cuts are yet another sign of a slowing housing market as the home furnishings segment experiences declines.

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Need a Life Line

Humana's stock dropped -8% Thursday following their announcement of unexpectedly high medical costs in Q4, potentially impacting their 2024 forecast. The company noted similar trends affecting the broader industry, leading to declines in UnitedHealth and CVS Health shares.

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Instacart Gets a Bump

Instacart's stock rose 7.5% Wednesday following an upgrade by Wolfe Research from 'peer perform' to 'outperform.' The firm cited an appealing risk/reward balance and multiple avenues for revenue growth, including a possible merger with Uber, as reasons for the upgrade.

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PayPal CEO Promises Big Changes

‍New PayPal CEO, Alex Chriss, told CNBC to expect the company to turn things around and take advantage of its network of 250,000 businesses that use its payments processing service.  Chriss said he would shock the world Jan 25th with new product announcements, hinting they are AI-driven.

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CASE STUDY: BTU +9.28%

Jan. 17th, it was announced that BTU will replace e.l.f. Beauty in the S&P SmallCap 600 effective before the opening of trading on Tuesday, January 23.

Peabody Energy Corporation (BTU), founded in 1883, specializes in coal mining and operates in various segments, supplying coal to electricity generators and steel manufacturers globally.

Users were alerted to the news through the 'Added to the S&P Small Cap 600' scenario. The following day, BTU saw a gain of over 9%-- beating the average 1D move of +5.38% for energy stocks within the scenario. BTU continued rising over the following days.

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Upcoming Catalysts:

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EARNINGS

Monday, January 22 - Brown & Brown (BRO), United Airlines Holdings (UAL), and Zions Bancorporation (ZION)

Tuesday, January 23 - Johnson & Johnson (JNJ), Procter & Gamble (PG), Netflix (NFLX), Verizon Communications (VZ), Texas Instruments (TXN), General Electric (GE), and Lockheed Martin (LMT)

Wednesday, January 24 - Tesla (TSLA), Abbott Laboratories (ABT), IBM (IBM), AT&T (T), General Dynamics (GD), Las Vegas Sands (LVS), and CSX (CSX)

Thursday, January 25 - Visa (V), Intel (INTC), Comcast (CMCSA), Union Pacific (UNP), American Airlines Group (AAL), Southwest Airlines (LUV), Levi Strauss (LEVI) and Alaska Air Group (ALK)

Friday, January 26 - American Express (AXP), Colgate-Palmolive (CL), Norfolk Southern (NSC)

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The LevelFields Team