Wall Street extends July rebound, led by technology and energy

  • US stocks rise in early trading, led by Apple and Exxon
  • US crude up more than 5%
  • The US dollar index plunges

July 29 (Reuters) – U.S. stocks extended their July rebound on Friday as the dollar and some Treasury yields tumbled as traders acted on positive business news despite rising labor and labor costs. other inflation indicators.

Positive forecasts from Apple Inc (AAPL.O) and Amazon.com Inc (AMZN.O) showed the resilience of mega-cap companies to survive an economic downturn, with hopes for monetary policy less aggressive stimulating feeling.

The two largest U.S. oil companies, Exxon Mobil (XOM.N) and Chevron Corp (CVX.N), also posted record revenues on Friday, buoyed by soaring crude oil and natural gas prices.

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The Nasdaq Composite (.IXIC) added 115.75 points, or 0.95%, to 12,278.34 and the S&P 500 (.SPX) gained 29.06 points, or 0.71%, to 4,101, 49. The Dow Jones Industrial Average (.DJI) rose 78.8 points, or 0.24%, to 32,608.43.

US labor costs rose sharply in the second quarter as the tight job market continued to drive wage growth, which could keep inflation elevated for some time.

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 tend to react positively to any perceived easing by policymakers. .

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 war in 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) last rose around 0.8%, on course for its best month since November 2020, supported by large gains in European markets, with the STOXX Europe 600 (. STOXX) up around 1.26%.

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.

“In the short term, we believe the risk-reward ratio of broad equity indices will be muted. Stocks are forecasting a “soft landing”, but the risk of a deeper “collapse” in economic activity is high.

Some of that concern had played out overnight in Asian stock markets, after Beijing failed to refer to its full-year GDP growth target following a meeting of high level of the Communist Party. Read more

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 0.5%.

Amid a contraction in US gross domestic product, the benchmark 10-year bond yield fell to 2.6469% from 2.681% on Friday night. But short-term Treasury yields edged higher on Friday after data on labor costs and wage growth suggested inflation remained elevated. The yield on the 2-year notes fell from 2.877% to 2.8905%.

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 0.2% against a basket of its major peers – still on course for a second month of gains. Read more

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:]

“Big hiring and falling GDP mean an unsustainable collapse in productivity. The labor market is expected to slow rapidly, soon,” Bank of America economists Ethan S. 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 3%, while U.S. West Texas Intermediate crude extended early gains, up more than 5%, as concerns over supply shortages ahead of the next OPEC ministers’ meeting offset doubts surrounding the economic outlook. Read more

Spot gold gained around 0.5% to $1,765 an ounce, a more than three-week high, supported by a weaker dollar and bets that the Federal Reserve could slow the pace of gains rates as economic risks worsen.

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

Our standards: The Thomson Reuters Trust Principles.

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