Stocks fell Monday following the market’s best month since 2020 as investors worried share prices may be getting ahead of themselves considering the Federal Reserve has a long way to go to bring inflation down to acceptable levels as the economy teeters on a recession.
The Dow Jones Industrial Average slipped 154.4, points, or 0.47%. The S&P 500 fell 0.81% and the Nasdaq Composite dropped 0.90%. Technology shares such as Apple, Microsoft and Alphabet, which have led the market’s bounce since mid-June, were lower.
On Friday, all major indexes gained, posting winning weeks and capping off the best month of the year so far and then some. The Dow gained 6.7% in July, while the S&P 500 added 9.1%. The Nasdaq Composite rose 12.4% as investors rushed into the tech stocks beaten up the most during this bear market. For each index, July’s performances were the best since 2020.
“We are seeing a relief rally in the stock market, as pessimism reached extreme levels, and as longer-term interest rates have been coming back down,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
“We believe the rally will last until later in the summer, but as stock prices rebound and it becomes increasingly clear that we are headed for a more typical recession (e.g. one with higher unemployment and nominal GDP dropping close to zero or negative), markets will again have another selloff,” he added.
This week, investors have more economic data and company earnings to digest. The Friday nonfarm payrolls report from the Bureau of Labor Statistics will give more insight into the strong labor market. So far this year, the solid growth of jobs has prompted economists to say the U.S. is currently not in a recession, even with two consecutive quarters of negative GDP.
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