US stocks were lower early Monday morning after the People’s Bank of China cut its one-year bond yield from 2.85% to 2.75% and injected an additional 400 billion yuan ($60 billion) into credit markets after government data showed factory output in July. and retail sales weakened.
Shares in the US rose Friday, with major indices posting gains for the week, as investors cheered for signs of a slowdown in inflation.
The S&P 500 and the Nasdaq Composite both posted their fourth consecutive week of gains. That was their longest run since a streak that ended in early November, when both rose for five weeks in a row.
Investors hope that a recent slowdown in consumer price growth will encourage the Federal Reserve to raise interest rates at a slower pace, which in turn could prevent the economy from sliding into recession.
Lower interest rates tend to drive up prices for stocks, bonds and more speculative assets like cryptocurrencies, and stocks have swooned this year, in part because of the Fed’s aggressive rate hikes.
While inflation is still near its highest in decades, Wednesday showed it had declined, clocking in at 8.5% in July, compared to 9.1% in June.
Data from Thursday showed that U.S. suppliers hiked prices in July at the lowest annual rate since last fall, supported by a decline in energy prices.
On Friday, the S&P 500 rose 72.88 points, or 1.7%, to 4280.15. The Nasdaq Composite rose 267.27 points, or 2.1%, to 13047.19. The Dow Jones Industrial Average rose 424.38 points, or 1.3%, to 33761.05. The Dow rose 2.9% for the week. The Nasdaq and S&P 500 are up more than 3% this week.
Investors will pay special attention to the second-quarter earnings reports of Walmart, Target, Lowe’s, TJ Maxx and Ross stores, as well as US consumer health, which sheds light on the impact of inflation on corporate earnings.
Markets will also turn to management guidance to confirm recent data showing inflation has peaked.
In addition, the New York Federal Reserve will kick off this week’s economic reports at 8:30 a.m. ET Monday with a close poll of regional manufacturing activity.
The Empire State Manufacturing Survey is expected to drop to 5.5 in August, from a stronger-than-expected value of 11.12 the previous month as it exited the contraction zone (a number above zero means more manufacturers in the New York area say improve rather than worsen operating conditions.)
Several housing-related reports will also be released this week.
At 10 a.m. ET, the National Association of Homebuilders will release its August Housing Market Index. The homebuilder sentiment gauge is expected to hold steady at 55, its lowest level since May 2020, after falling much more than expected to that level last month after high inflation and mortgage rates hurt home sales and buyer traffic. It would indicate that barely more than half of NAHB members view business conditions as good.
Other reports to watch this week include housing starts and building permits on Tuesday and existing home sales on Thursday, both for the month of July.
Meanwhile, equities in Asia were mixed after China cut a key rate and Japan reported that its economy grew at a faster pace in the last quarter.
Tokyo and Sydney advanced, while Hong Kong and Shanghai fell.
Tokyo’s Nikkei 225 index added 1.1% to 28,871.78 and Sydney’s S&P/ASX 200 climbed 0.4% to 7,062.50. T
The Shanghai Composite Index closed 0.1% lower to 3,275.34, while Hong Kong’s Hang Seng Index lost 0.4% to 20,092.37.
The South Korean markets were closed for the holidays.
Bangkok’s SET index rose 0.4% after the Thai government reported the economy grew at a quarterly pace of 0.7% in April-June, down from 1.1% in the first quarter of the year.