Here are the key news highlights that investors should consider as they begin their trading day:
1. Get Used to It
The current state of the stock market is marked by significant fluctuations. On Tuesday, all three major indices experienced a decline of more than 1%, leading to the Dow entering negative territory for the year.
(Notably, the S&P 500 and Nasdaq continue to show strong gains.) The primary culprit behind these fluctuations is undoubtedly interest rates. While the Federal Reserve has slowed its rate hike pace, the ripple effects are widespread.
The market, which had grown accustomed to historically low interest rates over the past two decades, must now come to terms with the reality of higher rates for the foreseeable future. Stay updated with real-time market developments.
2. House of pain
The situation in Washington isn’t contributing to market certainty either. If the financial markets are looking for assurance from Congress, they might have a tough time finding it. On Tuesday, a historic event occurred as California Republican Kevin McCarthy was removed from the speaker’s office in the House of Representatives.
This marked the first occurrence of such an event in American history. The motion to vacate, as it’s called, received support from eight Republicans and all Democrats after it was initiated by far-right GOP Representative Matt Gaetz of Florida.
Interestingly, McCarthy had previously agreed to a deal with his hard-right colleagues, allowing only one member of the House to file such a motion, which ultimately led to his removal as speaker just nine months into his tenure.
What comes next is uncertain. Currently, Representative Patrick McHenry, a supporter of McCarthy, is serving as the interim speaker. However, the House is essentially gridlocked without a permanent speaker in place. This situation is further complicated by the looming government shutdown deadline, which is just over a month away.
3. Intel’s Next Big Move
Intel is considering the possibility of conducting an initial public offering (IPO) for its programmable chip business within the next three years.
In addition to this potential IPO, the company is contemplating the option of securing private investments for this venture.
However, Intel’s primary intention is to retain a majority ownership stake in the spun-off entity. This strategic move aligns with Intel’s goal of managing expenses while capitalizing on the robust demand for programmable chips, particularly field programmable gate arrays (FPGAs).
These chips are renowned for their flexibility and energy efficiency, setting them apart from conventional processors. In July, Intel reported that its programmable chip unit had achieved three consecutive record-breaking quarters in terms of performance, although specific sales figures were not disclosed.
4. Sales and Strikes
General Motors, had a negative impact on sales by the ongoing strikes by the United Auto Workers have not yet. In the third quarter, this Detroit-based automaker recorded a remarkable year-over-year increase of 21.4%, surpassing its foreign counterparts such as Toyota, Hyundai, and Kia in terms of growth.
Meanwhile, Stellantis, which is also engaged in negotiations with the UAW, experienced a slight decline in sales. However, it’s important to note that this decline is not directly attributable to the strikes but rather reflects recent trends within the company. Ford is expected to release its sales figures on Wednesday.
Currently, approximately 17% of UAW workers at Ford, GM, and Stellantis are participating in the strikes, but there is potential for the union to expand these strikes further if negotiations continue to extend.
5. Mortgage Slump
Returning to the topic of interest rates, there has been a significant in mortgage demand, reaching its lowest point since 1996, as reported by the Mortgage Bankers Association. This decline is a direct consequence of interest rates surging higher, exacerbating an existing challenge related to affordability for both potential homebuyers and sellers.
To elaborate, the interest rate for the widely favored 30-year fixed-rate mortgage is on track to reach approximately 8%. This has led homeowners, who are currently benefiting from low mortgage rates, to hesitate when it comes to selling their homes. They are understandably reluctant to sell and then purchase a new property with a substantially higher interest rate.
Simultaneously, prospective first-time homebuyers are showing reluctance to enter the market due to the fear of incurring even higher home prices. The limited housing supply is already causing prices to soar, adding to the affordability concerns in the real estate market.
Investors should brace for a volatile stock market as interest rates rise, impacting both buyers and sellers. Meanwhile, Washington’s political turbulence adds uncertainty. Intel eyes an IPO for its chip business, emphasizing flexibility and demand. General Motors defies UAW strikes with strong sales, while mortgages slump due to surging rates, affecting housing affordability.