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Macrosynthesis
TLDR
- Biden sends B-52 bombers to Middle East
- Russia making pact with Iran
- Trump-Harris too close to call
- Jobs numbers and inflation rates sink
- Buffet stockpiling record amounts of cash
Biden Sends B-52 Bombers to Middle East In Show of Force to Iran
In what could be a deterrence tactic or a strategic move to respond swiftly should Iran strike at American assets or Israel again, President Biden ordered B-52s to the region. The planes are known for being able to fly over 8,000 mile distances and deliver large bombs. Placing them closer to Iran would speed up response times. The Iranian regime has been dialing up the rhetoric that they will respond to Israeli's recent retaliation against the 200-rockets Iran fired into Israel. Israeli intelligence has suggested that Iran is preparing to attack Israel from Iraq via its sponsored proxy groups with drones and missiles to avoid additional retaliation on Iranian soil.
Russia Closes in on Deal With Iran, Following Deal with North Korea
Russia and Iran are reportedly close to signing a treaty that will enhance their defensive cooperation and strengthen military ties. The new follows reports that North Korea has sent up to 10,000 troops to assist Russian efforts to take Ukraine. These collaborations by Putin are intended to increase Russia's power and influence while undermining U.S. influence and power. The U.S. has been supplying Ukraine with tens of billions of dollars worth of military equipment and weapons to hand a defeat to Putin, but has so far not allowed Ukraine to use its weapons to attacked Russian lands. The Biden administration stated that he would withdraw this caveat with Ukraine and enable a full scale attack on Russia if North Korean troops entered Ukrainian combat zones.
A report by the Wall Street Journal earlier this month found that Russia provided the Houthi terrorist group with satellite data to assist it in its attacks on Western ships in the Red Sea. Distracting the U.S. from Ukraine seems to be the major tactic of Putin in the Middle East. China has also offered support to Iran, its primary source of oil imports, setting up a dangerous situation where global powers could collide over the Middle East.
U.S. Presidential Elections, Polls and Betting Markets
With Election Day now just two days away, Saturday night delivered a surprising turn in betting markets. Trump’s three-week rise in odds, peaking at 66.6% on Polymarket, dropped to 56% within two days. On other betting platforms, the odds are nearly even at 50/50. This comes shortly after surprising poll results in Iowa, where a Des Moines Register poll shows Kamala Harris leading Trump by three points, reflecting a seven-point shift since September. However, an Emerson College poll released the same day has Trump leading by ten points, suggesting the Des Moines Register poll might be an outlier. The traditionally Republican-leaning state now shows increased support for Harris among women, largely due to her campaign’s focus on abortion rights. These contrasting results highlight a tight race with varying outcomes in the final days.
What Happens to the Economy if Trump Wins?
A Trump victory in 2024 could bring significant policy shifts. He may replace Federal Reserve Chair Powell and adjust monetary policy, introduce new tariffs on China, and intensify immigration enforcement. Deregulation in energy and tech could expand, while the 2017 tax cuts may be extended with potential additional reforms. Trump aims for Big Pharma reform through an alliance with RFK Jr. and seeks a peace deal in the Russia-Ukraine conflict. Government spending cuts might target green energy, media censorship could be challenged, and national security alliances could shift under his leadership.
U.S Job Numbers Collapse, Inflation Hits Target
U.S. job numbers were released Friday, coming in much lower than expected—sending markets on a brief rally in the morning before retreating in the afternoon. In October 2024, the U.S. economy added only 12,000 jobs, far below September’s revised 223,000 and the forecast of 113,000. Strikes, especially at Boeing, and possibly hurricanes, contributed to this slowdown. Healthcare and government sectors grew, while manufacturing saw declines, including a 44,000 drop in transportation equipment. Revisions for August and September reduced job counts by 112,000. The initial market reaction fueled speculation of another significant Fed rate cut; however, given the impact of external factors, two additional similar readings would be necessary to view this as a true reflection of the job market or a recession indicator.
