Market News 7/19

Markets

Currently, the Dow is scorching hot, even surpassing the extreme temperatures of Death Valley. The index has been on a remarkable winning streak for seven consecutive days, the longest such run since March 2021, thanks in part to robust bank earnings. Additionally, tech stocks received a boost from Microsoft, as the company achieved a record high following its announcement to introduce a $30 monthly surcharge for Microsoft 365, which includes generative AI tools.

Tech Stocks, Meme Stocks, Crypto: Investors Are Feeling Bold Again

Tech stocks are experiencing an intense surge, and this enthusiasm is spilling over into meme stocks. The world of cryptocurrencies is also witnessing a strong revival. The options market is currently flooded with bullish sentiment, reaching levels of popularity not seen since late 2021, just before stocks entered a prolonged bear market.

The surge in speculative stocks is reminiscent of the meme-stock frenzy seen before. The MEME ETF, which is linked to the Solactive Roundhill Meme Stock Index, has soared by an impressive 61% this year.

Among the top holdings with the highest weights in the MEME ETF, some notable performers include bitcoin miner Riot Platforms, which has seen a staggering 439% increase in value this year. Additionally, artificial intelligence lending platform Upstart Holdings surged by 308%, Coinbase Global by 196%, electric car manufacturer Rivian Automotive by 34%, and Carvana by a remarkable 740%. This frenzy has led to a surge in options trading, with record-high volumes associated with shares of these companies.

Finance

Goldman Sachs Profit Drops 58% as Bank Pulls Back on Consumer Lending

Goldman Sachs reported a notable increase in revenue, but a significantly lower profit for the second quarter, primarily due to write-downs in its consumer and asset-management divisions. The bank's quarterly profit was $1.22 billion, reflecting a sharp 58% decline compared to the previous year. Earnings per share stood at $3.08, falling short of the $3.16 per share forecasted by analysts surveyed by FactSet.

Despite the decline in profit, the bank managed to surpass expectations on the revenue front, with total revenue amounting to $10.9 billion, which represented an 8% decrease from the previous year. This still exceeded the analysts' anticipated revenue of $10.61 billion.

Travel

Record heat threatens to upend European tourism

In the United States, individuals are finding themselves with increased financial resources, leading to a surge in bank account balances compared to pre-pandemic levels. According to an analysis conducted by JPMorgan Chase, approximately 10% to 15% more money is now present in the checking and savings accounts of 9 million Chase customers compared to 2019. Additionally, after a period of trailing behind inflation, wages are finally rising at a faster rate than consumer prices. In the previous month, hourly wages increased by 4%, while the prices of consumer goods only rose by 3%.

This newfound financial stability is reflected in the spending habits of Americans, who are demonstrating a willingness to utilize their increased funds. However, despite the overall positive trend, median account balances have decreased by over 41% since reaching their peak in April 2021. This decline can be attributed to the distribution of stimulus checks during that period when people had limited opportunities to spend them due to pandemic restrictions. Nevertheless, consumer sentiment remains high, reaching almost a two-year peak this month, indicating a desire to engage in shopping activities.

This situation helps to elucidate why the anticipated recession, cautioned by Wall Street, has not materialized thus far, as reported by The Washington Post. It is hoped that this positive trend will continue in the future.

Conversely, the situation in Europe is different. The Wall Street Journal reports that Europeans are experiencing a decline in their economic well-being. Wages have decreased, and the impact of the ongoing Covid-19 pandemic and the conflict in Ukraine continues to be felt across the continent.

Politics

Trump likely to be charged in Jan. 6 investigation

According to former President Donald Trump, he has been informed that he is a subject of interest in the special counsel Jack Smith's investigation into the January 6, 2021, Capitol attack. Trump stated on Truth Social that receiving such a letter typically indicates an imminent arrest and indictment. If charged for his involvement in the insurrection, it would mark the third and most significant set of charges Trump has faced this year. Despite these growing legal challenges, he continues to be the clear frontrunner in the race for the GOP nomination for president.

Tech

Meta giving away its tech

Mark Zuckerberg, the CEO of Meta, announced that the company will make the code powering its latest large language model, LLaMA 2, open-source. This decision means that developers will have the freedom to utilize the code for both research and commercial purposes without any cost. Although it may appear counterintuitive to release technology that has been developed over years, Meta believes that open-sourcing will enable developers to identify issues with the software, ultimately leading to a more refined product and strengthening Meta's influence in the field.

In contrast to Meta's approach, companies like OpenAI, Microsoft, and Google offer limited access to their AI tools, keeping their technology more proprietary and controlled.