Investors are lapping a soothing blend of disinflation, peak interest rates, and trend growth. That mix helped stocks extend their gains this week, with the Nasdaq (.IXIC) closing above its 50-day moving average, a key technical hurdle. The Dow and S&P 500 also added ground, with UnitedHealth Group (UNH) beating profit expectations, helping the Dow industrials climb 0.7% to a record.
Investors remain focused on China after official data indicated factory activity contracted for the fourth month in July, further heightening fears of a broader economic slowdown. Investors are looking to government stimulus in the form of property and services reforms to support stalling growth. But so far, Beijing has only offered piecemeal measures and warm words, and official business surveys suggest the effects are already starting to wane.
On the corporate earnings front, two of Wall Street’s mega caps, Apple and Amazon, are due to update the Street this week in a forecast-beating earnings season that has already seen stocks hit their highest in over a year. Both companies are considered leading candidates to become the world’s first $1 trillion company, with Apple currently positioned ahead of Amazon due to its ongoing iPhone launch cycle. But if Apple can reduce production lead times and get its latest 14 Pro and Pro Max models to customers more quickly, the company could accelerate toward the mark, according to Evercore ISI analysts.
Inflation, another of the market’s watchwords in 2022, has also been cooling faster than expected. The latest report on consumer prices showed that the core reading (excluding food and energy) rose just 4% in May, the lowest since February 2021. That comes after Fed chairman Jerome Powell suggested the central bank’s tightening cycle might be near its end last month.
The S&P 500 futures point to a modest gain in the open on Monday, with investors digesting a raft of economic data. In Europe, the pan-European Stoxx 600 index was flat in early trading, with HSBC climbing 6% after raising its crucial profitability target and Chinese e-commerce giant Alibaba rising 2% after it said it would comply with U.S. regulators.
Shares of Boeing (B.A.) were among the biggest risers in the Dow, jumping 1.8% after CNBC reported the Federal Aviation Administration had approved inspection protocol revisions that should allow the company to resume 787 Dreamliner deliveries. UnitedHealth shares added 3% after the health insurance provider beat profit views elsewhere. The S&P 500 healthcare sector is up 16% this year, a key sector for the market’s gains as the Federal Reserve continues to lift interest rates. Consumer staples and discretionary stocks traded higher, bucking the broader selloff, with both S&P 500 sectors adding about 1%. But the gains slipped back as oil prices slid to a fresh four-month low on concerns over global supply and demand.
