Macrosynthesis

That's a Wrap

US stocks rallied on Friday, offsetting prior losses, buoyed by unexpectedly robust labor market data. The S&P 500, Dow Jones, and Nasdaq rose due to the strongest job addition in ten months, a surprise dip in unemployment, and consistent wage growth, hinting at a resilient labor market. This development raises hopes for the economy's soft landing and questions the timing of anticipated interest rate cuts, amidst varied Federal Reserve opinions.  

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Across sectors last week, the Energy sector emerged as the top gainer, showcasing a significant uptick of +3.9%, likely fueled by rising demand and supply constraints. On the other end of the spectrum, the Healthcare sector found itself at the forefront of the decliners, experiencing a substantial decrease of -3.1%, which was attributed to a lower than expected price increase from Medicare. Across industries, Gold Miners (GDX), Oil Drillers (OIH), and Oil Producers (XOP) saw the biggest gains, while Retail Companies (XRT), Regional Banks (KRE), and Clean Energy stocks (PBW) sold off on steady interest rate fears.

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Wages Push Higher

In March 2024, US private nonfarm payroll hourly earnings rose by 12 cents to $34.69, matching expectations with a 0.3% increase after a revised 0.2% gain previously. Hourly earnings for production and nonsupervisory roles also increased slightly. Year-over-year, earnings grew by 4.1%, aligning with forecasts.

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U.S Adds More Jobs

In March 2024, the US saw a significant employment boost, adding 303,000 jobs, the highest in ten months and surpassing expectations. Revisions to prior months' data also showed increased job growth, particularly in health care, government, and construction sectors. The robust job gains indicate a strong labor market, eliminating any immediate need for the Fed to cut interest rates.

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Crude Rises

WTI crude futures hovered around $87 per barrel Friday, eyeing a second consecutive weekly gain, driven by heightened geopolitical unrest in oil-producing regions and OPEC+'s supply management. Tensions surged after Israeli airstrikes hit Iran in retaliation for a series of attacks on Israel-bound ships. Iran vowed retaliation against Israel, spooking oil markets. Ukrainian AI-powered drone strikes against Russian oil refineries also derailed capacity.

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OPEC+ members were urged to adhere more closely to production cuts, while robust US economic indicators and anticipation for job data underscored a positive demand forecast for the leading oil consumer.

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This comes after the Biden Administration announced their halt on plans to restock the Strategic Petroleum Reserve by year-end, pausing solicitations for crude oil due to rising market prices. The reserve allows the U.S. to manage supply and pricing challenges, but the SPG currently sits at a 40-year low. This is a recipe for continued oil price increases heading into an election year, where gas prices are highly correlated to Presidential approval levels.

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Golden Days

Gold's price soared to record highs on Friday, again, achieving its third consecutive weekly increase amid speculations of U.S. interest rate cuts and robust buying by central banks. Strong U.S. job data didn't deter its ascent as the jobless rate dropped below forecasts, indicating tightness in the labor market and warranting the case for higher rates for longer.

Silver also is on the verge of an all-time high, though demand forecasts for it are mixed.

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Commodity Movers

Silver

+9.58% (1W Chg)

+13.77% (1M Chg)

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Gold

+3.52% (1W Chg)

+8.44% (1M Chg)

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Crude Oil

+4.39% (1W Chg)

+10.67% (1M Chg)

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Tea

+34.52% (1W Chg)

+28.02% (1M Chg)

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Noteworthy Events    

Musk vs Reuters

On April 5th, Tesla's stock fell nearly 2% following a Reuters report on halted low-cost car plans, crucial for mass-market expansion; CEO Elon Musk disputed the claims on X: “Reuters is lying (again).”  Tesla fell nearly 6% after the report, and bounced 5% after Musk's response. TSLA ended the week down -3.89%.

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Perfect Fit

Levi Strauss's stock surged +12% on April 4th after a first-quarter earnings beat, prompting an uplift in its annual profit forecast.

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Intel Slumps

Intel experienced a significant slump April 3rd, falling 8% following the disclosure of a $7 billion operating loss in its semiconductor foundry operations for the year 2023.

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Kreme + Micky D's

‍Krispy Kreme's stock surged 6% April 5th following an upgrade by Piper Sandler to overweight, motivated by its new partnership with McDonald's and positive outlook.

All that Glitters

Signet Jewelers, known for owning Zales, saw its stock pop almost 10% April 3rd following the announcement of a plan to repurchase approximately $414 million worth of its preferred shares, covering half of them.

T Breach

AT&T's stock declined by 0.85% this week following the announcement of a data breach that exposed over seven million customers' information on the dark web. Information leaked includes names, home addresses, phone numbers, dates of birth and Social Security numbers.

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CASE STUDY: Making 90% in 30 days

What? The price of Gold has risen 13% YTD, but strangely, one gold mining stock, Newmont, had been selling off and was down -25% at the start of the year.  

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Why? Negative sentiment due to the company missing earnings estimates pushed the stock way beyond a reasonable landing.

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Setup: Our analysts noticed the price disconnect with rising gold prices and sent the alert below to Level 2 users on Feb 29th:

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Newmont appears to be on a solid recovery path, underpinned by strategic growth initiatives, operational efficiencies, and a strong focus on shareholder value, making it an attractive investment option despite recent earnings misses. NEM is down -28.68% in the last year, while gold is up over 11%. In addition to this divergence, Newmont is likely to continue its reversal from its new low and rebound towards the $39 range.

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Trade Option: Buy Long or $30 Call 9/20/24 (Delta of .66/ Price $4.00 a contract)

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Result: NEM hit 39/share and the options contract rose 90% in 30 days, as shown in the graph above.

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Takeaway: The market usually prices things correctly, eventually, but very often large price discrepancies exist for months between what a company is worth and what price it trades at.  These can be used for great swing trades if you know where to look or know someone who does.

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Upcoming Catalysts:

EARNINGS

Tuesday

• Cognyte Software (CGNT)
• Neogen (NEOG)
• WD-40 (WDFC)

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Wednesday

• Delta Air Lines (DAL)

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Thursday

• CarMax (KMX)
• Constellation Brands (STZ)
• Lovesac (LOVE)

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Friday [Q1 2024 earnings reports begin]

• JPMorgan Chase (JPM)
• BlackRock (BLK)
• State Street (STT)
• Wells Fargo (WFC)

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The LevelFields Team