Wall Street Extends July Retracement, Led by Tech, Energy

  • The US accumulates early trade, led by Apple, Exxon
  • Brent crude gained about 3%
  • The US dollar index rose around 0.3%

July 29 (Reuters) – U.S. stocks extended their July rebound on Friday morning, with the dollar and Treasury yields also rising, as traders reacted to positive corporate news despite rising labor costs and other inflation.

Positive forecasts from Apple Inc ( AAPL.O ) and Amazon.com Inc ( AMZN.O ) indicated resilience among mega-cap companies to survive the recession, adding to sentiment for less aggressive monetary policy.

The two biggest U.S. oil companies, Exxon Mobil ( XOM.N ) and Chevron Corp ( CVX.N ), posted record earnings as crude oil and natural gas prices rose. Read more

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The Nasdaq Composite (.IXIC) added 119.52 points, or about 1%, to 12,282.11 and the S&P 500 (.SPX) added 25.97 points, or 0.64%, to 4,098.4. The Dow Jones Industrial Average (.DJI) rose 24.34 points, or 0.07%, to 32,553.97.

As a tight labor market continues to boost wage growth, it has kept inflation higher for some time. Read more

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 1.1 percent last month, the U.S. Commerce Department said on Friday. Read more

As inflation rises in major markets and central banks rush to raise rates without killing growth, riskier markets like stocks tend to respond positively to any sentiment on the part of policymakers.

Stocks rose as traders eased their bets on a gradual rise in prices after Thursday’s data showed the U.S. economy contracted in the second quarter. On Friday, Eurozone numbers beat expectations, but fears of a recession are rising as energy inflation rises in the face of the war in Ukraine.

The MSCI World Index (.MIWD00000PUS) rose 0.55%, for a monthly gain of nearly 6%, the best since November 2020, while European markets gained broadly, around the STOXX Europe 600 (.STOXX). 1%

Despite the positive end to the month, UBS Global Wealth Management Chief Investment Officer Mark Hafele said investors should proceed with caution.

“We think the risk-reward for the broader equity indices will be muted in the near term. Equities are pricing in a ‘soft landing’, but the risk of a deep ‘downturn’ in economic activity is elevated.”

There was some concern in Asian stock markets overnight after Beijing did not mention its full-year GDP growth target following a high-level Communist Party meeting. Read more

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 0.66 percent.

In the previous session, US gross domestic product fell 0.9% last quarter, up from a 1.6% decline in the previous quarter, initially weighed on the back of US bond yields and the greenback. But both were done on Friday.

The yield on the benchmark 10-year Treasury note recovered slightly from an overnight low to trade at 2.693% while the yield on the two-year note, which typically moves in step with interest-rate expectations, rose to 2.918% on the day. Read more

After flirting with positive territory earlier, the dollar rose 0.37% against a basket of major peers – a second month of gains.

Futures markets now predict that US interest rates will be higher in December this year than in June 2023, and that the Federal Reserve will cut interest rates by nearly 50 bps next year to support the slowdown. [0#FF:]

Of all commodities, Brent crude futures rose about 3%, while U.S. West Texas Intermediate crude production rose about 3.5% as fears of a supply shortage ahead of the next OPEC ministers’ meeting eased doubts about the economic outlook. Read more

Spot gold traded flat, holding around $1,753 an ounce, after hitting a more than three-week high, helped by a softer dollar and bets the Federal Reserve could cool rate hikes as economic concerns mount. [nL4N2ZA2CQ]

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Reporting by Lawrence Delevingne in Boston and Simon Jessop in London; Editing by Mark Heinrich

Our standards: The Thomson Reuters Trust Principles.

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