Stock Market Today: World Stocks Pull Back After China Reports Weaker Than Expected Q2 Growth

The future for the S&P 500 was virtually unchanged. That was 0.1% lower for the Dow Jones Industrial Average.

The markets in Japan were closed for a holiday and the market in Hong Kong was closed for a typhoon.

The Shanghai Composite index fell 0.9% to 3,209.63 after China reported its economy grew at an annualized rate of 6.3% in April-June. That’s better than the 4.5% growth in the January-March quarter, but well below forecasts of more than 7%.

The economy is expected to slow further in the coming months, although investors expect moves from Beijing to support growth.

So the data will be viewed through the lens of how it will influence policy decisions made at the upcoming Politburo meeting in late July, SPI Asset Management’s Stephen Innes said in a commentary.

In Seoul, the Kospi fell 0.4% to 2,619.00, while the Australian S&P/ASX 200 fell less than 0.1% to 7,298.50. Bangkok’s SET gained 0.8% and India’s Sensex rose 0.5%.

On Friday, Wall Street’s latest winning week concluded with a mixed end following stronger-than-expected earnings reports from several major US companies.

The S&P 500 fell 0.1% while the Dow Industrials rose 0.3%. The Nasdaq composite fell 0.2%.

Earnings reporting season has just begun and once again Wall Street expectations are low. Analysts are predicting the worst drop in earnings per share for S&P 500 companies since the spring of 2020. That would be the third straight quarter of earnings decline.

Such expectations are essential to financial markets because one of the biggest factors behind a stock price is how much profit the company earns. Wall Street nevertheless rallied strongly this week on rising optimism about the other key lever that drives stock prices: how much investors are willing to pay for every $1 in corporate earnings.

This emerged from two reports earlier this week inflation continued to cool in the US economy in June. That bolstered investors’ hopes that the Federal Reserve is almost comfortable halting its blistering campaign to raise rates.

The Fed has already raised its federal funds rate to a range of 5% to 5.25%, from near zero at the beginning of last year. High rates suppress inflation by slowing the economy and putting downward pressure on prices for stocks and other types of investments.

The Fed is still expected to raise rates again at its next meeting in two weeks. But traders are largely betting that this is the last rise of the cycle.

A report on Friday suggested that consumers feel much better about the economy thanks to slower inflation and a still solid labor market. A preliminary reading of a University of Michigan study showed that consumer confidence was at its highest level since September 2021, although lower-income consumers didn’t feel as positive.

Solid spending by US consumers has been one of the main pillars of keeping the economy out of recession. Despite the high interest rates, they have continued to spend as employers have continued to hire more workers.

On other trading Monday, US benchmark crude lost $1.12 to $74.30 a barrel in electronic trading on the New York Mercantile Exchange. It lost $1.47 to $75.42 a barrel on Friday.

Brent oil, the price base for international trade, fell $1.12 to $78.77 a barrel.

The dollar fell from 138.82 yen to 138.49 Japanese yen. It has recently been weakened by speculation that the Bank of Japan may soon change its ultra-loose monetary policy. That could narrow the gap between higher yields in the US and other markets where interest rates have risen sharply, and Japan, where benchmark interest rates have been held at minus 0.1% for a decade.

The euro rose from $1.1229 to $1.1241.