Weekly Market Update

Author : The BlackSummit Team
Date : July 29, 2023

The BlackSummit Team | July 29, 2023

Global Market News

Global equities make gains

Global equities made gains this week. The S&P 500 and Dow Jones closed up 1.01% and 0.66%, respectively, while the Nasdaq gained 2.02% over the week. The US 10-year Treasury ticked up several basis points to 3.96% while the price of a barrel of West Texas Intermediate crude oil increased to $80.67. Volatility, as measured by the CBOE Volatility Index, was roughly unchanged on the week, closing at 13.33.

Fed raises rates, US economy grows faster than expected

As widely expected, the Federal Reserve raised interest rates by 25 basis points this week, bringing the Fed funds rate to between 5.25% and 5.5%, its highest level in 22 years. Fed Chairman Jerome Powell indicated the central bank will continue rate hikes if necessary and reiterated that decisions will be made on a meeting-by-meeting basis. Also this week, US GDP data revealed the economy grew 2.4% in the second quarter, exceeding expectations.

International Developments

Coup topples Niger’s president General Abdourahmane “Omar” Tchiani has declared himself the new leader of Niger after the presidential guard under his command seized and deposed the country’s president, Mohamad Bazoum. The coup has been widely condemned internationally, including within an array of international institutions such as the African Union, the West African Regional Bloc, and the United Nations. Reaction within Niger has been more mixed, with some Nigerians showing support for the junta, while others have rejected the need to overthrow the government. The coup threatens to further destabilize the Sahel region and complicates Western efforts to combat Islamist militants as Niger has been a hub for counterterrorism efforts.

Spain’s election sees no clear winner

Spain’s Parliamentary elections ended earlier this week with mixed results as no party gained enough support to form a government. While the center right Popular Party won the largest number of seats at 136, the collapse in support for the hard right Vox party has made conservative coalition building untenable at present. Meanwhile, current prime minister Pedro Sánchez’s Social Party won slightly fewer seats at 122, leaving the Spanish government in limbo as Parliamentary leaders scramble to form a coalition government.

US Social & Political Developments

Senate likely to clash with House on defense bill

The Senate has overwhelmingly approved the National Defense Authorization Act 83 – 11. The package includes a pay raise for troops and civilian Department of Defense employees, investments in hypersonic missiles, and drone technology. Yet, the fate of the bill is currently in doubt, as Republican hard-liners in the House of Representatives seek to add amendments ending Pentagon support for abortion access via time off and travel reimbursement; blocking military health coverage for transgender services; and closing diversity training offices. The White House has threatened to veto the House bill.

Justice Department sues Texas over floating barriers

The Justice Department has filed suit against the state of Texas over its installation of floating barriers designed to stop migrants from crossing the Rio Grande. In its lawsuit, the DoJ has alleged that the barriers violate a section of the federal Rivers and Harbors Appropriation Act, as diplomatic protests from Mexico and domestic concerns over navigation and public safety come to the fore. Texas governor Greg Abbot has remained defiant in the face of the lawsuit, with the state refusing to take down the barriers and gearing up for a court battle.

Corporate/Sector News

Big Tech beats earnings expectations
Last quarter’s earnings have been reported for Big Tech companies, including Microsoft, Meta, and Alphabet. Microsoft reported record sales and profits, beating both analysts’ and its own estimates as it began seeing impacts from its investment in Artificial Intelligence (AI). Meta also posted good results with its first double-digit revenue growth since 2021, also driven by the company’s investment in AI. Alphabet, for its part, also saw better-than-expected results, largely driven by growth in its cloud-computing unit.

More consolidation of regional banks
Banc of California has agreed to purchase its rival PacWest, after the latter saw soaring interest expenses after borrowing from the Federal Reserve to stay afloat. Regional banks have seen difficulties leading to consolidation, particularly in early 2023 in the collapse of Silicon Valley Bank. While mergers may shore up the regional banking industry, experts warn that mergers may also limit some populations’ access to capital, especially those living in rural areas. The merger between the California banks is expected to be completed late this year or early 2024.

“Barbenheimer” double feature
The movies Barbie and Oppenheimer, together as an unlikely double-feature called “Barbenheimer,” have had a record-breaking release. Barbie has already earned over a half-billion dollars globally, and its partner Oppenheimer has reached a global gross of $230 million. The pair were associated with one another when they were announced to be released on the same day, creating a social-media zeitgeist over seeing the two movies together. Neither film has seen a slowdown in moviegoers since their release on July 21^st.