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- Weekly Wrap-Up - October 5th, 2024
Weekly Wrap-Up - October 5th, 2024
A strong jobs report, not what the Fed expected?
CMG Venture & Mark Roussin
October 05, 2024
Good morning investors!
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Every weekend we publish “The Weekly Wrap-Up” — your ticket to being well informed and staying ahead in the investment game!
This report is designed to help investors of all skill levels break down important stories/topics within the stock market. And best of all, we cut through all of the BS and give you exactly what you need to know in easy to digest, bite sized pieces of content.
Grab your coffee and let’s dive in.
Market Talk
The major indexes all ended the week slightly higher, while oil and treasury yields saw significant increases.
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3 Stories Moving the Market
These are some of the biggest stories from the second half of the week that had an influence on market action.
U.S. job creation top estimates in September as payrolls surged by 254,000
The U.S. economy added significantly more jobs than expected in September, with nonfarm payrolls increasing by 254,000, surpassing the 150,000 forecast.
The unemployment rate dropped to 4.1%, down from 4.2%.
Upward revisions for previous months also contributed to easing concerns about the labor market. August's figure was revised up by 17,000, and July by 55,000, bringing the average monthly growth to 144,000.
Wage growth was strong, with average hourly earnings rising 0.4% for the month and 4% year-over-year, exceeding expectations.
👉 EDGE TAKEAWAY: On the surface, this sounds like great news. More jobs, higher wages—what’s not to like? But when…upgrade to Edge+ to read the Full Edge Takeaway.
Spirit Airlines' stock plummeted nearly 30% amid reports of potential bankruptcy talks with bondholders.
The airline has lost over 85% of its value this year following the collapse of its $3.8 billion merger with JetBlue.
Spirit holds $3.06 billion in long-term debt and leases and has struggled with profitability, posting losses in five of the last six quarters. Additionally, several planes were grounded due to engine issues.
The airline anticipates a larger third-quarter loss, citing intense competition for budget travelers and an oversupply of seats in the U.S. market.
📚 EDGE-UCATION: What would happen if Spirit Airlines does declare bankruptcy?
If Spirit Airlines declares Chapter 11 bankruptcy, several potential outcomes could occur, depending on how the situation evolves:
Business Continues: If Spirit files for Chapter 11, it would allow the airline to continue operating while reorganizing its debts and financial obligations. The goal would be to emerge as a leaner, more financially stable company.
Debt Restructuring: Spirit would work with creditors to restructure its $3.06 billion debt load. This could involve negotiating more favorable payment terms or reducing the overall debt through concessions.
Cost-Cutting Measures: The airline might take aggressive steps to cut costs, which could include reducing flights, grounding planes, renegotiating contracts, laying off workers, or trimming routes.
Customer Impact: Typically, during a Chapter 11 bankruptcy, customers' bookings, frequent flyer miles, and service remain unaffected in the short term. However, there could be disruptions in service as the company adjusts operations.
Shareholders' Losses: Stockholders are likely to suffer substantial losses, as the company's stock value could decline further or be wiped out altogether.
Aircraft Lease Renegotiations: Spirit may try to renegotiate aircraft leases or return planes to lessors to reduce expenses, which could lead to a smaller fleet.
There could also be ripple effects across the entire airline industry:
Higher Airfares: With Spirit Airlines gone or significantly downsized, competition in the low-cost market would shrink, potentially leading to higher airfares for budget-conscious travelers.
Competitors' Gain: Airlines like Frontier, JetBlue or Southwest may absorb Spirit’s market share, leading to expanded routes or service in the ultra-low-cost segment. Competitors may also seek to acquire Spirit’s assets, like airport slots or aircraft.
Port strike ends as workers agree to tentative deal on wages and contract extension
A major U.S. dockworkers union and the United States Maritime Alliance reached a tentative wage deal and extended their current contract until January 15 to allow time for further negotiations.
This agreement ends a strike that disrupted East and Gulf Coast ports, affecting the supply of goods like fruits and automobiles. The strike had caused shipping delays, with containers being redirected to the wrong ports and goods anchored offshore, leading to rising shipping costs.
About 50,000 dockworkers participated in the first strike of its kind since 1977.
The tentative agreement includes a 61.5% wage increase over six years, though issues like port automation remain unresolved.
In Other News
In this section, we'll be curating a selection of news headlines we think you'll find interesting. If a topic catches your eye, click the provided links to read more about it.
Meta, challenging OpenAI, announces new AI model that can generate video with sound
Rivian shares fall after EV maker slashes production forecast, misses Q3 delivery expectations
Ubisoft shares skyrocket 30% after report Tencent, Guillemot family considering buyout
Levi Strauss trims guidance as it weighs sale of Dockers business
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IE+ Posts of the Week
We continue to push out more and more content every week to give investors that edge. Here are the posts Investor’s Edge+ subscribers received this week.
Edge Report
Mondays are for the investors. Every Monday morning we share exactly what we’re watching in the week ahead, how we’re positioning, and even share a sneak peek into our systems and models. This week we discussed the upcoming jobs reports and how large of an effect they will have on monetary policy going forward. See the latest full report here:
Top Stocks to Watch - October
At the beginning of each month we share our top stocks that we are watching in the weeks ahead. This week we released the fourth edition of this new report where we performed a full analysis of 10 stocks and shared our price targets.
We decided to unlock one stock’s analysis so everyone can see the value Edge+ members get. Get your sneak peek here:
Stock Deep Dive - Salesforce
Our Deep Dive focused on Salesforce this week. We not only broke down the financials of the world’s largest enterprise software company but we also shared our valuation models, price targets for 2024, and put the stock through our new Edge Scoring System. You can see the full analysis here:
The Week Ahead
The week ahead has the makings to be an exciting one as we get new inflation data and banks are set to usher in the latest earnings season.
Earnings Reports
Banks officially kick off our next earnings season next week. Here is the list of names we will be covering next week:
Monday 10/7: --
Tuesday 10/8: Pepsico
Wednesday 10/9: --
Thursday 10/10: Delta Airlines and Domino’s Pizza
Friday 10/11: JPMorgan Chase and BlackRock
Here is the full calendar of scheduled earnings releases:
Source: Earnings Whispers
Economic Reports
Next week is all about inflation data as we get two key reports — the CPI and PPI. This will be the first inflation data that may have been affected by the rate cuts last month. You can bet the market action will be heavily influenced by these results.
We also get initial jobless claims, consumer sentiment, the meeting minutes from the last Fed meeting, and a number of speeches from Fed members.
Want more? Check out our other resources
If you haven’t done so, check out the social media pages of our collaborators and give them a follow:
Mark (Dividend Seeker)
Chris (CMG Venture)
Thank you for reading this edition of the Weekly Wrap-Up. Have a great weekend!
Until next time investors!
Mark & Chris
The Investor’s Edge
Disclosure
This is not investing advice. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.
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