Macrosynthesis

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"Be fearful when others are greedy, and greedy when others are fearful." - Warren Buffet

The Week Ahead

In this month's economic update, the US April jobs report and the Federal Reserve's interest-rate decision take center stage. The economy is estimated to have added 181k jobs, marking the lowest gain since December 2020, with the unemployment rate rising to 3.6%. Average hourly earnings are projected to grow by 0.3% month over month, in line with the previous period.

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The Fed is expected to increase rates by .25 percent to counter high inflation, despite a sharper-than-anticipated economic slowdown in Q1. This would set the fed funds rate target at 5.00%-5.25% - highs not seen since 2007. Upcoming ISM surveys will show continued contraction in manufacturing and further expansion in the services sector.

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Eye for an Eye

In recent days, the U.S. and Iran have escalated tensions in the oil market by seizing each other's oil-laden tankers. The U.S. confiscated Iranian oil from a Marshall Islands tanker at sea, and in retaliation, Iran seized another tanker. This comes amid years of U.S. sanctions pressure over Iran's nuclear program, which Tehran claims is for civilian purposes, while Washington suspects nuclear bomb development. Iran's oil exports have been rising despite not recognizing the sanctions.

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Argentina + China

Argentina has announced it will begin paying for Chinese imports in yuan instead of dollars in an attempt to ease its diminishing dollar reserves. The move comes as the nation faces increasing financial instability, with inflation surpassing 100% for the first time in three decades. The Argentine government had previously committed to building foreign currency reserves as part of a $44.5 billion debt relief deal with the International Monetary Fund.

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Last Week's Top Events

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Noteworthy Events

This Week's Recap

Wall Street continued its rally on Friday, with the Dow closing 270 points higher, marking a 10-week high. The S&P 500 and Nasdaq 100 also saw gains of 0.8% and 0.7%, respectively. Investors reacted positively to strong earnings reports and easing concerns about a Fed-induced economic slowdown. Exxon Mobil's shares rose 1.2% after doubling its Q1 profit, while Intel jumped 4% after its quarterly report showed revenues stabilizing after falling off a cliff.

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Amazon's shares fell 4% despite solid revenue growth, limiting the Nasdaq's gains, as the company advised investors they were seeing pullbacks in spending on Amazon Web Services.

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Snap and Pinterest also experienced declines of 17% and 15.6%, respectively, due to disappointing Q2 outlooks. Pinterest is in the midst of a transition to enable ecommerce through the platform that has yet to materialize.

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For the week, the Dow, S&P 500, and Nasdaq 100 increased 0.7%, 0.7%, and 1.2%, respectively, with the Dow marking its best month since January.  

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FRC Trouble

U.S. regulators are pushing for a swift sale of First Republic Bank (FRC) this weekend, following the failure of two other major U.S. banks in recent months. Half a dozen banks, including Citizens Financial Group (CFG), PNC Financial Services Group (PNC), JPMorgan Chase & Co (JPM), and US Bancorp (USB), are bidding for First Republic in an auction managed by the Federal Deposit Insurance Corp (FDIC) and advised by Guggenheim Securities. A deal announcement is anticipated on Sunday night, with the FDIC possibly seizing the lender simultaneously.

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This development comes on the heels of failures at Silicon Valley Bank and Signature Bank, which prompted emergency interventions from the Federal Reserve. Investors will closely monitor the First Republic deal to gauge the level of government support required. The FDIC currently insures deposits up to $250,000, but regulators may need to insure all deposits at First Republic, pending approval from key authorities.

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Since March, these banks have collapsed:

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- First Republic, the 14th largest bank

- Silicon Valley Bank, the 16th largest bank

- Silvergate, 147th largest bank

- Signature Bank, the 29th largest bank

- Credit Suisse, the 45th largest bank in the world

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Enter Metaverse

Meta saw its shares rise 9% in after-hours trading on Wednesday following the release of its Q1 financial results. The tech giant exceeded Wall Street's revenue, earnings, and user growth expectations, marking the first quarter of year-over-year revenue growth after three consecutive quarterly declines.

