Good Business Results of Companies Impacted Growth on Global Stock Markets

Last week, stock prices on global markets rose sharply due to better-than-expected business results from companies and investor hopes that the U.S. Fed will slow the pace of interest rate hikes.

On Wall Street, the Dow Jones strengthened by 3 percent last week, reaching 32,845 points, while the S&P 500 jumped 4.3 percent to 4,130 points, and the Nasdaq index rose 4.7 percent to 12,390 points. As a result, the indices recorded strong growth throughout the month. The S&P 500 ended July with a gain of 9.1 percent, marking its largest monthly jump since November 2020, while the Nasdaq increased by 12.3 percent, the highest since April of the same year.

Among the business results that positively influenced the growth, technology giants such as Apple, Amazon.com, Alphabet, and Microsoft stood out, as they hold significant weight in the S&P 500 and Nasdaq indices.

Overall, the earnings announcement season has been very good so far. Of the 279 companies in the S&P 500 index that have reported their business results, 77 exceeded analysts’ earnings expectations.

It is now estimated that corporate earnings in the second quarter rose by 7.1 percent compared to the same period last year, while just last week, growth of less than 6 percent was expected.

On the other hand, macroeconomic indicators are not particularly inspiring. Last week, it was reported that the U.S. Gross Domestic Product (GDP) fell by 0.9 percent on an annualized basis in the second quarter, marking the second consecutive quarter of decline, while analysts expected slight growth. Although some believe this does not constitute a recession since not all economic segments have declined and the labor market remains strong, the fact is that GDP has fallen for two consecutive quarters on a quarterly basis, which, by the usual definition, represents a recession.

Regardless of whether it is a recession or a slowdown in economic growth, this data has sparked speculation that the U.S. central bank may be less aggressive regarding interest rate hikes in the future. To curb inflation, which is at its highest levels in 40 years, the Fed raised key interest rates by another 0.75 percentage points on Wednesday, for the second consecutive month, to a range of 2.25 to 2.50 percent.

However, investors were encouraged by Fed Chairman Jerome Powell’s statement that future central bank moves will depend on upcoming economic indicators and that a slowdown in the pace of monetary policy tightening is to be expected.

In any case, investors are calm regarding interest rates until the end of summer, as the next Fed meeting will not take place until September. 

Stock prices also rose on European markets last week. The London FTSE index strengthened by 2 percent to 7,423 points, while the Frankfurt DAX rose by 1.7 percent to 13,484 points, and the Paris CAC increased by 3.7 percent to 6,448 points. Solid earnings from European companies have been supporting good stock market performance for some time, so the pan-European Stoxx 600 ended July with a gain of 6.3 percent, marking its best monthly performance since November 2020.

On the Tokyo Stock Exchange, however, the Nikkei index weakened by 0.4 percent to 27,801 points.