Big Tech and Oil Extend Wall Street’s Midsummer Rebound

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  • US stock market indices jump 1 to 2%; Amazon, lead Chevron
  • S&P 500 and Nasdaq post biggest monthly gains since 2020
  • Oil futures up almost 2%; The US dollar index plunges
  • Yields on longer-term Treasuries fall

July 29 (Reuters) – U.S. stocks extended their midsummer rebound on Friday as the dollar and some longer-term Treasury yields plunged as Wall Street applauded positive corporate news despite rising costs labor and other indicators of continued inflation.

Positive forecasts from Apple Inc (AAPL.O) and Amazon.com Inc (AMZN.O) showed giant corporations’ resilience to survive an economic downturn, while energy giants Exxon Mobil (XOM .N) and Chevron Corp (CVX.N) posted record earnings on Friday, buoyed by soaring crude oil and natural gas prices.

The Dow Jones Industrial Average (.DJI) rose around 1%, the S&P 500 (.SPX) gained around 1.4% and the Nasdaq Composite (.IXIC) gained almost 2%. The S&P 500 and Nasdaq have now posted their biggest monthly percentage gains since 2020.

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Still, US labor costs rose sharply in the second quarter as a tight job market continued to boost wage growth, which could keep inflation high.

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

As inflation rises in major markets and central bankers scramble to raise rates without killing growth, riskier markets like stocks have tended to react positively to any perceived easing by policymakers. policies.

After Thursday’s data showed the US economy contracted in the second quarter, stocks rose as traders bet rates would rise more slowly. Eurozone figures on Friday, meanwhile, beat expectations, but recession fears are growing as energy inflation continues to bite in the face of Russia’s invasion of Ukraine.

“We believe earnings across all equity classes will likely peak in 2022 and decline as the economy weakens, revenue growth stalls and input costs remain high,” wrote Thursday. Wells Fargo Investment Institute strategists in a note.

The MSCI World Index (.MIWD00000PUS) gained around 1.2%, on its way to its best month since November 2020, supported by large gains in European markets, with the STOXX Europe 600 (.STOXX) up about 1.3%.

Despite the positive end to the month for equities, Mark Haefele, chief investment officer at UBS Global Wealth Management, said investors should proceed with caution, noting: “In the short term, we believe the risk-reward ratio of equity indices wide will be attenuated. . Stocks predict a ‘soft landing’, but the risk of a deeper ‘collapse’ in economic activity is high.”

Long-term Treasury yields fell on Friday after data on labor costs and wage growth suggested inflation remains sticky and raised fears of a recession as the Federal Reserve seeks to cool the economy without triggering a sharp downturn.

The benchmark 10-year bond yield fell to 2.66% from 2.681% late Thursday, while the 2-year bond yield rose slightly to 2.89% from 2.87%.

The U.S. dollar rebounded from a three-week low in choppy trading on Friday as the slew of U.S. economic data suggested more inflation and higher interest rates. The dollar was last down around 0.3% against a basket of its major peers – still on track for a second month of gains.

Futures markets now expect US interest rates to peak by December this year, rather than June 2023, and the Federal Reserve will cut interest rates by nearly 50 basis points next year. to sustain the slowdown in growth. [0#FF:]

“Strong hiring and falling GDP mean an unsustainable collapse in productivity. The labor market is expected to slow rapidly, soon,” Bank of America economists Ethan Harris and Aditya Bhave wrote on Friday. “The Fed is likely to react slowly to a recession. We believe market optimism about a dovish pivot from the Fed is premature.”

Across commodities, Brent crude futures rose around 2.6%, while U.S. West Texas Intermediate crude extended early gains, up 1.8%, on concerns over supply shortages ahead of the next OPEC ministers’ meeting offsetting doubts surrounding the economic outlook.

Spot gold gained around 0.4% to $1,762.5 an ounce, a more than three-week high, supported by a weaker dollar and bets that the Federal Reserve could ease the pace. rate hikes as economic risks worsen.

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Reporting by Lawrence Delevingne in Boston and Simon Jessop in London; edited by Mark Heinrich, Will Dunham and Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.

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