5 Things To Know Before The Stock Market Opens Wednesday - Free Websites, Share News And Posts Publicly

WED, OCT 04, 2023

MORNING SQUAWK

1. Get used to it

The stock market is going through a lot right now. All three major indices fell more than 1% on Tuesday, and the Dow is now negative on the year. (The S&P 500 and the Nasdaq are still up double digits, for what it’s worth.) The main culprit? Interest rates, of course. The Federal Reserve may have slowed down its pace of rate increases, but the effects are pervasive. Now, a market that had grown accustomed to low, low rates for a good 20-plus years finds itself having to accept that rates are going to be higher for some time, as CNBC’s Jeff Cox points out. Follow live market updates.

2. House of pain

The situation in Washington isn’t helping, either. If markets want certainty from Congress, good luck. The House booted California Republican Kevin McCarthy from the speaker’s office Tuesday, the first time that’s happened in American history. Eight Republicans and all Democrats voted in favor of the so-called motion to vacate, after far-right GOP Rep. Matt Gaetz of Florida pushed for the vote. Of course, it was McCarthy himself who agreed to allow just one member of the House to file such a motion as part of the deal with his hard-right antagonists that made him speaker nine months ago. What’s next? For now, Rep. Patrick McHenry, a McCarthy ally, is the interim speaker, but the House is effectively paralyzed without an actual speaker. And the government faces another shutdown deadline in just over a month.

3. Intel’s next big move

Intel is looking to spin off its programmable chip business with an initial public offering some time in the next three years. The company, which also recently spun off its Mobileye self-driving business, could seek private investment in any such move, but it also intends to hold on to a majority stake. The move comes as Intel seeks to control costs while banking on the strong demand for programmable chips, or field programmable gate arrays (FPGAs). These chips are known for being more flexible and power-efficient than traditional processors. Intel said in July that the unit had registered three straight record quarters, but the company didn’t break out specific sales for it.

4. Sales and strikes

The United Auto Workers’ strikes aren’t hitting General Motors’ sales just yet. The Detroit automaker posted a 21.4% year-over-year jump for the third quarter, outpacing foreign rivals Toyota, Hyundai and Kia. Stellantis, which is also negotiating with the UAW, posted a slight decline, although that isn’t attributable to the strikes, just reflective of recent trends for the company. Ford is expected to post its sales figures Wednesday. About 17% of UAW workers at Ford, GM and Stellantis are on strike, although the union could expand the strikes further as negotiations drag on.

5. Mortgage slump

Bringing it back to interest rates: Mortgage demand hit the lowest point since 1996, according to the Mortgage Bankers Association. That’s a direct result of rates shooting higher, compounding an already tough affordability problem for would-be buyers and sellers. Indeed, the rate on the popular 30-year fixed-rate mortgage is headed toward 8%. Homeowners who are locked into low rates on their mortgages are reluctant to sell since they don’t want to then buy a new place with a much higher rate. Meanwhile, entry level buyers are hesitant to pay an even higher price for a home, with tight supply already jacking up prices.

— CNBC’s Mike Calia wrote this newsletter. Jeff Cox, Alex Harring, Emma Kinery, Christina Wilkie, Kif Leswing, Michael Wayland and Diana Olick contributed.

— Follow Squawk Pod for the best conversations and analysis from Squawk Box in a curated, daily podcast.