S&P 500, Nasdaq Jumped 3% and Crude Oil Advanced 15% In July

Barry Adams
31 Jul, 2023
New York City

Market averages were in a holding pattern on Wall Street as investors looked ahead to a busy week of earnings and debated Fed's next move and health of the U.S. economy. 

With overall inflation cooling for about nine months in a row, tracking lower energy prices, investors have stepped up to add more stocks in the hope that the resilient economy will avoid a recession. 

The stronger-than-expected second quarter GDP growth of 2.4% also emboldened investors and most companies have reported earnings ahead of market expectations. 

In addition, regional banks have been able to retain deposits despite rising interest rates and so-far avoided the talks of wider bailout in the industry. 

The S&P 500 index gained 2.9% and the index traded higher for the fifth month in a row and the Nasdaq Composite index advanced 3.8% in July, and the index increased for the fifth month in a row also. 

The Dow Jones Industrial Average, the index tracking mega-cap stocks, gained 3.2% in July after a 13-rally boosted its performance in the year so-far. 

Activities in the crude oil patch dominated trading in July after WTI crude oil price advanced 15% and Brent crude oil jumped 17% in July. 

Crude oil prices matched the monthly gains in January 2022 and traded near their highest level in 14 weeks.  

In Asia, China's official manufacturing activity survey showed declining activities for the fourth month in a row, the National Bureau of Statistics reported Monday. 

The PMI Index for manufacturing industry edged slightly higher to 49.3 in July from 49.0 in June on weak domestic demand recovery and falling exports orders. 

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.05% to 4,579.51 and the Nasdaq Composite rose 0.4% to 14,322.01. 

The yield on 2-year Treasury notes decreased to 4.88%, 10-year Treasury notes inched lower to 3.95% and 30-year Treasury bonds edged down to 4.02%. 

Crude oil increased $1.42 to $82.0 a barrel and natural gas prices increased 1 cent to $2.64 a thermal unit. 

 

U.S. Stock Movers 

Apple, Amazon, CVS Healthcare and Starbucks are among the 1,300 companies scheduled to report earnings this week. 

Arista Networks, Avis Budget Group, ON Semiconductor, Lowes Corp, CNA Group and ZoomInfo Technologies are expected to release earnings on Monday. 

Oil companies traded higher following the recent rise in price of oil and gas and oil service stocks registered the largest monthly gain since October 2022. 

Oil service sector led the gainers in the oil patch with a rise of 18% in July after Helix Energy, Nabors Industries Ltd and Helmerich & Payne advancing more than 25% in the month.  

Exxon Mobil, Chevron, Valero and Occidental Petroleum and Marathon Oil extended the recent sector rally as the price of Brent crude approaches closer to $90 a barrel. 

 

Euro Area Q2 GDP Accelerated, Inflation Eased in July  

Market averages across Europe traded higher and investors reviewed the latest updates on GDP and inflation. 

Benchmark indexes in Frankfurt, Paris and London advanced after the Euro Area core inflation eased and GDP improved and net mortgage approvals rose the U.K. 

 

Euro Area Core Inflation Above Overall Inflation In July 

The Euro Area inflation slowed for the third month in a row to 5.3% in July from 5.5% in June, the statistical agency Eurostat reported Monday. 

The ongoing decline in energy prices drove the overall inflation lower, but service inflation rose and core inflation was above overall inflation for the first time since 2021. 

Energy prices declined at a faster pace of 6.1% in July compared to 5.6% decline in June, service inflation accelerated to 5.6% from 5.4% respectively. 

Core inflation which excludes food, energy, alcohol and tobacco, was unchanged at 5.5% in the month. 

Despite the cooling of inflation, prices are still rising at a faster pace than the level of 2% preferred by the European Central Bank, suggesting an aggressive rate hike campaign to continue.  

 

Euro Area Economic Growth Accelerated In Second Quarter  

The Euro Area economy expanded by 0.3% in the second quarter from the previous quarter, after waning inflation supported a slight rise in consumer spending, Eurostat reported today. 

From a year ago, the eurozone economy rose 0.6%, the weakest pace of expansion since the recession over two quarters ending in the first quarter of 2021.  

The economic growth picked up in the quarter after flat growth in the first quarter and Germany's economy stagnated and growth in France accelerated but slowed in Spain. 

Italy's economy contracted  by 0.3% in the second quarter following a rise of 0.6% in the previous period, the statistical agency ISTAT said Monday.

On an annual basis, the economy expanded at 0.6%, extending the advance to the 10th quarter in a row but at the slowest pace. 

Prior to the announcement, the Bank of Italy forecasted annual economic growth to rise 1.3%, higher than 1.2% growth projected by the Prime Minister Giorgia Meloni's government.  

 

UK Mortgage Approvals Increased in June 

Home mortgage approvals rose in June in the UK, as buyers rushed to lock in rates ahead of the rise in interest rates over the next several months. 

Net home mortgage approvals increased to 54,700 in June, higher than the revised 51,100 in May, the Bank of England reported Monday.    

However, the approvals for mortgage refinancing with a different lender increased to 39,100 from 34,100 in the respective periods.  

The effective mortgage rate on a new contract increased 7 basis points to 4.63% in June and the rate on the outstanding mortgage stock rose 10 basis points to 2.92%. 

 

Europe Indexes & Yields

The DAX index decreased 0.1% to 16,446.83, the CAC-40 index jumped 0.3% to 7,497.78 and the FTSE 100 index increased 0.06% to 7,699.41.  

The yield on 10-year German bonds increased to 2.48%, French bonds traded higher to 3.05%, the UK gilts edged up to 4.34% and Italian bonds increased to 4.12%.

The euro edged lower to $1.10, the British pound to $1.281 and the U.S. dollar fetched 87.02 Swiss cents

Brent crude increased $1.25 to $85.67 a barrel and the Dutch TTF natural gas increased €2.53 to €28.37 per MWh.

 

Europe Stock Movers

Heineken NV declined 7.1% to €89.98 after the brewing company lowered its 2023 earnings outlook. 

Diageo and Anheuser Busch InBev fell more than 1% after Heineken lowered its earnings guidance.  

Novo Nordisk AS advanced 0.7% to $157.82 after the company launched its weight loss drug Wegovy in Germany. 

Senior Plc declined 2.1% to 166.80 pence despite the automobile and aircraft parts supplier reporting higher profit in the first-half profit. 

Marshalls Plc fell 5.2% to 261.72 pence after the building and roofing products company lowered its annual outlook. 

BT Group declined 1.9% to 121.70 pence after the company appointed Allison Kirkby as its new chief executive.