Morning news brief

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A MARTÍNEZ, HOST:

Nervous investors will be watching the stock market this morning after a sharp sell-off on Monday.

MICHEL MARTIN, HOST:

Yes, the Dow Jones Industrial average tumbled more than 1,000 points yesterday, while the S&P 500 index dropped by 3%. Japan's stock market also fell sharply on Monday but recovered much of that ground overnight. The market volatility has raised questions about the staying power of the U.S. economy, which had been a pillar of global growth since the pandemic.

MARTÍNEZ: NPR's Scott Horsley joins us now. Scott, I mentioned that investors are nervous. How worried should everyone else be?

SCOTT HORSLEY, BYLINE: Well, A, most analysts I've talked to think the stock market is overreacting. The economy isn't growing as fast as it had been. It's not adding jobs at the pace it was a year or two ago. But we're not on the brink of recession, either, which is what you might think if you just looked at the stock ticker. The unemployment rate rose last month, but not because a lot of people got laid off, but rather because a lot of new people came into the job market. Now, that said, it's possible the market downturn itself could do some damage to the economy. For example, economist Kathy Bostjancic of Nationwide says rich people who own a lot of stocks might check their portfolios and decide, maybe we'll be a little more careful with our spending this year.

KATHY BOSTJANCIC: It kind of rattles their confidence. They could pull back on spending. And that's one way you have that negative feedback. The other one is that businesses are concerned about the carnage in the financial markets. And therefore, that also could curtail business investment.

HORSLEY: Consumer spending and business investment were both pretty strong in the spring. GDP grew in the second quarter at a pretty good clip. That could change in the last half of the year if this market route continues.

MARTÍNEZ: Now, Japan's stock market also had a terrible day on Monday. The Nikkei average suffered its biggest drop since 1987. That's a long time ago, before I even graduated high school, Scott, so what's going on here?

HORSLEY: Most central banks around the world are looking at cutting interest rates, but Japan's central bank raised rates last week. That's putting upward pressure on the Japanese currency. As a result, some speculators who had been borrowing at very low interest rates in Japan to invest elsewhere were forced to unload stocks. Bostjancic says that was one of several global factors that contributed to yesterday's big sell-off.

BOSTJANCIC: Now, with the Bank of Japan raising rates, it means it's no longer as profitable for investors to borrow in yen or in Japan. But also, I think there is concerns about geopolitical tensions and possible widening of war in the Middle East, and also uncertainty about the presidential election.

HORSLEY: Japan's stock market fell more than 12% yesterday. But it bounced back overnight, regaining most of that loss. The Nikkei average rose more than 10% today.

MARTÍNEZ: So, Scott, the federal reserve - because all eyes are now going to turn to the Fed. So what's the federal reserve going to do? What are they going to respond to all this?

HORSLEY: Well, the Fed is certainly keeping an eye on the market, not because it's overly worried about stock prices, but because it wants to make sure the financial system is functioning smoothly. The Fed did not cut interest rates when it met last week. Some now see that as a missed opportunity. And expectations are that the Fed will cut rates at its next meeting in September. Before that, though, Fed Chairman Jerome Powell is set to speak later this month at the annual economic conference in Jackson Hole, Wyo. That is always an event with high altitude and high expectations. And this week's market turbulence will just put an even brighter spotlight on the talking heads in the Tetons.

MARTÍNEZ: NPR Scott Horsley thanks lot, Scott.

HORSLEY: You're welcome.

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MARTIN: The Justice Department won a historic victory against Google in an antitrust lawsuit. A federal judge ruled that Google acted illegally to ensure the company dominated the search engine market.

MARTÍNEZ: NPR's tech correspondent Dara Kerr is here to talk about how monumental this decision is and what it could mean for the future of Google. Dara, it sounds like a big loss for Google. Tell us more about the judge's ruling.

DARA KERR, BYLINE: Yeah, it was a big blow. So this is the first major antitrust lawsuit against a tech company to go to trial in decades. If you remember, the last one was against Microsoft in the 1990s, and the government won that case. So for this Google case, the Justice Department used Microsoft as a template, and it worked. In his nearly 300-page ruling, Judge Amit Mehta straight out called Google a monopolist. And he said it acted illegally to make sure it stayed a monopoly. He noted in his ruling how Google was once a scrappy startup founded by two Stanford students in a rented garage, and now has become one of the world's most valuable companies. And he suggested that dominance wasn't by accident. When I called up former chair of the Federal Trade Commission Bill Kovacic, he could not overstate how important this ruling was.

BILL KOVACIC: It's a very significant outcome for the Department of Justice, not just for U.S. policy, but for global efforts to control Big Tech.

KERR: So the ripple effects, A, could be very huge here.

MARTÍNEZ: Yeah, and the judge you mentioned called Google a monopolist. So what does that mean for the company going forward?

KERR: Yeah, Google was quick to say it's appealing the ruling. The company's president of global affairs said in a statement that Google is the best search engine, and the judge recognized that. But the judge also said that Google had a major advantage over its rivals. That advantage is exclusive agreements with device makers like Apple and Samsung. Google has paid those companies billions of dollars to be the default search engine on their phones and computers. During the trial, we learned that in one year alone, Google paid more than $26 billion for that privilege.

