US stock futures edge lower after best month for S&P 500, Dow since November 2020

US stock futures fell early Monday to close August after the Dow Jones Industrial Average and the S&P 500 posted their biggest monthly gains since November 2020.

What’s Happening Futures on the Dow Jones Industrial Average YM00 were down -0.07% 22 points, or 0.1%, at 32,803. The S&P 500 futures ES00 was down 8.50 points, or 0.2%, -0.20% to 4,125. Nasdaq-100 futures NQ00 was down -0.19% 33 points, or 0.3%, at 12,938.25.

The stock ended sharply higher on Friday, excluding the Dow DJIA, up +0.97% 6.7% for the month, while the S&P 500 SPX, +1.42% saw a 9.1% July jump, both since November 2020. The biggest monthly profit for 12.3% for its best monthly performance since April 2020 and the strongest July on record, according to Nasdaq Dow Jones market data.

what is driving the market

Big gains for the stock index last week capped a strong July bounce off earnings that have so far been better than expected. Investors also cheered what they saw as signs that the Federal Reserve may not have to raise rates as aggressively as before as the economy slows.

“In equity markets, there were some signs of caution about how Fed speakers and upcoming data could affect the narrative as generally impressive earnings results in both the US and Europe gave the bulls the upper hand, while yields returned provided additional support,” said Rafi Boyadjian, principal investment analyst at XM, in a note.

On Friday, data showed higher gasoline prices pushed the personal-consumption-expenses price index up 1% in June, exceeding a forecast of 0.9%. June inflation, as measured by the PCE index, showed that the cost of living climbed 6.8% over the past year, the highest rate since January 1982.

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Last Wednesday, the Fed ended its two-day policy meeting with a 75-basis-point rate hike in an effort to contain rising inflation. Fed Chairman Jerome Powell said last week that another 75 basis-point move could be considered in September, but the Fed would adopt a data-dependent, meeting-by-meeting approach to decisions.

Powell also warned that reining in red-hot inflation would require the economy to see a period of downward trend development and that the path to a so-called soft landing for the economy continued to narrow.

Skeptics argue that bulls, seeking a so-called pivot from the Fed, were misreading the message from central bankers.

Federal Reserve Bank of Minneapolis President Neil Kashkari said on Sunday that the central bank is still committed to its target of 2% inflation. However, “we are far from that goal”, he said in an interview on CBS News’s “Face the Nation”.

“Investors risk reading too much into Powell’s somewhat scathing rhetoric last week and scathing remarks Sunday by the Fed’s most reprehensible policy maker, Neil Kashkari, possibly because he is not a FOMC member this year. Huh.” Boyadjian said.

Chinese manufacturing activity unexpectedly contracted in July, as Beijing’s COVID-19 restrictions and weak demand stoked hopes of a more robust economic revival. China’s National Bureau of Statistics said on Sunday that the official Manufacturing Purchasing Managers’ Index fell back to 49.0 in July, up from 50.2 in June. The result left the index below the 50 level that separates expansion from contraction and below the average forecast of 50.3 among economists surveyed by the Wall Street Journal.

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