Market News 7/26

Markets

The Dow Jones Industrial Average is experiencing an extraordinary winning streak, now reaching 12 consecutive days, as it continues to receive positive earnings reports. However, Spotify recently disappointed investors with poor financial results. The company's losses widened due to unsuccessful podcasting investments, and its projected revenue fell short of analysts' predictions. Interestingly, despite adding a remarkable number of new subscribers, Spotify's stock took a sharp decline.

The focal point of the economy today is the Federal Reserve. With another interest rate hike expected, investors are closely monitoring Jerome Powell's comments to ascertain if the Fed is contemplating any further increases.

Dow Notches Longest Winning Streak Since 1987

The Dow Jones Industrial Average achieved a remarkable feat by climbing for 13 consecutive sessions, a feat not seen since January 1987 when Paul Volcker was concluding his fight against inflation as the Federal Reserve chair. On this occasion, it was Jerome Powell's turn as the current Fed chair oversaw a significant interest rate hike, reaching a 22-year high.

Throughout the day, the Dow experienced fluctuations, oscillating between modest gains and losses before ultimately finishing with a 0.2% increase. Powell's remarks suggested that the central bank might consider pausing rate hikes at its September meeting. Meanwhile, the broader market had a mixed response, with the S&P 500 dipping slightly by less than 0.1%, and the tech-heavy Nasdaq Composite falling 0.1%.

Interestingly, in the past, after Powell's post-meeting explanations to the market following 10 consecutive rate increases between March 2022 and May, stocks tended to decline. However, investors seemed less certain this time, possibly due to the widely anticipated nature of the rate increase.

Contrasting with the reaction in the stock market, bond traders appeared relatively unfazed. Yields on benchmark 10-year Treasuries slipped to 3.850%, while 2-year Treasuries, often used as a gauge for investors' interest-rate expectations, ticked down to 4.825%.

Tech

Earnings Seasons

The Dow Jones Industrial Average continues its impressive winning streak, now extending to 12 days as more earnings reports come in. However, Spotify faced disappointing results, revealing increased losses due to its unsuccessful podcasting investments and projecting lower revenue than analysts had anticipated, causing its stock to plummet despite a surge in new subscribers.

All attention is currently focused on the Federal Reserve, with another rate hike expected. Investors are eagerly awaiting Jerome Powell's comments to gauge whether the Fed is contemplating further increases.

In the tech sector, there is considerable anticipation surrounding the performance of Big Tech companies, especially in the field of generative AI. Microsoft and Google-parent Alphabet recently released their first earnings reports since investing heavily in AI projects, offering a test of the technology's impact on their businesses.

The verdict for Alphabet is positive, as Google's search advertising sales surpassed expectations, proving that rivals like ChatGPT and Microsoft's AI-equipped Bing haven't significantly impacted Google's search dominance. Microsoft also performed well, beating expectations on both revenue and profit and signaling its commitment to investing in AI infrastructure.

Investors seem optimistic about tech companies' AI initiatives, giving them room to invest despite some analysts' concerns about a potential AI-fueled stock market bubble. Microsoft's decision to charge extra for AI tools resulted in a surge in its stock price, and Alphabet's stock also experienced significant growth throughout the year.

Snap, the social media platform known for Snapchat, unveiled its AI chatbot, My AI, boasting impressive user engagement. However, the company faced challenges in competing against platforms like TikTok for ad spending in a slow market, leading to a decline in sales and a subsequent 19% drop in share prices after-hours.

As the earnings season continues, other tech giants like Meta, Amazon, and Apple are scheduled to report their earnings. Expect to hear artificial intelligence mentioned frequently, as AI has become a significant focus for tech companies. Last quarter, AI was mentioned over 1,000 times in S&P 500 earnings calls, with Alphabet, Microsoft, and Meta contributing to that number at least 200 times. The prevalence of AI discussions even led to a ban on earnings season drinking games in some offices.

Environment

Ongoing Heat Waves

A consortium of scientists specializing in rapid weather event analyses has made a significant discovery regarding ongoing heat waves. According to their findings, this summer's extreme heat waves in the United States, Mexico, and Europe would be "virtually impossible" without the influence of climate change caused by human activities. Furthermore, they determined that the heat wave in China had a staggering 50 times higher likelihood of occurring due to global warming.

Meanwhile, off the coast of South Florida, the ocean temperatures have reached an alarming level. A buoy stationed in Manatee Bay recorded ocean temperatures as high as 101.1 degrees Fahrenheit, akin to the temperature of a hot tub.

Sports

Bronny James is stable after going into cardiac arrest.

LeBron James' 18-year-old son experienced a cardiac arrest while practicing at the University of Southern California on Monday. Fortunately, he is now in stable condition and has been moved out of the Intensive Care Unit, as confirmed by a statement from the family's spokesperson. Known as Bronny, he holds the sixth-ranking position as a point guard in his class. Bronny was anticipated to make his debut for the Trojans during an exhibition tour in Greece and Croatia next month.