U.S. Stocks Rise, Giving S&P 500 Best Month Since 2020 – World News 24/7 (2024)

Investors have taken comfort in recent days from the idea that slowing economic growth might encourage the Fed to raise rates at a slower clip. They also have been encouraged by positive signals during earnings season, as expectations for quarterly profit growth rose over the past month.

But money managers and strategists are also debating whether stocks can hold on to the recent gains in the face of continued monetary tightening and worrisome signals about the economy. Many are skeptical.

“It seems like the market has prematurely declared victory over inflation,” said

Sameer Samana,

senior global market strategist at Wells Fargo Investment Institute. “It’s completely out of step with what the Fed and Chair Powell laid out this week.”

On Friday the S&P 500 rose 57.86 points, or 1.4%, to 4130.29. The Dow industrials added 315.50 points, or 1%, to 32845.13. The Nasdaq Composite advanced 228.09 points, or 1.9%, to 12390.69. All three gauges ended the week with gains.

Still, the major indexes are deep in negative territory for 2022, after the S&P 500 ended June with its worst first half since 1970. The benchmark is now down 13% for the year.

Conflicting economic signals are forcing investors to chart their paths forward without a clear view into how business conditions will develop in the months ahead. Data Thursday showed the U.S. economy shrank for a second quarter in a row, meeting one popular definition of a recession. At the same time, employers have continued to add jobs and the unemployment rate has remained low.

“It’s this odd dynamic of having a really stronglabor environment with a weaker economic environment,” saidMichael Vogelzang, chief investment officer at Raleigh, N.C.—based Captrust. “Ijust don’t think anybody can really truly understand where this is going to come out without more data.”

Data Friday showed robust growth in consumption and wages, potentially keeping pressure on the Federal Reserve to raise interest rates to bring inflation under control. Worker pay and benefits rose 1.3% in the second quarter—a near record pace—and consumer spending rose 1.1% in June, accelerating from May.

Friday’s gains were broad-based, with nine of the S&P 500’s 11 sectors advancing. The energy group led with a gain of 4.5%, while the consumer staples segment brought up the rear with a decline of 0.7%.

Among individual stocks,

shares fell $9.15, or 6.2%, to $138.91 after the maker of Gillette razors and Ariel laundry products said buyers were starting to cut back spending following months of rapid inflation.

Amazon.com

shares jumped $12.67, or 10%, to $134.95 after the tech company said quarterly revenue grew faster than analysts had expected.

Apple

shares added $5.16, or 3.3%, to $162.51 after it reported that iPhone sales continued to grow in the recent quarter.

High energy prices propelledChevronto record earnings of $11.6 billion in the second quarter, pushing shares up $13.39, or 8.9%, to $163.78. Fellow oil giant

Exxon Mobil

posted a profit of $17.9 billion, lifting the stock $4.29, or 4.6%, to $96.93.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note edged down to 2.642% Friday from 2.680% on Thursday. Yields move in the opposite direction of bond prices, and have fallen in recent weeks on expectations the Fed will soon slow the pace at which it is raising interest rates.

The yield on the two-year U.S. Treasury, meanwhile, settled Friday at 2.897%. That extends a span in which the shorter-term bond has traded at a higher yield than its longer-term counterpart, a situation known as an inverted yield curve that is seen as a warning of a potential recession.

Investors are closely focused on any hint from the central bank about the future path of monetary policy.

After raising its benchmark interest rate by 0.75 percentage point for a second straight meeting Wednesday, the Fed indicated that at some stage it will likely ease off to gauge the effects of higher rates on the economy. About 73% of S&P 500 companies that have reported quarterly results have beaten profit forecasts, soothing money managers who feared earnings would begin to slide.

But many investors remain cautious about the outlook for the economy and stocks. With inflation at a 40-year high, some say central banks in the U.S. and elsewhere will remain in a hurry to raise rates. The data showing the U.S. economy shrank for a second quarter in a row added to the nerves.

“The key takeaway is that they’re not falling off a cliff,” said Brian O’Reilly, head of market strategy at Mediolanum International Funds, of earnings. “Consumer demand is still relatively strong.”

Nonetheless, Mr. O’Reilly said he thinks the bounce in stocks will fade. “We’re still facing a pretty dicey economic backdrop,” he said, adding that there are few signs that inflation is peaking.

Overseas markets were mixed. The Stoxx Europe 600 rose 1.3%.

Chinese stocks dropped after a quarterly government economic meeting failed to provide a stimulus package. The Politburo, China’s top policy-making body, on Thursday all but acknowledged that the country would miss its annual growth target this year. It signaled the government would stick to its zero-tolerance Covid-19 measures and take only cautious steps to support the ailing property market.

Hong Kong’s benchmark Hang Seng Index fell 2.3%. China’s benchmark Shanghai Composite closed down 0.9%.

The selloff of China tech stocks followed a Wall Street Journal report that billionaire

Jack Ma

is planning to relinquish control of Ant, an affiliate of

Alibaba.

The move could delay Ant’s initial public offering for a year or longer.

Elsewhere in Asia, the Nikkei 225 index in Tokyo was flat, while South Korea’s Kospi Composite edged up 0.7%.

Write to Karen Langley at karen.langley@wsj.com and Joe Wallace at joe.wallace@wsj.com