Macrosynthesis

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TLDR

• U.S. stock indexes take a pause after all-time-highs
• Biden poor debate performance triggers selloff in solar stocks
• May inflation rate meets expectations
• Yen drops, french bond yields surge on bond selloff
• Cocoa prices finally drop some
• Shares of Rivian soar on investment from Volkswagen
• Celsius shares drop on analyst downgrade despite support for stock

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U.S. Stock Indexes Take a Breather

The U.S. stock market showed mixed performance last week, with the Dow and S&P 500 both declining by 0.1%, while the Nasdaq rose by 0.2% and the Russell 2000 (small caps) surged by 1.3%. The CBOE Volatility Index dropped by 5.8% to 12.44. Sector-wise, Consumer Staples indexes fell by 0.7%, Utilities by 1.1%, Financials by 0.2%, and Healthcare and Information Technology both by 0.4%. Conversely, Telecom gained 1.3%, Energy rose by 2.6%, Consumer Discretionary increased by 0.5%, and Real Estate indexes went up by 0.7%.

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Biden Debate Debacles Trigger Selloff in Solar Stocks

Following a poor debate performance, prominent politicos are speculating that Joe Biden may not be the Democratic nominee in November. Biden was unable to keep facts straight or recall many statistics during the debate.  Media reactions and political discussions suggest that Biden's candidacy is now in serious jeopardy. Post-debate polls suggest that Trump leads Biden 67% to 33%. However, reports indicate that President Biden remains committed to his campaign and plans to participate in a second debate with Donald Trump in September.

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Shares of solar companies like First Solar (FLSR) sank on Friday on concerns a Trump presidency would roll back incentives for solar that have helped spur interest in solar and bring costs down on solar panels.

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Euro Inflation Dips, French Yields Surge Amid Election Jitters

‍In May 2024, Euro Area inflation expectations for the next 12 months fell to 2.8%, the lowest since September 2021. Three-year expectations dropped to 2.3%. Meanwhile, the French 10-year OAT yield rose to 3.28%, amid concerns over the upcoming parliamentary elections. Polls suggest Marine Le Pen's National Rally could secure over 30% of votes, raising fears of increased spending and fiscal deterioration. The yield spread between French and German 10-year bonds hit multi-year highs.

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PCE Cools

In May 2024, the US personal consumption expenditure price index remained unchanged from April, marking the smallest increase in six months. Goods prices fell by 0.4%, while services rose by 0.2%. Core PCE, excluding food and energy, increased by 0.1%.

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Consumer Spending Slows

In May 2024, US personal spending rose 0.2%, falling short of the anticipated 0.3% increase. The $47.8 billion rise in PCE included $34.2 billion in services and $13.6 billion in goods. Health care, housing, utilities, and air transportation drove the services increase, while nondurable goods, especially prescription drugs, led the goods rise.

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Similarly, Walgreens cut its full-year profit outlook after disappointing fiscal third-quarter earnings due to a challenging consumer environment, causing shares to drop over 20%. Despite revenue growth in its healthcare segment, the company is closing underperforming stores and simplifying its U.S. healthcare portfolio as part of cost-cutting measures.

Housing Slump

In May 2024, U.S. new home sales dropped to a six-month low, impacted by rising mortgage rates, while supply hit a 16-year high. Despite a sharp upward revision for April sales, the housing market recovery is faltering, affecting homebuilding and sales of previously owned homes.

Yen Drops Further

The yen remains under pressure despite Japan's top currency official, Masato Kanda, warning of potential intervention and the BOJ's readiness to intervene 24 hours a day. Japan is prepared to act against excessive currency fluctuations, but the yen continued hovering near its lowest level in 34 years. With a widening yield gap between Japan and the US, analysts forecast further yen weakening, possibly triggering intervention. Market movements and trader positions suggest ongoing bearish sentiment towards the yen.

