STOCK MARKET NEWS: S&P, Dow, Nasdaq wrap winning month even with inflation, recession drags

U.S. stocks edged higher Friday morning continuing gains from Thursday despite fresh data showing the nation’s economy contracted for a second-straight quarter.

The S&P 500 added 48.82 points, or 1.2%, to 4072.43, building on its strong gains from the prior session.

The broad market index closed sharply higher Wednesday as well after the Federal Reserve raised interest rates and Fed Chairman Jerome Powell hinted the pace of rate rises would eventually slow. 

The Dow Jones Industrial Average added 332.04 points, or 1%, to 32529.63. The technology-heavy Nasdaq Composite Index gained 130.17 points, or 1.1%, to 12162.59. 

The U.S. economy shrank at a 0.9% annual rate last quarter, marking a second straight quarterly decline in gross domestic product, the Commerce Department said Thursday.

The data intensified debate among analysts and investors about whether the economy is in a recession. 

Stocks have started the third quarter in better form after the declines suffered in the first half of the year. Corporate earnings haven’t been as bad as investors had feared, suggesting that soaring inflation and signs of flagging economic growth aren’t weighing too heavily on companies’ balance sheets. A

ll three major indexes have risen at least 8% from their 2022 lows in mid-June and are headed toward strong monthly gains. The Federal Reserve has signaled it is serious about bringing inflation down. On Wednesday it raised its federal-funds rate by 0.75 percentage point to a range between 2.25% and 2.5%.

Some traders have ramped up bets on a slower pace of interest rate increases in coming months after the meeting, helping propel the stock-market rally.

In bond markets, the yield on the benchmark 10-Year U.S. Treasury note fell for the third consecutive session to 2.680% from 2.731% on Wednesday. The yield on the 2-year note dropped to 2.874% from 2.968%.

Meanwhile, Asian shares were mixed Friday, as Chinese shares sank after leaders acknowledged the official 5.5% growth target for this year won’t be met. 

Hong Kong’s Hang Seng index dropped 2.4% to 20,123.55 and the Shanghai Composite index declined 1% to 3,250.64 after China’s leaders acknowledged the struggling economy won’t hit its official 5.5% growth target this year. 

The announcement after a planning meeting of the ruling Communist Party said Thursday Beijing will try to prop up sagging consumer demand but will stick to strict anti-COVID-19 tactics that have disrupted manufacturing and trade.

It underscores the high cost Xi’s government is willing to incur to stop the virus in a politically sensitive year when he is widely expected to try to extend his term in power. 

Japan’s benchmark Nikkei 225 lost 0.2% to 27,801.64, while Australia’s S&P/ASX 200 gained 1.0% to 6,945.20. South Korea’s Kospi added 0.7% to 2,451.50.

Japanese government data showed factory output in June jumped 8.9% from the previous month, marking the first rise in three months. The recent easing of pandemic lockdowns in China has helped boost Japanese production.

A surge in COVID-19 infections to record levels in many parts of Japan has raised concern. But Robert Carnell, regional head of research Asia-Pacific at ING believes that Japan’s second quarter GDP, or gross domestic product, will rebound marginally from the first quarter’s contraction.