Market News 7/27

Markets

Yesterday, the stock market showed a mixed performance following the Federal Reserve's decision to raise interest rates once again. However, the Dow Jones Industrial Average extended its impressive winning streak to 13 consecutive days, reminiscent of the era's fashion trends with shoulder pads and perms, marking its best streak since 1987. Despite reporting a quarterly loss, Boeing's stock price reached its highest point since November 2021, driven by positive news of increased commercial plane deliveries.

Dow’s Winning Streak Comes to an End

On Thursday, the Dow Jones Industrial Average experienced a decline, putting an end to its impressive 13-day winning streak. This streak was the longest since 1987 and the second-longest in history. The blue-chip index dropped by 237 points, equivalent to 0.7% of its value. Similarly, the S&P 500 and the tech-heavy Nasdaq Composite also experienced losses, falling by 0.6% and 0.5%, respectively. While stocks initially showed positive momentum during the trading session, they lost steam in the afternoon.

Throughout the week, the major indexes remained relatively unchanged as investors assessed the ongoing economic strength and better-than-expected earnings on Wall Street.

Concurrently, U.S. government bond prices decreased, leading to higher yields. The 10-year Treasury note's yield settled at 4.011%, rising from Wednesday's 3.85% – marking the most substantial one-day climb since September. Additionally, the 2-year Treasury yield, which is more sensitive to policy expectations, increased to 4.939% from 4.825%, while the 30-year Treasury bond yield rose to 4.058% from 3.927%.

Economy

Interest rates reach 22-year high and may get higher

The last time interest rates reached this level was back in January 2001 when President George W. Bush had just assumed office, and MP3 players were a popular technology. Yesterday, Fed Chair Jerome Powell announced yet another quarter-point increase in interest rates, aiming to tackle inflation. This move brought interest rates to the range of 5.25% to 5.50%, the first time they have been at this level since January 2001.

This latest rate hike marks the 11th increase since March 2022 when interest rates were raised from near zero. Moreover, it appears that the Federal Reserve might not be finished, as Powell stated that one more rate hike is still a possibility later in the year.

The potential for further rate increases hinges on the developments leading up to the Fed's next meeting in September. Powell and his team will closely monitor whether consumer prices continue to decrease in response to the previous rate hikes, as they seek to find the optimal balance for inflation control.

Some positive signs indicate that the worst of inflation may be behind us:

• The upcoming release of the government's latest personal consumption expenditures price index, which is the Fed's preferred measure for tracking inflation, is expected to show the smallest increase in inflation since the end of 2021.

• Last month, the consumer price index revealed that inflation had fallen to 3%, still above the Fed's target of 2% but a significant improvement from the 9.1% seen in June of the previous year.

• Some companies, like Coca-Cola and Unilever, are indicating a willingness to halt further price increases. Coca-Cola, for instance, has already decided not to mark up their drink prices for the remainder of the year.

However, the Federal Reserve aims for a more comprehensive solution. Powell emphasized that to truly conquer inflation, the job market must slow down its current rapid pace. Currently, the job market boasts a low unemployment rate of 3.6%.

Politics

Hunter Biden’s plea deal is on hold

Typically, when an individual agrees to plead guilty to a crime, the hearing is often a mere formality. However, Hunter Biden's recent hearing on two misdemeanor tax charges took an unexpected turn. The judge presiding over the case declined to accept the plea deal. Consequently, Hunter Biden entered a not guilty plea, at least temporarily, while both sides gather and submit further information to the judge. It is anticipated that he may change his plea if a new agreement with prosecutors is reached and approved by the judge. Regardless of the outcome, Hunter Biden's actions are likely to continue being a contentious political issue.

Tech

Huge Physics discovery?

Scientists in South Korea are touting a potential breakthrough in physics that could be revolutionary - an ambient pressure, room-temperature superconductor. Superconductors are materials that can conduct electricity with zero resistance, making them highly efficient for electrical transportation and various applications like faster computers and powerful batteries. However, existing superconductors only work at extremely low temperatures and under high pressure, limiting their practicality.

The quest to develop a room-temperature superconductor has been ongoing for more than a century, and if successful, it could bring about significant advancements, such as widespread high-speed maglev trains, heat-resistant iPhones, more affordable and powerful MRI machines, and reduced electricity costs for consumers.

Although the potential impact is immense, there's a note of caution. The study claiming this breakthrough has not yet undergone peer review, and the results have not been independently replicated, leading many experts to approach the claim with skepticism. The scientific community has faced previous instances of unverified claims in this area, which raises concerns and warrants careful scrutiny of any potential breakthroughs.