U.S. stocks extended their July rebound on Friday morning, with the dollar and Treasury yields also advancing, as traders acted on positive corporate news despite increased labor costs and other inflation indicators.
Positive forecasts from Apple Inc and Amazon.com Inc indicated resilience in mega-cap companies to survive an economic downturn, with hopes of a less aggressive monetary policy boosting sentiment.
The two largest U.S. oil companies, Exxon Mobil and Chevron Corp, also posted record revenue on Friday, bolstered by surging crude oil and natural gas prices.
The Nasdaq Composite added 119.52 points, or around 1%, to 12,282.11 and the S&P 500 gained 25.97 points, or 0.64%, to 4,098.4. The Dow Jones Industrial Average rose 24.34 points, or 0.07%, to 32,553.97.
U.S. labor costs increased strongly in the second quarter as a tight jobs market continued to boost wage growth, which could keep inflation elevated for a while.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, also rose 1.1% last month, the U.S. Commerce Department said on Friday.
As inflation surges across major markets and central bankers scramble to raise rates without killing off growth, riskier markets like stocks have tended to react positively to any perceived softening in sentiment on the part of policymakers.
After Thursday data showed the U.S. economy contracted in the second quarter, stocks rose as traders bet rates would rise more slowly. Euro zone numbers on Friday, meanwhile, beat expectations, yet recession fears are mounting as energy inflation continues to bite in the face of the war in Ukraine.
The MSCI World index was last up 0.55%, on course for a near-6% monthly gain, its best since November 2020, buoyed by broad gains across European markets, with the STOXX Europe 600 up around 1%.
Despite the positive end to the month for stocks, Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said investors should proceed with caution.
"In the near term, we think the risk-reward for broad equity indexes will be muted. Equities are pricing in a 'soft landing', yet the risk of a deeper 'slump' in economic activity is elevated."
Some of that concern had been evident in Asian stock markets overnight, after Beijing omitted reference to its full-year GDP growth target following a high-level Communist Party meeting.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.66%.
News in the prior session that U.S. gross domestic product had shrunk 0.9% last quarter, on top of a 1.6% contraction in the quarter before that, initially weighed on the U.S. bond yields and the greenback. But both ticked up on Friday.
The yield on benchmark 10-year Treasury notes recovered slightly from its overnight lows to trade at 2.693% while the two-year note's yield, which typically moves in step with interest-rate expectations, was also up on the day to 2.918%.
After earlier flirting with positive territory, the dollar was last up 0.37% against a basket of its major peers - on course for a second month of gains.
Futures markets now predict that U.S. interest rates will peak by December this year, rather than June 2023, and the Federal Reserve will cut interest rates by nearly 50 bps next year to support slowing growth. [0#FF:]
Across commodities, Brent crude futures rose nearly 3%, while U.S. West Texas Intermediate crude extended early gains, up around 3.5%, as concerns about supply shortages ahead of the next meeting of OPEC ministers offset doubts around the economic outlook.
Spot gold traded flat, holding around $1,753 an ounce, after hitting a more than three-week high, supported by a softer dollar and bets that the Federal Reserve may cool the pace of rate hikes as economic risks deepen.
(Reporting by Lawrence Delevingne in Boston and Simon Jessop in London; editing by Mark Heinrich)