Inflation continued to cool and get closer to the Federal Reserve’s 2% annual target in September, although it doesn't feel like at any restaurant. The personal-consumption expenditure price index rose to 2.1% from a year earlier, the Bureau of Economic Analysis reported. With near-perfect inflation, the Fed will remain more focused on the job market and ensuring maximum employment while tempering inflation. In lay terms, this means it looks like the path for continued rate cuts is pretty likely. That's good news for mortgage rates and borrowing money.
Federal Reserve's Reverse Repo Usage Plummets
The Federal Reserve’s overnight reverse repurchase (RRP) facility, which allows banks, money-market funds, and government-sponsored enterprises to park excess cash and earn interest, saw usage fall below $200 billion, marking its lowest level since May 2021. Only 41 participants placed $155 billion on Friday, down significantly from a $2.55 trillion peak in December 2022. The RRP, which serves as a tool for the Fed to manage liquidity and maintain control over short-term interest rates, currently offers a 4.8% rate, but rising market rates at 4.93% have drawn cash away. Experts see this drop as evidence of reduced excess liquidity amid the Fed’s quantitative tightening. Dallas Fed President Lorie Logan suggested adjustments to the RRP rate could further encourage cash to move toward private markets.
Sector Recap: Mixed Performance Across S&P 500 Index
Last week, the S&P 500 fell -2%. Sectors showed mixed performance, with Telecom (+1.5%) and Consumer Discretionary (+0.5%) being the only sectors posting gains. Information Technology (-3.3%) and Real Estate (-3.1%) saw the largest declines, reflecting a challenging week for growth-oriented sectors. Utilities (-2.8%) and Energy (-2.1%) also faced significant losses, while Consumer Staples (-1.3%), Industrials (-1%), and Materials (-1.2%) posted moderate declines. Financials (-0.2%) and Healthcare (-0.6%) experienced relatively minor drops, indicating sector-specific pressures across the board.
Upcoming Week
Tuesday’s U.S. presidential election is highly anticipated by global investors, alongside the Federal Reserve's interest rate decision, ISM Services PMI, consumer sentiment, trade data, factory orders, and productivity. Earnings season will focus on large and mid-cap companies.
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Tea
+43.5% (1W Chg)
-4% (1M Chg)
Eggs
+35.5% (1W Chg)
+93.36% (1M Chg)
Silver
-3.76% (1W Chg)
+1.84% (1M Chg)
Natrural Gas
-13.8% (1W Chg)
+14.44% (YTD Chg)
Company News
LevelFields AI Alert Highlights This Week
This week, LevelFields alerts delivered impressive returns. ADN announced a new CEO, resulting in a 32.87% gain in a single day. BEBE's special $2 per share dividend led to a 32.58% rise, while Peloton saw a 27.8% gain following its own CEO announcement. CCEL’s new dividend boosted its stock by 25.6%. Conversely, MTNB announced layoffs affecting nearly 80% of its workforce, causing an 80% drop in one day.
Berkshire Hathaway is Stockpiling Cash, But Why?
In 2024, Warren Buffett sold over $100 billion of Apple stock, paused Berkshire Hathaway’s buybacks due to high stock prices, and built the company’s largest cash reserve of $325 billion. Amid a 40% rise in the S&P 500 since October 2023, Buffett appears cautious, suggesting concerns over stock overvaluation or a potential economic downturn. Berkshire's cash now includes a record $288 billion in U.S.
Treasury bills, surpassing the Fed Reserve's own holdings. Some have speculated that Buffet is hedging against a Harris/Democratic win which would likely result in increased capital gains rates. But Buffet is also someone who has lived through many large scale wars, and may seen signs of conflicts escalating globally.
