US Stock Market Soars on Upbeat Earnings and Optimism Over Inflation Relief
The US stock market rallied as encouraging profit reports and signs of easing inflation rekindled investor optimism, with the S&P 500 reaching its highest close in 15 months and tech stocks leading the charge.
The US stock market gains momentum on positive earnings and signs of easing inflation, S&P 500 reaches a 15-month high while Nasdaq leads with a 1.9% surge. (PHOTO: Mainichi)
Market Optimism Surges as S&P 500 Hits 15-Month High; Nasdaq Leads Big Tech Surge
The US stock market’s rally regained strength, driven by optimistic profit reports and signs of easing inflationary pressures on the economy. The S&P 500 surged 1% to reach its highest closing level in over 15 months, while the Dow Jones Industrial Average climbed 0.5% after breaking a 13-day winning streak the previous day. The tech-heavy Nasdaq composite led the charge, surging 1.9% as prominent Big Tech stocks outperformed.
Investors have been buoyed by hopes that the Federal Reserve will respond to moderating inflation rates by halting its interest rate hikes. This could potentially sustain economic growth and stave off an anticipated recession. The S&P 500 completed its third consecutive week of gains and the ninth out of the last eleven weeks.
A recent report provided further support for these hopeful prospects, revealing that the Fed’s preferred inflation measure slowed more than expected last month. Moreover, data indicated that worker compensation during the spring rose less than anticipated, suggesting less upward pressure on inflation. Traders are optimistic that this slowdown in inflation could prompt the Federal Reserve to conclude its rate hike cycle, which has already raised the federal funds rate to 5.25%-5.50% from near-zero levels just a year ago.
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Mixed Sentiments Prevail Amid Market Surge; Skeptics Warn of Potential Risks and Lingering Inflation Concerns
However, skeptics argue that the stock market’s rally might be excessive and premature, as the full impact of the Fed’s rate hikes has yet to materialize. Concerns remain that certain sectors of the economy may still buckle under pressure, exemplified by the three US bank failures earlier in the year that rattled confidence. Additionally, inflation continues to exceed the Fed’s target level, potentially necessitating sustained measures to curb it.
Despite these concerns, the prospect of a pause in rate hikes boosted technology stocks and other beneficiaries of lower rates, which led to the market’s upswing on Friday. Tech giants like Microsoft, Apple, and Amazon were the driving forces behind the S&P 500’s upward trajectory, each registering gains of at least 1.4%. Additionally, companies reported stronger profits for the spring than analysts had anticipated, further supporting the market sentiment.
However, not all companies thrived during this time. Exxon Mobil faced a 1.2% decline and weighed heavily on the S&P 500 after reporting weaker-than-expected profits for the spring, although its revenue surpassed forecasts. The bond market saw yields on the 10-year Treasury fall to 3.95% from 4.00%, impacting mortgage and other significant loan rates. The two-year Treasury, more sensitive to expectations regarding Federal Reserve actions, declined to 4.87% from 4.92%.
A survey showed that US consumer sentiment in July was not as robust as initially thought, although it still marked the strongest reading since October 2021. Additionally, inflation expectations inched up in July but remained considerably lower than the previous year, a development the Fed aims to maintain to prevent exacerbating inflationary pressures.
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