Macrosynthesis

U.S. Stock Indexes Hit New Highs

The Nasdaq and S&P 500 reached record highs amid favorable inflation reports showing reduced import costs and positive news from major tech companies. Apple surged following its AI strategy reveal, while Oracle and Broadcom saw significant gains on strong earnings. Despite this, the Dow Jones struggled. Treasury yields fell to two-month lows, and crude oil prices rebounded. Market sentiment was dampened by a drop in consumer sentiment and rising long-term inflation expectations. The Federal Reserve kept rates steady while Powell stated that the initial rate cut will significantly loosen financial market conditions, boosting the economy. However, he emphasized the need to ensure the economy requires lower rates before proceeding.

Tech and Semiconductor The Biggest Winners Last Week

Communications, Energy Minerals, and Non-Energy Minerals sectors declined, losing -3.63%, -3.49%, and -3.34% respectively. In contrast, Technology and Technology Services sectors gained, with 6.45% and 1.54% increases. Real estate stocks also increased on hopes of interest rate cuts in September. Semiconductors and software stocks also rose last week on lower rate hopes. Materials stocks and regional banks performed the worst.

Consumer Sentiment Plummets With Biden's Approval Ratings

‍Recent consumer sentiment data highlight a challenging economic perception among Americans. The University of Michigan consumer sentiment index fell for the third consecutive month to 65.6 in June 2024, marking the lowest level since November. This decline reflects rising concerns over high prices and weakening incomes, with assessments of personal finances and current economic conditions both deteriorating. Biden's approval ratings mirror this sentiment, with a significant disapproval rate of 56.5% as of June 12, compared to an approval rate of 38.0%. Notably, lower-income households express higher disapproval (60%) than those earning above $75K (58%), showing widespread economic dissatisfaction. The alignment between low consumer sentiment and Biden's declining approval ratings emphasizes the economic challenges faced by his administration.

Fed Holds Rates Steady, Signals Fewer Cuts in 2024 as Treasury Yields Drop

The Federal Reserve held interest rates steady and signaled only one rate cut for 2024, down from the previously anticipated three cuts. Contrarily, traders now see a 72% chance of a September rate cut, up from 50% on Monday, and higher odds for cuts in November (84%) and December (97%). The Fed also raised the long-term interest rate projection, indicating a higher rate for an extended period. This decision follows modest progress towards the 2% inflation target.

However, the US 10-year Treasury yield fell for the fourth consecutive session on June 14th to 4.21%, its lowest since March, due to lower-than-expected CPI and PPI data and rising initial claims. This has increased bets on multiple Fed rate cuts this year, despite the Fed's hawkish stance.

‍

French Stocks Plummet Amid Fears of Far-Right Election Victory

France’s stock market faced its worst week since March 2022, driven by fears of a far-right election win that some fear could mark the beginning of more isolationist and interventional policies. The CAC 40 index dropped almost -6% this week following President Macron's snap election call, while finance minister Bruno Le Maire warned of a financial crisis if extreme parties won.

Bank of Japan Holds Rates; Launches Dating App to Boost Low Birth Rates

The Bank of Japan kept its key short-term interest rate at 0% to 0.1% in June, following its first rate hike since 2007. The board may consider reducing bond purchases in July. Japan's economy has moderately recovered, with resilient private consumption but flat exports. Inflation remains around 2-2.5%.

On a separate note, Japan's fertility rate hit a new record low, with only 727,277 births last year. In response, Tokyo launched a government dating app to encourage marriages and boost birth rates amidst ongoing population decline.

‍

‍

‍

‍

Commodity Movers

Oat

-5.86% (1W Chg)

-17.70% (1M Chg)

‍

Cheese

+3.63% (1W Chg)

+25.47% (YoY Chg)

‍

Gold

+1.72% (1W Chg)

-2.48% (1M Chg)

‍

Silver

+2.19% (1D Chg)

-0.58% (1M Chg)

‍

‍

‍

Noteworthy Events

Signet Jewelers Shares Drop 15% After Mixed Q1 Results and Increased Discounts

Signet Jewelers' shares dropped nearly -15% June 13th after mixed Q1 results, posting adjusted earnings of $1.11 per share and $1.51 billion in revenue. Analysts expected $0.85 per share and $1.52 billion. Management highlighted ongoing consumer pressure and increased discount activity.

