Investors remain in the upside down, where good economic news is bad news for the stock market. Reports this week showed the unemployment rate fell to 3.5% while more jobs than expected were added to payrolls. This good economic news triggered a major selloff in the markets this week, killing the bear market rally, as investors now expect the Fed to continue a relentless push towards 4.5% interest rates and fear the Fed going too far, too fast, causing recession.
Higher rates also bring down the present value of future cash flows, making richly valued companies with high p/e ratios prone to large downward price corrections. Microsoft, Apple, Meta, and other members of the Nasdaq 100 all pulled back, with many hitting their 52-week lows.
Overall market sentiment is terrible, and the only thing that could turn it around is the inflation report this Friday. If it shows inflation dropping a lot, markets will rally. And vice versa.
Healthcare stocks remain a bright spot, along with energy stocks, both of which had some huge winners this week. Cano Health was up 9% on news CVS may acquire it. DexCom was up 25% on positive news from Medicare. And there's a lot of hoopla over Eli Lilly's new obesity drug. If they're savvy, they will partner with Hershey's and come up with the first diet M&M pill. Trick, or treat?
On the energy side, Diamondback Energy crushed it, +13%, as did COP and PSX, +11% each.
The increase was in response to the better than expected economic news and head scratching news OPEC+ would be cutting oil output, thereby increasing gas prices as the world struggles with inflation.
Normally, such a move by OPEC+ would drive Tesla prices up, were it not for Elon Musk driving the price of Tesla down on news that he will have to sell more of his Tesla shares to pay for his $44B acquisition of Twitter. So much for Tesla spending zero on marketing.
Visa and FTX Teaming Up
Visa is teaming up with global crypto exchange FTX to offer debit cards in 40 countries focusing on Latin America, Asia, and Europe. "It's a technology that we absolutely see disrupting traditional payment networks," FTX CEO Sam Bankman-Fried told CNBC in a phone call. "There's a decision you have to make as a traditional payments company: do you want to lean into this or do you want to fight against it? I respect the fact that many of them are leaning into it."
Bankman-Fried also said enabling card payments was key to the market's growth beyond being a speculative asset or a store of value to some. The partnership was announced Friday, which LevelFields Crypto Adoption sent out an alert for.
The partnership was a wake up call to investors who have written off crypto as a dying fad.
Did You Miss?
Mass Layoffs at Peloton
PTON announced Thursday that it will be cutting 500 jobs, roughly 12% of its workforce. The company's CEO says it has six months to prove it can survive on its own or it won't be viable. Chief Exec, Barry McCarthy said, "he is giving the unprofitable company about another six months to significantly turn itself around." The news led to a peak price change of 9.82% before closing the day at +4.00%
Peloton's stock has dropped 90% over the past year, as the company struggled to grow beyond a niche audience amidst a post-pandemic drop in demand. They have been laying off employees all year, with each layoff causing a price surge in its stock.
Rumors have been swirling for 7 months over whether the company may be acquired by Amazon, Nike, or Apple. If you say enough times perhaps it will happen? Even a broken clock is right twice a day.
Northern Oil and Gas, Inc Dividend Increase
NOG, an Oil and Gas exploration company headquartered in Minnesota, announced a Dividend Increase on Thursday. It is said that management will recommend that the Board of Directors approved a 20% increase to NOG's quarterly common stock dividend, to $0.30 per share, for the fourth quarter of 2022. " NOG closed its previously announced $110 million acquisition of non-operated Midland Basin properties on October 3, 2022."
The event sent to stock up 5%, and it landing up about 3% at closing. NOG is up +98% since the first LevelFields alert went out on it 1 months ago.
Learning Corner
A Novel Way to Trade Buybacks (part 1)
We've heard from users a few times that they "missed the trade" because they weren't able to act fast enough to catch the upward movement. So we thought we'd discuss a few additional strategies for playing buybacks over the next few weeks.
Playing The Selloff
If you look at the Table View inside the Buybacks scenario, you'll notice stocks often sell off the 2nd day following a buyback. These are investors taking profits after the event catalyzes the stock. And it presents an opportunity for savvy traders.
We use the filters to find the types of companies that typically selloff after a buyback, then bet the stock will go down using put options. A -2% pullback on the stock could equate to a +30% gain on a weekly put option.
Notable Earnings Announcements This Week
Tuesday
- AZZ
- Earnings Estimate $1.38
Wednesday
- PepsiCo (PEP)
- Earnings Estimate $1.83
Thursday
- Delta Air Lines (DAL)
- Earnings Estimate $1.55
Friday
- JPMorgan Chase (JPM)
- Earnings Estimate $2.91
Other Events:
October 11
- UK Unemployment Rate
- US Consumer Inflation Expectations
October 12
- UK GDP YoY
- US PPI
- ECB President Lagarde's Speech
- FOMC Minutes
October 13
- US CPI
- US Inflation Rate
The LevelFields Team