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Market Snapshot: S&P 500, Dow score biggest monthly gains since November 2020, Nasdaq books best July ever

U.S. stocks ended sharply higher Friday, with the S&P 500 index and Dow Jones Industrial Average closing the final trading day of July with the biggest monthly gains since November 2020. Big-tech earnings reports helped lift equities while investors shrugged off another sign of high inflation from the Federal Reserve’s preferred gauge.

How did stocks trade?

The Dow Jones Industrial Average
DJIA,
+0.97%

gained 315.50 points, or 1%, to close at 32,845.13, booking a third straight day of gains.

S&P 500
SPX,
+1.42%

climbed 57.86 points, or 1.4%, to finish at 4,130.29, rising for a third consecutive day.

Nasdaq Composite
COMP,
+1.88%

rose 228.09 points, or 1.9%, to end at 12,390.69, also scoring a three-day win streak.

For the week, the Dow gained 3%, the S&P 500 rose 4.3% and the tech-heavy Nasdaq advanced 4.7%. For July, the Dow climbed 6.7%, the S&P 500 jumped 9.1% and the Nasdaq surged 12.3%, according to Dow Jones Market Data.

What drove markets?

The U.S. stock market closed out July with large monthly gains after a week packed with big-tech company earnings, the Federal Reserve’s policy meeting, and economic data including the latest reading on inflation.

“This was a big week of economic data and earnings,” said Tom Mantione, a managing director with UBS Private Wealth Management, in a phone interview Friday. The market was positioned for “bad news and so far this week they haven’t gotten it,” he said, adding that “earnings so far this season have not been as bad as people anticipated.”

Traders reacted favorably to results from tech giants Apple Inc.
AAPL,
+3.28%

and Amazon.com Inc, with Amazon
AMZN,
+10.36%

surging 10.4% Friday while Apple gained 3.3%, according to FactSet data.

“After the close [on Thursday] Apple and Amazon reported earnings on the stronger side of what we’ve seen for mega-caps so far, with both releases containing optimism around supply chains and consumer spending,” said strategists at Deutsche Bank, in a note Friday.

See: Amazon stock jumps 14% as sales beat and AWS growth overcome a second straight quarterly loss

Also see: Apple says macro issues aren’t hurting iPhone business as earnings top expectations

On the economic front, inflation data released Friday by the Bureau of Economic Analysis showed that higher gasoline prices led the personal-consumption-expenditures price index up 1% in June, exceeding forecasts of 0.9%.

“This inflation metric is for June and we know much has changed since then, especially gas prices so investors should put this inflation report into historical context,” said Jeffrey Roach, chief economist for LPL Financial, in an emailed note Friday. “Looking ahead, July inflation rates will ease a bit from the previous month as food and energy costs should wane in July.”

Still, June inflation measured by the PCE index showed the cost of living over the past year climbed 6.8%, the highest rate since January 1982, in a sign that price pressures in the economy are still intense and unlikely to relent quickly.

See: U.S. inflation surges again and stays at 40-year high, key price gauge shows

“The numbers today were another reminder that we can’t just pretend that inflation isn’t going to be the problem for a data dependent Fed,” said Steve Sosnick, chief strategist at Interactive Brokers.

But equity bulls continued to focus on better-than-expected corporate earnings and hopes that the Fed may become less aggressive raising interest rates as the economy slows. The central bank concluded its two-day policy meeting on Wednesday with another rate hike of three quarters of a percentage point in an effort to curb soaring inflation.

“Investors were geared up for a more aggressive tone” from Fed Chair Jerome Powell and also had “a lot of angst” about this earnings season, said Keith Lerner, co-chief investment officer at Truist Advisory Services, by phone Friday. “Market expectations were so depressed that a little bit of good news can go a long way.”

Read: Was Fed’s Powell dovish or not? 4 key takeaways from Wednesday’s press conference.

With nearly half of companies having reported results for the second quarter, the S&P 500 has so far seen a blended profits growth rate of 7.6%, with 76% beating profit forecasts, according to IBES data from Refinitiv.

Stephen Innes, managing partner at SPI Asset Management, said the positive mood in global equities was partly due to Thursday’s weaker than expected U.S. GDP numbers, which were seen reducing the pace of Fed rate hikes.

“Yes bad news is good! [Fed chair] Powell did say the next hike will be data-dependent; will this be a leading indicator to a moderating Fed path or a selling opportunity into a bear rally?” Innes added.

Stocks rallied in July, with the S&P 500 and Dow each scoring their best month since November 2020 while the Nasdaq booked its biggest monthly gains since April 2020, according to Dow Jones Market Data. The Nasdaq saw its best July ever, the S&P 500 had its strongest July since 1939 and the Dow booked its best July performance since 2010.

But Americans are feeling gloomy. A final reading from the University of Michigan’s July consumer sentiment gauge on Friday came in at 51.5, compared with the consensus 51.1. That’s near an all-time low as consumers worry about the soaring cost of living.

Which companies were in focus?

Intel Corp.
INTC,
-8.56%

shares dropped 8.6% after the company reported that its revenue in the second quarter declined by 22% compared with the same period last year.

Chevron Corp.
CVX,
+8.90%

and Exxon Mobil Corp.
XOM,
+4.63%

booked big gains after reporting strong earnings spurred by the rise in oil prices. Shares of Chevron jumped 8.9% while Exxon climbed 4.6%.

How did other assets fare?

The yield on the 10-year Treasury note BX:TMUBMUSD10Y fell 3.8 basis points to 2.642%. In July, the 10-year yield fell 33.1 basis points, the largest monthly decline since March 2020 based on 3 p.m. Eastern time levels, according to Dow Jones Market Data.

The ICE U.S. Dollar Index DXY was trading 0.5% lower at 105.83.

Oil futures
CL.1,
+1.95%

ended higher, with West Texas Intermediate crude for September delivery
CLU22,
+1.95%

rising 2.3% to settle at $98.62 a barrel. Prices based on the front month ended 4.1% higher for the week, but down nearly 6.8% for the month, according to Dow Jones Market Data.

Gold
GC00,
+0.76%

for December delivery
GCZ22,
+0.76%

gained 0.7% to settle at $1,781.80 an ounce, with the most-active contract for the yellow metal rising nearly 3.2% for the week but losing 1.4% for the month.

Bitcoin
BTCUSD,
-0.58%

was down 0.3% at $23,943.

In European equities, the STOXX Europe 600 Index
SXXP,
+1.28%

finished 1.3% higher Friday, rising 3% for the week and booking a 7.6% gain for July. London’s FTSE 100 Index
UKX,
+1.06%

closed up 1.1% Friday for a weekly gain of 2% and a monthly rise of 3.5%.

In Asia, the Shanghai Composite Index
SHCOMP,
-0.89%

closed 0.9% lower Friday for a weekly decline of 0.5% and a monthly drop of 4.3%. The Hang Seng Index
HSI,
-2.26%

lost 2.3% Friday, falling 2.2% for the week and sliding 4.8% in July. The NIKKEI 225 Index
NIK,
-0.05%

dipped less than 0.1% Friday, edging down 0.4% for the week but scoring a monthly gain of 5.3%.

—Jamie Chisholm contributed to this report.

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