Macrosynthesis

‍That's a Wrap

US stocks hit record highs last week, with the S&P 500 up 1.4% and the Nasdaq up 1.74%. This surge was fueled by strong results from major tech companies, overshadowing a strong jobs report. Meta soared 20.32% after announcing a new dividend, stock buyback and significant sales growth. Amazon and Nvidia saw significant jumps in their stock prices, while Apple saw a slight decline due to disappointing sales in China. ExxonMobil fell slightly after mixed results, whereas Chevron rose after increasing its dividend. The job market exceeded expectations with 353K new jobs, maintaining the unemployment rate at 3.7% and showing an unexpected acceleration in wage growth.

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Consumer discretionary stocks and communications stocks outperformed other sectors last week, with real estate stocks and energy companies the worst performers. Homebuilders and semiconductors continued to outperform the S&P 500, while regional banks and oil services companies faced major sell offs.

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Dollar Rallies

The dollar index hit 104 on Friday, a seven-week high, as the strong US jobs report diminished Fed rate cut expectations.

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Job Report Beats Expectations

January's US jobs report unexpectedly reported a 353K job addition, the highest since January 2023, and a significant beat against forecasts. Despite the strong headline numbers, the details reveal concerns: the boost in average hourly earnings resulted from a cut in estimated working hours, not actual wage increases.

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The growth in employment was predominantly in part-time jobs, with a notable decline in native-born worker employment, highlighting potential political and economic implications, especially regarding immigration policies.

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Keep it Steady

The Federal Reserve kept interest rates steady, seeking more inflation control evidence before cuts. Powell downplayed a March rate cut, expecting it possibly by May or June. Despite hopes, rate reductions won't directly lower mortgage rates but should over time. Powell's remarks lowered investor expectations for a March cut, emphasizing the need for continued positive inflation data before easing rates. The Fed is cautiously optimistic about nearing its 2% inflation target but awaits more proof.

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NYCB and a Looming CRE Bubble

New York Community Bank's stock plummeted by 40% after a surprising $260 million loss and a 70% dividend cut, ahead of the Fed's emergency loan program expiration. Small banks, holding 70% of U.S. Commercial Real Estate (CRE) loans, face pressure from a $1.9 trillion exposure, with a sharp decline in CRE values and mass vacancies.

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The crisis extends internationally, with Japan's Aozora Bank also suffering significant losses due to U.S. CRE loan write-downs. This situation signals potential widespread defaults in office loans, increasing risks for banks and indicating a deepening crisis in the CRE and regional banking sectors, raising concerns for the broader economy.

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Bombs Dropped

The U.S. conducted airstrikes in Iraq and Syria targeting over 85 locations linked to Iran's Revolutionary Guard and affiliated militias, reportedly killing nearly 40 people, in response to an attack that killed three U.S. troops. The strikes, involving long-range bombers, aim to counteract Iran-backed militants and are expected to continue.

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Iraq summoned the U.S. envoy in protest, condemning the strikes that killed civilians and fighters. Iran criticized the attacks for increasing regional tension, while the U.S. insists it does not seek conflict but will protect its forces.

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Commodity Movers

Propane

+15.09% (1W Chg)

+35.78% (1M Chg)

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Coal

-8.73% (1W Chg)

-50.85% (YoY Chg)

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Crude Oil

-7.89% (1W Chg)

-14.72% (YoY Chg)

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Orange Juice

+20.27% (1W Chg)

+57.83% (YoY Chg)

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Noteworthy Events    

Better Than The Metaverse

‍Meta Platforms, the parent company of Facebook and Instagram, saw a significant increase of 20.3% Friday following a report of a tripled profit in the fourth quarter and the announcement of its first dividend scheduled for late March. The company also experienced a 25% revenue increase year-over-year, marking its quickest growth rate since mid-2021.

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Amazon

Amazon's stock surged over 7% Friday following a fourth-quarter earnings report that exceeded expectations, with earnings of $1 per share on revenue of $169.96 billion, surpassing analyst predictions of 80 cents per share on $166.21 billion in revenue.

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Peloton

Peloton's stock plummeted over 24.3% Thursday following a bleak forecast for its quarterly and annual sales, with expectations ranging from $700 million to $725 million, falling short of the anticipated $754 million by analysts. Additionally, the company reported mixed outcomes for its fiscal second quarter.

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Alphabet

Alphabet's stock dropped 7.5% Wednesday following its fourth-quarter results, where it reported advertising revenue of $65.52 billion, slightly missing the expected $65.94 billion, despite surpassing overall earnings and revenue predictions.

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General Motors

General Motors' stock increased by 7.8% Tuesday following the company's announcement of surpassing Wall Street predictions for both revenue and earnings, alongside promising projections for 2024. In the fourth quarter of 2023, General Motors achieved adjusted earnings of $1.24 per share with a revenue of $42.98 billion.

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BoA and Citigroup

‍‍Shares of Bank of America and Citigroup gained Tuesday after Morgan Stanley elevated its outlook on numerous large banks, expressing optimism for the sector's future. Bank of America's stock climbed 3.5% due to an upgrade to overweight from equal weight, while Citigroup's shares surged 5.5% following an improvement to overweight from underweight.

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UPS Slashes Workforce

Shipping giant UPS slashed its workforce by 12,000 jobs in response to slowing demand for shipping services due to reduced economic activity.

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CASE STUDY: CABA +115%

One year following a Quick Sprints alert by LevelFields on January 23rd, 2023, Cabaletta Bio Inc (CABA), experienced a significant rise of +115%.

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This alert initially led to a 6.37% increase in just one day.

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Over three years, Quick Sprints alerts have yielded a cumulative return of 466%, with a success rate of nearly 70% across over 140 events. The average one-day move stands at +3.28%.

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Notably, the scenario is identifying momentum through 9 different indicators. Sometimes the momentum last for several days, other times weeks.

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While it's unclear how long that momentum will last, this scenario can be used to spot hot companies at the breakout point - like CABA. Such opportunities must be judged on a case by case basis, but the longer term success happens quite often.

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Upcoming Catalysts:

EARNINGS

Monday - McDonalds (MCD), Chegg (CHGG), Caterpillar (CAT), Palantir (PLTR)

Tuesday - Eli Lily (LLY), AGCO Corp (AGCO), Assurant (AIZ), Hertz Global (HTZ), Western Union (WU)

Wednesday - Disney (DIS), Allstate (ALL), Carlyle Group (CG), CoreCivic (CXW), PayPal (PYPL)

Thursday - Affirm (AFRM),  Apollo Global Management (APO), Duke Energy (DUK), Take-Two Interactive Software (TTWO), Kenvue (KVUE), Pinterest (PINS), PhillipMorris (PM)

Friday - PepsiCo (PEP)

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The LevelFields Team