Macrosynthesis  

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The Rate Debate

The US stock indexes rose last week, with the 10-year US Treasury yield dropping below 3.90%. The Federal Reserve announced a subtle shift in monetary policy, holding rates steady and projecting .75% in rate cuts in 2024. This filled the bulls with hope that inflation had been tamed and money was about to get cheaper to borrow.

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The Federal Reserve, European Central Bank (ECB), and Bank of England are aligning for rate cuts in 2024, with the Fed likely to cut first in June, the ECB in September, and the Bank of England in November.

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The Bank of England and ECB kept their rates unchanged, with the former resisting early rate cuts and the latter hinting at a possible rate cut in June. Meanwhile,US retail sales outperformed expectations in November, indicating strong consumer and labor demand.

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Last Week's Recap

On the last triple witching day of 2023, Wall Street indexes showed minimal movement. The S&P 500 and Dow Jones slightly fell, and the Nasdaq wavered. Remarks byNY Fed President Williams on rate cuts influenced market caution.

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The NY Empire State Manufacturing Index dropped unexpectedly, but S&P Global PMIs showed a robust services sector.

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The Dow Jones hit record highs, and the S&P 500 and Nasdaq reached their highest levels in nearly two years. This week marked continued gains, with the S&P 500 and Nasdaq up for the seventh week and the Dow Jones for the ninth.

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Market Trends

Real estate (+5%), financial (+3.3%), material (+4%), and industrial sectors (+3.5%) were the biggest winners last week.  In a similar show of strength for a broad market rally, the equal-weighted S&P 500 ETF (RSP) significantly outperformed the market cap-weighted S&P 500 ETF (SPY), which is heavily skewed towards megacap tech companies. The RSP rose +3.2% while the SPY rose only 1.7% for the week. The outperformance indicates investors are betting on a light or no recession scenario for 2024 where all sectors are expected to rise.

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Next Week

The upcoming financial reports in the United States will focus on various key economic indicators. The Personal Income and Outlays report for November, which includes the PCE price index, is particularly significant. Other important data includes the final Q3 GDP growth figures, the CB Consumer Confidence index, and statistics on durable goods orders.

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Additionally, the housing sector will be in the spotlight, with a close examination of building permits, housing starts, and both existing and new home sales. These reports are crucial for investors and analysts tracking the economic health of the country.

Private Sector Growth

In December 2023, the S&P Global US Composite PMI climbed to 51.0, indicating the fastest private sector growth in five months and marking the third consecutive month of expansion. This growth, driven primarily by the service sector, featured the largest increase in new orders since July, though overall expansion rates remained low.

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Commodity Movers

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UK Gas

-14.01% (1W Chg)

-27.61% (1M Chg)

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Uranium

+11.22% (1M Chg)

+68.99% (YoYChg)

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Lithium

-31.58% (1M Chg)

-82.42% (YoY Chg)

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Coffee

+7.77% (1W Chg)

+14.59% (1M Chg)

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CASE STUDY: GM +6.65%

On Thursday at 11:03 am, General Motors announced that GM's Cruise division would lay off 900 employees, amounting to 24% of the group's total workforce. The layoffs predominantly affect commercial operations and related corporate functions.

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This decision comes just a day after the robotaxi subsidiary let go of nine key leaders. These actions are a direct consequence of an incident on October 2, where a pedestrian was dragged 20 feet by a Cruise self-driving car following a collision with another vehicle. In response to this event, Cruise has since paused all public road operations and stopped the production of a new robotaxi model, among other measures.

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As a result of the cost cutting and wound cauterizing, GM rose +6.65%.

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LevelFields users were alerted to the announcement right away through the Mass Layoff scenario and were able to hop in on the price movement.

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Large, profitable companies typically show an increase in price following significant layoffs. Filtering the data in this way turns an overall bearish event, into a bullish event.

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Noteworthy Events    

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Scholastic

Scholastic Corporation's stock value experienced a significant decrease of -12% Friday following its recent financial report. This downturn is attributed to a 4% drop in their revenue compared to the same period last year, with the company acknowledging challenges in the retail sector as a key factor for this decline.

Adobe

Adobe's stock experienced a significant decline of over +5% Thursday following the announcement of its earnings and revenue projections for the fiscal year 2024. These forecasts were lower than anticipated, leading to a notable decrease in the company's share value.

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Moderna

Moderna's stock experienced a surge of over +14% Thursday, following positive results from midstage trials of their cancer vaccine, which is a collaborative effort with Merck. This vaccine has shown effectiveness in decreasing the likelihood of death or recurrence in patients with melanoma.

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Rivian

Rivian Automotive, an EV manufacturer, experienced an +11.2% increase Thursday following the announcement of a partnership with AT&T. This agreement involves AT&T committing to purchase an unknown number of electric vehicles from Rivian, starting in early 2024, as part of a program focused on reducing the emissions of their fleet. Rivian has been plagued by production setbacks, but the company's $21B market cap has been held up by its large contract with Amazon to purchase a fleet of delivery vans.

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Oracle

Oracle, a software provider, experienced a slide of -12.4% on Tuesday. This drop followed the company's announcement of its fiscal second-quarter earnings, where it reported revenue of $12.49 billion. This figure fell short of the expected $13.05 billion consensus estimate from analysts.

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Upcoming Earnings

Monday, December 18

HEICO (HEI)

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Tuesday, December 19

FedEx (FDX)

Accenture (ACN)

FactSet (FDS)

FuelCell Energy (FCEL)

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Wednesday, December 20

General Mills (GIS)

Micron Technology (MU)

Toro (TTC)

Winnebago (WGO)

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Thursday, December 21

CarMax (KMX)

Paychex (PAYX)

Carnival (CCL)

Nike (NKE)

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The LevelFields Team