Stocks Close Out the Month Higher After Mixed Earnings & Data…..

U.S. stocks ended the day higher in the final trading session of July, marking the best monthly gain for the S&P 500 since August of 2020. The advance came amid upbeat earnings results from some key heavyweight companies, headlined by stronger-than-expected results from Dow member Apple and Amazon. However, Intel and Procter & Gamble both missed expectations and issued disappointing guidance, limiting gains for the Dow. In other earnings news, Exxon Mobil and Dow component Chevron topped estimates amid the spike in energy prices and increased demand. The economic calendar was mixed, as Q2 employment costs came in higher than expected, inflation data continued to accelerate, and Chicago manufacturing activity decelerated more than expected, though personal income and spending rose more than projected and consumer sentiment bounced off record lows more than anticipated. Treasuries closed mixed following the data and this week’s Fed rate hike decision, and the U.S. dollar dipped. Crude oil prices and gold gained ground. Asia finished mixed and Europe traded to the upside to close out the week and month after reports that the Eurozone’s GDP unexpectedly accelerated.

The Dow Jones Industrial Average increased 316 points (1.0%) to 32,845, the S&P 500 Index went up 58 points (1.4%) to 4,130, and the Nasdaq Composite advanced 228 points (1.9%) to 12,391. In moderate volume, 4.6 billion shares of NYSE-listed stocks were traded, and 4.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $2.20 to $98.62 per barrel. Elsewhere, the gold spot price advanced $9.20 to $1,778.40 per ounce, and the Dollar Index lost 0.4% to 105.95. Markets ended higher for the week, as the DJIA gained 3.0%, the S&P 500 increased 4.3%, and the Nasdaq Composite went up 4.7%.

Personal income, spending, and employment costs beat forecasts, consumer sentiment improved

Personal income rose 0.6% month-over-month (m/m) in June, above the Bloomberg consensus forecast calling for a 0.5% gain, and matching May’s upwardly-revised increase. Personal spending increased 1.1%, north of expectations calling for a 1.0% increase, and compared to the prior month’s favorably-adjusted 0.3% gain. The June savings rate as a percentage of disposable income was 5.1%, down from May’s upwardly-revised 5.5% rate.

The PCE Deflator was up 1.0% m/m, above expectations of a 0.9% rise, and following May’s unadjusted 0.6% rise. Compared to last year, the deflator was 6.8% higher, in line with estimates, and compared to the prior month’s unadjusted 6.3% gain. Excluding food and energy, the PCE Core Price Index rose 0.6% m/m, above expectations of a 0.5% increase and versus May’s unadjusted 0.3% gain. The index was 4.8% higher y/y, compared to estimates to match May’s unrevised 4.7% rise.

The Q2 Employment Cost Index increased 1.3% quarter-over-quarter (q/q), above estimates calling for a 1.2% rise, and down slightly from Q1’s unadjusted 1.4% rise.

The July final University of Michigan Consumer Sentiment Index was revised higher unexpectedly, from the preliminary 51.1 figure, where estimates called for it to remain. The upward revision came as the current conditions portion of the survey was adjusted to the upside, while the expectations component was unchanged from the preliminary estimate. The overall index came off June’s record low of 50.0 level as current conditions improved solidly but expectations dipped m/m. The 1-year inflation forecast was unrevised at 5.2%, in line with forecasts, but was down from June’s 5.3% rate. The 5-10 year inflation forecast was revised slightly higher to 2.9%, from the preliminary read of 2.8%, where it was expected to remain, and below June’s 3.1% rate.

The Chicago PMI slowed more than expected but remained in expansion territory (a reading above 50). The index decreased to 52.1—the lowest since August 2020—in July from June’s 56.0 reading, and versus estimates calling for a decline to 55.0. The softer-than-expected report came as new orders moved further into contraction territory and production growth reversed course and fell into contraction territory, while employment moved further into expansion territory. Prices paid rose at a faster pace, exacerbating pricing pressures, and supplier deliveries rose at a slower pace to suggest supply chain challenges may begin to ease.

Treasuries closed mixed, and the inversion of the 2-year and 10-year notes remains intact with the markets grappling with this week’s Fed monetary policy decision, where it raised its benchmark interest rate by 75 basis points (bps) for the second-straight meeting and the markets appeared to take comments from Chairman Jerome Powell as less hawkish. The yield on the 2-year Treasury note closed 2 bps higher at 2.89%, while the yield on the 10-year note dipped 2 bp to 2.65%, and the 30-year bond rate finished unchanged at 3.03%.

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