Dow, Standard & Poor’s, and Nasdaq had their best month since 2020, but pitfalls remain

Investors wrapped up the month with a basket of red flags on the economy, yet all three major market averages posted their best month since 2020, considering Inflation and stagnation Step by step confirmation.

to me Standard & Poor’s 500, the broadest measure of stocks, investors will need to go back to 1939 to see a similar performance in July. Overall, the index rose 9.1% during the month, the largest percentage and point gain since November 2020, according to market data group Dow Jones.

And it may continue to climb, according to Fundstrat Global Advisors director Mark Newton, who expects a 4000 to 4200 target by mid-SeptemberBut he warns that it may come without some setbacks.

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“The first part of August has historically been negative, and a lot of cycles are showing that the markets should consolidate a bit over the next couple of weeks. For investors who are just waking up to this rally, I don’t think this is the ideal spot to put in new money,” he advised.

The United States is in recession

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New York Stock Exchange, Corner of Wall Street and Broad. ()

to me Nasdaq Heavy Technology ComplexThe month was the best-performing on record, according to tracking market data set from Dow Jones, rising 12.3% for the biggest increase since April 2020 — buoyed by better-than-expected results from Microsoft, Amazon and Apple, as well as lower Treasury yields with stable for 10 years at 2.642% on Friday.

ribbon protection else they change they change %
MSFT MICROSOFT CORP. 280.74 +4.33 + 1.57%
AMZN AMAZON.COM INC. 134.95 +12.67 + 10.36%
AAPL Apple company 162.51 +5.16 + 3.28%

These high profile companies helped mask the bleak economic news. Investors were touched by the confirmation of a US recession after the second-quarter GDP contracted 0.9%, the second negative reading in a row. This came after the Federal Reserve raised its interest rate by 75 basis points to tame severe inflation, which remains stubbornly high. On Friday, the Fed’s preferred measure of inflation rose 6.8% on an annual basis, its highest level in 40 years. If you exclude volatile food and energy items, the rise was 4.8%, the Commerce Department reported.

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“I can’t understand the stock market is going up because obviously there’s a slowdown in growth and maybe a recession, and the Fed’s statement on Wednesday was as hawkish as anyone could expect. I’ve never heard that a hawkish Fed and a sluggish economy are good for stocks, Larry Lindsey, former director of the National Economic Council, told FOX Business’ Larry Kudlow.

As for the Dow Jones Industrial Average, on Friday it came close to breaking out of the bear market it returned to in March. For July, the Dow added 6.7%, the largest point and percentage gain since November 2020. To officially exit the bear market, the average needs to close at 32,877.66 or higher, according to tracking market data group Dow Jones.

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While its real earnings in the second quarter were generally strong with 73% of companies reporting positive earnings numbers and 66% positive revenue, targets for the third quarter are down, according to FactSet chief earnings analyst John Batters.

“During July, analysts cut third-quarter EPS estimates by a larger-than-average margin,” he wrote in his latest research report. He added, “The market will definitely be watching the EPS estimate reviews over the next few weeks to see if analysts continue to lower the EPS estimate” for the whole of 2022 and 2023.

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