Wall Street wins but caution prevails at the start of the third quarter

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NEW YORK — Wall Street gained ground in light trading on Friday, the first session of the second half of 2022, as investors headed into the holiday long weekend in search of the next catalyst for market action.

All three major U.S. stock indexes rebounded from session lows and were last slightly higher in the wake of the stock market’s worst first half in decades.

All three were on track to post weekly losses.

« It’s a Friday before a major summer long weekend, so it’s not a high-volume day, » said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

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Market participants are now looking ahead to the second-quarter earnings season, the Labor Department’s June jobs report and the Federal Reserve’s monetary policy meeting expected later in July.

The microchip sector fell sharply after Micron Technology Inc warned of cooling demand.

Micron shares slid 2.7%, dragging the Philadelphia SE Semiconductor index down 3.8%.

Concerns over falling demand in the face of decades-high inflation were reflected in the Institute for Supply Management’s (ISM) Purchasing Managers’ Index, which showed a deceleration in input prices for new orders.

The ISM report appears to support the view that the economy is cooling and inflation appears to have passed its peak. That raised questions about whether the Fed will have room for a dovish pivot after its second consecutive 75 basis point interest rate hike expected in July.

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« The Fed is going to need a lot more evidence to change its mind about further continued interest rate hikes, » Ghriskey added. « There is still a lot of uncertainty about the economy and inflation despite early signs that inflation may have peaked. »

The Dow Jones Industrial Average rose 227.33 points, or 0.74%, to 31,002.76, the S&P 500 gained 24.73 points, or 0.65%, to 3,810.11 and the Nasdaq Composite added 45.03 points, or 0.41%, to 11,073.77.

Among the 11 major S&P 500 sectors, utilities had the largest percentage gains, while technology was the most down.

The second quarter reporting season begins in several weeks and 130 of the S&P 500 companies have announced in advance. Of those, 45 were positive and 77 were negative, a lower negative-to-positive ratio than a year ago, according to Refinitiv data.

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The prospect of profit margins hit by killer inflation and lower consumer demand will cause market participants to listen closely to forecasts.

Analysts now expect overall second-quarter S&P 500 earnings growth of 5.6%, down from the 6.8% expected at the start of the quarter, according to Refinitiv.

Meta Platforms Inc fell 1.5721% after Facebook parent CEO Mark Zuckerberg warned employees to prepare for a deep economic downturn.

Shares of department store chain Kohl’s Corp fell 17.3% following its decision to halt talks over a possible sale to Franchise Group.

Advancing issues outnumbered declining ones on the NYSE by a ratio of 1.70 to 1; on the Nasdaq, a ratio of 1.27 to 1 favored advancers.

The S&P 500 posted a new 52-week high and 48 new lows; the Nasdaq Composite recorded 8 new highs and 201 new lows. (Reporting by Stephen Culp; Additional reporting by Amruta Khandekar and Sruthi Shankar in Bengaluru; Editing by David Gregorio)