Will July’s Stock Rally Continue?

Stocks finished higher last week for the second-straight week, capping their strongest monthly performance since November 2020. Despite the Federal Reserve aggressively lifting interest rates last week and a Q2 GDP print showing the U.S. economy contracted for the second straight quarter, investors instead looked through the headwinds and focused on what may lie ahead. The S&P 500 Index gained +4.3% on the week, while the NASDAQ Composite jumped +4.7%. Notably, the S&P 500 is higher by nearly +13.0% since its June low. Growth outperformed Value for the third week in the past four, supported by better-than-feared earnings reports out of Big Tech and declining bond yields. The Dow Jones Industrials Average closed last week higher by nearly +3.0%.

The Fed and Q2 GDP are on Deck This Week—How Might Stocks React

Stocks closed last week higher for the second time in three weeks. The S&P 500 Index jumped +2.6%, while the NASDAQ Composite finished the week higher by +3.3%. Despite risk-off trading on Friday, the S&P 500 ended the week back above its 50-day moving average. Not since April has the Index been able to trade above its short-term trading trend. In addition, the Dow Jones Industrials Average finished up nearly +2.0%.

Investors’ Focus Remains on Inflation, Consumer Sentiment, and Q2 Earnings

Stocks closed another week in the red but were able to mitigate larger losses by Friday’s close. The S&P 500 Index finished down 0.9% for the week but clawed back some of the steeper losses seen earlier in the week, helped by a +1.9% gain on Friday. Similarly, the NASDAQ Composite ended last week down 1.6%, while the Dow Jones Industrials Average, supported by its value bias, closed lower by 0.2%.

Last Week’s Market Gains Will Be Tested By Inflation, Q2 Earnings Season

Stocks climbed higher in the shortened July 4th week and strung together their longest consecutive daily winning streak of the year. The S&P 500 Index rose +1.9% last week, the Dow Jones Industrials Average gained +0.8%, and the NASDAQ Composite popped +4.6%. And while a five consecutive day winning streak for the S&P 500 is hardly something to brag about, it’s good enough to mark the best run for the Index all year. However, the week was generally quiet, with investors waiting on inflation reports and the start of the second quarter earnings season. The June Federal Open Market Committee (FOMC) meeting minutes and nonfarm payrolls report were last week’s highlights for investors. Although both offer a lagging look at policy and the economy, their significance to market dynamics and the direction of stock prices are often influential.

Investors Increasingly Looking for a Goldilocks Scenario

Stocks couldn’t carry their momentum forward last week after breaking a seven-week losing streak, as the S&P 500® Index dropped 1.2%. The NASDAQ Composite fell roughly 1.0% during the shortened holiday week, and the Dow Jones Industrials Average lost 0.9%.