Market News 7/25

Markets

The Dow continued its winning streak, achieving its 11th consecutive day of gains yesterday, marking its most impressive run since February 2017. However, several significant events are on the horizon this week that could have an impact on the markets. These include the release of Big Tech earnings (Microsoft and Alphabet reporting today) and the anticipated rate hike announcement from the Federal Reserve tomorrow.

Dow’s Winning Streak Extends to 12 Sessions

On Tuesday, U.S. stocks experienced another rise, supported by a 5.33% increase in 3M shares, contributing to the Dow Jones Industrial Average achieving its 12th consecutive day of gains. The Dow closed at 35,438.07 points, its highest since February 2022, with a modest increase of around 27 points or 0.1%. The S&P 500 also rose by 0.3%, while the Nasdaq Composite, with its tech-heavy components, saw a more significant gain of 0.6%.

Investors remained attentive to upcoming earnings reports from major technology companies and the beginning of a two-day Federal Reserve meeting. Despite these factors, earnings reports had a significant impact on the market's performance during the day.

3M, known for products like Scotch tape and Post-it Notes, reported a quarterly loss due to a litigation settlement. However, positive developments in other areas, such as improved margins and raised earnings expectations for the year, led to a 5.3% surge in its shares, making it the top gainer in the Dow.

Several other companies also reported notable results. Dow Inc., a chemical maker, saw its shares rise by 1.77% after reporting better-than-expected earnings. General Electric experienced a 6.3% jump after raising cash flow and sales targets, whereas its rival RTX faced a 10% decline after revealing a potential production flaw with its Pratt & Whitney jet engines.

The overall market sentiment remained optimistic, driven by growing economic confidence among investors. Positive economic data that exceeded expectations suggested a reduced risk of an immediate recession. Additionally, signs of cooling inflation provided hope that the Federal Reserve could manage pricing pressures without triggering an economic downturn.

The current stability in the market was reflected in the Dow's 12-day winning streak, the longest in six years since early 2017. If the index records another gain on Wednesday, it would mark the longest streak since 1987, highlighting the market's recent resilience.

Politics

The DOJ sued Texas over its Rio Grande buoy barrier.

Following the Department of Justice's warning to Texas that it would take legal action if the state did not remove the buoys installed to prevent migrants from crossing into the US from Mexico, the Department of Justice has filed a lawsuit. Texas Governor Greg Abbott responded defiantly, stating, "Texas will see you in court, Mr. President."

The basis of the lawsuit is the claim that Texas violated the Rivers and Harbors Act. The Biden administration argues that the unauthorized border boundary created by these buoys has led to humanitarian and diplomatic issues. These actions by Texas are part of Operation Lone Star, an initiative that employs police resources to address migration. Governor Abbott justifies this program by asserting that the federal government is not adequately enforcing immigration laws.

Education

Elite colleges favor rich kids just because they’re rich

New research conducted by a group of economists from Harvard provides evidence that confirms what stressed high-school seniors have long suspected: the ultrawealthy have significant advantages in gaining admission to top universities.

The study, which analyzed admissions data from 1999 to 2015, revealed that children from the richest 1% of families are more than twice as likely to attend Ivy League universities, Stanford, Duke, or the University of Chicago compared to students with the same SAT or ACT scores but lower family incomes.

At these prestigious institutions, the wealthiest applicants had the highest nonacademic scores, which consider factors like extracurricular activities, personality traits, and recommendation letters. Particularly, students from secular private schools had a substantial advantage, being twice as likely to be accepted compared to their public school counterparts.

Furthermore, the study found that children of alumni (legacy applicants) were more than twice as likely to gain admission compared to non-legacy applicants, irrespective of their family income. However, among legacy applicants in the top 0.1% income bracket, the acceptance rate was eight times higher than that of similarly performing students with average acceptance rates.

Another disparity highlighted in the research is that one in eight attendees at elite colleges from the top 1% income group were recruited athletes, while only one in 20 admits came from the bottom 60% of family incomes.

The researchers suggest that even though the Supreme Court has prohibited colleges from using race-based affirmative action, these elite institutions could significantly boost racial diversity by removing preferential treatment for the 1% income group, which is predominantly composed of white individuals.

Sports

Another Soccer Mega Deal?

After being turned down by Lionel Messi, Saudi Arabia extended a compelling offer to another soccer sensation, aiming to lure Kylian Mbappe from Paris Saint-Germain. The Saudi club Al Hilal proposed a staggering $332 million transfer fee, setting a new world record, alongside an astronomical one-year salary of $776 million, as reported by CBS Sports. To put this mind-boggling figure into perspective, it surpasses the combined career earnings of NBA star LeBron James and golf legend Tiger Woods, according to Front Office Sports. In fact, the proposed salary would equate to an astonishing $24 per second.