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This growth may signal a potential recovery in the ad market, which was negatively impacted by economic uncertainty in the latter half of 2022.

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Despite spending heavily on AI and its metaverse project, CEO Mark Zuckerberg stated that the company is becoming more efficient, allowing for better product development and a stronger position to deliver its long-term vision. However, Meta's Reality Labs segment recorded a loss of $3.99 billion last quarter, with the company expecting further losses in 2023.

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Meta has reported Mass Layoffs four times since February of this year and is up +63.42% in the last three months.

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The Breakup

Fox Corp. shares took a -5% hit Monday as news of Tucker Carlson's departure from the network broke. The departure follows Fox's recent settlement of a $787 million defamation suit brought by Dominion Voting Systems Inc.

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The settlement and Carlson's departure highlight the financial and legal challenges facing Fox, making it a riskier investment to consider.

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Carlson's departure has had analysts scratching their heads about what the talkshow host will do next. Could he be eyeing a spot on the Trump Presidential Race team, or will he be searching for a new role in media?

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CASE STUDY: COUR Stock Buyback

Coursera, Inc. announced Thursday after close that its Board of Directors approved a share repurchase program with authorization to purchase up to $95 million of the Company's common stock. Coursera operates an educational content platform that connects learners, educators, and institutions worldwide.

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LevelFields users were alerted to the Stock Buyback announcement Thursday night, which resulted in a  +18.70 1D return in the COUR share price.

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The Stock Buyback scenario, on average, has a +2.76% 1D return. In the last three months, the scenario has had a cumulative return of 588.03%!

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Turn on alerts for the scenario and avoid missing out.

Upcoming Catalysts:

This week promises to be action-packed for investors, with several crucial events on the horizon. Key highlights include the US labor report and monetary policy decisions from the Federal Reserve and European Central Bank, which are expected to impact global markets. Additionally, earnings reports from major companies such as Pfizer, AMD, Uber, Qualcomm, and Apple will be in focus, alongside ISM Services and Manufacturing PMI, job openings, and US external trade data.

Notable Earnings

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Monday

• Air Lease (AL)
• Avis Budget (AVIS)
• Chegg (CHGG)
• J&J Snack Foods (JJSF)

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Tuesday

• Advanced Micro Devices (AMD)
• Pfizer (PFE)
• AmerisourceBergen (ABC)
• BP (BP)
• Ceasars Entertainment (CZR)
• Chesapeake Energy (CHK)
• Clorox (CLX)
• Denny's (DENN)

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Wednesday

• Barrick Gold (GOLD)
  
• Albemarle (ALB)
• Allstate (ALL)
• Allegiant Travel (ALGT)
• CVS Health (CVS)
• Etsy (ETSY)
• CoreCivic (CXW)
• MetLife (MET)

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Thursday

• Apple (AAPL)
• American Electric (AEP)
• Anheuser-Busch InBev (BUD)
• Bumble (BMBL)
• Carlyle Group (CG)
• Cars.com (CARS)
• DoorDash (DASH)
• Dropbox (DBX)
• Datadog (DDOG)
• Lyft (LYFT)

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Friday

• AMC Entertainment (AMC)
• Goodyear Tire (GT)

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Economic Reports That Will Shift Investor Sentiment

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Wednesday

• Fed Chair Powell Interest Rate Announcement

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Thursday

• U.S Trade Deficit
• U.S Productivity
• U.S Jobless Claims

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Friday

• U.S Unemployment
• Consumer Credit

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JNJ Spinoff

Johnson & Johnson will spin off its consumer health unit in a new IPO this week.  The company, Kenvue, includes well-known brands like Band-Aid, Neutrogena, Listerine, and Tylenol. The IPO starts trading Friday.

We dig into the IPO as well as an energy drinks that's growing revenues 100% in our Level 2 Weekly Analysis this week.

This is not financial advice. All information represent opinions only for informational purposes.

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The LevelFields Team