The S&P 500 index rose 4.3% last week and recorded a 9.1% July climb, its strongest monthly gain in nearly two years, as better-than-expected quarterly earnings fueled a relief rally.
The S&P 500 ended Friday’s session at 4,130.29, up from last Friday’s closing level of 3,961.63.
Last week’s advance helped lock in the S&P 500’s strongest month of gains since November 2020. Still, July’s 9.1% jump failed to erase all of June’s tumble; the index is still below May’s closing level of 4,132.15. For 2022, the S&P 500 is also still solidly in the red with a 13% drop for the year to date.
The weekly climb came even as the Federal Reserve’s policy-setting committee raised its key rate by another 0.75 points and data indicated the US economy may have entered a recession.
The rate increase, made Wednesday by the Fed’s Federal Open Market Committee, brought the central bank’s benchmark lending rate to a range of 2.25% to 2.5%, in line with Wall Street projections but marking the highest level since December 2018. The move, which marked the second month in a row that the rate was increased by 0.75 point, came two weeks after inflation data showed US consumer prices soared 9.1% in June.
Gross domestic product data released Thursday showed the US economy shrank in the second quarter as consumer spending slowed, triggering questions over whether a recession has begun. The Q2 GDP contraction amounted to a 0.9% annualized drop and follows a 1.6% contraction in the first quarter. Recessions are often defined by two successive quarters of GDP contractions, but the National Bureau of Economic Research makes the official determination considering many factors.
At a Wednesday press conference ahead of the GDP data, Fed Chairman Jerome Powell said there are “too many areas of the economy that are performing too well” for him to think the US is in a recession. Still, he acknowledged that demand was “moderating.”
The week’s advance was broad, with every sector of the S&P 500 gaining. Energy had the largest percentage increase, up 10%, followed by a 6.5% climb in utilities and a 5.7% rise in industrials. Other sectors up by more than 5% each included consumer discretionary and technology.
On the economic front, the market will get July readings on the manufacturing and services sectors from Standard & Poor’s as well as the Institute for Supply Management in the earlier part of next week, but July jobs numbers due Friday are likely to receive the most attention.
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