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President Joe Biden caused panic in the Democratic camp with his shaky performance in last night’s presidential debate, while former President Donald Trump repeated a string of falsehoods while doubling down on his record of cutting taxes and raising tariffs during his first term in office.
Many economists worry that a repeat of similar policies in a second Trump term could lead to faster inflation at a critical time and add to the nation’s fast-growing debt mountain.
what’s happening: U.S. stocks rose in pre-market trading on Friday, with the CNN Fear & Greed Index remaining in neutral territory for a second consecutive day as investors ignored the contentious presidential debate that dominated the news cycle.
Investors instead chose to focus on inflation — the Federal Reserve’s preferred gauge, the personal consumption expenditures (PCE) price index, is due to be released on Friday — and the end of a strong first half of the trading year.
“In the current environment, the trajectory of inflation and interest rates, and whether the Fed can achieve a soft landing for the economy, will likely matter more than the election,” Truist chief market strategist Keith Lerner said in a recent analysis.
Lerner noted that despite the different policies of the last three US presidents – Barack Obama, Trump and Biden – the S&P 500 has delivered annual returns of 12-17%.
Market volatility often builds up around the end of election years and then falls, but this election is unusual in that there are two incumbent candidates, which could hasten the typical end-of-year post-election relief rally, said Ed Clissold, chief U.S. strategist at Ned Davis Research.
Investors have bigger things to worry about.
“Stock market movements and investor reactions over the next few days will depend heavily on the upcoming inflation data,” Antonio Ernesto Di Giacomo, market analyst at brokerage xs.com, said on Friday.
“Friday’s PCE reading will be decisive and provide important insight into the future of inflation and potential actions from the Federal Reserve.”
Markets are also focusing on a strong finish to the first half of the year, with the S&P 500 expected to finish the first half of the year up 15%. Goldman Sachs’ Scott Rubner wrote in a recent note that a strong first half typically means the second half will be “very strong.”
By sector: Jonas Golterman, deputy chief market economist at Capital Economics, said the head-to-head between Biden and Trump will have little impact on broader market indexes, but certain sectors will be more affected by the election results.
For example, finance and energy tend to be easily influenced by policy direction.
The US dollar also responded, strengthening slightly after early CNN polls showed Trump was seen as the likely winner of the debate. This may be due to Trump reiterating his intention to impose a 10% tariff on all imports, which could spur inflation and call into question the interest rate cuts.
Focus on FranceAcross the Atlantic, investors are less optimistic about looming political risks.
French President Emmanuel Macron has called for early parliamentary elections after his centrist Renaissance party suffered a crushing defeat to the far-right opposition in the European Parliament elections. The first round of the French elections will take place in Sunday, and the second round on July 7th.
France has the euro zone’s highest budget deficit and is at risk of running afoul of the European Commission’s new fiscal rules, making markets wary of populist policies proposed by parties on both the left and the right.
“Political uncertainty is a headwind for both sentiment (as reflected in financial markets) in the near term and now economic activity,” wrote Katie Nixon, chief investment officer at Northern Trust Wealth Management. “We expect volatility in European stock and bond markets through July.”
Most European stock indexes rose on Friday, but France’s benchmark CAC 40 fell 0.3 percent.
The gap between French and German government bond yields hit its highest level since the 2012 euro zone crisis on Friday as investors worry that spending promised by France’s far-right party will add to the country’s already huge government debt.
CDK Global is still down ahead of next week’s busy Independence Day auto sales holiday. Car dealerships use the company’s software to manage everything from schedules to records, but a major outage since last week has paralyzed about 15,000 dealerships across North America.
CDK said last Saturday that it had begun restoring the software, but now car buyers and dealers alike are stuck. The company has hinted at several times that a fix is needed, only to say each time that the system will remain unavailable for some time to come.
My CNN colleagues Lamisha Maruf and Eva Rosenberg report on what you need to know about the massive software outage.
What does CDK Global do? CDK Global provides data and technology to auto dealerships. The company’s systems are used by approximately 15,000 auto dealerships across the United States and Canada.
CDK operates a variety of software products that auto dealers use to keep records of negotiated deals, schedule and communicate service, and handle workflows like that. While not all dealers use CDK’s products, and those that do not use CDK for all of their dealership operations, system shutdowns are an issue for many dealers.
To protect customer privacy, customer details are no longer written on a piece of paper lying around on a desk. Instead, information about transactions and customer appointments is stored in a server that is inaccessible to salespeople affected by the outage.
Can I still buy or repair a car? Salespeople and service employees who spoke to CNN said it’s taking longer for people to buy a car because they’re now using pen and paper for the process, said Scott Campbell, a salesman at Capital City Buick GMC in Berlin, Vt. Campbell estimates that wait times have doubled to triple.
Several buyers and repair customers told CNN they experienced lengthy delays.
When will CDK be back online? CDK Global does not expect its systems to be back online before June 30th.
Why did the system go down? CDK said it was investigating the outages after two cyber incidents caused its systems to go offline. The company did not disclose who was behind the incidents.
Bloomberg previously reported that the company was in negotiations with a group of Eastern Europe-based hackers who were demanding a ransom of tens of millions of dollars to end the outage.
Walgreens plans to close a significant number of its roughly 8,600 stores across the U.S. as it tries to turn around the struggling drug chain’s business, my colleague Jordan Balinski reports.
The company did not provide specifics on how many stores it would close, but said Thursday it plans to close a “significant number” of underperforming stores across the U.S. as part of a multiyear optimization program.
Chief Executive Officer Tim Wentworth said on a conference call with analysts on Thursday that “changes are imminent” for about 25 percent of stores that are unprofitable and that Walgreens’ strategic review “will include closing a significant number of underperforming stores.”
“We have reached a point where the current pharmacy model is not sustainable and challenges in the operating environment require us to change our approach to the market,” he said.
