Wall Street closed higher on Friday to end July on a happy note buoyed by strong earnings results of four tech behemoths defying coronavirus-induced economic devastations. All three major stock indexes ended in green for the day and for the month. However, for the week, both the S&P 500 and the Nasdaq Composite rallied while the Dow suffered a marginal loss.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.4% or 114.67 points to close at 26,428.32. However, 20 components of the 30-stock blue-chip index ended in the red while 10 finished in green. The Nasdaq Composite ended at 10,745.27, surging 1.5% or 157.46 points.
Meanwhile, the S&P 500 gained 0.8% to end at 3,271.12. The Technology Select Sector SPDR (XLK) and the Communication Services Select Sector SPDR (XLC) climbed 2.5% and 1.4%, respectively. Notably, six out of eleven sectors of the benchmark index closed in positive territory while five in negative territory.
The fear-gauge CBOE Volatility Index (VIX) was down 1.2% to 24.46. A total of 11.01 billion shares were traded on Friday, higher than the last 20-session average of 10.53 billion. Decliners outnumbered advancers on the NYSE by a 1.40-to-1 ratio. On Nasdaq, a 1.94-to-1 ratio favored declining issues.
Big Techs Drive the Market
On Jul 30, after the closing bell, four technology behemoths declared blowout earnings results. Notably, Apple Inc. AAPL, Amazon.com Inc. AMZN, Facebook Inc. FB and Alphabet Inc. GOOGL significantly surpassed both earnings and revenue expectations.
Moreover, sales of Apple’s iPhones surprised to the upside — 26.4 million versus 22.4 million expected. Amazon’s earnings per share nearly doubled year over year. Both Daily Active Users and Monthly Active Users of Facebook rose 12% year over year. Sales at Google’s cloud business jumped 43%, while YouTube ad revenues rose 6%.
Consequently, shares of Apple, Facebook and Amazon surged 10.5%, 8.2% and 3.7%. Each of these stocks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The Department of Commerce reported that consumer spending rose 5.6% in June after jumping an upwardly revised 8.5% in May. The consensus estimate was also for an increase of 5.6%. Purchases of goods increased 6.4% while expenditure on services grew 5.2%. Notably, consumer spending accounts for nearly two-third of the U.S. GDP.
Personal income declined 1.1% after declining an upwardly revised 4.4% in May. The consensus estimate was for a drop of 0.8%. Personal savings rate fell to 19% compared with an upwardly revised 24.2% in May. Wage rate grew 2.2% in June after surging 2.6% in May.
Personal consumption expenditure (PCE) price index increased 5.2% in June compared with an upwardly revised 8.4% in May. The core PCE price index (excluding the volatile food and energy components) – Fed’s favorite inflation gauge – remained flat at 0.2%, in line with the consensus estimate. Year over year, the core PCE price index rose 0..9% in June compared with 1% in May, way below the Fed’s target rate of 2%.
U.S. employment cost index increased a marginal 0.5% in the second-quarter 2020. In the 12 months ended in June, employment costs increased at a modest rate of 2.7%.
The University of Michigan reported that the final index of U.S. consumer sentiment for the month of July dropped to 72.5 from an initial reading of 72.9. Both the consensus estimate as well as last month’s final index was 73.2%. The index for current situations fell to 82.8 in July from 87.1 in June.
The index of expectations for next six month tumbled 65.9 in July from 72.3 in June.
The second-quarter 2020 GDP of the Eurozone plunged 12.1%, its lowest since records began in 1995. The GDP of Germany, Italy, France and Spain plummeted 10.1%, 12.4%, 13.8% and 18.5%, respectively. Notably, Eurozone’s GDP in the first-quarter contracted by 3.6%.
Weekly Roundup
The last week was mostly positive for wall Street. The S&P 500 and the Nasdaq Composite gained 1.7% and 3.7%, respectively, while the Dow lost a marginal 0.2%. The technology and real estate sectors drive the market while disappointing earnings results of oil behemoths pulled down the Dow.
Monthly Roundup
Wall Street rallied for four consecutive months in July. Notably, the Dow, the S&P 500 and the Nasdaq Composite surged 2.3%, 5.5% and 6.8%, respectively, in July. This impressive rally took place despite the resurgence of coronavirus in as many as 24 states which forced them to close some parts of the economy that were reopened just a month ago.
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