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Today in the Market (1/30/2023)

Good Evening! The U.S. stock market fell on Monday as investors awaited a week including the latest Fed meeting, a rush of heavyweight earnings reports, and employment data.

The S&P 500 decreased by 1.30%, whereas the Dow Jones declined by 0.77%. The Nasdaq Composite fell the most by 1.96%.

NOPE, NOT ALLOWED

A federal court ruled on Monday that Johnson & Johnson (JNJ) cannot use bankruptcy to settle a multibillion-dollar dispute over its baby powder. 

Here is some context. This ruling stands in the way of Johnson & Johnson’s attempts to transfer around 38,000 legal claims to its subsidiary, LTL Management. Which, J&J established the division and filed for bankruptcy in 2021, stating that this would provide an easier path to settlement for the thousands of individuals who allege that the company’s baby and talcum powders caused them to acquire cancer.

What is preventing it? When the LTL segment filed for bankruptcy, the firm said that it would offer a financial “backstop”. According to Reuters, this safeguard would assure Johnson & Johnson would pay the claims. However, the court concluded that only financially troubled businesses may use the bankruptcy system for restructuring assistance. “While LTL faces a substantial future talc liability, its funding backstop plainly mitigates any financial distress,” according to the court’s decision.

THEY GROW UP SO FAST

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Three decades ago yesterday, the first exchange-traded fund (ETF) in the U. S. debuted. In the subsequent decades, these once-niche investing products have grown common on Wall Street, upsetting the mutual fund sector and altering the interaction between individuals and the stock market. 

How much has it grown? The first US ETF is now the world’s largest, with $375 billion in assets, and by the end of 2022, the ETF industry as a whole had acquired $6.5 trillion in assets.

How do exchange-traded funds operate, and why have they grown so popular? ETFs are basically securities that mirror the performance of a basket of assets, such as equities. The SPDR S&P 500 ETF, for instance, monitors the performance of S&P 500 firms. On top of that, ETFs have a number of advantages, including ETFs generally have lower fees than mutual funds, they have built-in tax advantages, and they are accessible to anyone with a brokerage account; you can buy or sell them like a stock.

In addition to these benefits… the emergence of ETFs has also been spurred by the increasing realization that investing in individual equities is unwise(Read more here about diversification). The proportion of US fund assets held by passive index funds has increased to about 50% from less than 2% in the early 1990s.

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