U.S. equities wavered on Monday, coming off a positive week for the major averages as traders braced for the busiest week of corporate earnings, as well as insights into further interest rate hikes from the Federal Reserve.
The Dow Jones Industrial Average rose 118 points, or 0.3%. The S&P 500 also gained 0.3%, while the Nasdaq Composite fell slightly, after opening higher. All three of the indexes are on track for their best month of the year.
Monday kicks off the final week of trading for the month of July — and perhaps the most important week of the summer — with the Fed meeting, GDP data and earnings from almost a third of the S&P 500 on deck. Investors are still worried about the potential of an economic recession and are hoping this week’s news storm will help direct their expectations.
“Investors likely believe Thursday’s GDP report will show a second quarter of decline, which is the unofficial signal of recession,” Sam Stovall, chief investment strategist at CFRA Research, told CNBC on Monday. “While the Fed will probably announce a 75-basis-point rate hike on Wednesday, they will offer a more moderate tone towards further rate increases. We see this counter-trend rally continuing in the near term.”
Energy stocks were on the move higher as oil prices rose. Diamondback Energy jumped more than 6%, while while Marathon Oil, APA Corp and Valero Energy each gained more than 5%. Chevron was the top gainer in the Dow, up 2.7%.
On the flip side, shares of Newmont Corporation slid 12% after the mining company reported a quarterly loss that was down nearly 41% from a year ago, hurt by a drop in gold prices.
Philips tumbled 6% after the Dutch medical equipment maker reported weaker-than-expected quarterly earnings, citing lockdowns in China and supply chain issues.
On Friday, the major averages fell on the back of weaker-than-expected earnings from Snap that sent tech shares tumbling. Still, all three benchmarks closed the week higher, with the Dow up 2%. The S&P 500 advanced about 2.6%, and the Nasdaq capped the week up 3.3%.
It was the second positive week in the last three for the major averages. The S&P 500 has been attempting a comeback after falling into a bear market earlier this year. The index is currently up more than 8% from its 2022 and trading near the highest levels since early June.
Investors shifted into risk assets last week after absorbing some strong corporate results that had Wall Street deliberating whether the bear market has found a bottom.
“Equities have managed to stage a rally MTD, and climb a wall of worry. The bounce has been led by cyclical and Growth stocks, helped by longer end yields stabilizing, which in turn eases the pressure on P/E’s,” Barclays’ Emmanuel Cau wrote in a Friday note.
“This confirms to us that the market’s focus has switched from inflation worries to growth worries, with a sense that bad news is becoming good news again,” Cau added.