4:26pm: Investors test last week's broad rally
The Dow closed Monday down 47 points, 0.1%, at 32,798, the Nasdaq Composite dropped 22 points, 0.2%, to 12,369 and the S&P 500 slid 12 points, 0.3%, to 4,119.
The benchmarks enjoyed time above water but couldn't salvage a winning day to begin August after a strong final week of July.
“Markets may test the substantial rally that occurred last week as they consider the progress the Federal Reserve has made thus far to stem the course of inflation,” John Stoltzfus, Oppenheimer’s chief investment strategist, wrote in a note, according to CNBC.
Chipmakers generally did well, as shares of Advanced Micro Devices Inc and NVIDIA Corporation both improved more than 1%.
12:18pm: Traders try to build on late-July rally
At midday, the Dow was up 58 points, 0.2%, at 32,903, the Nasdaq Composite added 34 points, 0.3%, to 12,425 and the S&P 500 improved 1 point to 4,131.
After starting in the red, all three benchmarks have climbed back into positive territory. The first session of August follows a July that was the S&P 500's best since 2020.
"The bulls are taking a breather following the very impressive rally seen last week, where the S&P 500 hit its highest level since early June," Equiti Capital analyst David Madden wrote Monday. "Today, the index is up fractionally, the market is being supported by the dip in yields. The US 10-year yield has fallen below 2.6%. It is worth noting, it came close to testing 3.5% in mid-June, so it has been a considerable drop in the past seven weeks. The big decline in the yield suggests that bond traders are not worried about the Fed carrying out several large rate hikes in the months ahead."
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9.50am: Fall back at open
US blue chips, as predicted, fell back at the open on Monday, but overall the market was mixed consolidating recent gains after their three-day winning streak last week.
Around a quarter of an hour after the opening bell, the Dow Jones Industrials Average was trading 25 points, or 0.1% lower at 32,820, while the S&P 500 also shed 0.1%, but the Nasdaq Composite rallied from an opening decline to add 0.1% supported by recent upbeat tech earnings.
Global recessionary worries reared their head once more on Monday following China’s weaker than expected PMI numbers which came after disappointing second quarter GDP numbers in the US last week.
Craig Erlam, senior market analyst, UK & EMEA, OANDA commented: "Chinese PMIs dampened the mood as the reopening boost to activity quickly faded. The country was already facing an uphill challenge, to put it mildly, with regards to its growth target this year and the fact that manufacturing activity is slowing again doesn't bode well. While the non-manufacturing survey is much healthier, it also experienced a deceleration last month which further suggests the economy is struggling to get back to full strength."
But, he added: "One positive from the surveys was the improvement in supply chain conditions which should aid the inflation fight around the world. Of course, it is more than just a supply chain problem at this point but every little helps as central banks are forced to hike rates aggressively for fear of inflation becoming entrenched."
6.30am: Global recession uncertainties
US stocks were expected to start the new month lower on Monday, snapping the three-session winning streak that followed last week's, as-expected, Federal Reserve interest rate hike.
Investors look to have shifted focus to worries about a global recession after weak data out of China on Monday and last week's poor US GDP numbers, although recent robust corporate earnings could provide underlying support.
Share prices enjoyed a decent run last week despite news of the surprise drop in US second quarter GDP and the widely expected 75-basis point Fed rate increase, ending a see-saw July positively.
On August 1, however, futures for the Dow Jones Industrial Average were trading 0.2% lower pre-market, while those for the broader S&P 500 index and the tech-laden Nasdaq-100 both fell 0.3%.
Naeem Aslam, chief market analyst at Avatrade.com, commented: "US futures are trading soft today as traders are digesting the economic numbers out of China. The data has largely disappointed investors. The rebound in the Chinese data, which we saw more recently in Chinese numbers, began to stall, and the evidence of this came in the Chinese Manufacturing PMI number today, which dropped into the contraction territory and printed a reading of 49 from its previous reading of 50.2. Investors are blaming the current slowdown in the acidity due to the lockdowns taking place in China."
He added: "If that is the reason, then there is less to worry about as such lockdowns are on the decline, and in the coming weeks, we should see improvement in the economic data. However, if the weakness in the economic numbers isn’t due to the lockdowns but in fact, due to the cautionary tone adopted by corporates in their spending and paying due to the mounting recession fear, then we are looking at a picture that requires a great deal of attention."
"We think that the slowdown is primarily due to the concerns of a potential recession taking place around the globe due to higher inflation and less spending, and it is highly likely that we may well see more evidence on this. Another reason that is also pulling the US futures down today is the hawkish tone adopted by the Fed members. Remember, the Fed increased the interest rate by 75 basis last week, and market players aren’t expecting the Fed to stay that hawkish. However, some comments over the weekend by Fed officials have alarmed investors," Aslam concluded.
Among the corporate earnings due Monday, conglomerate Loews (NYSE:L) Corporation will report before the market opens, while tech firms Pinterest and Activision Blizzard will report after the closing bell.
Contact the author at jon.hopkins@proactiveinvestors.com