Macrosynthesis
TLDR
- Iran attacks Israel, Trump blames Harris
- Oil prices rise on fears of broader war
- Fed rate cuts in question due to jobs data
- Spirit Airlines faces possible bankruptcy
- Mpox vaccinations begin in Africa
- Toyota invests in flying taxis
September Turned Out Better Than Expected for Stocks. Will October Disappoint?
October has big shoes to fill after September, when the S&P 500 recorded its best performance in 11 years, defying its historical trend as the weakest month for the market. Strong earnings growth and interest rate cuts fueled a 2% rise. However, high stock valuations and potential economic concerns still pose risks for investors. Adding to the market's volatility, Iran launched a 200-missile attack on Israel on Tuesday, marking its second direct attack this year. Most missiles were shot down by the Israelis with some support from the U.S. military. Around 30 struck an Israeli air base and one struck an empty school. Israeli leaders have stated they will respond with force and while the U.S. attempts to curtail the scope of the retaliation through diplomacy, many are speculating that Israel will attack Iran's oil refineries to curtail their ability to generate funding.
Former President Trump didn't waste any time seizing the events as an opportunity to convince U.S. voters that the reason Iran has been funneling money into their military and military proxy groups like Hezbollah, Hamas, and the Houthis is because the Biden administration unfroze billions of dollars in Iranian assets. The Biden administration has stated the money can only go to humanitarian causes and has not encouraged the 170 attacks on U.S. military bases by Iran-backed militias.
Harris's lead over Trump has narrowed to nearly 2.5% nationally. And a recent poll shows Trump leading Harris significantly on voter beliefs of which candidate is strongest on foreign policy. The global turmoil may be chipping away at Harris' slight lead. The stakes are high for markets. Clean energy and EV stocks like First Solar and Tesla had been rising since Harris took a lead in the polls and will likely selloff if Trump is elected as he does not support federal subsidies on these industries.
Oil Rallies In Wake of Iranian Attack
Investors are flocking to the crude oil market amid the largest rally in nearly two years, driven by geopolitical tensions following Iran's missile attack on Israel. Oil prices have surged over $6 per barrel. Former Israeli Prime Minister Ehud Barak believes Israel is likely to retaliate by targeting Iran's oil industry, potentially through significant aerial strikes similar to previous actions in Yemen. Despite U.S. opposition to attacking Iran’s nuclear facilities, Barak suggests Netanyahu’s government may still consider such strikes as a symbolic move amidst escalating Middle East tensions. Increased retail trading has heightened market volatility, with volumes in oil-linked products, including the United States Oil Fund, reaching their highest levels since Russia’s invasion of Ukraine in 2022, adding both liquidity and risk to the market.
Job Market Resilience Poses Questions For Feds Next Move
In September 2024, U.S. nonfarm payrolls surged by 254,000, marking the largest gain in six months, with the unemployment rate dropping to 4.1%. Wages increased by 0.4%, and job growth outpaced expectations. The robust report signaled economic resilience, reducing the likelihood of significant Federal Reserve rate cuts. However, betting markets are still set on 1% rate cuts this year.
Wages Rise Beating Estimates
In September, average hourly earnings for U.S. private nonfarm payrolls rose by 0.4% to $35.36, surpassing the forecasted 0.3%. Wages for private-sector production and nonsupervisory employees increased by 0.3% to $30.33. Over the past year, wages rose 4.0%, exceeding market expectations. Rising wages, alongside increasing oil prices, pose significant risks to future inflation. Higher wages often lead to increased consumer spending, which can drive prices higher, fueling inflation. While current wage growth may reflect a recovery from previous price surges, there is a risk of the economy overheating if wages continue rising too quickly.
