The S&P 500 is about to have its best month since November 2020.

July turned out to be the best month for Wall Street stock investors since November 2020, a rebound fueled by better-than-expected financial results from some of America’s biggest companies and bets the Federal Reserve could ease its policy. constrain the economy sooner than expected. .

The S&P 500 was up 1 percent by early Friday afternoon, taking its monthly gain to more than 8.5 percent. That would be its best month since the first announcements about an effective Covid-19 vaccine helped lift shares nearly 11 percent in November 2020.

It’s a sharp change in tone after a particularly difficult streak. Investor Sentiment

he has been encouraged by signs that some of America’s biggest companies are managing to weather economic headwinds, including slowing growth and rising interest rates. This week, big-name tech names like Apple, Microsoft, Amazon and Alphabet — whose size and performance pushed the stock market to new highs in recent years — reported results that comforted investors. Shares of all four were higher for the week and month.

At the same time, investors seemed to take comfort in the latest Federal Reserve meeting, interpreting the central bank as willing to slow the pace of interest rate hikes as the economy begins to cool. Rising interest rates increase costs for businesses and weigh on earnings, causing investors to watch for signs of easing in current Federal Reserve policy.

“Despite pockets of weakness, earnings have been good,” said Alex Atanasiu, portfolio manager at Glenmede Investment Management. He added that despite the Fed raising interest rates on Wednesday, longer-term Treasury yields, which help set borrowing costs around the world, have fallen along with expectations of further rate hikes. of interest, “and that reinforces the actions”.

Of the 278 S&P 500 companies that have reported earnings so far, 209 have beaten analysts’ expectations, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Amazon’s stock price soared about 11 percent on Friday after its Thursday earnings report, adding roughly $140 billion to the company’s market valuation. Amazon is among the best performing stocks over the past month, up more than 27 percent. Because of its roughly $1.4 trillion market value and the way the S&P 500 Index is weighted, that move has a big impact on the index’s performance.

Only Apple, the world’s largest company with a market value of around $2.6 trillion, had a bigger effect on the S&P 500 this month. Apple shares rose 18 percent in July.

There were also bright spots elsewhere. European stocks rose nearly 8 percent in the month, despite concerns about Italy’s economic and political health and growing fears of a natural gas shortage ahead of winter. In corporate bond markets, the debt of riskier junk-rated companies returned more than 5 percent, according to an index run by Bloomberg, posting its best monthly performance since October 2011.

Despite the strong performance, however, some investors remain cautious, warning that the recent rally could fade just as quickly.

“I think we’re going to have a tough time in the second half of the year, where economic data continues to show that growth is eroding and inflation may not come down as fast as people expect,” said David Donabedian, chief investment officer. . of CIBC’s US private equity business.

The higher move is a reflection that the current round of upgrades from US companies is not as bad as feared, which is different from good. Investors pushed the S&P 500 down more than 8 percent in June, ahead of the current harvest of earnings results, and the index remains more than 14 percent below its peak in January.

Some investors also said there is a willingness to keep buying stocks while inflation is so high because other, safer assets don’t offer the returns that allow them to defend against the eroding effect of rising prices.

“I’m not as bullish as the market seems to be,” said Lauren Goodwin, an economist at New York Life Investments. “But running for the hills when inflation is this high is just a drag on returns. We have to keep investing.”

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