Macrosynthesis

Last Week's Recap

U.S. stock markets saw marginal gains on Friday, with the Dow Jones closing 40 points higher, the S&P 500 adding 0.1% to nearly reach the 4,300 mark unseen since August 2022, and the Nasdaq also going up by 0.1%. Market players remained cautious ahead of the upcoming U.S. CPI report and Fed rate hike decision.

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The Federal Reserve is anticipated to hold off on rate adjustments at its June meeting.

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For the week, the Dow Jones saw a 0.5% rise, the S&P 500 increased by 0.3%, marking its fourth consecutive weekly gain, while the Nasdaq remained relatively flat.

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Smoke from Canadian wildfires blanketed the eastern U.S. causing schools to cancel outdoor activities and the government to issue air quality warnings. To many, the unusually large wildfires resulting from dry conditions in eastern Canada coupled with lightning strikes were further evidence of climate change and the need for green technology.

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On the back of these events, which affected New York City, Goldman Sachs issued an upgrade on utilities stocks, especially those with a large renewable energy portfolio, calling the sector "no longer boring" for investments. The firm cited NextEra Energy (NEE) as the clear market leader.

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The Week Ahead

This week will be eventful for economic news worldwide, with significant focus on the United States, Europe, and Asia.

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In the US, the Federal Reserve's decision on interest rates is highly anticipated. Currently, a 77% chance of maintaining the current rates is projected, but upcoming inflation data might alter this prediction.

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US inflation is expected to decrease to 4.1% in May from 4.9% in April, with core gauge likely slowing to 5.2% from 5.5%. A 0.1% decline in retail sales is anticipated. Other noteworthy releases will include producer and foreign trade prices, industrial production, the preliminary estimate of Michigan Consumer Sentiment, overall capital flows, business inventories, and May's government budget figures. Regional activity indexes such as the Philadelphia Fed Manufacturing Index and NY Empire State Manufacturing Index will also be closely monitored.

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In Europe, investors will be following the monetary policy meetings of the European Central Bank and Bank of Japan. Additionally, Germany's ZEW Business Confidence and the UK's trade balance and GDP figures for April will be released.

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In Asia, China is set to release data on industrial production, retail sales, and fixed asset investment, while India will announce its inflation rate and industrial production figures.

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High Tides Ahead?

Treasury Secretary Janet Yellen has suggested that smaller banks may look towards consolidation due to the current pressures within the industry. In an interview on CNBC, Yellen stated that she anticipates some consolidation in the future, despite not wanting to see the diverse banking system threatened by such action.

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She also expressed concerns about the commercial real estate sector due to shifting work attitudes and practices towards remote work, particularly in a higher interest rate environment. Despite potential restructuring and challenges, Yellen assured that stress tests have shown that the largest banks possess sufficient capital and liquidity to handle any future strains.

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Last Week's Top Events

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Noteworthy Events  

️Tesla Charging Up

Tesla shares increased by 4% following General Motors' agreement to join Ford in utilizing Tesla's electric-vehicle charging network.

This collaboration among three of the largest U.S. automakers will provide access to over 60% of the U.S. EV market to Tesla's North American Charging Standard, potentially making it the primary network in the country.

The White House announced that charging stations using Tesla standard plugs could receive billions in federal subsidies if they also included the U.S. charging standard connection.

This agreement is expected to add $3 billion to Tesla's EV charging services revenue over the next few years. However, independent charging companies such as ChargePoint Holdings, EVgo, and Blink Charging saw their shares drop by 11% to 13%.

There are concerns that increased usage of Tesla Superchargers could overcrowd the stations or dilute the exclusivity advantage for Tesla owners.

Epstein Trial

Victims' lawyers in the Epstein case have requested further depositions from JPMorgan Chase CEO, Jamie Dimon, and two other bank officials. They claim the bank has been slow to provide key documents, including an internal review after Epstein's death and a timeline of emails. The bank denies the need for new depositions.

JPMorgan is facing related lawsuits from the U.S. Virgin Islands and is suing former asset management overseer, Jes Staley, to cover potential lawsuit losses.

Crypto Tales

The Securities and Exchange Commission (SEC) has launched a sweeping lawsuit against two of the world's largest cryptocurrency exchanges, Coinbase and Binance. Both platforms, which see billions of dollars' worth of digital assets change hands daily, are being accused of failing to register their exchanges with the SEC. The SEC's stance is that most cryptocurrencies are securities, hence current laws give the SEC the authority to regulate them. If the SEC wins these cases, it could force crypto companies to register with the SEC, significantly reshaping crypto regulation. The allegations against Binance are particularly severe, including accusations that it misled investors about its capacity to detect market manipulation and misused customer funds.