So now, going forward, it's hard to know what's going to happen to Google. And that's because in his decision, the judge didn't address remedies for the company. Instead, there's going to be a whole separate other trial where he will decide those. I spoke to one of the top antitrust experts in the country, George Hay, about what the judge might mandate. Hay is a former chief economist for the Justice Department's antitrust division.

GEORGE HAY: The remedy here is pretty obvious. He's going to say those contracts with Apple and Samsung have to go away.

KERR: No contracts means Google likely won't be the default search engine. But Hay says we're a long way from that because of the whole appeals process.

MARTÍNEZ: OK, now, beyond Google, though, Dara, I mean, what does Monday's ruling mean for other lawsuits? The government has brough against Big Tech?

KERR: Yeah, well, there are a lot of lawsuits. The Justice Department and the Federal Trade Commission have sued Facebook parent company Meta, and there's Amazon, and it sued Apple and some other small tech companies, too. And it's clear the Justice Department is emboldened by this ruling and celebrating their win against Google. In a statement, Attorney General Merrick Garland said, quote, "no company, no matter how large or influential, is above the law." And the experts I spoke to agree. They say this ruling could pave the way for similar rulings on those other lawsuits. So this push to break up the power of Big Tech seems like something that's just going to continue.

MARTÍNEZ: All right, that's NPR tech correspondent Dara Kerr. Thanks, Dara.

KERR: Thank you.

MARTÍNEZ: And a note here - Google is a financial sponsor of NPR, but we cover them like we would anyone else.

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MARTÍNEZ: In South Carolina, people are being urged to stay home and off the roads.

MARTIN: That's because Tropical Storm Debby is expected to dump potentially catastrophic amounts of rain, especially along the coast.

MARTÍNEZ: South Carolina Public Radio's Victoria Hansen joins us now from where she lives just outside Charleston, about a mile from the beach. Victoria, what are you seeing this morning?

VICTORIA HANSEN, BYLINE: Well, I'm seeing lots of rain this morning. In fact, it was so heavy at times overnight, it was kind of tough to sleep. Now, we did have a tornado touch down just south of Charleston, which damaged homes, and we're under a flash flood warning for much of the morning. The problem is this storm is expected to creep along our coast. The National Weather Service in Charleston says anywhere 10 to 20 inches of rain is likely with the possibility of up to 30 inches in some places. So to give you some perspective, we typically get 50 to 60 inches of rain a year, so we could see half that in just a matter of days. Not to mention, we are expecting a storm surge of 2 to 4 feet. That means even more water will push onshore, giving all this rain little place to go.

MARTÍNEZ: Yeah, so when it creeps, I guess that means a lot of water is kind of being dumped. How are state and local leaders preparing? I mean, they know it's coming, so are they evacuating people?

HANSEN: Yes, so far, no evacuations. But the city of Charleston did enact a curfew last night. Essentially, they closed the peninsula beginning at 11 p.m. until later this morning, when they plan to reassess. Here's Mayor William Cogswell at a press conference last night.

WILLIAM COGSWELL: For your own safety and the safety of the emergency responders, please, stay indoors. Do not go out. This is a lot of water coming our way and we need to take it very, very seriously.

HANSEN: And it's important to point out, flash flooding is what claims so many lives during these storms. Now, high-water rescue vehicles and boats, they are ready in case people do in fact need help. And shelters have opened across the state for those who know their homes flood. Again, city and state leaders are urging people just to stay home.

MARTÍNEZ: So given all that, are people staying home?

HANSEN: Well, fortunately, many businesses are closed, and yes, people have been preparing, getting supplies and sandbagging their homes. I caught up with Kathy Evans (ph) at a grocery store during a break in the rain yesterday. She's lived in Charleston for nearly 30 years now, and she does what many of us do - she prepares for the worst, and she hopes for the best. And she says absolutely she is staying home, even if it's for days, until the storm passes.

KATHY EVANS: I don't want to be that person who brings out our very hard-working law enforcement or fire department to save me because I didn't listen. And then they put their lives at risk.

HANSEN: Now, Evans says she does worry about all the new people who have moved to South Carolina recently and the addition of so many new homes. That means there's less open land to absorb all that water.

MARTÍNEZ: Victoria, you're covering this, but you're also experiencing it. What do you worry about?

HANSEN: You know, I worry about the flooding. We had what they called historic floods in 2015, which just dumped a substantial amount of rain on us, more than 20 inches. At that time, my backyard probably took in about 3 feet of water.

MARTÍNEZ: Oh, wow.

HANSEN: I checked this morning - that's not the case. But the frogs are very lively, is the only thing I can say.

MARTÍNEZ: (Laughter).

HANSEN: It was very, very loud outside my window last night. So, you know, again, I think a lot of us just don't know what to expect. It depends upon how long, you know, the storm kind of hovers over us. And then there's a possibility that it could go back out to the Atlantic and then make landfall again before heading to North Carolina.

MARTÍNEZ: That's South Carolina Public Radio's Victoria Hansen speaking to us from just outside Charleston. Victoria, thank you.

HANSEN: And thank you. Transcript provided by NPR, Copyright NPR.