Wall Street begins a rebound and could regain height this week
Wall Street could regain momentum this week after starting a rebound on Friday thanks to economic indicators not as bad as expected. The S&P 500 rebounded nearly 2% on Friday on retail sales rising 1.0% in June, better than the 0.8% expected, although most of the advance was due to the inflation. US indices also benefited from a recovery in the manufacturing activity index in the New York area, which returned to growth in July after two months of contraction, a drop in consumer inflation expectations according to the University of Michigan and a rise of just 0.2% in import prices in June, the weakest pace since December, good news for inflation.
Wall Street also benefited from reassuring comments from Atlanta Fed President Raphael Bostic, who pleaded for the institution not to raise rates “too dramatically”, echoing comments the day before from very hawks in Christopher Waller and James Bullard, who had said they favored a 75bp hike at the next meeting in ten days.
The positive trend was also fueled by favorable results and/or forecasts from several large companies. Citigroup (+13.2%) posted the best results of any major bank in Q2 so far, while Wells Fargo (+6.2%) missed estimates but reported net revenue from interest is expected to be 20% higher than in 2021 and UnitedHealth (+5.4%) beat earnings estimates and issued a better-than-consensus forecast.
Economic releases will continue to play an important role in investor sentiment in this increasingly stagflationary environment as we await the Fed on July 27-28. The next stats to watch will be European inflation numbers on Tuesday and Wednesday, the ECB meeting and the Philadelphia Fed manufacturing index on Thursday, and flash PMIs for July in major Western countries on Friday.
S&P 500 daily price chart – key levels