S&P 500 rises slightly to start August following its best month since 2020

Oil prices declined on Monday amid demand concerns, but Goldman’s Jeff Currie believes fears of an all-out demand slowdown are overblown.

He sees international benchmark Brent crude touching $130 by the end of the year. On Monday, the contract traded roughly 3.2% lower at $100.68 per barrel.

Supporting his bull case is the demand picture. While demand growth might be slowing, it’s not contracting. Currie said this key point is being left out of the broader narrative in the commodities market.

“The overall demand picture — it’s still growing,” he said Monday on CNBC’s “Squawk Box.”

— Pippa Stevens

Morgan Stanley’s chief U.S. equity strategist Michael Wilson believes the recent rally won’t last long as corporate earnings are posited to start deteriorating.

“While the bond market is starting to assume they get inflation under control, it may come with a heavier cost than normal, potentially a recession while they are still tightening, which may leave a very small window for stocks to work before earnings surprise on the downside,” Wilson said in a note to clients.

“We think that window is now but it can shut quickly. Risk reward is poor after the recent rally so trade accordingly as time may be running out,” he added.

Wilson, one of Wall Street’s biggest bears, said the decline in stocks in June didn’t fully reflect the risk of a recession as earnings typically fall much more drastically in a downturn.

— Yun Li

The market can’t seem to pick a trend in early trading.

The major averages wavered between gains and losses for most of the month’s first hour of trading. The Dow Jones Industrial Average, for example, fell as much as 204 points — only to trade as much as 87 points higher minutes later. As of 10:42 a.m. ET, the 30-stock average was down just 8 points.

This choppy trading action comes amid somewhat weak market breadth. Roughly four stocks declined at the New York Stock Exchange for every three advancers. Meanwhile, just 193 S&P 500 stocks were positive on the day.

To be sure, these moves come amid relatively high volume, at least in early trading. FactSet data shows the SPDR S&P 500 ETF Trust (SPY), which tracks the benchmark index, traded 9.17 million shares between 9:30 a.m. and 9:59 a.m. ET. That’s well above an average of 7.29 million shares traded in that time period. The SPY has also topped its average volume for the 10 a.m.-10:59 a.m. time frame, with 19.36 million shares having exchanged hands.

—Fred Imbert

Manufacturing expanded in July for the 26th straight month, but at the slowest pace since June 2020, according to the latest Institute for Supply Management reading.

The index registered a 52.8 reading for the month, representing the percentage of businesses seeing growth for the month. The number fell slightly from June’s 53 reading, but was a bit above the Dow Jones estimate for 52.1.

Importantly, one big reason for the low reading was a massive slide in the prices index, which tumbled 18.5 points to 60. Though the number indicates that price increases are still strong, the relative decline is significant for an economy with an inflation rate running at its fastest pace since the early 1980s. The monthly decline in the index was the biggest fall since June 2010.

In another encouraging development, the employment index rose to 49.9, still barely in contraction territory but 2.6 points higher than June. New orders dropped to 48 while inventories edged higher to 57.3.

Comments from participants indicate that inflation and supply chain bottlenecks remain a concern.

“Growing inflation is pushing a stronger narrative around pending recession concerns. Many customers appear to be pulling back on orders in an effort to reduce inventories,” said one respondent in the food, beverage and tobacco products industry.

— Jeff Cox

Declining oil prices are the main contributor to the early sell-off hitting markets, according to Jim Cramer.

“This sell-off by the way is all oil, which is really rather amazing,” he said on CNBC’s “Squawk on the Street” on Monday.

Oil prices slipped on the back of weak manufacturing data from China and Japan and ahead of a meeting of OPEC officials. Brent crude at one point dipped below $100 a barrel.

— Samantha Subin

Both the consumer staples and consumer discretionary sectors traded higher Monday, bucking a broader market decline. The S&P 500 staples sector advanced nearly 1%, while consumer discretionary gained 0.8%. Colgate-Palmolive led staples with a 2.6% gain. Dollar Tree, Dollar General and Target advanced more than 2% each to lead discretionary stocks higher. Tesla, which is also part of the discretionary sector, gained 4.2%.

—Fred Imbert

The weakness in oil prices was weighing on major energy stocks in early trading.

Shares of Diamondback Energy fell 3.7%, while ExxonMobil slid more than 2%. Chevron dipped 1.6%. Devon Energy and Occidental Petroleum shed 2.6% and 1.5%, respectively.

Futures for U.S. benchmark West Texas intermediate crude were last down more than 5%, trading at roughly $93.30 per barrel. European benchmark Brent crude fell more than 4% to break below $100 per barrel.

Stocks fell to start Monday’s session, kicking off August in the red. The Dow Jones Industrial Average slipped 154.4, points, or 0.47%. The S&P 500 fell 0.81% and the Nasdaq Composite dropped 0.90%.

