Macrosynthesis  

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Last Week's Recap

Fed Talk, Gold, China, Bitcoin

Ahead of the Federal Reserve's blackout period before the December 13 FOMC meeting, Fed Chair Powell appeared indifferent in a recent chat, focusing on interest rates being "well into restrictive territory," which markets interpreted as an end to rate hikes.

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This led to lower yields, a surge in stocks and Bitcoin, and increased speculation about a rate cut by March. Additionally, gold prices soared to record highs, fueled by institutional and Chinese buying, indicating a shift from fiat currency to more tangible assets like gold.

Treading Carefully

The Federal Reserve maintained the federal funds rate at 5.25%-5.5% for a second consecutive time in November, a 22-year high. During a press conference, Powell suggested that another rate hike might no longer be needed and clarified that rate cuts have not been discussed.

Treasuries

The US 10-year Treasury yield dropped to 4.2%, nearing a three-month low, as investors purchased bonds on the belief rate hikes were over. Supporting this view, recent economic indicators show a slowdown: November's ISM Manufacturing PMI indicated a continued contraction in factory activity, PCE inflation readings decelerated, and continuing jobless claims reached a two-year high, all suggesting a cooling economy.

Manufacturing Slows

The ISM Manufacturing PMI remained at 46.7 in November 2023, indicating ongoing contraction in the manufacturing sector and falling short of the expected 47.6. Production and employment rates declined further, while supplier delivery times sped up for the 14th consecutive month. New orders and inventories decreased at a slower rate, and prices stabilized somewhat due to easing energy markets, despite rising steel prices.

Market Moves

The S&P 500 finished up a little less than 1% for the week, while the NASDAQ closed 1.2% higher. But the real story is in the equal-weighted S&P 500 index (RSP) which was up over 3% for the week and just broke into positive return territory for the year. Until now, most the stock market gains were being driven by a dozen companies. A rally across more stocks, referred to as market breadth, signifies broad positive sentiment for stocks and the economy.

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In other news, real estate (+4.6%) and materials (+3%) were the best performing sectors for the week, rising on hopes of interest rates falling. Gold miners (+7%), regional banks (+8%), and solar stocks (+6%) were the outperforming industries last week. Small biotechs (XBI) also rebounded sharply last week (+6%) possibly marking the end of a near 2-year, -53% decline in value.

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Noteworthy Events    

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Elastic Price

Shares of Elastic, an enterprise search engine provider, soared over 37% Friday following robust quarterly results and an upgrade to an overweight rating by Wells Fargo. The upgrade hypothesized significant potential for revenue growth from AI utilization.

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Samsara

Samsara's shares increased by 16% Friday following the cloud company's announcement of better-than-expected quarterly results and a forecast that surpassed expectations.

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Salesforce

Salesforce's stock rose 9.4% Thursday, positively impacting the Dow Jones Industrial Average, after the cloud software vendor reported fiscal third-quarter earnings exceeding analysts' expectations. Revenue grew by 11% from the previous year. However, Salesforce's growth rate has declined in 2023 amid cost-cutting efforts by businesses.

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Snowflake

Snowflake's shares surged by 7.1% Thursday following the cloud company's announcement of better-than-expected quarterly results and a promising product revenue forecast for the fourth quarter. The company reported adjusted earnings of 25 cents per share and revenue of $734 million.

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Green Rover

Pet marketplace Rover Group's shares rose 28.9% Wednesday following the announcement that it has agreed to be acquired by Blackstone in a deal valued at $2.3 billion. The transaction is expected to close in the first quarter of 2024.

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CASE STUDY: ASST Surges +99%

Asset Entities Inc., a leader in digital marketing and content delivery, announced a plan to buy back 1,250,000 shares of stock on Monday. This move reflects confidence in the company's financial stability and future growth.

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Following the announcement, the company's stock saw a significant increase, climbing 200% by midday and closing at nearly double its opening value, from $0.33 to approximately $0.66.

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LevelFields AI users were alerted to the announcement at 8AM on Monday.

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While relatively rare for microcap-sized companies to create stock repurchase programs, it happened 137 times over the past year. The the average one day return is +6% across all events evenly, irrespective of the size of the stock repurchase program.

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Upcoming Catalysts:

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Notable Earnings

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Monday

Science Applications (SAIC)

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Tuesday

Auto Zone (AZO)

Toll Brothers (TOL)

Signet Jewlers (SIG)

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Wednesday

C3.AI (AI)

Thor Industries (THO)

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Thursday

Broadcom (AVGO)

Lululemon Athletica (LULU)

Dollar General (DG)

Docusign (DOCU)

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Friday

Hello Group (MOMO)

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The LevelFields Team