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Commodity Movers

Natural Gas

-2.93%  (1D Chg)

-8.1% (1W Chg)

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Steel

-3.73% (1W Chg)

-6.91% (1M Chg)

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Sugar

+6.91% (1W Chg)

+10.76% (1M Chg)

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Cocoa

-18.83% (1M Chg)

+131.93% (YoY Chg)

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Noteworthy Events    

Nike Shares Tumble 20% on Sales Cut and China Woes

Nike shares plunged nearly 20% June 28th after the company cut its full-year guidance and warned of a 10% sales drop in the current quarter, citing weak sales in China and uneven global consumer trends. Despite beating earnings estimates, Nike fell short on revenue expectations, raising concerns over its future performance.

Levi Strauss Stock Sinks 15% on Revenue Miss

Levi Strauss (LEVI) shares fell 15.4% June 27th after the company reported second fiscal quarter revenue of $1.44 billion, missing the $1.45 billion forecast.

Hims & Hers Shares Drop 7% Amid Weight Loss Drug Concerns

Hims & Hers Health (HIMS) shares dropped over 7% after Hunterbrook Media reported alleged issues with the company's weight loss drug sales. Hunterbrook takes issue with Hims’ GLP-1 supplier, BPI Labs, which is owned by Belcher Pharmaceuticals. Two Belcher executives received prison time for a healthcare fraud scheme a couple years ago. Hunterbrook Capital, affiliated with Hunterbrook Media, holds a short position in the company's stock.

Rivian Soars 50% on $5B Volkswagen Investment

Rivian Automotive's stock (RIVN) surged over +49% June 26th after securing a $5 billion investment from Volkswagen Group, with an initial $1 billion in a convertible note and the remaining $4 billion by 2026. Lucid shares also rose 4%. Rivian was the latest Level 2 alert, sent prior to the Volkswagen announcement.

Whirlpool Soars 15.5% on Bosch Buyout Rumors

Whirlpool shares surged 15.5% June 26th following a Reuters report that Bosch is considering a bid for the appliance manufacturer.

SolarEdge Crashes 20% Amid $300M Notes and Bankruptcy Shock

SolarEdge Technologies shares fell -20.6% after announcing a $300 million convertible notes offering and revealing a customer’s $11.4 million bankruptcy-related non-payment in an SEC filing.

PGTX Joins the S&P 500 Small Cap Index

‍Protagonist Therapeutics rose over +11.23% on June 28th after it was announced that it would be added to the S&P SmallCap 600 on July 3rd.

Maxeon Slapped with Lawsuit

MAXN tumbled over -23% on June 28th after Glancy Prongay & Murray filed a class action lawsuit against the solar company.

Celsius (CELH) Stock Drops on Analyst Downgrade

Shares of fast-growing energy drink maker Celsius are down -28% this month, following a downgrade from one analyst who cited concerns of slowing growth. Celsius grew revenues 100% for the year and 37% in the last quarter. Of the 16 analysts who offered an opinion on the stock in May, 14 rated the stock a buy or strong buy, and none recommended selling. We hold a position in Celsius, as does Pepsi, which is helping take the energy drink worldwide. Earnings grew over 100% in the last quarter.

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CASE STUDY

PTGX Rises Following Inclusion in S&P 600 Small Cap Index

Who: Small biotech, Protagonist Therapeutics, provides therapies for blood disorders, and inflammatory and immunomodulatory diseases.

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What: The company was just added to the S&P Small Cap Index, resulting in a 9% increase in the stock price. Inclusion in the index requires ETFs that track the index to buy shares in PTGX to stay aligned with the index they copy. Shares will be bought by ETFs July 2nd.

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Why: Inclusion in the S&P Small Cap 600 happens when a company has gained a large enough market cap and met the criteria of S&P. In this case, PTGX rose around 40% prior to inclusion in the index. The share price has been climbing following the company's announcement of a $630 million dollar licensing deal with Takeda pharmaceuticals.

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How: The inclusion in the S&P 600 index results in a short term price move 87% of the time, per LevelFields AI data, but it also signifies when a company has grown large enough in market cap to be included.

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This event serves as a marker for the company's growth, and can often lead to much larger gains longer term, as inclusion typically indicates positive financials.

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Upcoming Catalysts:

EARNINGS

Tuesday

• TSLA delivery numbers
• MSC Industrial (MSM)
• Radius Recycling (RDUS)
• Simulations Plus (SLP)

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Wednesday

• Constellation Brands (STZ)

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Thursday

• July 4th Holiday

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The LevelFields Team