[New York Stock Market] Rally on Strong Big Tech Earnings... Nasdaq Up 12% in July Alone

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market closed higher on the 29th (local time), the last trading day of July, buoyed by strong earnings from big tech companies such as Apple and Amazon, despite a significant rise in the inflation indicator favored by the Federal Reserve (Fed). The monthly gains for July were the highest since November 2020.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,845.13, up 315.50 points (0.97%) from the previous session. The S&P 500, which focuses on large-cap stocks, rose 57.86 points (1.42%) to 4,130.29, and the tech-heavy Nasdaq index ended the day at 12,390.69, up 228.10 points (1.88%).

For the month of July, the Dow rose more than 6%. The S&P 500 surged over 9% this month alone. Although the Nasdaq remains about 20% below its peak in a bear market, its July gain exceeded 12%. All of these represent the largest monthly increases since November 2020.

Economic media CNBC reported that "investors' fears over the Fed's aggressive pace of interest rate hikes are diminishing, and the belief that inflation has peaked is beginning to take hold." Additionally, earnings that exceeded market expectations supported the rally. However, some voices suggest this might be a bear market rally.

By individual stocks, Apple and Amazon, which released stronger-than-expected earnings after the previous day's close, led the market rally. Apple closed up 3.25% from the previous session. Amazon, which provided a third-quarter outlook exceeding market expectations, surged more than 10%. Other leading tech stocks such as Tesla (+5.79%), Nvidia (+1.0%), and Microsoft (+1.50%) also showed gains.

Energy stocks also showed strength. ExxonMobil and Chevron, which reported record quarterly profits supported by rising oil prices, rose 4.63% and 8.90%, respectively. On the other hand, streaming company Roku slid more than 23% after releasing earnings and outlooks below expectations. Intel also fell over 8% due to weak earnings.

Investors focused on the Fed's preferred inflation indicator, the Personal Consumption Expenditures (PCE) price index, corporate earnings reports centered on tech stocks, recession concerns, and the Fed's future tightening path. According to FactSet, more than half of S&P 500 companies have reported earnings, with 72% beating expectations.

The June PCE index released that morning rose 6.8% year-over-year, reaching the highest level since January 1982. The increase was larger than the previous month. Month-over-month, it rose 1.0%. Core PCE also rose 4.8% year-over-year, increasing more than the previous month's 4.7% rise.

Although inflation still shows no signs of slowing, market concerns about a recession are rising, leading to ongoing bets that the Fed will slow its pace. Fed Chair Jerome Powell, who took a giant step in rate hikes the previous day, left open the possibility of another giant step in September during a press conference but mentioned that "at some point, slowing the pace of rate hikes will be appropriate."

The Fed's year-end target for the benchmark interest rate is between 3.0% and 3.5%. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market currently reflects the possibility of rate hikes of 0.5 percentage points in September, 0.25 percentage points in November, and 0.25 percentage points in December FOMC meetings.

As recession concerns persist, U.S. Treasury yields in the New York bond market fell to the 2.64% range. The decline in Treasury yields indicates increased demand for safe-haven government bonds, pushing bond prices higher. The 2-year Treasury yield, sensitive to monetary policy, is above 2.9%, surpassing the 10-year yield. This inversion of short- and long-term Treasury yields is typically seen as a recession warning sign.

The final July University of Michigan Consumer Sentiment Index released that day was 51.5, an improvement from 50.0 the previous month. However, consumer sentiment remains at the baseline. The Consumer Expectations Index, which forecasts the economy over the next six months, worsened to 47.3 from the previous month.

Oil prices rose as OPEC+ oil-producing countries are expected to maintain their current production increase levels at the upcoming meeting scheduled for the 3rd of next week. On the New York Mercantile Exchange, September West Texas Intermediate (WTI) crude oil closed at $98.62 per barrel, up $2.20 (2.28%) from the previous session.

This content was produced with the assistance of AI translation services.