(Bloomberg) — Stocks climbed after solid earnings from megacaps overshadowed concern about uncomfortably high levels of inflation that could make the Federal Reserve keep its firm grip on monetary policy.
The S&P 500 headed toward its best month since November 2020.
The Nasdaq 100 outperformed, with Amazon.com Inc. and Apple Inc. set to add nearly $170 billion in market value after joining some of its peers in assuaging investor concerns by reporting higher revenue.
Bond yields fell alongside the dollar.
Earnings reports from the biggest technology companies are showing that the group is navigating the tough economic environment better than smaller rivals, fueling a rebound in stock prices and encouraging investors about the outlook for the second half.
“Companies with a strong balance sheet, strong cost controls, and that produce strong sales growth will do exceptionally well in this environment,” said Geir Lode, head of global equities at Federated Hermes, adding that the market will again favor growth over value stocks.
The tech results tempered worries about a surge in two key US inflation gauges and a reading of consumer long-term price expectations hovering near an 11-year high.
Fed Bank of Atlanta President Raphael Bostic said the US economy was “a ways” from entering a recession and the central bank had further to go in raising interest rates to get inflation under control.
A soft landing is a plausible outcome for the labor market, Fed Governor Chris Waller noted.
Read: Ex-Fed’s Quarles Says Rate-Hike ‘Athleticism’ Will Cool Prices
Despite the big rebound in stocks this month, several market watchers are still skeptical about a sustained rally due to the many economic challenges and the fact that the market hasn’t gotten cheap enough to call it a bottom.
“This is a rally within a bear market rather than the start of a new bull market,” said David Donabedian, chief investment officer of CIBC Private Wealth US.
“We would expect a lower P/E ratio if we were at the bottom of the market. While the equity market has partially recovered, we expect it will retest the lows we saw in June.”
Donabedian says that the optimism about the Fed potentially wrapping up its rate hike cycle earlier that expected is “more hope than reality”.
He sees more rate hikes and says there’s still a lot of work ahead to bring down inflation while adding that “a slowing job market is on the way.”
In other corporate news, Intel Corp., the biggest maker of computer processors, slashed forecasts for the year.
Roku Inc., the maker of streaming-TV devices, said advertisers are pulling back on spending due to economic concerns. Exxon Mobil Corp. and Chevron Corp. posted their highest-ever profits, reaping the rewards from surging commodity prices.
Procter & Gamble Co. sank as its forecast for sales growth lagged estimates.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.8% as of 11:46 a.m. New York time
- The Nasdaq 100 rose 0.9%
- The Dow Jones Industrial Average rose 0.4%
- The Stoxx Europe 600 rose 1.3%
- The MSCI World index rose 0.8%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro was little changed at $1.0206
- The British pound was little changed at $1.2177
- The Japanese yen rose 0.7% to 133.33 per dollar
Bonds
- The yield on 10-year Treasuries declined four basis points to 2.63%
- Germany’s 10-year yield was little changed at 0.82%
- Britain’s 10-year yield was little changed at 1.86%
Commodities
- West Texas Intermediate crude rose 4.1% to $100.42 a barrel
- Gold futures rose 0.8% to $1,782.50 an ounce
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