3-day Rally Lifts S&P 500, Nasdaq to Best Monthly Gains in Two Years

Barry Adams
29 Jul, 2022
New York City

Wall Street indexes extended gains for the third day in a row after tech companies reported better-than-expected earnings and investors looked beyond the latest rate hike and recession worries. 

Investors overlooked the latest release of preferred inflation measure data and surmised that the weaker GDP data may encourage the Fed in slowing the future rate hikes. 

For the week, the Nasdaq Composite and the S&P 500 indexes advanced 4.0%. 

The S&P 500 index increased 1.4% to 4,130.29 and the Nasdaq Composite index rose 1.9% to 12,390.35. 

In July, the S&P 500 index gained 8.8%, its best monthly return in the year so far and the Nasdaq Composite index has jumped 12%, its best monthly performance in 2022.   

Futures of crude oil increased $1.80 to $98.21 a barrel and natural gas gained 17 cents to $8.31 a unit. 

 

PCE Jumps to 40-year High 

The yield on 10-year Treasury notes rose to 2.703% and 2-year notes rose to 2.93% after the Fed's preferred measure of inflation, which always understates the inflation experienced by most families, rose 6.8% in June. 

The personal consumption expenditure price index rose 6.8% in June, the fastest pace since 6.9% in 1982, according to the report released by the Bureau of Economic Analysis Friday.   

The PCE index increased 1% from May, the largest monthly increase since February 1981.

Core PCE, which excluded food and energy prices, rose 4.8% in June after rising at 5.3% in February. 

On a monthly basis, the core PCE index increased 0.6%, its largest monthly increase since April 2021. 

 

Movers: Amazon, Apple, Chevron, ExxonMobil, Intel 

Amazon.com, Inc surged 10.4% to $134.99 after the online retailer reported a loss but guided higher-than-expected third quarter revenues. 

Revenues in the second quarter rose 7% to $121.23 billion. 

In the second quarter, Amazon reported a net loss of $2.0 billion or 20 cents a diluted share compared to $7.8 billion or 76 cents a diluted share a year ago.  

Second quarter 2022 net loss includes a pre-tax valuation loss of $3.9 billion from its investment in Rivian Automotive, Inc.

The online retailer guided third quarter revenues between $125 billion and $130 billion, an increase between 13% and 17% from a year ago. 

Apple Inc jumped 3.1% to $162.04 in trading after the regular trading hours after the company reported June quarter revenues increased 2% to $83 billion. 

Net income in the fiscal 2022 third quarter declined to $19.4 billion or $1.20 a diluted share from $21.7 billion or $1.331 a diluted share a year ago. 

Chevron Corp increased 8.5% to $163.14 after the oil explorer, refiner, and distributor reported June quarter revenues soared more than 80% to $68.7 billion from $37.6 billion a year ago. 

Net income in the quarter soared four-fold to $11.7 billion from $3.1 billion a year ago. 

Diluted earnings per share soared to $5.95 from $1.60 a year ago. 

Exxon Mobil Corp increased 4.5% to $96.65 after the energy company said June quarter revenues soared to $115.7 billion from $67.7 billion a year ago. 

Net income in the quarter jumped to $17.9 billion from $4.5 billion a year ago. 

Diluted earnings per share rose to $4.21 from $1.10 a year ago. 

Exxon Mobil also announced a quarterly dividend of $3.72 billion or 88 cents compared to 87 cents a share or $3.7 billion a year ago. 

Free cash flow in the quarter totaled $16.9 billion and shareholder distributions were $7.6 billion for the quarter, including $3.7 billion of dividends.

Intel Corp declined 10.7% to $35.41 after the semiconductor chipmaker reported June quarter revenues declined 22% to $15.3 billion, its largest decline in more than a decade. 

Intel's gross margin plunged to 36.5% from 57.1% a year ago and swung to net loss of $0.5 billion from net income of $5.1 billion a year ago. 

Quarterly loss was 11 cents a diluted share compared to income of $1.24 a year ago.  

Procter & Gamble Co declined 4.8% to $140.90 after the consumer products maker reported net sales in the fiscal year 2022 fourth quarter ending in June increased 3% to $19.5 billion. 

Net income rose 5% to $3.06 billion from $2.90 billion and diluted earnings per share rose to $1.21 from $1.13 a year ago.  

 

Eurozone Growth Accelerates 

Eurozone GDP expanded unexpectedly in the second quarter ending in June, according to the flash estimate released by the eurostat. 

GDP rose 0.7% on a quarterly basis after rising at 0.5% in the first quarter. 

On an annual basis, the GDP growth slowed to 4.0% in the second quarter after rising at 5.4% in the first quarter. 

The revised estimate of the data is set to be released on August 17. 

Despite the rising energy prices and persistent supply chain disruptions, the French economy expanded on rising exports and investments and Spain and Ital's economy grew on rising household spending. 

France's GDP rose 0.5% from the first quarter when the economy shrank 0.2%, Spain's GDP rose 1.1% from the previous quarter when the economy grew 0.2%. 

Italy's GDP rose 1.0% in the second quarter after rising at 0.1% rate in the previous quarter. 

Germany's GDP was flat after rising at 0.8% in the previous quarter on a quarterly basis and the growth slowed to 1.5% from 3.6% on an annual basis. 

The statistical agency also reported July inflation accelerated to 8.9% from June's 8.6% in its flash estimate Friday. 

Core inflation excluding food, energy, and alcohol and tobacco rose to 4.0% from 3.7% in the previous month.

Estonia, Latvia, and Lithuania reported more than 20% inflation rate topping the inflation rate among all other currency block members.