08th July 2023 – 14th July 2023 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 4,505.42 | 14,113.70 | 13.34 | 34,509.03 | 2,471.50 | 16,040.23 |
| 2.42% | 3.32% | -10.05% | 2.29% | 2.56% | 2.35% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 19,564.50 | $1,959.30 | $25.16 | $79.63 | 82.14 | 92.24 |
| 1.20% | 1.49% | 8.05% | 1.87% | -0.63% | 1.72% |
Source: MarketWatch
Hello Saturday,
This week, Elon Musk launches an AI company, a US judge gives the go-ahead for Microsoft’s takeover of Activision Blizzard, and Domino’s finally partners up with Uber Eats.
- The tech-heavy Nasdaq 100 index is to undergo a special rebalancing as seven tech stocks now make up roughly 51% of the index, due to the rally in tech stocks.
- A US District Judge rules in favour of Microsoft in its $69 billion merger deal with Call of Duty owner Activision Blizzard; the Federal Trade Commission has filed an appeal.
- After years of being opposed to the idea of third-party delivery apps, Domino’s signs a deal with Uber Eats for the US and 27 international markets; this deal is expected to help with Domino’s sluggish delivery business and add $1 billion in new sales.
- Automakers Volkswagen and Stellantis invest $100 million each for nickel and copper mines in Brazil through a SPAC deal in an attempt to source minerals that meet higher environmental and labour standards for EV battery production and reduce dependence on China.
- Elon Musk launches AI company xAI after months of teasing a ChatGPT rival; the firm has 12 industry experts as employees.
Taking stock | Tech tango | Call of justice | Dealivery | Battery bets | Reality check | Invest wisely
Taking stock
All major indices rose for the week as earnings season kicked off with the big banks posting their Q2 results. For the week, the S&P 500 gained 2.42%, the Nasdaq surged 3.32%, and the Dow added 2.29%. Despite the turmoil in the banking industry on account of regional banks, the big banks, including JPMorgan Chase, Wells Fargo, and Citigroup, ended up doing well and beat expectations.
Tech tango
The Nasdaq 100 index, which tracks the 100 largest non-financial companies in the US, is getting a makeover — it will undergo a special rebalance effective July 24, 2023. While the index is rebalanced quarterly, it has undergone a special rebalance only twice before, once in 1998 and then in 2011. So, why is it happening now?
The Nasdaq 100 is a tech-heavy index that is weighted by market capitalisation. This year, major gains have been had by Big Tech companies as well as companies like Nvidia due to the AI buzz. As of June 3, seven companies listed on the Nasdaq 100 — Amazon, Apple, Alphabet, Meta, Microsoft, Tesla, and Nvidia — accounted for about 51% of the index.
These stocks have surged massively year-to-date, with Nvidia jumping more than 200%. This is not good for the index because it ties its movements too closely to those of a handful of companies. The special rebalancing of the index is meant to address this overconcentration and redistribute the weights.
Call of justice
In December, the US Federal Trade Commission (FTC) sued to block Microsoft’s acquisition of Activision Blizzard, the video game company behind Call of Duty. This Tuesday, US District Judge Jacqueline Scott Corley ruled in favour of Microsoft and gave it the go-ahead to close the deal. On Thursday, the FTC filed an appeal.
Ever since Biden became president, the FTC has been taking on Big Tech to keep its power in check. According to the FTC, Microsoft’s $69 billion deal to acquire Activision will hurt consumers — Microsoft could stop offering best-selling Activision-owned games like Call of Duty and World of Warcraft for rival game consoles like Sony’s PlayStation and Nintendo in order to boost sales of its own gaming console, the Xbox. But Judge Scott Corley said that the FTC was unlikely to win the case.
This win for Microsoft comes after the deal was approved by the European Union in May. The merger was blocked in the UK by the Competition and Markets Authority (CMA) in April and is currently under appeal. But after the US judge’s ruling on Tuesday, the CMA said it’s ready to negotiate and reconsider.
Dealivery
This week, Domino’s Pizza said it was partnering with Uber Eats to carry out deliveries in the US and 27 international markets. This decision is a major pivot for the world’s largest pizza chain, which for the longest time had been against the idea of partnering with third-party delivery apps, especially in the US.
In April, Domino’s warned of a slowdown in its delivery business, and this partnership is expected to benefit it on that front — CEO Russell Weiner said it could add $1 billion in new sales. After this deal was announced on Wednesday, Domino’s shares rose 10% during morning trading. This fall, four pilot markets will be tested in the US, and customers will be able to order all items off Domino’s menu on Uber Eats and Postmates. By the end of the year, this partnership is expected to be rolled out nationwide, and Uber Eats will remain Domino’s exclusive US partner until 2024.
Battery bets
Auto giants Volkswagen and Stellantis commit $100 million each to a $1 billion special-purpose acquisition company (SPAC) that aims to buy two Brazilian mines that produce nickel and copper. Investing directly in mines is likely to be beneficial to the automakers — it will bring down the cost of EV battery cells and strengthen the supply chain.
Currently, China dominates the minerals required for producing EV batteries, and companies in the West are trying their best to secure these materials outside China.
Source: The Wall Street Journal
Such moves will also allow automakers to source materials from mines that meet the environmental and labour standards required to qualify for EV subsidies, tax credits, and loans in Europe, Canada, and the US. Earlier this year, Ford invested in a nickel mine in Indonesia, while General Motors invested $650 million in EnergyX, a lithium technology startup.
Reality check
Elon Musk, CEO of Tesla and owner of Twitter, was an early backer but later critic of Open AI’s ChatGPT. For several months now, he has been teasing plans to build a rival, sometimes dubbed ‘TruthGPT’, which would be a ‘maximum truth-seeking AI’. And this week, he finally launched his own AI company — xAI.
The company’s website indicates that it’s a separate company from X, Twitter’s parent company, and that its goal is to “understand the true nature of the universe”. The firm has a team that consists of 12 industry experts, and will work closely with Tesla, Twitter, and Musk’s other companies.
Invest wisely
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Warm regards,
Another week
in the markets
