Macrosynthesis

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Last Week's Recap

August inflation numbers came in higher than expected at .3 percent -  excluding oil and food. Total inflation for August came in at .6%, higher than expected and the previous month. The report gave many investors evidence for believing the Fed will continue raising rates in November.

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Amazon, Nvidia, and Microsoft experienced significant drops, contributing to the overall decline. The Dow Jones decreased by 288 points, and both the S&P 500 and Nasdaq saw decreases of 1.2% and 1.6%, respectively on Friday.

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Shares in General Motors and Stellantis saw gains of 0.8% and 2% respectively, following the initiation of a highly anticipated strike by the United Auto Workers which halted production. Despite enjoying a successful public debut recently, Arm Holdings experienced a 4.5% decline.

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Over the week, there has been a slight downward trend in the market with the Dow Jones, S&P 500, and Nasdaq falling by 0.1%, 0.5%, and 0.9%, respectively. Investors are keenly looking forward to the FOMC monetary policy announcement expected next week.

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Consumer Sentiment Drops

In September 2023, the University of Michigan reported a drop in US consumer sentiment to 67.7, missing the anticipated 69.1 mark. This dip, reflecting growing economic concerns amid the Federal Reserve's strict policies and rising living costs, is somewhat tempered by a slight uptick in future expectations, buoyed by hopes of decreasing inflation, which is projected to fall to 3.1% over the next year, the lowest estimation since March 2021.

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Crude Rallies On

WTI crude futures recently escalated beyond $90 per barrel, marking a ten-month peak, driven by escalating global demand and dwindling supplies, exhibiting a nearly 4% growth this week. This upward trend, supported by China's economic revitalization measures and increased demand, is anticipated to persist for a third consecutive week. The market sentiment is also boosted by predicted Q4 market deficits, as indicated by OPEC, the US government, and the International Energy Agency, primarily due to continuous supply reductions by Saudi Arabia and Russia.

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US total crude oil stockpiles, the Strategic Petroleum Reserves, have diminished to under 800 million barrels - a level last observed in 1985, shortly after the SPR's inception. This signifies that the US currently holds a mere 46-day supply in its total reserves, hitting a historic low, in stark contrast to the record 92-day supply documented three years ago, which was double the present levels.

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Japan Panic Buys Gold

In recent times, Japan has witnessed a surge in gold purchases, propelled by the yen's significant depreciation and rising inflation rates, surpassing even the US. As the yen continues to weaken, households are seeking a hedge against increasing inflation, a trend fueled further by the Bank of Japan's persistent lax monetary policy. The nation's largest gold dealer has reported prices exceeding 10,000 Yen per gram - a first - reflecting a global rise in gold prices driven by various factors including the pandemic and geopolitical tensions.

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Economists predict a sustained rise in gold demand in Japan as residents seek protection against the devalued yen and mounting inflation, a shift marked by a broader change in risk perception among Japanese households.

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Next Week

Next week, the financial sector will be significantly shaped by the Federal Reserve's interest rate verdict set for Wednesday. Moreover, the U.S. market will closely monitor the unveiling of the S&P Global PMI statistics, along with numerous housing indicators such as housing starts, building permits, and existing home sales. Simultaneously, central banks from several countries including the UK, Japan, China, and others are scheduled to assess and potentially adjust their respective monetary policies.

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Commodity Movers

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Crude Oil

+4.14% (1W Chg)
+15.33% (1M Chg)

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UK Gas

+3.26% (1D Chg)
+8.63% (1W Chg)

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Cocoa

+5% (1W Chg)
+60% (1Y Chg)

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Sugar

+11.24% (1M Chg)
+50.50% (1YR Chg)

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Last Week's Top Events

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Noteworthy Events  

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UAW Strike

General Motors, Ford, and Stellantis experienced varied price movements Friday as a United Auto Workers' targeted strike began. Ford's shares remained nearly unchanged, while General Motors and Stellantis saw increases of 0.9% and 2.2% respectively. The workers initiated the strike at multiple assembly plants of these automakers on Thursday night, following the passing of a crucial deadline to negotiate a new labor contract.

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Planet CEO Unfit

Shares of Planet Fitness fell by 15.9% Friday following the board's decision to oust CEO Chris Rondeau. The interim CEO role has been assigned to board member Craig Benson, who is also recognized as the former governor of New Hampshire.

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Nucor

The steel manufacturing company Nucor witnessed a 6.1% decline Friday following its projection of lower-than-anticipated earnings for the third quarter. The company attributes this to difficulties in pricing and volume, anticipating earnings to range between $4.10 and $4.20 per share.
 
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Adobe

Adobe's stock fell by 4.2% Friday after announcing its Q3 results on Thursday. Despite reporting higher earnings and revenue than expected, along with forward guidance aligning with market predictions, the shares declined. Goldman Sachs maintained their buy ratings for Adobe, while JPMorgan held a neutral stance due to the considerable price of Adobe's upcoming $20 billion acquisition of Figma.

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Strong Arming

The U.S. Department of Justice started its antitrust trial against Google, which claims Google uses financial power to keep a near monopoly on search. Aside from Google, which is also being sued for similar by the European Union, Apple stands to lose out on the $15B Google pays them annually to maintain Google search as the default search on iPhones.  

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Semi-sour

Taiwan Semiconductor stated they were delaying deliveries, raising concerns about weak consumer demand which lead semiconductor stocks to fall.

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CASE STUDY: Seadrill +24%

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The activist investor scenario is an easy one to use, especially for those with less time to trade. The basics are that a large investor is buying more than 5% of the company with the intention to cut costs, grow profits and return more capital to shareholders. This is a process that takes time so the ideal hold time is 6-12 months.

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in April, an activist investor bought shares in Seadrill, a offshore oil drilling contractor. Since then, shares are up 24 percent and the company continues buying back shares.  

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It's important to note that shares fell before they rose. Why? Because stock prices don't usually form a straight line. There is volatility day to day, and this scenario is looking for mid-term winners.

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For more on this scenario, visit our help section.

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Upcoming Catalysts:

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Notable Earnings

Tuesday

AutoZone (AZO)

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Wednesday

FedEx (FDX)

This week, FedEx is set to announce its fiscal first-quarter results after market close on Wednesday. Analysts anticipate the company will report an 8.4% year-over-year increase in earnings, amounting to $3.73 per share, although revenues are expected to see a 7.6% decline, settling at $21.8 billion.

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Thursday

Darden Restaurants (DRI)

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The LevelFields Team