— Carmen Reinicke

Technology shares, among the best performers since the market bottomed in mid-June, were set to fall slightly on Monday. Apple, Microsoft, Alphabet were all in the red in premarket trading. Apple shares are up 25% since the S&P 500’s bottom on June 16 through Friday. Microsoft is up 14% and Alphabet is 10% higher over the same period.

— John Melloy

It’s too soon to call the bottom even as the S&P 500 just enjoyed its best month since November 2020, according to BofA Securities head of U.S. equity and quantitative strategy Savita Subramanian.

The strategist said the stock market typically bottoms after earnings estimates get slashed dramatically, but that hasn’t happened yet.

“Was June low the big low? We need more EPS cuts,” Subramanian said in a note. “We are still in the very early innings of downturn and estimate cuts.”

During the prior five recessions except in 1990, the S&P 500 bottomed after estimates were revised down, but today, estimate cuts are just starting and forward earnings per share is still up 7% since the market peak, the strategist said.

Secondly, Bank of America’s bull market signposts indicate it’s premature to call a bottom. Subramanian said historical market bottoms were accompanied by over 80% of these indicators being triggered, and now just 30% are triggered.

Lastly, she said bear markets always ended after the Federal Reserve started to cut interest rates, which is a scenario that’s at least six months away.

— Yun Li

Shares of Boeing rose more than 4% in premarket trading, helping to trim the overnight losses for futures.

The move comes after the Wall Street Journal and Reuters reported over the weekend that U.S. regulators approved the company’s planned inspection changes to the 787 Dreamliner.

Additionally, a potential strike among Boeing machinists in St. Louis was averted until at least Wednesday, when the workers will vote on a new contract.

Boeing’s stock has been hot in recent weeks, rising more than 16% in July.

— Jesse Pound

Stock futures fell back into the red on Monday ahead of market open, erasing earlier gains. Dow Jones Industrial Average futures shed 49 points, or 0.15%. S&P 500 futures and Nasdaq 100 futures slipped 0.27% and 0.17%, respectively.

— Carmen Reinicke

Oil prices declined during Monday morning trading on Wall Street after soft manufacturing data out of China prompted demand slowdown concerns.

West Texas Intermediate crude, the U.S. oil benchmark, shed 2.3%, or $2.31, to trade at $96.31 per barrel. International benchmark Brent crude dipped 1.8% to $102.07 per barrel.

WTI rose 4.14% last week, for its first positive week in four. However, it ended July in the red for its second straight losing month.

— Pippa Stevens

Stock futures rose from overnight lows to trade flat Monday morning ahead of the open. Both Dow Jones Industrial Average futures and Nasdaq 100 futures turned positive, trading slightly in the green. S&P 500 futures were still negative but gained from trading overnight.

— Carmen Reinicke

The dollar index sank to 105.311 Monday, its lowest level since July 5 as investors bet that the Federal Reserve’s rate hikes will tip the economy into recession. Year to date, the index is still up nearly 10%.

• The dollar slumped to 131.87 against the yen, its lowest in six weeks.
• Both the Euro and the Pound gained against the dollar as well, hitting the highest levels against the currency since July 21 and June 28, respectively.
• The Australian dollar also rose to 0.7046 against the dollar.

— Carmen Reinicke

Bitcoin fell about 3% early Monday after coming off its best month of 2022, as stock futures took a small dip. The cryptocurrency rallied on Wednesday through Friday as investors responded to updates from the Federal Reserve about its rate hiking path as well as the latest GDP report, and pulled back over the weekend as the possibility that the market has likely hit a bottom began to settle in. Bitcoin continues to trade in tandem with stocks, whose major indexes also notched their best months of the year Friday.

“Bitcoin may be struggling to break above the $24,000 level, but its weekly candle finally closed above the 200-week moving average and that could improve the technical sentiment significantly,” said Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank. “In case of break out, the price could retrace its June loss and could go as high as $32,000.”

— Tanaya Macheel

Target shares jumped about 2.5% in early trading after Wells Fargo upgraded the stock to overweight from equal weight, saying the recent pullback was a good buying opportunity. Target shares are down 29% so far this year amid inflation curbing consumer spending and lingering supply chain issues.

— John Melloy

The market’s strong performance in July could be lead to more gains in August and September, data compiled by Bank of America shows.

Stephen Suttmeier, a technical strategist at the bank, said in a note that, when the S&P 500 rises 5% or more in July, “August and September show stronger seasonality vs when July is not up 5% or more and for all years back to 1928.”

More specifically, the benchmark index averages a return of 2.01% in August after such a strong July, with the S&P 500 rising 59% of the time. September, meanwhile, is up 55% of the time and averages a return of 0.73% in these scenarios.

