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5 things to know before the stock market opens Wednesday, October 4

by Clarence Jones

The stock market is facing significant challenges, with all three major indices falling by more than 1% on Tuesday. This has resulted in the Dow Jones index being in negative territory for the year, while the S&P 500 and Nasdaq are still showing double-digit gains. The primary culprit behind this downturn is the impact of interest rates, which have been steadily increasing. Although the Federal Reserve has slowed down its rate increases, the effects are still being felt across the market. This has forced investors to come to terms with the fact that interest rates are likely to remain higher for the foreseeable future.

Another factor adding to the market’s uncertainty is the political situation in Washington. The House of Representatives recently removed Kevin McCarthy from the speaker’s office, marking the first time in American history that such an event has occurred. McCarthy was voted out by a coalition of eight Republicans and all Democrats, after a motion to vacate the speaker’s position was initiated by far-right GOP representative Matt Gaetz. The government now faces the challenge of operating without a speaker, while also dealing with an impending shutdown deadline in just over a month.

In the corporate world, Intel has announced plans to spin off its programmable chip business through an initial public offering in the next three years. The company, which recently spun off its self-driving business Mobileye, aims to control costs while capitalizing on the strong demand for programmable chips. These chips are known for their flexibility and power efficiency, making them highly sought after in various industries. Intel intends to retain a majority stake in the spun-off business and may seek private investment as well.

General Motors (GM) has reported a 21.4% year-over-year increase in sales for the third quarter, despite facing strikes by United Auto Workers (UAW) members. GM has outperformed foreign rivals Toyota, Hyundai, and Kia in terms of sales growth. Stellantis, which is also negotiating with the UAW, experienced a slight decline in sales, but this is not directly linked to the strikes. Ford is expected to release its sales figures soon. Approximately 17% of UAW workers at GM, Ford, and Stellantis are on strike, and there is a possibility that the union could expand the strikes if negotiations continue to be prolonged.

Lastly, the mortgage market is experiencing a slump, with demand reaching its lowest point since the 1990s. This decline is a result of interest rates rising substantially, exacerbating the existing affordability issues in the housing market. The rate on the 30-year fixed-rate mortgage is on track to reach 8%, which has deterred existing homeowners from selling their properties and potential buyers from entering the market. With limited housing supply driving up prices, entry-level buyers are particularly hesitant to purchase homes at even higher prices.

In conclusion, the stock market is grappling with the impact of rising interest rates, political uncertainties, labor strikes, and a struggling mortgage market. These factors have contributed to significant volatility and challenges for investors.

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