S&P 500 Holds Close to Last Friday’s Highs Above 4,100; Boeing Shares Jump 6.0%

Key Points

• Major US indices are ever so slightly in the red on Monday as investors digest weak US manufacturing data.
• While contributing to recession fears, the data also pointed to a welcome slowdown in inflationary pressures.
• The energy sector was the underperformer, whilst Boeing shares shot higher.

Major Indices Experience Modest Pullback

Major US equity indices stabilized slightly below Friday’s closing levels after hitting fresh multi-week highs midway through the session amid choppy, two-way trading conditions. The latest batch of tier 1 US data, the July ISM Manufacturing PMI survey, showed growth in the US industrial sector falling to its weakest in over two years and forward-looking components like the New Orders subindex falling further into contractionary territory.

This exacerbated concerns that the US economy is either already in, or on the verge of slipping into, a recession. But, more optimistically, ISM’s prices paid subindex, which is a gauge of the inflationary pressures faced by manufacturers, saw a substantial dip in July to its lowest level in two years, a sign that inflation in the US has probably peaked for now.

Taken together, evidence of a weakening economy as well as falling inflationary pressures suggests that, as markets have started betting on in recent weeks, the US Federal Reserve won’t need to be as aggressive with rate hikes in the coming quarters. While some traders were clearly taking profit after US equities closed out their strongest month since 2020 last week, optimism about a more benign Fed tightening outlook is for now keeping the bears away.

The S&P 500 was last down about 0.25% in the 4,120 area, having come close to hitting 4,150 earlier in the day, with the bulls still eyeing a test of early June’s highs in the 4,170s. The Nasdaq 100 index, meanwhile, was briefly able to rally above the 13,000 level for the first time since early May, but has since slipped back to trade in the 12,900s. The Dow came within a whisker of hitting 33,000, but has since dropped back to trade broadly flat just above 32,800.

Equity investors are looking ahead to the release of US jobs data for July on Friday, which is likely to show that the US labor market remains healthy, albeit cooling off somewhat.

Energy Sector Lags As Oil Prices Drop, Boeing Shares Leap

A sharp drop in global oil prices on weak global manufacturing PMI survey data (out of the Eurozone, UK, China and Japan as well as the US) amid concerns about the demand outlook weighed heavily on the S&P 500’s energy GICS sector, which dropped nearly 2.0%. The index has thus handed back a substantial portion of last Friday’s 4.5% jump that was at the time driven by record-setting Exxon Mobil and Chevron quarterly earnings.

In terms of the other sector, most were also in the red, though to a lesser degree than energy, with just Consumer Staples (+1.2%), Industrials (+0.2%) and Consumer Discretionary (+0.6%) in the green. In terms of major individual stock stories, Boeing’s share price leapt to its highest levels since late April on a Reuters report that the US aviation regulator had approved Boeing’s inspection and modification plan that would allow it to resume deliveries of its 787 Dreamliner jet.