Day Traders Diary

7/29/22

The major averages jumped, extending their two-day rally on Friday as investors digested strong tech earnings and looked past concerns about high inflation and a recessionary environment. The Dow Jones Industrial Average advanced 316 points, or 0.97%. The S&P 500 climbed 58 points or 1.42%, while the Nasdaq Composite added 228 points or 1.8%.

Wall Street headed for strong weekly gains. The Dow is now up 2.6% for the week, while the S&P 500 and the Nasdaq Composite are up about 4% each.

The major averages were also on pace for their best month of the year. The Dow is on track for a more than 6% gain for July, which would be its highest since March 2021. The S&P 500 is up by 8.8% for the month and the Nasdaq Composite, while still in bear market territory, is up nearly 12%. Both are looking at their biggest monthly gains since November 2020.

That performance is a stark contrast from the previous six months when stocks tumbled to their June bear market levels. The market reversed as investors' fears about the aggressive pacing of the Federal Reserve's interest rate increases started to wane and the idea that inflation has perhaps peaked began to settle in.

Still, some have remained worried about inflation levels with Russia's ongoing war on Ukraine and the possibility that markets could turn lower again. On Friday, the Bureau of Economic Analysis reported that June's personal consumption index climbed 6.8% on a 12-month basis. This inflation indicator, which is watched closely by the Fed, hit its highest level since January 1982.

On Friday investors also got the final reading of the University of Michigan Consumer Sentiment Index, which came in at 51.5 for July. That's a slight improvement over the preliminary reading and up from the June all-time low of 50.

Nevertheless, gains from two of the market's biggest stocks led the major averages higher. Amazon shares popped 11% after the e-commerce giant reported stronger-than-expected sales for the previous quarter, while Apple climbed about 3% after posting better-than-expected iPhone revenue.

Chevron and Exxon Mobil also posted better-than-anticipated results for the previous quarter, sending their shares higher by about 8% and 4%, respectively.

However, the latest batch of corporate results has been mixed.

Shares of Roku sank more than 26% after the company missed estimates and warned of a slowdown in advertising. Chipmaker Intel dropped 11% after its quarterly results fell short of expectations.

For example, while Intel lowered its full-year expectations, Microsoft issued a rosy income forecast for the year ahead; while Walmart cut its profit outlook, Amazon gave upbeat guidance.

More than half of S&P 500 companies have reported earnings, with 72% of those names beating expectations, FactSet data shows.

The week's gains come after investors shook off a three-quarters of a percentage point hike from the Federal Reserve on Wednesday and a negative GDP reading on Thursday.