The S&P 500 rallied 9.1% in July, marking its biggest one-month gain since November 2020.

— Fred Imbert

Chinese e-commerce giant Alibaba said it will comply with U.S. regulators and work to maintain its listings in New York and Hong Kong.

“Alibaba will continue to monitor market developments, comply with applicable laws and regulations and strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange,” it said in a statement to the Hong Kong bourse.

The statement came after Alibaba was added to the U.S. Securities and Exchange Commission’s list of Chinese companies at risk of being delisted for not meeting auditing requirements on Friday. U.S.-listed Alibaba shares plunged 11% in the Friday trading session.

— Sumathi Bala

Inflation is hitting consumers’ wallets, and the economy looks to be slowing.

With the consumer accounting for 68% of all economic activity in the first quarter, it is a key metric to watch.

What does all of this mean for consumer-related companies, and will they hold up in a recession? Wall Street analysts pick the consumer stocks they say are resilient, even as the economy slows. Pro subscribers can read more here.

— Weizhen Tan

Chinese factory activity grew in July, but at a slower pace than in June, according to the latest Caixin/Markit manufacturing Purchasing Managers’ Index.

The private survey print came in at 50.4, down from 51.7 in June.

PMI readings are sequential and represent expansion or contraction from the month before. A figure above 50 represents growth.

Over the weekend, official data from the National Bureau of Statistics showed that factory activity declined, with the PMI at 49.

— Abigail Ng

So far, 56% of companies in the S&P 500 have reported results for the second quarter 2022. Of those, 73% have reported EPS results above analyst estimates, according to FactSet.

That means that so far, blended earnings growth – including both companies that have reported and estimates for those reporting later – is 6% for the second quarter. That’s higher than the blended earnings growth seen in last week.

Still, if the actual earnings growth rate is 6% at the end of the season, it will mark the lowest earnings growth rate for S&P 500 companies since the fourth quarter of 2022.

Revenue, on the other hand, is outperforming earnings. The blended revenue growth rate so far is 12.3%, up from last week and last quarter. If the actual revenue growth rate is 12.3% it will mark the sixth-straight quarter of year-over-year revenue growth of more than 10% for the index.

— Carmen Reinicke

All three major indexes ended the day higher on Friday, capping off a solid month of trading in July. Here are other key stats about how stocks traded last month.

• The Nasdaq composite closed more than 22% from 52-week highs, while the S&P 500 and the Dow closed more than 14% and 11% from their 52-week highs, respectively.
• The Dow gained 6.73% in July, its best month since Nov. 2020. It was also the S&P 500’s best month since Nov. 2020. It gained 9.11% in July.
• The Nasdaq composite gained 12.35% in July and broke a three-month losing streak. It was the best month for the index since April 2020.
• Only health care, consumer staples and utilities sectors closed within 10% of 52-week highs. Still, all 11 sectors were positive in the month of July.
• U.S. Treasury yields were lower on Friday, narrowing spreads.

— Carmen Reinicke

Investors are still watching for signs that the U.S. is in a recession and that inflation is slowing down. Last week, the Federal Reserve increased its benchmark interest rate by another three-quarters of a percentage point to stave off high inflation.

The first reading of second-quarter GDP on Thursday was negative, potentially pointing to a technical recession. On Friday, the June personal consumption expenditures hit the highest level since January 1982. The report is a key inflation measure.

Solid earnings reports from Amazon and Apple boosted each company stock and lifted the indexes higher to round out July. Energy companies such as Chevron and Exxon Mobil also rose on better-than-expected reports, ending Friday higher. Not all earnings have been rosy, however. Meta Platforms and Intel both posted disappointing results, sending shares lower.

— Carmen Reinicke

Stock futures opened just slightly lower to start trading Sunday evening.
Dow and S&P 500 futures were lower by 0.2%. Nasdaq futures were off by about 0.3%.

— John Melloy

Stocks enter the typically volatile month of August with a tailwind. There are dozens of earnings reports in the week ahead, with more than 20% of the S&P 500 companies reporting. There is also key data, with Friday’s July jobs report the most important.

Big economic reports could become important catalysts now that the Federal Reserve has indicated it is going to rely on data for its decision on how much to raise interest rates in September. Fed Chairman Jerome Powell said the labor market remains strong, and investors worried about an economic slowdown will be carefully watching to see how strong job creation remains. There are 250,000 jobs expected. According to CFRA, since 1995, the S&P 500 has averaged a 0.5% decline in August. Strategists say earnings could remain a positive force.

“A lot of this is better than feared. If that process continues, it’s likely to help the market grind higher. The market seems to be sitting on this notion that we had priced in Armageddon and thus far, that has not been thrust upon us,” said one strategist.

— Patti Domm