S&P 500 (SPX) advanced approximately 9.1% for July and posted its biggest monthly percentage gain since November 2020.
Second-quarter U.S. corporate results have mostly been stronger than expected, and it is important to say that of the 279 S&P 500 companies that have reported earnings so far, 77.8% have exceeded expectations.
According to IBES data from Refinitiv, corporate earnings are expected to have increased 7.1% in the quarter versus an estimated 5.6% at the start of July.
Speculation that the U.S. central bank may not need to be as aggressive with interest rate hikes as some had feared also positively influenced on S&P 500, while the upbeat forecasts from Apple and Amazon supported the rally on Friday.
Apple reported that it sees continued strength in demand for iPhone while Amazon announced that it expects higher revenue in the third quarter. Rick Meckler, a partner at Cherry Lane Investments, said:
In today’s market, the Amazon and Apple numbers are giving the market support on the idea that two large companies that are a large part of the S&P seem so far to be able to navigate through these tougher times.
The negative news is that the American economy unexpectedly contracted in the second quarter, but Federal Reserve officials decreased the possibility of a recession for now.
The Federal Reserve remains serious about reining in inflation, and the central bank released its decision on interest rates last week with a hike of 75 basis points. The June Consumer Price Index jumped by 9.1% YoY, its fastest rate in more than 40 years, accelerating from 8.6% in May.
The U.S. Producer Price Index jumped by 11.3% YoY in June, also higher than anticipated, and because of this, the Federal Reserve will probably continue to be aggressive in raising interest rates to combat inflation.
RSM Chief U.S. economist Joseph Brusuelas said on Friday that he expects the Fed to continue to raise rates until it reaches 3.25%-3.5% before it pauses to assess its impact on growth, inflation, and employment.
Bankrate Chief Financial Analyst Greg McBride said that there would be more interest rate increases in the months ahead, while Morgan Stanley economists led by Ellen Zentner expect the Fed funds rate to peak at 3.625% in December 2022.
The biggest monthly percentage gain since November 2020
S&P 500 posted its biggest monthly percentage gain since November 2020 and closed the month at 4,130 points. Second-quarter U.S. corporate results have mostly been stronger than expected, and positive earnings results of the remaining companies could help the S&P 500 to advance even more.
Data source: tradingview.com
Despite this, further turmoils should not be discounted, and if the price falls again below the 4,000 support level, the next target could be around 3,800 or even 3,500.
S&P 500 advanced approximately 9.1% for July and posted its biggest monthly percentage gain since November 2020. Second-quarter U.S. corporate results have mostly been stronger than expected, and speculation that the U.S. central bank may not need to be as aggressive with interest rate hikes also positively influenced on S&P 500.