Macrosynthesis

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US Job Growth Slows in March, Yet Labor Market Remains Strong  

In March, the US economy generated 236,000 new jobs - the lowest increase since December 2020 and short of the predicted 239,000. Despite this slowdown, the labor market continues to exhibit strength as the economy gradually stabilizes in the aftermath of the pandemic.

Various sectors experienced notable job growth in March. Leisure and hospitality led the way with 72,000 new jobs, primarily in food services and drinking establishments. Government positions increased by 47,000, while professional and business services added 39,000 jobs. Health care also saw gains, creating 34,000 new roles.

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Employment in transportation and warehousing experienced a modest uptick of 10,000 jobs. However, the retail sector saw a decline, losing 15,000 jobs, mainly in building material and garden equipment and supplies dealers.

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Mass Layoff Announced Last Week:

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• UBS
• McDonald's temporarily shuts U.S. Offices in preparation for Layoff Notices
• Roku (Roku was a large depositor at the fallen Silicon Valley Bank
• Netflix
• GM

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A New Cold Wa

Chinese state-owned telecom giants are investing $500 million to develop an undersea fiber-optic internet cable network connecting Asia, the Middle East, and Europe. This ambitious project rivals a similar US-backed initiative and underscores the escalating tech rivalry between Beijing and Washington, which threatens to disrupt the global internet landscape.

In a significant diplomatic development, top Iranian and Saudi Arabian officials met in China for their first formal discussion in over seven years. This gathering signals a potential realignment in the Middle East and demonstrates China's growing influence in the region.

China is also contemplating a ban on exporting technologies used to manufacture high-performance rare earth magnets, which are crucial components in electric vehicles. This move could have significant implications for the burgeoning EV market.

For additional analyses on this evolving situation, including how to trade it, sign up for our weekly Level 2 newsletter and premium alerts.

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Coup D'etat

In a head scratching move, France completed its first gas trade using the Chinese Yuan last week, deviating from the long-standing tradition of settling transactions in US Dollars. This decision comes as French President Emmanuel Macron calls for Europe to reduce its dependency on the United States, following a meeting with Chinese President Xi Jinping.

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Macron's push for European autonomy has been fueled by over 20 events in the past month challenging the US Dollar's dominance, as well as concerns over inflation and a regional banking crisis.

Last Week's Top Events

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Noteworthy Events

This Week's Recap

US stock futures linked to the three major indices displayed modest gains on Friday, following a volatile trading session on Wall Street as the market approached a three-day weekend. The Labor Department's latest report revealed that the US economy added 236,000 jobs in March, marginally below the expected 238,000. The unemployment rate dipped to 3.5%, beating the anticipated 3.6%.

However, the International Monetary Fund (IMF) issued a cautionary note, projecting a mere 3% growth for the global economy over the next five years. This figure marks the weakest performance in more than 30 years, driven by sluggishness in the US and Eurozone.

Last week, the S&P 500 experienced its first weekly decline in a month, fueled by concerns that the US economy may be heading toward a recession amidst mixed economic data.

Other Noteworthy Events:

• US personal savings rate dropped to 3.7% in 2022, the lowest since 2007.
• Raytheon Technologies awarded $1.2 billion contract to provide Patriot air defense system to Switzerland.
• Fedex announced a 10% dividend increase. The stock rose in response.
• Eli Lilly says experimental Alzheimer’s drug reduces brain plaque in early study
• A leaked US document alleges that Israel’s spy agency Mossad encouraged protests against the Israeli government’s judicial overhaul, the NY Times and Washington Post reported.  

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CASE STUDY: VBI Vaccines -35.45%

VBI Vaccines Inc., a biopharmaceutical company, announced Tuesday, a strategic shift in order to streamline operations and maintain financial stability. VBI is reducing its quarterly operating expenses and workforce by 30-35%.

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Additionally, the company plans to execute a 1-for-30 reverse stock split of its issued and outstanding common shares.

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LevelFields users were alerted to the Mass Layoff announcement on Tuesday morning, which resulted in a -35.45% 1D drop in the VBIV share price.

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The Layoff scenario is an interesting one. Here's how to play it: for businesses that are established and doing well, layoffs represent the fastest way to generate higher earnings per share. Unless there is substantial pressure on the business model or sales from economic events, the share prices increase following these events.

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For struggling and unprofitable companies like VBIV, layoffs are a signal of extreme financial distress. Share prices typically selloff following layoff announcements for these types of companies. You can see this trend inside the scenario page after altering the filters for company size and revenue growth.  The selloff represents an opportunity to short the stock.

Upcoming Catalysts:

Earnings

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Monday

• Greenbrier (GBX)
• PriceSmart (PSMT)
• Tilray (TLRY)

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Tuesday

• Albertsons (ACI)
• CarMax (KMX)

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Wednesday

• Apogee (APOG)
• Bed Bath & Beyond (BBBY)
• Sportsman's Warehouse (SPWH)

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Thursday

• Delta Airlines (DAL)
• Delta Air Lines (DAL, $33.69) is poised to unveil its first-quarter financial results before the market opens on Thursday. Market analysts anticipate a significant turnaround for the airline, with earnings estimated at 32 cents per share – a stark contrast to the per-share loss of $1.23 witnessed in the same period last year.
• First Republic Bank (FRC)
• Progressive (PGR)

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Friday

• JPMorgan Chase (JPM)
• BlackRock (BLK)
• Citigroup (C)
• PNC (PNC)
• Wells Fargo (WFC)

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Economic Reports That will Illuminate the Fed's Path Forward

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Wednesday

• US CPI
• Treasury Budget
• Fed Minutes

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Thursday

• US PPI

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Friday

• Consumer Sentiment
• Retail Sales

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Most Recent Level 2 Trades:

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The LevelFields Team