WSJ What’s News - The Magnificent Seven Stocks Bring Market Misery

Episode Date: July 24, 2024

P.M. Edition for July 24. The Magnificent Seven looked more like the Miserable Seven, as the exclusive group of tech stocks dragged down the U.S. market. Markets reporter David Uberti explains what is behind the sell-off. And what could a Kamala Harris presidency mean for the U.S. economy? Tax policy reporter Richard Rubin has more. Plus, Israeli Prime Minister Benjamin Netanyahu tackles a tricky balancing act: appealing to Democrats without alienating Donald Trump. National security reporter Lara Seligman discusses his appearance before Congress. Francesca Fontana hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

So what's it like to buy your first cryptocurrency on Kraken? Well, let's say I'm at a food truck I've never tried before. Am I gonna go all in on the loaded taco? No, sir. I'm keeping it simple. Starting small. That's trading on Kraken. Pick from over 190 assets and start with the 10 bucks in your pocket.

Easy. Go to kraken.com and see what crypto can be. Not investment advice. Crypto trading involves risk of loss. See kraken.com slash legal slash ca dash pru dash disclaimer for info on Kraken's undertaking to register in Canada. Israel's prime minister addresses the U.S. Congress, hoping he doesn't alienate both Democrats and Republicans.

And what would a possible Kamala Harris presidency mean for the economy? We can expect, based on former aides that we've talked to, for her to emphasize the things that she cares about most. What we don't have a feel for is whether that's going to be a change in policy or a change in emphasis. Plus, the Magnificent Seven looked more like the Miserable Seven, as the exclusive group of tech stocks dragged down the U.S. market.

It's Wednesday, July 24th. I'm Francesca Fontana for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Israeli Prime Minister Benjamin Netanyahu addressed a joint session of Congress earlier today in the middle of an unprecedented shakeup

in American politics and growing pressure on his government to cut a ceasefire deal with Hamas. My friends, if you remember one thing, one thing from the speech, remember this. Our enemies are your enemies. Our fight is your fight. And our victory will be your victory. Netanyahu used much of the first part of his speech to highlight the Gaza war, pointing out former hostages and Israeli soldiers in the audience. He also rejected criticism that Israel has

intentionally targeted civilians in Gaza and restricted the flow of humanitarian aid. Outside, protesters gathered near the capital calling for a ceasefire in Gaza. The Israeli prime minister faces a new balancing act in the U.S., trying to appeal to the new, potentially more progressive face of the Democratic party while not alienating Donald Trump. National security reporter, Laura Seligman joins me with more on Netanyahu's appearance on the Hill. Laura, did Netanyahu manage to do that balancing act?

He had a really tricky balancing act to do here and he mostly succeeded. He certainly thanked President Biden for his support to Israel. He thanked him for putting together the coalition back in April that defended Israel from Iranian missiles. He spent quite a bit of time thanking President Biden and thanking the American people, but he also definitely paid tribute to Trump. He applauded Trump for brokering the Abraham Accords. He talked about moving the US embassy to Jerusalem and recognizing Israel's rights in the Golan Heights. So he sort of struck a pretty good balance between appealing to both

sides of the aisle and that was one of the main things he really had to do during this visit, especially because over the weekend, of course, President Biden dropped out of the presidential race and named endorsed Kamala Harris. And Kamala Harris, as we wrote yesterday, has been a little bit more progressive, a little bit more emphatic in calling for a ceasefire and in calling for the humanitarian situation in Gaza to be addressed, aligning herself more with that progressive side of the Democratic Party. So he really, he really had to appeal to both here.

What's at stake for Israel depending on the outcome of the election in November? This was a really high stakes visit for Netanyahu because of where he is politically right now. There have been a lot of protests in Israel over his failure to bring back all the hostages. There's been talk of an election being called in Israel and so he's really trying to head that off and trying to show that he has the support of Israel and that he has not, as some critics say, destroyed the US-Israeli alliance. So his primary concern is his domestic audience because he wants to hold onto power.