Meanwhile, Coinbase, a publicly traded company, could potentially emerge as a very different business post-lawsuit. COIN dropped to a whopping -24% week low after the announcement, before settling at -15% on Friday.

Both companies have resolved to fight the charges and prepare for a potentially lengthy legal battle. The lawsuits have already started affecting investor confidence in these platforms, with significant outflows from both Coinbase and Binance.

Bitcoin price dropped 5% last week, presumably on the expectation for lower demand caused by lower trading across these crypto exchanges.

DocuSign Points to Signs of Weakness

DocuSign dropped 2.5% despite promising earnings due to cautious customer behavior and smaller deals as stated by its CEO.

UnStonked

Gamestop lost another CEO last week and the highly shorted, Reddit-loved stock sold off -18% on the news.

What about Gary?

The U.S. Securities and Exchange Commission (SEC) Chair, Gary Gensler, is alleged to have offered advisory services to Binance and its founder, Changpeng Zhao, in 2019, according to documents filed by Binance's legal representatives. At the time, Gensler was teaching at the Massachusetts Institute of Technology and was appointed as the head of the SEC in 2021 by President Biden. Since his appointment, Gensler has been conducting a significant crackdown on the cryptocurrency industry, which includes filing 13 charges against Binance and Zhao for regulatory non-compliance. Lawyers for Binance and Zhao argue that Gensler previously had a close relationship with the company, including meeting Zhao and offering to be an informal advisor.

PRVA

Exp World Holdings and Privia Health Group announced they would be added to the S&P SmallCap 600 on June 7th. LevelFields users received early alerts about this announcement at 7:04am, enabling them to capitalize on the subsequent 10% gain in PRVA stock.

This instance is particularly noteworthy as healthcare stocks added to the S&P SmallCap 600 index typically see an average one-day return of +11.67%.

Other Noteworthy Events

• China increased its gold reserves for a seventh straight month.
• Iran, in partnership with Russia, Qatar, and Turkmenistan, is planning to establish a natural gas hub in the Persian Gulf. Iran owns 16% of the world's natural gas reserves.
• Additionally, Russia and Iran are collaborating on the introduction of a gold-backed stablecoin aimed at facilitating international trade payments.
• Billionaire Ray Dalio says the United States is at the beginning of a late, big-cycle debt crisis.
• Pakistan has expressed its interest in joining the BRICS.
• The Venezuelan President visited Saudi Arabia. Venezuela has the largest amount of oil reserves, and Saudi Arabia is number two.
• UBS is considering delaying its second-quarter earnings results after Credit Suisse Rescue Deal
• Nearly 1 out of 5 offices in the United States are vacant right now.

CASE STUDY: HOTH

Hoth Therapeutics Announced Positive Preclinical Results of HT-ALZ treatment for Alzheimer's Disease on Tuesday morning. Hoth Therapeutics, Inc. is a development stage biopharmaceutical company, which engages in the provision and development of therapeutic platform.

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LevelFields users were alerted to the Alzheimer's Trial announcement at 8am on Tuesday, resulting in a +78.19% 1D jump in share price. The Alzheimer's Trial scenario has generated a cumulative return of 88% over the last three months and averages a +17.62% 1-day return.

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Upcoming Catalysts:

Notable Earnings

Monday

• Oracle (ORCL)
• Oracle, a leading enterprise software firm, is set to disclose its fiscal fourth-quarter results after the close of Monday's trading. Analysts anticipate the company to report earnings of $1.58 per share, which would be a 2.6% increase from the previous year, and revenue of $13.7 billion, a significant 15.9% YoY increase. Analysts expect Oracle to share a compelling narrative about its advances in artificial intelligence (AI) and graphics processing unit (GPU) capacity at its Oracle Cloud Infrastructure (OCI) division.  

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Wednesday

• Lennar (LEN)
• Highlight: Tight Home Inventory, Higher Home Prices, Rising Interest Rates

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Thursday

• Adobe (ADBE)
• Highlight: Generative AI Technology Announcement
• Kroger (KR)

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Economic Reports

Tuesday

• Core CPI

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Wednesday

• Core PPI
• Fed Decision on Interest Rate Policy

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Thursday

• Jobless Claims
• Retail Sales data

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Friday

• Consumer Sentiment
• 2 Fed speakers Friday, the blackout period ends

This is not financial advice. All information represent opinions only for informational purposes.

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The LevelFields Team