All three indexes were heavily in the red right out the gate this morning, the Dow down some 250 points until about 10:30, then started a slow recovery breaking even around 1:30 to finally close up 321 points. So the first day of Q3 got started with a bang but still with a ton of volatility and leaving all three indexes in the red for the week.  Today’s data was a double-edged sword validating a deceleration in new orders but also confirming that the economy is cooling and inflation has passed its peak.  

This raises optimism that the Fed might do a dovish pivot regarding rate hikes after July. But today’s expert is skeptical. “The Fed is going to need to see a lot more evidence to change its mind.”  Investors will be looking to Q2 reporting for the impact of inflation and waning consumer demand. Q2 earnings growth is now estimated at 5.6%, a significant downgrade from the 6.8% predicted in April.  Coming into the holiday weekend, volume was light at 11 billion. 

Fri  July 1, 2022  4:24 PM

Wall Street ends first day of third quarter with solid rebound

By Stephen Culp

DJ: 30,775.43  -253.88        NAS: 11,028.74  -149.16        S&P: 3,785.38  -33.45      6/30

DJ: 31,097.26  +321.83       NAS: 11,127.84  +99.11         S&P: 3,825.33  +39.95     7/1

NEW YORK, July 1 (Reuters) - Wall Street bounced back to a sharply higher close in light trading on Friday as investors embarked on the second half of the year ahead of the long holiday weekend.  All three major U.S. stock indexes reversed early losses to end in well into positive territory in the wake of the stock market's worst first half in decades.  Still, all three indexes posted losses for the week.

"We're headed into the holiday weekend and having a late-day relief rally," said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. "But we’ll likely have to wait until investors return from the holiday weekend to see if it’s sustainable at the start of the new quarter."  Market participants now look to the second-quarter earnings season, the Labor Department's June employment report, and the Federal Reserve's monetary policy meeting expected later in July.

The microchip sector dropped sharply after Micron Technology Inc (MU.O) warned of cooling demand. read more  Micron's shares slid 2.9%, pulling the Philadelphia SE Semiconductor index (.SOX) down 3.8%.  Worries over waning demand in the face of decades-high inflation were reflected in the Institute for Supply Management's (ISM) purchasing managers' index, which showed a deceleration in both new orders input prices.  ISM's report seemed to back the view that the economy is cooling and inflation appears to be past its peak. This has raised the possibility that the Fed might have wiggle room for a dovish pivot after its second straight 75 basis point interest rate hike expected in July. "The Fed is going to need to see a lot more evidence to change its mind about further continued interest rate hikes," said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York. "There’s still a lot of uncertainty about the economy and inflation despite early signs that inflation may have peaked." 

 

The Dow Jones Industrial Average (.DJI) rose 321.83 points, or 1.05%, to 31,097.26, the S&P 500 (.SPX) gained 39.95 points, or 1.06%, to 3,825.33 and the Nasdaq Composite (.IXIC) added 99.11 points, or 0.90%, to 11,127.85.  All 11 major sectors of the S&P 500 ended the session green, with utilities (.SPLRCU) enjoying the largest percentage gain.

Second-quarter reporting season begins in several weeks, and 130 of the companies in the S&P 500 have pre-announced. Of those, 45 have been positive and 77 have been negative, a weaker negative/positive ratio than a year ago, according to Refinitiv data.  The prospect of profit margins taking a hit from bruising inflation and waning consumer demand will have market participants listening closely to forward guidance.  Analysts now expect aggregate second-quarter S&P 500 earnings growth of 5.6%, down from the 6.8% projected at the beginning of the quarter, per Refinitiv.

Department store chain Kohl's Corp shares (KSS.N) tumbled 19.6% following its decision to halt talks of a possible sale to Franchise Group (FRG.O). read more

Advancing issues outnumbered declining ones on the NYSE by a 2.77-to-1 ratio; on Nasdaq, a 1.57-to-1 ratio favored advancers.  The S&P 500 posted one new 52-week high and 48 new lows; the Nasdaq Composite recorded 12 new highs and 219 new lows.

Volume on U.S. exchanges was 11.01 billion shares, compared with the 12.88 billion average over the last 20 trading days.