But that said, he certainly has to make sure both sides of the aisle are happy with him for lack of a better term ahead of the election. For the Republican side, he's sort of facing this problem that President Trump is not very fond of him recently because after the 2020 election, he congratulated Biden for his win, which of course, Trump is still saying that the election was stolen. So he's kind of gonna have to go and kiss the ring on Friday.

He's gonna visit Mar-a-Lago and meet with Trump there and we'll see whether that sort of remedies the situation. And then of course on the other side with President Biden, he has a very long, decades long relationship with President Biden and Biden has always been a strong supporter of Israel but Israeli-U.S. relations have been really strained because of the horrible humanitarian situation in Gaza and Israel's blockade of some of the aid getting through to the point where Biden has even held up certain shipments of weapons to Israel which was caused a blow-up and Nijingahu kind of went off the rails and

called out the US for doing that a few weeks ago and that sort of shocked everybody and now he's sort of come to pay amends for that. Although he did appeal to the US Congress specifically to send more weapons and send more faster so that Israel can finish the job. How have lawmakers reacted? Well, first, just to set the scene, a lot of lawmakers actually boycotted the speech. Vice President Kamala Harris actually didn't even show up to the speech, which her spokesperson

said was due to a previously scheduled event. She was traveling in Indianapolis today, but it's kind of interesting that she didn't reschedule that because usually the vice president would preside over a joint session of Congress related to the speech of a foreign leader like Netanyahu. So that was kind of an interesting signal. A lot of other lawmakers, especially Democratic lawmakers, also did not attend the speech. Bernie Sanders did not attend. Chris Van Hollen did not attend. And then on the other side, JD Vance, who's Trump's

vice presidential nominee, he also didn't attend. So that's the first thing. The second thing I would say is that in the room there seemed to be a pretty emphatic reaction to him. There were a lot of standing ovations. There was a lot of applause. So the immediate audience, they certainly seemed to take well to the speech, but you have to know that there were a lot of people that were not there. — That was national security reporter Laura Seligman. President Biden is slated to address the nation from the Oval Office this evening, his first major public remarks since dropping his bid for reelection and endorsing Kamala Harris.

In his address, set for 8 p.m. Eastern, Biden's expected to focus on his reasons for exiting the presidential race and what he aims to accomplish in his final months in the White House. It's expected to be part of a wider effort by his team to highlight his accomplishments while he's still in office and ensure that his contributions don't get lost as the party moves on to Vice President Kamala Harris, who's already locked up enough support to be the Democratic nominee. Biden plans to focus on issues where he believes he can make a difference, including turning

even more to getting a peace deal in the Middle East. Tomorrow, he's scheduled to meet with Israeli Prime Minister Netanyahu. Coming up, what can we tell about Kamala Harris' priorities when it comes to the economy, based on her track record? That's after the break. Good things come to those who plan ahead. Family vacay? Reserve your ride as soon as you book your flights. To all the planners, now you can reserve your Uber ride up to 90 days in advance. See Uber app for details.

Kamala Harris is well known for her Biden administration role in immigration. Her legacy is California's attorney general and her defense of abortion rights. But what would a possible Harris presidency mean for the economy? Wall Street Journal tax policy reporter Richard Rubin joins me now. Richard, let's start with some of the economic challenges that Kamala Harris might face if she becomes president. She's coming into the same challenges that President Biden has been facing, which is prices are significantly higher than they were a few years ago after the run up in inflation.

Interest rates are higher than they've been in the past. There's concern about the federal deficit. So there's issues surrounding that. And then all of the general issues, I think some of the ones that she's focused on are, you know, trying to improve access to capital for small businesses, which is always a concern and access to childcare and to capital for small businesses, which is always a concern, and access to childcare and elder care for households. So there are a range of economic issues that would be important if she were to become president

that are important now. And then you have the big decision point among many, which is the expiration of the 2017 tax cuts, a big chunk of them at the end of next year. Obviously, the economy is a key issue for voters. Looking back at her track record, what can it tell us about what to expect from a Kamala Harris presidency? And so this is where it gets a little tricky. So when she was in the Senate and she was running for president in 2020 in the Democratic primaries, she moved pretty well to the left. So she was proposing something that was not quite but

resembled a universal basic income for middle income households. She endorsed the Green New Deal of significant climate investment. She talked about big expansions of Medicare and health insurance coverage. She was against the US-Mexico-Canada free trade agreement, one of just a handful of Democrats who were opposed to that.

