Market News 7/20

Markets

Investors remained pleased yesterday as the Q2 earnings season continued to deliver positive results, leading to the Dow securing its eighth consecutive day of gains. This winning streak is the longest it has experienced since September 2019, leaving investors with a sense of optimism and satisfaction.

Dow Opens Higher, Nasdaq Retreats as Tesla, Netflix Drop

The S&P 500 and the Nasdaq Composite experienced a decline due to a selloff in Netflix and Tesla shares, which dampened investor optimism about the second-quarter earnings season, despite largely reassuring bank results.

Netflix's stock slid after the company reported revenue that fell short of its own projections, despite adding 5.9 million subscribers. On the other hand, Tesla's shares fell after CEO Elon Musk cautioned that the company might need to cut prices further.

American Airlines, Johnson & Johnson, and Abbott Laboratories reported their earnings early on Thursday. Additionally, U.S. jobless claims, which act as a proxy for layoffs, showed a slight decrease last week.

During morning trading, the stock market showed mixed performance. While the S&P 500 and Nasdaq Composite were down, the Dow industrials rose and were on track for their ninth consecutive day of gains.

U.S. bond yields rose, with the yield on the benchmark 10-year Treasury note reaching 3.831%, up from 3.741% on the previous day.

An index of regional bank stocks declined as several of them reported their results. Truist Financial saw a decline of about 3%, while Zions Bancorp, which reported its results the previous night, experienced a jump in its stock price.

Overseas markets displayed mixed trends, with the Stoxx Europe 600 rising by 0.1%, while Asian stocks weakened, with Japan's Nikkei 225 down by 1.2%, and Hong Kong's Hang Seng Index declining by 0.1%.

Tech

Tesla Profit Jumps 20% as Price Cuts Help Lift Deliveries

Tesla's stock (TSLA) experienced a decline of 5.82%, indicated by a red down-pointing triangle, following price cuts that were not as detrimental to the company's second-quarter profit growth as some analysts on Wall Street had anticipated.

Despite this, CEO Elon Musk cautioned investors on Wednesday that further price reductions might be necessary, and the company would be reducing production this quarter to update its factories. Already, Tesla has implemented starting price cuts in the U.S. ranging from 14% to 28% this year, depending on the model.

In response to concerns about the impact of macroeconomic conditions, Musk explained to analysts that the company doesn't have complete control over these external factors. He expressed that if macro conditions remain stable, Tesla's prices are likely to remain stable as well. However, if macro conditions become unstable, the company may have to lower prices accordingly. As a result of these announcements, Tesla's shares fell over 4% in after-hours trading.

Sports

The Women’s World Cup is here

The US Women's National Team aims to secure their third consecutive victory after winning in 2015 and 2019. The roster includes a mix of familiar faces and new talent. Nine players from the 2019 squad and five from the 2015 team are part of the team, featuring well-known players like Megan Rapinoe and Alex Morgan. Alongside them, promising newcomers like Sophia Smith and Trinity Rodman are ready to make a name for themselves.

Significant financial investments are being made in women's sports, marking a shift from the long-standing focus on men's sports. Although the Women's World Cup prize pool is currently a quarter of the Men's World Cup ($110 million compared to $440 million), changes in the industry indicate a potential shift in the future:

1. Every player in the tournament is guaranteed $30,000 in prize money for the first time.

2. The prize pool has more than tripled from the 2019 World Cup.

3. Broadcasters like Fox Sports have reported nearly selling out all ad inventory for the tournament.

4. Companies like Ally Financial are directing 90% of their ad spending towards women's sports and 10% to men's sports, further emphasizing the increasing interest and support in women's athletics.

Politics

Supreme Court Has Worked on Code of Conduct but Gotten Nowhere

For years, an internal plan to establish the Supreme Court's first-ever code of conduct has been at a standstill, despite increasing scrutiny surrounding the justices' ethical behavior. People familiar with the matter revealed that the justices are deeply divided on the issue, even as public approval of the court declines and lawmakers pressure them to adopt stricter ethical rules like those in other courts.

On Thursday, the Senate Judiciary Committee is expected to approve legislation sponsored by Democrats that would mandate the Supreme Court to adopt a code of conduct with enforceable rules and more robust disclosure requirements. While the bill faces significant challenges in passing both chambers of the narrowly divided Congress, its supporters hope that the justices will take their concerns seriously.

Chairman of the Judiciary Committee, Dick Durbin (D., Ill.), expressed his wish that such legislation would not be necessary, emphasizing that Chief Justice John Roberts has the authority to address the Supreme Court's ethical challenges on his own.

Economy

Home Sales Fall as Would-Be Buyers Face High Rates, Low Supply

In June, sales of previously owned homes experienced a decline due to higher mortgage rates and a limited availability of properties, leading to frustration among potential buyers.

The increase in mortgage rates has made home purchases less affordable, resulting in fewer buyers entering the market and reducing overall demand. Additionally, the higher rates have discouraged existing homeowners from selling, leading to a shortage of homes available for sale.

While the decrease in both demand and supply has led to a decline in the number of home sales, home prices have not dropped significantly. In many regions of the country, buyers who can afford to remain in the market are still encountering bidding wars.

According to the National Association of Realtors, existing home sales, which constitute a significant portion of the housing market, fell by 3.3% in June compared to the previous month, reaching a seasonally adjusted annual rate of 4.16 million. This figure represents the slowest sales pace since January, and June sales were down by 18.9% compared to the same month the previous year.