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Despite a stumble out of the gate, stocks bounced back on Friday, finishing the first trading session of July solidly in positive territory. Wall Street is attempting to recover after posting the worst first half of a year in decades.
With investors looking ahead to the long holiday weekend, the major U.S. equity average built gains during the afternoon, with the Dow and S&P 500 both showing advances of more than 1% by the close.
Looking at the closing numbers, the Dow Jones rose 321.83 points to end at 31,097.26. The S&P 500 notched gains of 39.95 points and recorded a close of 3,825.33. The Nasdaq concluded trading at 11,127.85, a gain of 99.11 points on the day.
Looking to the bond market, yields continued their recent retreat. The 10-year Treasury yield dropped 9 basis points to 2.89% but had been below 2.80% earlier in the session. The 2-year yield declined 9 basis points to 2.84%.
“Today’s decline in US government bond yields has accelerated in a way that is eye catching,” Mohamed El-Erian tweeted earlier in the day. “The original catalyst was the broadening concern about a recession. Thereafter, technicals kicked in suggesting market participants were caught off side in a traditionally low-liquidity day.”
Looking at economic news, the June ISM manufacturing index fell more than expected to 53. A number over 50 still indicates growth, but many analysts worried about some of the report’s other numbers, with cautious signals coming from the measures for new orders and employment.
“Ouch: ISM new orders index falls to 49.2 and employment index comes in at 47.3 – both in contraction zone,” Schwab’s Kathy Jones tweeted.
“Usually, the ISM lags China’s Caixin PMI by about three months, but we very much doubt that the July ISM will drop to the 45 or so apparently implied by the Caixin,” Pantheon Macro said. “We also doubt it will then rebound to 60 over the next couple months.”
Pantheon added: “The Caixin index has been distorted by China’s zero-Covid policy, which has had little impact on U.S. manufacturing. Still, we are happy to see the rebound in China’s manufacturing sector, because it suggests, at least, that the ISM is unlikely to keep falling past July.”
Gold trimmed losses after tagging a new 5-month trading low, touching $1,783/oz. By midday trading, the precious metal had cracked positive territory, rebounding back above $1,800. Silver dipped below $20/oz earlier in the day.
Morgan Stanley said in a note: “Consumers are continuing to list inflation as their number one concern and 2/3 of consumers are planning to reduce spending over the next 6 months in response to inflation.”
Citi Global Research put out a note that stated: “We continue to think inflation will hold up well-enough for the Fed to achieve policy rates above 4% in early 2023. Recession risk is elevated, but much more so in 2023 than over the remainder of 2022.”
Among active stocks, shares of Kohl’s have plunged double digits as the retailer ended its strategic review and said it is seeing a softening in consumer spending.