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Market Update: Dow Extends Winning Streak, Fed Meeting, and Earnings Reports
Dow Closes Higher for Eleventh Consecutive Session
The Dow closed at its highest level since February 2022, continuing its winning streak for the eleventh consecutive session. However, upcoming events could potentially derail this positive momentum. Tech giants Alphabet and Microsoft are set to release their earnings after the market closes on Tuesday. Additionally, the Federal Reserve will begin its July policy-setting meeting. Analysts expect the central bank to raise its benchmark interest rate again, but all eyes will be on Chairman Jerome Powell's remarks regarding future Fed actions.
General Motors Boosts 2023 Outlook
General Motors (GM) reported strong second-quarter results and raised its 2023 outlook for the second time. However, CEO Mary Barra mentioned that the guidance assumes successful negotiations with the United Auto Workers union without any work stoppages. GM also announced plans to cut costs even further, aiming for $3 billion in cost reductions through next year. The automaker's second-quarter revenue increased by 25% compared to the previous year.
Slower Chinese Growth Raises Concerns
China's GDP growth in the second quarter fell short of expectations, leading policymakers to introduce measures to support the country's property sector and increase consumption. However, the Chinese government did not provide many details about future actions, which has raised concerns about the near-term economic outlook. Analysts suggest that the lack of major announcements or policy specifics indicates policymakers' struggle to come up with suitable measures to bolster growth.
IRS Halts Surprise Visits
The Internal Revenue Service (IRS) has decided to end its decadeslong practice of making surprise visits to households and businesses to collect tax revenue. This practice has faced criticism due to increasing threats and hostility towards IRS agents. IRS Commissioner Danny Werfel stated that the agency has sufficient tools to collect revenue without resorting to unannounced visits and is currently undergoing a broader reorganization process.
UPS and Teamsters Union Resume Talks
UPS and the Teamsters union have restarted negotiations in an effort to avoid a potential strike next week. The union is seeking higher wages for its members and has already secured agreements on issues like air conditioning in delivery trucks. The current contract between UPS and the Teamsters union expires on July 31, and a strike could start the following day if an agreement is not reached. The outcome of these talks is crucial, as even a brief strike could have significant economic implications.
In conclusion, investors remain optimistic as the Dow continues its winning streak. However, the upcoming Fed meeting, earnings reports, and other market variables could potentially impact the current market sentiment. Meanwhile, General Motors reports strong Q2 results but highlights the importance of successful labor negotiations. Concerns arise as China's economic growth slows, and the Chinese government reveals limited plans to support its economy. The IRS announces the end of surprise tax collection visits, and UPS and the Teamsters union scramble to reach a contract agreement and prevent a potential strike.
Hot Take: Implications for New Businesses
The current market developments, including the Dow's winning streak, upcoming earnings reports, and the Fed meeting, can have implications for new businesses looking to establish themselves in the market.
The Dow's extended winning streak indicates overall positive investor sentiment, which can create a favorable environment for new business ventures. Investors' optimism and confidence in the market can translate into increased funding opportunities and potential partnerships, making it an opportune time for new businesses to secure capital and attract investors.
The upcoming earnings reports of tech giants Alphabet and Microsoft provide insights into the performance of the technology sector, a crucial area for many new businesses. Strong earnings from these companies can signal a healthy market for technology-based startups, attracting additional interest from investors.
The Federal Reserve's policy-setting meeting, particularly Chairman Jerome Powell's remarks, can have a significant impact on the market. Any indications of potential interest rate hikes or changes in monetary policy can influence investor behavior and business decisions. New businesses need to closely monitor these announcements as they can impact the cost of borrowing and access to capital, which are crucial considerations for startups.
The slower Chinese economic growth and limited government plans to support the economy can have implications for businesses with global aspirations. It may become more challenging for new businesses to enter or expand into the Chinese market, considering the uncertain economic outlook and potential policy restrictions. However, businesses that are less dependent on the Chinese market could encounter less direct impact.
Additionally, labor negotiations between companies like General Motors and the Teamsters union, and the potential for strikes, can indirectly affect new businesses. Disruptions in supply chains or transportation services as a result of labor disputes can impact operations, production, and delivery schedules for new businesses, particularly those relying on logistical support.
In conclusion, new businesses should closely monitor the market updates and their potential consequences. While there are favorable conditions for funding and technology-based startups, consideration should be given to potential shifts in monetary policy, global economic uncertainties, and labor disputes that may hinder growth and stability. Strategic planning and adaptability will be key for new businesses seeking to navigate these dynamic market conditions successfully.
Article First Published at: https://www.cnbc.com/2023/07/25/5-things-to-know-before-the-stock-market-opens-tuesday-july-25.html