So she's been on the very progressive side of the Democratic Party right up until the moment she was put on the ticket four years ago. Then in the period she's been vice president, she's been a loyal and important member of the Biden-Harris administration. And so his policies are her policies. The real question that we have right now is, you know, is she going to basically just be a continuation of the Biden policies? Or will she kind of revert to where she was when she was in the Senate and running for president? Or now that she has this sort of

opportunity where she doesn't have to run in any sort of primary right now, will she move away from some of those progressive positions and try and stake out economic arguments that might be particularly appealing to swing voters in key states. Which path might she take then? The basic assumption is she probably is pretty much going to stick with the policies the administration has laid out. You know, a fair amount of thought and effort has gone into those and she's been involved in those discussions.

And so that would be kind of the starting point. We can expect based on former aides that we've talked to, for her to emphasize the things that she cares about most. So the things like access to capital for small businesses, particularly in minority communities, to emphasize, you know, she's talked about student debt cancellations and something she's been involved in advocating the care economy, child care, elder care, those kinds of issues that are important to the workforce. You can expect some emphasis on those. What we don't have a feel for is

whether that's going to be a change in policy or a change in emphasis. That was Tax Policy Reporter Richard Rubin. The magnificent seven group of tech giants led today's stock markets sell off. The 7 stocks collectively lost billions in market value. The tech-heavy Nasdaq's 3.6% decline was its largest since October 2022, when the Federal Reserve was cranking up interest rates to tamp down inflation. The S&P 500 ended 2.3% lower, its worst day since December 2022, and the Dow Jones Industrial Average fell 1.3%, or 504 points. Market supporter David Uberti joins us with more.

David, what happened? What we have today is some energy that has been building in the market for months, more than a year at this point, in favor of AI stocks seemingly switching in the opposite direction. There has been mounting skepticism about the potential payoffs of AI for some time, just by mere fact of this being very expensive technology and the cost-benefit analysis really coming into focus. That increasingly has happened with earnings reports in recent days, specifically with Tesla and Google owner Alphabet, both of which disappointed investors,

either with exceedingly high AI investments, or as the case is with Tesla, a delayed rollout of what they call their robo taxi. So investors have taken that as a signal that maybe all of this AI hype that they've been really riding on over the last year or two years potentially might not be living up to everything they thought it would be. Is this the end or is there more to come? Well Magnificent Seven, there's two that have reported thus far, meaning that there's five

more companies to come in the weeks ahead. Nvidia will be the bellwether stock, the bellwether company that everyone will be watching. The problem with many of these firms is that they have consistently exceeded Wall Street's expectations over the last year or two. So now they're in this real conundrum where there are the expectations of what sorts of profits and growth they produce, but they're also expected to beat those expectations. So they actually have to really, really overshoot what everyone in the market thinks in order to sort of keep this trajectory going.

So over the coming weeks, you're going to have investors really parsing closely a lot of these risks and rewards from some of these huge investments companies like Nvidia or Microsoft or Amazon are making. Markets reporter David David Uberty. Is your employer saying no to letting you work from anywhere? Not just from home, but from another state or another country? What questions do you have about why this pullback is happening and what it says about the future of work?

Send a voice memo to wnpod at wsj.com or leave a voicemail with your name and location at 212-416-4328. We might use it on the show. Before we go, we have a correction. Higher U.S. home prices are driving many Americans out of the housing market. An earlier version of yesterday's evening podcast incorrectly said that higher home sales were responsible.

And that's what's news for this Wednesday afternoon. Today's show was produced by Anthony Bansi and Pierre Bienneme with supervising producer Michael Kosmitis. I'm Francesca Fontana for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.