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Stocks Head Into Positive Week, Fed Meeting in Focus
Stocks Close Strong Week, Fed Meeting Looms
Stocks are starting the week with a positive outlook after the three major US indices closed out a strong week. The Dow had its best week since March, with all five trading days ending higher. Improved jobs numbers for June and stable inflation rates have investors eager to see the Federal Reserve's actions at its upcoming policy-setting meeting. Market expectations are for the central bank to resume its rate-hiking agenda, but with solid economic numbers, the question remains on the timeline for future rate increases.
Busy Earnings Week Begins, Analysts Expect Decline
Last week provided a taste of the upcoming earnings season, with reports from major companies like PepsiCo, JPMorgan Chase, and Delta Air Lines. This week's schedule is even busier, with big names like Netflix and Tesla set to release their earnings. Analysts are predicting that S&P 500 companies' earnings will be down more than 7% compared to the previous year. Here are the major companies reporting earnings this week:
Bank of America and Morgan Stanley (before the bell)
Goldman Sachs (before the bell); Netflix, Tesla, IBM, United Airlines (after the bell)
Johnson & Johnson and American Airlines (before the bell)
Sony and Microsoft Reach Agreement on Activision Deal
Sony and Microsoft have reached a long-term agreement to keep Call of Duty, the popular video game franchise, on PlayStation consoles. Sony's concerns about the potential anti-competitive effects of Microsoft's acquisition of Activision Blizzard have been resolved. This deal is expected to proceed after federal courts rejected attempts by the Federal Trade Commission to stop the acquisition. Microsoft and Activision intend to finalize the deal on Tuesday.
Trouble Ahead for US Media Industry
The US media industry is facing significant challenges, including striking writers and actors, weak advertising revenue, and streaming losses. Traditional television is also on its way out, and companies are exploring potential solutions. Netflix, as a disruptor in the industry, will kick off media earnings this Wednesday. While the streaming giant is in a relatively good position, its rivals are facing existential crises. Consolidation and fire sales may be on the horizon, as seen when Disney CEO Bob Iger revealed that the television business is doing worse than expected.
Russia Walks Away from Black Sea Grain Deal
Russia has backed out of a Black Sea grain deal just hours before it was set to expire, potentially threatening food security for millions. The agreement, which allowed Ukraine to export grain to several markets, has been jeopardized by Russia's anger over Turkey's support for Sweden joining NATO. Russia has also claimed that Ukraine struck a bridge connecting Russia to Crimea, an area that was annexed by Russia nine years ago. The situation continues to develop, and live updates are available.
Disclaimer: CNBC's Samantha Subin, Rohan Goswami, Jordan Novet, Lillian Rizzo, Ruxandra Iordache, and Natasha Turak contributed to this report.
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Market Implications for New Business
The recent developments in the stock market and various industries discussed in this article can have significant implications for new businesses entering the market. Here are some key points to consider:
Market Optimism and Fed Meeting:
The positive outlook in the stock market, driven by strong job numbers and stable inflation rates, suggests a favorable environment for new businesses. The Federal Reserve's upcoming policy-setting meeting and potential rate hikes may impact borrowing costs and overall market sentiment. New businesses should closely monitor the Fed's decisions and assess the potential implications on their expansion plans and financing strategies.
Earnings Season and Market Volatility:
The ongoing earnings season, with major companies like Netflix, Tesla, and IBM reporting this week, is expected to reveal a decline in S&P 500 companies' earnings compared to the previous year. This could contribute to market volatility and investor sentiment. New businesses should be prepared for potential market fluctuations and ensure they have robust financial planning and contingency measures in place to navigate any adverse impacts.
Industry Challenges in Media and Gaming:
The US media industry is facing significant challenges, such as striking writers and actors, weak advertising revenue, and streaming losses. Traditional television is also experiencing a decline. While disruptive companies like Netflix may be relatively well-positioned, new businesses in the media and entertainment space should carefully assess the evolving industry landscape and identify innovative solutions to differentiate themselves and overcome the sector's challenges.
Regarding the gaming industry, Sony and Microsoft's agreement to keep the Call of Duty franchise on PlayStation consoles highlights the importance of strategic partnerships and securing exclusive content. New businesses in the gaming industry should focus on forging alliances, creating unique offerings, and building strong relationships with key players to gain a competitive edge.
The situation between Russia and Ukraine, particularly regarding the Black Sea grain deal, serves as a reminder of the potential impact of geopolitical tensions on global markets. New businesses operating in industries dependent on international trade should carefully monitor geopolitical developments and assess the potential risks and opportunities associated with regional conflicts or diplomatic disputes.
In summary, new businesses should stay informed about market trends, regulatory decisions, and industry challenges to adapt their strategies accordingly. By maintaining flexibility, being proactive in identifying opportunities, and implementing robust risk management practices, new businesses can navigate the evolving landscape and position themselves for long-term success.
Article First Published at: https://www.cnbc.com/2023/07/17/5-things-to-know-before-the-stock-market-opens-monday-july-17.html