Dave & Busters Scores Poorly in Earnings

Dave & Buster’s stock dropped nearly -11% June 13th after Q1 sales missed expectations. The company reported $588 million in revenue, falling short of the $621 million expected by analysts.

Oracle Shares Soar 13% to Record High on Cloud Deals with Google and OpenAI

Oracle shares surged over 13% on June 12th to a record high following cloud deals with Google and OpenAI. The company will bring its database to Google's cloud in November and partner with Microsoft and OpenAI for additional computing capacity, despite disappointing Q4 results.

Apple Shares Jump 7%, Surpassing Microsoft After AI Initiative Unveiling

Apple shares rose over 7% this week, briefly surpassing Microsoft in market value. This follows a jump on Tuesday after the company unveiled its artificial intelligence initiative, Apple Intelligence, at its developers conference.

Affirmation for Affirm

Affirm Holdings' stock jumped +11% on June 11th after announcing its buy now, pay later loans will be integrated into Apple Pay for U.S. users on iPhones and iPads, available later this year.

Southwest Stock Heads South This Summer

Southwest Airlines shares dropped -5.6% on the 11th after the airline announced openness to meeting with Activist Investor Elliott Management, which holds a $1.9 billion stake and has advocated for a leadership change.

CuriosityStream Surges Over +20% After Stock Buyback

CuriosityStream surged from $1.03 to $1.35 on June 11th following a stock buyback announcement, alerted to Levelfields users at 9am, resulting in a one-day return of over 20%.

‍

‍

‍

CASE STUDY

‍

OppFi Inc. up 26% in 1 Day Due to Financial Events

Company Overview: OppFi Inc. (Ticker: OPFI) is a financial technology company that specializes in providing credit access to individuals with limited options by connecting banks and consumers. Recently, OppFi made significant financial moves that influenced its stock performance.

‍

Key Events:

1. Stock Buyback Announcement
   • Date: April 9, 2024
   • Impact: On the day of the announcement, the market reacted positively to this strategic decision, reflecting a 25.39% positive impact over the following day.
     
     
2. Special Dividend Declaration
   • Date: April 9, 2024
   • Impact: Alongside the stock buyback, OppFi declared a special dividend. This decision was perceived favorably by investors, leading to a 25.39% increase in the stock price the next day.

‍

Market Reactions and Analysis: The dual financial strategies of a stock buyback and a special dividend were aimed at enhancing shareholder value. The stock buyback signaled management's confidence in the company's future prospects, as repurchasing shares often suggests that the stock is undervalued. Concurrently, the special dividend provided immediate returns to shareholders, further boosting investor confidence.

‍

The immediate market response was a significant 25.39% increase in the stock price following these announcements, indicating strong approval from the market. The decisions positioned OppFi as a proactive company focusing on shareholder returns and long-term value creation.

‍

Why Did Management Do This?: This is a more important question. Leaders don't just give away cash they need - they give away cash they DON'T need. Why don't they need it? Because OPFI is growing revenues 14% and is now profitable. In an unfavorable rate environment, they are successful securing loans for their customers. What will happen when rates go down? It's likely the loan numbers will rise, which is good news for them.

‍

How To Trade It?

There are a few ways, but here are a couple:

1. Trade the event in a single day trade (buy on the event, sell when it peaks)

2. Buy the stock on the dip. After a big moves, stocks almost always sell off. This creates a second buying opportunity, as shown in the graph.

‍

‍

‍

‍

‍

‍

‍

‍

‍

Upcoming Catalysts:

EARNINGS

‍

Monday

• La-Z-Boy (LZB)
• Lennar (LEN)

‍

Tuesday

• KB Home (KBH)

‍

Thursday

• Darden Restaurants (DRI)
• Kroger (KR)
• Accenture (ACN)

‍

Friday

• Smith & Wesson Brands (SWBI)

‍

‍

‍

The LevelFields Team