SMCI Plummets After Auditor Resigns
Super Micro’s stock dropped 45% this week, wiping out its 2024 gains, after losing its second auditor in under two years and delaying its financial filings. Ernst & Young resigned, citing unwillingness to be associated with Super Micro’s financial statements, a decision the company disputes.
Super Micro faces additional challenges, including a Justice Department investigation and accounting concerns raised by short-seller Hindenburg Research. Analysts have downgraded the stock, citing potential accounting irregularities and possible dealings with sanctioned entities, adding to the uncertainty as the company plans a business update on Election Day.
The Trump Stocks Are Flashing Warning Signs
As the U.S. election nears, Trump-linked stocks like Trump Media & Technology Group, Phunware, and Rumble have seen volatile trading as retail investors bet on a Trump victory. Trump Media, associated with TruthSocial, surged 88% in October, while Phunware, known for developing Trump’s campaign app, and Rumble, a conservative-favored video platform, rose 98% and 10.7%, respectively. Despite recent gains, both DJT and Phunware dropped 25% and 47% this past week.
AMD Stocks Drops on Earnings Miss
AMD reported third-quarter earnings that met expectations, with revenue slightly surpassing forecasts. Its data center segment saw a significant 122% year-over-year increase, driven by strong AI GPU sales, though overall fourth-quarter guidance was lukewarm. The company introduced its MI235X AI chip, projecting $5 billion in AI-related sales this year. While data center and client segments grew, gaming revenue dropped 68%, impacted by lower demand for console chips. Despite the robust AI growth, AMD's stock fell 10% this week due to cautious investor sentiment and modest forward guidance.
Amazon Bets Big on AI, Beats Earnings Estimates, Pledges Billions in Expenditures
Amazon's capital expenditures surged 81% in Q3, driven by heavy investments in generative AI. CEO Andy Jassy reassured investors of long-term returns, likening the potential to Amazon Web Services' success. Amazon plans to spend $75 billion on capital expenditures this year to build out data centers, with even higher investments projected for 2025. AWS has seen strong demand, with its generative AI business achieving a multi-billion-dollar run rate and triple-digit growth. Jassy highlighted the transformative potential of AI, noting Amazon's aggressive pursuit of this "once-in-a-lifetime" opportunity.
Snapchat is Making a Comeback
Snap reported stronger-than-expected Q3 results, with an 8-cent earnings per share and $1.37 billion in revenue, driven by direct-response ads and Snapchat+ growth. CEO Evan Spiegel highlighted tech upgrades, including Simple Snapchat and new augmented reality products. Global daily active users reached 443 million. However, analysts remain cautious due to Snap’s slow user growth and high valuation. Despite price target increases from some firms, Snap’s ad revenue trails competitors, and growth prospects hinge on further engagement and potential challenges for rivals like TikTok.
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Upcoming Earnings:
Monday: Palantir (PLTR), Fox Corp (FOXA), Marriott (MAR), Public Service Enterprise Group (PEG), New York Times (NYT), Yum China (YUMC), Zoetis (ZTS)
Tuesday: Archer-Daniels-Midland (ADM), DuPont (DD), Emerson Electric (EMR), Marathon Petroleum (MPC), Restaurant Brands International (QSR), Yum! Brands (YUM)
Wednesday: Upstart (UPST), Arm Holdings (ARM), CVS Health (CVS), Johnson Controls (JCI), Owens Corning (OC), Shopify (SHOP), Sempra Energy (SRE), Teva Pharmaceutical (TEVA)
Thursday: Becton Dickinson (BDX), Datadog (DDOG), Ferrari (RACE), Hershey (HSY), Ralph Lauren (RL), DraftKings (DKNG)
Friday: AMC Networks (AMCX), Baxter (BAX), CNH Industrial (CNH), Flowers Foods (FLO), NRG Energy (NRG), Lamar Advertising (LAMR)
This is not financial advice. All information represent opinions only for informational purposes. Given the vast number of stocks we cover in these reports, assume staff covering stocks have positions in stocks discussed.
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