Energy Stocks Surge on Rising Oil Prices, Conflicts
The S&P 500 sectors showed mixed performance, with notable gains in Energy, which surged by 7%, and Telecom, which increased by 2.2%. Utilities and Financials also posted positive returns, up 1.1% and 1%, respectively, while Industrials and Information Technology had modest gains of 0.4% and 0.1%. In contrast, several sectors experienced declines, with Materials falling the most at -2%, followed by Real Estate at -1.9%, Consumer Staples at -1.6%, Consumer Discretionary at -1.2%, and Healthcare at -0.9%. This varied sector performance indicates a divergence in market conditions, with Energy clearly outperforming while most other sectors experienced slight declines. The S&P 500 finish flat for the week.
Mpox Vaccine Campaign Starts in Africa
The Ministry of Public Health and Prevention, supported by the World Health Organization (WHO), just started vaccinating vulnerable groups against mpox in high-priority provinces in the Democratic Republic of the Congo (DRC). A total of 265,000 doses of the Bavarian Nordic mpox vaccine arrived in Kinshasa in September, donated by the European Union, the Government of the United States and Gavi with support from Africa CDC. The latest figures show 859 people have died from the mpox virus so far this year, with roughly 30,000 reported cases.
The Week Ahead
This week will be crucial in the U.S. with the release of September’s CPI report, FOMC Meeting Minutes, and the start of earnings season. Investors will monitor speeches by Federal Reserve officials and data on producer prices, consumer sentiment, and foreign trade. Globally, inflation data from Brazil, Mexico, and Russia, along with Germany’s industrial and trade reports, UK GDP, and Canada's unemployment and trade figures, will also draw attention. And earnings season starts Friday, with the major banks reporting the state of the consumer.
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Gasoline
+7% (1W Chg)
-2.67% (YoY Chg)
Crude Oil
+9% (1W Chg)
+7.37% (1M Chg)
Steel
+6.78% (1D Chg)
+12.77% (1W Chg)
Silver
+11.62% (1M Chg)
+53.99% (YoY Chg)
Company News
LevelFields AI Alert Highlights This Week
This week, LevelFields alerts delivered impressive returns. SGMT's breakthrough therapy spurred a 12% gain in one day, with a total rally of over 40% for the week. CRGY was added to the S&P Small Cap 600, driving a 12% gain in a single day. SND announced a $10M buyback, resulting in a 10.5% daily gain, while CIEN's $1B buyback boosted shares by 7.5% in one day.
Arcadium Lithium Jumps 30% Amidst Buyout Rumors
Arcadium Lithium Plc shares surged over 30% after reports emerged that Rio Tinto is in talks to acquire the company in a deal valued between $4 billion to $6 billion. The ongoing negotiations have yet to result in a final agreement.
You Wanted it, You Got It: Flying Taxi Company, JOBY, Gets a Boost from Toyota
Toyota is investing $500 million in Joby Aviation to help launch its U.S. electric air taxi services, expected to begin in 2025. This new investment adds to Toyota's $394 million capital injection in 2020. Joby will use the funds for aircraft certification and commercial production, aiming to expand sustainable air travel globally. Joby surged over 15% this week. This comes as a huge boost as the company reported a revenue of only 28K last quarter.
Spirit Airlines Stock Plummets on Bankruptcy Fears
Spirit Airlines' shares plummeted to a record low after reports emerged that the company is considering Chapter 11 bankruptcy. The budget carrier is facing an October 21 deadline to refinance over $1 billion in debt, following a blocked acquisition by JetBlue and struggles with rising costs, shifting consumer demand, and an engine recall. It probably didn't help that they treat their customers like stray cats, but maybe that was just our experience.
Levi's Stock Drops Following Poor Earnings
Levi Strauss reported mixed quarterly results, missing revenue expectations, and announced it is considering selling its Dockers brand due to a 15% decline in sales. Despite a 5% gain in Levi’s namesake brand, overall revenue remained flat. Following the announcement, Levi’s stock dropped over 8%. The company also lowered its full-year revenue guidance but maintained its earnings outlook.
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Upcoming Earnings:
Tuesday: PepsiCo (PEP)
Wednesday: AZZ (AZZ)
Thursday: Delta Airlines (DAL), Dominos Pizza (DPZ)
Friday: JPMorgan Chase (JPM), BlackRock (BLK), Wells Fargo (WFC)