U.S. stocks ended mostly higher Monday, while the dollar slipped and Treasury yields held steady, as investors braced for what could be the most important week of the trading year, capped by a crucial interest rate decision from the Federal Reserve.
With global stocks blunted by the prospect of recession, and activity data in some of the world's biggest economies indicating continued slowing, investors have been reluctant to embrace risk markets for much of the past few weeks.
That said, U.S. stocks have had a surprisingly solid performance over the month of July -- with a 4.66% gain for the S&P 500 -- following the worst first half start in more than fifty years.
U.S. corporate earnings, however, have thus far failed to provide the near-term support for a sustained market recovery, and with the 106 S&P 500 companies reporting so far this season, only around 75.5% have beaten Street forecasts, compared to the recent four-quarter average of 80.6%.
Around 172 S&P 500 companies will report June quarter earnings this week, highlighted by the four of the market's biggest stocks: Apple (AAPL), Amazon (AMZN), Google (GOOGL) and Meta Platforms (META).
Second-quarter earnings are forecast to grow by around 6.2% from last year, to a share-weighted $467.2 billion, but that pace is largely the result of record profits for the energy sector. Stripping away that contribution leaves earning down 3.2% from last year, according to Refinitiv data.
Activity data is also starting to wilt under the pressure of the Fed's inflation fight, with S&P Global's closely-tracked PMI index for the services sector -- the lynchpin for U.S. economic growth -- falling below the 50 point mark that separates growth from contraction for the first time in two years this month.
Treasury Secretary Janet Yellen told NBC's 'Meet The Press' Sunday that the economy isn't in recession -- despite having likely contracted for two consecutive quarters -- but is rather "in a period of transition in which growth is slowing and that’s necessary and appropriate."
Bond markets aren't indicating that same optimism, however, with the U.S. Treasury yield curve remaining deeply inverted as growth slows and inflation continues to test multi-decade highs. Benchmark 2-year note yields were last seen trading at 3.041% following a $45 billion auction of new paper while 10-year notes pegged at 2.82% in afternoon New York dealing.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies and often moves in the opposite direction of stock prices, was marked 0.26% lower on the session at 106.45.
The CME Group's FedWatch suggests a firm 77.5% chance of a 75 basis point rate hike Wednesday, a move that would take the Fed's key rate to a range of between 2.25% and 2.5%, but with bets on a smaller follow-on move in September outweighing those for more large-sized moved, suggesting the Fed is beginning to worry about their impact of growth and employment in the world's biggest economy.
In Europe, the region-wide Stoxx 600 gained 0.13% by the close of trading in Frankfurt, following on from a 0.28% decline for the MSCI ex-Japan index in Asia.
On Wall Street, the S&P 500 finished up 5 points, or 0.13%, while the Dow Jones Industrial Average gained 90 points, or 0.28%, to end the session at 31,990.04 points. The tech-focused Nasdaq slipped 0.43% to close at 11,782.67 points.
Tesla (TSLA) shares fell 1.4%, following an SEC filing showing the carmaker booked a $170 million loss on its bitcoin holdings over the first six months of the year.
Boeing (BA) shares ended nearly 1% lower following a weekend vote from some 2,500 union members to begin strike action at three St. Louis area plants starting August 1.
