S&P 500 Gains 0.4%, Hits Fresh Three-month Highs Above 4,300 Despite China Growth Worries

Despite concerns about China's growth, indices rise

Major US equity indexes were protected from worries about the future for global economic growth on Monday in the aftermath of dismal July economic activity statistics out of China during the overnight session by a decline in US treasury rates, which boosted rate-sensitive large tech/growth firms. The People's Bank of China, the country's central bank, unexpectedly slashed interest rates to relieve financial conditions in response to the negative economic indicators for China.

A slowdown in China's growth might help quell the inflationary pressures that have compelled the Fed to tighten monetary policy aggressively this year. It could also result in a slowdown in US growth that could discourage future major tightening. Analysts said that recent data that 1) revealed that US pricing pressures had now peaked and 2) indicated that the US economy was still expanding in early Q3 as well as 3) recent better-than-expected company results were all encouraging for stock prices for US equities.

The S&P 500 finished the trading day on Monday up around 0.4%, crossing the 4,300 mark for the first time since May 4 and bringing its run of gains from the lows in the low 3,700s in July to almost 15%. The Dow Jones Industrial Average increased by 0.45% to reach its 200-Day Moving Average for the first time since April 21. The Nasdaq 100 index increased by 0.75% to reach its highest level since late-April in the 13,600s.

Investors Prepare for Heavyweight Retailor Earnings and US Retail Sales Data

Energy, one of the eleven S&P 500 GICS sectors, had the poorest performance, dropping 2.0% after a steep decline in oil prices due to worries about China's consumption. Other than the materials industry, industrial metals prices saw a significant decline. The consumer staples (+1.05%), consumer discretionary (+0.6%), and information technology (+0.6%) sectors outperformed all other sectors in terms of growth. Tesla was the top-performing large-cap stock, gaining 3.1%.

The retail industry will be in the spotlight this week due to 1) the publication of the US Retail Sales numbers for July on Wednesday and 2) the profits from industry giants including Walmart, Target, and Home Depot. Along with a number of other tier 2 data releases this week, including the regional PMIs for August, which will provide an early indication of how the US economy is doing this month, the minutes from the Fed's July policy meeting are also scheduled to be released on Wednesday.