Macrosynthesis

That's a Wrap

US stocks declined on Friday amid concerns over unexpected strong Producer Price Index (PPI) data, which measures selling price changes from businesses. Goods and services pricing increases .3% and .6%, respectively, the largest gains in 12 months. The data suggests the Federal Reserve might delay interest rate cuts as inflation is showing stickiness.

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The S&P 500 fell by 0.5%, the Dow by 145 points, and the Nasdaq by 0.8%, as producer prices rose more than expected, driving fears of continued inflationary pressure. Key sectors like real estate and technology underperformed, while energy showed resilience. Notably, Applied Materials' shares surged due to strong earnings, contrasting with pullbacks in companies like DoorDash, Meta, and Nike. Over the week, both the S&P 500 and Nasdaq saw declines. Markets are closed Monday in the U.S. for President's Day.

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Homesick

In January 2024, US housing starts plummeted by 14.8% to an annualized rate of 1.331 million, marking the most significant decline since April 2020 and falling short of the expected 1.46 million. This drop, the sharpest in nearly four years, was led by a notable decrease in multifamily projects, with single-family home construction projects also decreasing. Despite this setback, builders remain optimistic, anticipating a boost in demand as mortgage rates are expected to decrease.

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Consumer Optimism?

In February 2024, the University of Michigan's consumer sentiment index in the US rose to 79.6, reaching its highest level since July 2021. The index reflects growing optimism about the economy's prospects, buoyed by a slowdown in inflation and a strong labor market. Despite a minor increase in short-term inflation expectations to 3%, the long-term outlook remained stable, underscoring consumer confidence in economic stability. This optimism is helping to fuel the stock rally.

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Space Race

The US has raised concerns about Russia developing an anti-satellite nuclear weapon, marking a resurgence in the space race among the US, Russia, and China. This development emphasizes the growing competition for space dominance, with all three nations enhancing their capabilities for space warfare. The US has responded with advancements like the "Silent Barker" satellite constellation to monitor potential threats, signaling a new era of strategic military competition in space.

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Up Hill Battle

The US Senate approved a $95B foreign aid package, with significant funds allocated to Ukraine, Israel, and Taiwan. Despite Senate approval, the package faces challenges in the House, where Speaker Mike Johnson signaled potential opposition without border security measures. The bill aims to support Ukraine against Russia, aid Israel's conflict with Hamas, and provide humanitarian assistance in conflict zones.

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Commodity Movers

Natural Gas

-13.35% (1W Chg)

-35.88% (1M Chg)

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Uranium

+11.57% (1M Chg)

+103.75% (YoY Chg)

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Tea

-20.22% (1W Chg)

-17.76% (1M Chg)

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Orange Juice

+27.78% (1M Chg)

+54.62% (YoY Chg)

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Noteworthy Events    

DWAC Doubles

‍The SPAC intended to merge with and become Trump's Truth Social Platform has doubled in price in the past month and experiencing high volumes as the ex-President is emerging as the Republican contender for U.S. President in 2024. On Feb 16th, the SEC approved the transaction, green-lighting the merger to happen.  This values it at $1.8B for its 2 million daily active users.

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Roku

‍Roku's shares fell by -23.81% Friday following the announcement of a larger-than-anticipated loss for the fourth quarter. Additionally, the company's average revenue per user, an important performance indicator, failed to meet expectations.

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Applied Materials

Shares of Applied Materials rose 6.35% Friday following the company's fiscal first-quarter results, which exceeded expectations, along with a strong outlook for the second quarter. This performance set the stock on track for its best day since November 10, 2022, when it saw an 11% increase.

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Wells Fargo

Wells Fargo's stock surged 7% Thursday following the announcement that the Office of the Comptroller of the Currency has concluded a 2016 consent order. This marks the sixth consent order lifted since 2019, initially imposed due to a scandal involving the creation of fake accounts. The orders mandated Wells Fargo to overhaul its product sales and marketing practices.

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Uber

Uber's stock soared by 11% Wednesday, reaching a new 52-week high, following the company's announcement of its first $7 billion share buyback program. Additionally, Uber anticipates its gross bookings will grow by a mid to high-teen percentage over the coming three years.

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Lyft

Lyft's CEO acknowledged a clerical error in their earnings report, correcting a margin expansion figure from 500 to 50 basis points. Despite the mistake, Lyft's stock surged after clarifying the error and emphasizing ongoing profitability efforts. Lyfts CEO responded to the mistake by saying "somehow, all of our eyes got a little bit cloudy and didn't see this one extra zero." Lyft ended the week up nearly 35% on the typo.

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Shopify

‍Shopify's shares fell by nearly -15% Tuesday due to a mixed outlook for the upcoming quarter, with an expected free cash flow margin in the high single digits, which falls short of the anticipated 13.6% by analysts. Despite this, the company exceeded fourth-quarter earnings and revenue expectations.

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CASE STUDY: JetBlue +21.58%

On Feb. 12th, Billionaire Investor Carl Icahn reported a new 10% stake in JetBlue Airways, deeming the airline's stock undervalued. The news washed through dozens of news outlets, leading to a 21% surge in JetBlue shares.

Icahn obtained JetBlue board seats and intends to drive profits in the airline. This move comes as JetBlue seeks profitability post-COVID and after a failed merger with Spirit Airlines.

On the 12th, LevelFields users were alerted to the event through the 'Activist Investor Buys Stock' scenario at around 5:45 pm. Tuesday morning, JetBlue opened at nearly $6.80, up from Monday's close of around $6.09. JBLU soared to over $7.50 a share in the hours after Tuesday's opening. For the week, JetBlue ended up +19.97%.

While stocks can move quickly and heavily in this scenario, larger gains come to those with patience, allowing time for the activists like Icahn to do their work in making the company more profitable and rewarding shareholders. Ideal hold times are 6-12 months for this scenario, according to the data.

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Upcoming Catalysts:

EARNINGS

Tuesday

• Home Depot (HD)
• Walmart (WMT)
• Celanese (CE)
• Palo Alto Networks (PANW)

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Wednesday

• Nvidia (NVDA)
• ANSYS (ANSS)
• Canadian Natural Resources (CNQ)
• Etsy (ETSY)
• Synopsys (SNPS)

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Thursday

• Booking Holdings (BKNG)
• Carvana (CVNA)
• EOG Resources (EOG)
• Fiverr (FVRR)
• Mercado Libre (MELI)
• Moderna (MRNA)

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Friday

• AerCap (AER)

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The LevelFields Team