US Stocks Open Higher, Putting S&P 500 on Track for Best Month Since 2020


The S&P 500 was on track for its best month in almost two years as investors considered a mixed picture of the strength of the American consumer.

The broader index was up 0.4% shortly after the opening bell. The Dow Jones Industrial Average rose 8 points, or less than 0.1% and the Nasdaq Composite climbed 0.4%.

Gains moderated after data 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.

Still, Procter & Gamble shares fell 3.9% after the maker of Gillette razors and Ariel laundry products said buyers were starting to cut back spending after months of rapid inflation. Colgate-Palmolive edged declined 0.4% after maintaining its sales forecasts for 2022.

Amazon.com shares jumped 10% after the tech company said quarterly revenue grew faster than analysts had expected. Apple shares added 2.3% after it reported that iPhone sales continued to grow in the recent quarter.

Federal Reserve Chairman Jerome Powell said the central bank raised interest rates by three-quarters of a percentage point and signaled that more large increases to combat high inflation could be coming. Photo: Manuel Balce Ceneta/AP

Intel dropped 10.9% on a surprise quarterly loss. Roku tumbled 23% after the maker of streaming hardware said key revenue drivers would come under pressure in the second half of the year.

High energy prices propelled Chevron to record earnings of $11.6 billion in the second quarter, pushing shares up 3.7%. Fellow oil major Exxon Mobil posted profits of $17.9 billion, lifting the stock 2.3%.

In the bond market, the yield on 10-year Treasurys edged up to 2.701% from 2.680% on Thursday. Yields move in the opposite direction to bond prices, and have fallen in recent weeks on expectations the Federal Reserve will soon slow the pace at which it is raising interest rates.

Investors have taken comfort in recent days from the suggestion that slowing economic growth might encourage the Fed to raise rates at a slower clip, sending the S&P 500 up 2.8% for the week and 7.6% for the month. If sustained through Friday, that would be benchmark index’s best performance since November 2020, the month of the presidential election.

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. Reports showing 72% of companies on the S&P 500 have beaten profit forecasts have soothed money managers who feared earnings would begin to slide. The S&P 500 has climbed more than 11% from its low point for the year in mid-June.

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 US and elsewhere will remain in a hurry to raise rates. Adding to nerves, data this week showed the US economy shrank for a second quarter in a row.

“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.”

Nevertheless, Mr. O’Reilly 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.

Traders working on the floor of the New York Stock Exchange this week.

Photo:
Spencer Platt/Getty Images

Overseas markets were mixed. The Stoxx Europe 600 pink 1%, led by shares of basic-resource, retail and construction companies.

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 measures and take only cautious steps to support the ailing property market.

Hong Kong’s benchmark Hang Seng Index fell 2.3%. Large-cap technology stocks including Alibaba,

Meituan and Kuaishou Technology led the decline, all of them down 4% or more.

China’s benchmark Shanghai Composite closed down 0.9%, while the CSI 300 index of the largest stocks listed in Shanghai and Shenzhen slid 1.3%.

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 Joe Wallace at joe.wallace@wsj.com and Rebecca Feng at rebecca.feng@wsj.com

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