Macrosynthesis

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Money Talks

The US dollar index (DXY) dipped under 102 on Friday amid signs of inflation easing in June, according to personal consumption expenditure data. Core PCE prices climbed 4.1% year-on-year in June, the smallest rise since September 2021, and lower than the predicted 4.2%. However, the DXY is on track for gains for the second week in a row, bolstered by encouraging US economic data and a .25% Fed interest rate hike last week.

The US economy grew by 2.4% in the second quarter, outpacing the projected 1.8% growth and putting market bears back in the caves, while durable goods orders increased and jobless claims hit multi-month lows. The euro and the British sterling currencies modestly rebounded from two-week lows.

There has been a significant shift in South America with countries moving away from using the dollar for trade. Recently, Bolivia began adopting the Chinese yuan for trade, which might seem inconsequential given the country's size, but this move mirrors a broader trend of nations starting to use local currencies for trade. Russia expressed its backing for the use of the Chinese yuan in transactions with Latin America.

Latin America, home to extensive mineral reserves, is seeing stronger ties with China. The Lithium Triangle, consisting of Chile, Argentina, and Bolivia, contains 60% of the world's lithium reserves. Additionally, Peru and Chile are the world's top two copper producers, and Brazil holds 17% of global nickel reserves.

As these changes unfold and the reduction in dollar-based trading continues, there is need for reflection on the implications for these resource-based economies, including BRICS countries and those seeking membership, like Saudi Arabia, Iran, and the UAE.

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Last Week's Recap

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On Friday, the Dow Jones Industrial Average closed 176 points higher, while the S&P 500 and Nasdaq increased by 1% and 1.9% respectively, amid investors evaluating the latest corporate earnings and economic data. The PCE inflation saw a further decrease in June, and coupled with recent GDP data, the economy demonstrated resilience, prompting hopes of the Federal Reserve nearing the end of its monetary tightening campaign.

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In terms of earnings, Intel saw a share price increase of 6.6% due to strong quarterly results and a positive outlook. Roku's shares surged by 31.3% following a smaller-than-anticipated loss and revenue surpassing estimates. And Google earnings beat estimates, putting the company back on track for gains.

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However, not all companies had a positive day. Exxon Mobil saw a 1.2% drop in share price due to mixed second-quarter results. Ford's shares also declined by 3.4% after the company delayed its electric vehicle production goal to next year-- even though they posted strong quarterly earnings.

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For the week overall, the Dow Jones increased by 0.4%, the S&P 500 gained 0.8%, and the Nasdaq rose by 2.1%.

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The Week Ahead

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This upcoming week is full of key economic events. In the US, the spotlight will be on non-farm payrolls and earnings reports, accompanied by data on factory orders, Job Openings, and the ISM's Manufacturing and Services PMI. Internationally, monetary policy decisions from central banks in the UK, Australia, and Brazil will be watched. Q2 GDP growth rates in the Euro Area, Hong Kong, and Mexico will also be significant, as will the inflation rates from the Euro Area. China is slated to share manufacturing and services PMI data, while unemployment rates from Japan, Germany, the Euro Area, and Canada will be reported.

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Last Week's Top Events

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Noteworthy Events  

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To Kill a Mocking Bird

Twitter is now known X, in a rebrand to make the social application an "everything app," instead of just a messaging service. The iconic Twitter bird icon was removed from buildings and logos last week though the url remains Twitter.com.

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Roku Streams a Win

Roku's shares jumped 31% on Friday following a report that showed a smaller-than-anticipated loss for the recent quarter. The streaming company registered a loss of 76 cents per share, which was lower than the $1.26 loss per share analysts had predicted, as per Refinitiv. Revenue also exceeded expectations, reaching $847 million against the estimated $775 million.

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Good Intel

‍Intel shares surged over 6% on Friday after the company reported second-quarter earnings that surpassed expectations. The strong results signaled a return to profitability following two consecutive quarters of losses. Additionally, Intel's third-quarter forecast surpassed analyst predictions.

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Not so Sweet

Shares of salad chain Sweetgreen fell nearly 9% on Friday after the company reported Q2 sales that fell short of the street's expectations, as well as a net loss of $27.3 million. Despite these setbacks, Sweetgreen revealed reduced losses and an increased forecast for restaurant-level margins. The company aims to become profitable for the first time by 2024.

Just a phase?

Enphase shares plummeted over 13% (5 days) following the release of its Q2 revenue figures. The company reported revenue of $711 million, which failed to meet estimates of $722 million. Further contributing to the stock's decline were downgrades from Deutsche Bank, Wells Fargo, and Roth MKM.

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Other Noteworthy Events

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• The Walton family, founders of Walmart, offloaded $4.39 billion worth of their Walmart ($WMT) shares in the first half of 2023, marking the largest executive share sale in a company for the year.
• Exxon announced plans to get into the Lithium business and keep pace with the EV vehicle boom
• The US has proposed new vehicle fuel economy standards that aim to increase fuel efficiency to 58 miles per gallon by 2032, as reported by Reuters.
• The US House Financial Services Committee has advanced a bill aimed at creating a federal regulatory structure for stablecoins which also protects the right of citizens to self-custody. This is a significant step towards regulating this growing sector of the digital asset market.

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CASE STUDY: Shopify Up +50%

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While we showcase 1Day and 10Day moves in prices most often, LevelFields can be used for longer term investments as well as short term trades.

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In January, the Quick Sprints scenario identified Shopify breaking out of a pattern. The stock fell on the day of the alert but continued rising as Quick Sprints is an indicator of momentum, not price moves for a single day.  The stock went on to rise 25% over the subsequent week.

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In May, SHOP announced they would layoff 20% of their workforce and the stock rose 23% on that event. Why did it rise? Because a large company with a strong business model but poor profitability can immediately improve profits by firing people. And the higher the profits, the more valuable a share of stock becomes.

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Taken together, these two stock events for Shopify show a pattern of increasing interest in SHOP and improving narratives about the company. From the first LevelFields alert, the stock is up +50%.

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‍Upcoming Catalysts:

Notable Earnings

Monday

• Blink Charging (BLNK)
• ON Semiconductor (ON)
• Western Digital (WDC)

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Tuesday

• Advanced Micro Devices (AMD)
• Allstate (ALL)
• Devon Energy (DVN)
• Merck (MRK)
• MicroStrategy (MSTR)

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Wednesday

• Atmos Energy (ATO)
• Clean Harbors (CLH)
• CVS Health (CVS)
• Energy Transfer (ET)
• Occidental Petroleum (OXY)
• PayPal (PYPL)
• Zillow Group (ZG)

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Thursday

• Amazon.com (AMZN)
• Apple (AAPL)
• Moderna (MRNA)

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Friday

• AMC Networks (AMCX)
• Dominion Energy (D)

Economic Reports

Thursday

• Jobless Claims

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Friday

• U.S. Unemployment Rate

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

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The LevelFields Team