23rd July – 29th July 2022 | Another week in the markets
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This week the US GDP drops, stocks end the month strong, and several major companies release quarterly earnings.
- Federal Reserve raises the interest rate by 75 basis points
- Global giants such as Amazon, Apple, Intel, and Meta post quarterly earnings
- GDP drops by 0.9%, contracting the US economy
- The House passes the Chips and Science bill and the Inflation Reduction Act of 2022
- JetBlue to acquire Spirit Airlines for $3.8 billion
Taking stock | Hike as prescribed | Quarterly ups and downs | Shrinkage | Legit-slative moves | Carrier conquest | Invest wisely
Stocks on Wall Street rallied on Friday after tech giants Apple and Amazon posted quarterly results along with upbeat forecasts for the third quarter. S&P and Nasdaq posted their biggest monthly percentage gains since 2020. This week stocks also rallied as investors speculated that the Federal Reserve might not be as aggressive as they had feared earlier.
Hike as prescribed
On Wednesday, the Federal Reserve hiked the interest rate, an expected move, by 75 basis points. This brings the central bank’s key rate to a range of 2.25% to 2.5%, the highest in over four years. Despite this, the stocks rose – S&P 500 rose by 2.6%, and Nasdaq jumped 4% on Wednesday. This was partly because investors focused on Powell’s comments that signaled smaller rate hikes in the future.
Quarterly ups and downs
This week, several major companies such as Apple, Amazon, Meta, and Intel released quarterly earnings. On Wednesday, Meta reported a steep drop in revenue, and its shares fell by 3.8% in extended trading. Amazon’s shares climbed more than 13% in after-hours trading on Thursday as the company posted better-than-expected revenue of $121.23 billion. Apple too exceeded expectations and posted one of the best quarters in its 46-year history. Intel saw a drop in sales as customers’ demand for personal computers fell, and its shares dropped by 10% in extended trading. Shell plc, the energy giant, posted another record profit as oil and gas prices continue to surge. It also announced a $6 billion share buyback in the third quarter. The global drinks company Diageo posted a significant increase in net sales, witnessing double-digit organic growth in sales across all regions. On Friday, Roku’s shares closed down 23% after the company posted earnings that missed both top and bottom line estimates.
The US economy shrank again in the second quarter, but this didn’t come as a surprise to experts, given the aggressive monetary policy tightening by the Federal Reserve to curb inflation. The Gross Domestic Product (GDP) for the April-June quarter fell by a seasonally adjusted annual rate of 0.9%. While this raised recession fears, several economists believe a downturn hasn’t yet started, but a mild one can be expected by next year.
The House passed the Chips and Science bill on Thursday to support semiconductor manufacturing and research in the US. The bill includes allocating billions of dollars, about $52 billion, to domestic computer chip manufacturing companies and more funds to support research for developing US technologies.
Along with this, companies will also benefit from additional tax credits. All this is to increase the US’s competitiveness with China in semiconductor manufacturing. In another big legislative move, the Inflation Reduction Act of 2022 was also introduced. It addresses a range of important issues and includes a minimum corporate tax of 15% for companies with profits of more than $1 billion each year, increased investments in clean energy and tax credits, and healthcare provisions to reduce costs. This is expected to be advantageous for companies across industries such as renewable energy and affordable care, as the act brings in billions of dollars of funding.
On Thursday, JetBlue Airways announced its deal to buy Spirit Airlines for $3.8 billion. This would make it the country’s fifth-largest airline. This is also the first-biggest airline deal in the country since 2016, when JetBlue lost the bid to Alaska Airlines to take over Virgin America. This deal, which came in a day after Spirit and Frontier Airlines scrapped their merger agreement, is expected to close in the first half of 2024. JetBlue’s shares lost 0.4% while Spirit’s gained 5.6%, and Frontier surged by over 20% on Thursday.
While uncertainty remains the theme globally, your investment strategy shouldn’t remain uncertain. That’s because when it comes to your long-term financial goals, consistently investing in the stock market is the key to meeting them. As for the market volatility, you can hedge it by diversifying and applying strategies like dollar-cost averaging. This means investing a fixed amount of money regularly over the long term, irrespective of the market price. And you can do this for various goals by setting up Systematic Investment Plans (SIP) on the Appreciate App and adding high-performing US stocks to your portfolio.
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