Dow posts longest win streak in almost 3 months as investors brush aside signs of slowdown in China
By Vivien Lou Chen and William Watts
Energy sector slides as oil prices tumble
Stocks bounced back from a lower open on Monday, handing the Dow its longest streak of gains since late May, as investors looked past soft data out of China and U.S. data that missed forecasts.
How stocks traded
What drove markets
Stocks finished higher after reversing course from a lower open, when disappointing economic news out of China set a negative tone. China's retail sales, investment and industrial output all slowed and missed forecasts, while the Asian country's central bank trimmed lending rates.
Concerns about slower demand from China pressured the energy sector, with September WTI futures losing $2.68, or 2.9%, to settle at $89.41 a barrel.
Read:Energy remains a sweet spot for investors. Here's a list of 'energized' stocks to think about
In U.S. data releases, the New York Fed's Empire State business conditions index, a gauge of manufacturing activity in the state, plummeted 42.4 points to negative 31.3 in August. Though the figure didn't help sentiment, economists were taking it with a grain of salt.The Empire State data "wasn't entirely bad: deliveries times were steady for the first time in almost two years, employment managed to rise, and inflation pressures did not increase," said Oren Klachkin, lead U.S. economist at Oxford Economics, in a note."At the same time, manufacturers were not cheerful about the outlook for the next six months," Klachkin wrote. "We caution not to take too much away from this report since N.Y. manufacturing constitutes a small portion of the country's manufacturing base."Stocks started experiencing renewed upward momentum in late-morning trading after the S&P 500 completed a four-week winning streak on Friday, which delivered its best percentage advance for such a period since November 2020.
Similarly, the tech-heavy Nasdaq Composite sits at an almost four-month high after surging 23.3% off its mid-June low as of Monday. Stocks were buoyed last week as the U.S. consumer-price index and producer-price index showed inflation cooling, though still running quite hot.
"The good news on inflation coming on the heels of a very strong July payrolls report has reinvigorated belief in a 'soft landing' for the economy. This is an outcome that we thought was at least as likely as a recession, and now the markets are moving closer to pricing in this scenario," said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, in a note.
"The risk is that the markets get ahead of themselves, especially with investor FOMO starting to kick in," she wrote, referring to the phenomenon known as "fear of missing out."Read:Why BlackRock says the stock market's big summer rally isn't worth chasing and After calling the summer stock-market rally, JPMorgan says it's not yet time for investors to play defense
Technical indicators speak to the improved tone of late. The Cboe Volatility Index , a gauge of expected market volatility that usually rises when investors are fearful, hovered around its long-term average of 20 on Monday.
See:Can the stock market bottom without Wall Street's fear gauge hitting 'panic' levels?
The breadth of the market's latest bounce is also considered supportive, with Bespoke Investment noting the percentage of S&P 500 stocks trading above their 50-day moving average has jumped to 88% from just 2% on June 16th.
Read: Why stock market bulls are applauding the S&P 500's close above 4,231
In other economic data, the National Association of Home Builders' monthly confidence index fell 6 points to 49 in August, the trade group said Monday. It's the first time since 2020 that it came in below a break-even measure of 50.
Companies in focus
How other assets fared
Hear from Carl Icahn at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The legendary trader will reveal his view on this year's wild market ride.
-- Jamie Chisholm contributed to this article.
-Vivien Lou Chen
(END) Dow Jones Newswires
August 15, 2022 16:38 ET (20:38 GMT)
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