The S&P 500 rose on the final trading day of July and notched its fifth consecutive month of gains, its longest winning streak since 2021. The S&P 500 finished up 3.1% for the month, while the tech-heavy Nasdaq Composite added 4%. The Dow Jones Industrial Average clinched a 3.3% monthly gain. The monthslong rally in the stock market broadened this month, lifting everything from smaller regional banks to the biggest technology companies in the world, a sign that many traders expect continued strength in the U.S. economy.

“The market has fully embraced the soft landing scenario,” said Bryant VanCronkhite, a senior portfolio manager at Allspring Global Investments. A stretch of better-than-expected data on jobs and inflation has pushed traders to unwind some of their bets on a looming downturn. Some have ditched their gloomy forecasts on stocks and abandoned recession wagers, helping push swaths of the stock market higher alongside bond yields.

Gains in regional-bank stocks such as Zions Bancorporation pushed the KBW Nasdaq Regional Banking Index up 18.3% for the month, its best stretch since November 2016. These stocks were battered earlier in the year, when Silicon Valley Bank’s collapse stoked a banking crisis and exacerbated worries about a looming recession. Energy companies ripped higher, with stocks such as Schlumberger and Halliburton gaining around 18% apiece for the month. Meanwhile, tech stocks continued a winning streak that has helped send the Nasdaq up 37% for the year, besting the Dow by its widest margin through July of any year on record, according to Dow Jones Market Data going back to the 1970s. The Dow is up 7.3% year to date.

On Monday, fresh data showed that Texas manufacturers expect general business activity to expand in the next six months. Expectations for capital expenditures to rise also jumped to the highest levels since the middle of last year. Later this week, traders will be watching the monthly jobs report for more clues on the economy. The S&P 500 added 0.1% Monday, while the Nasdaq edged up 0.2%. The Dow industrials rose about 100 points, or 0.3%, boosted by shares of Chevron and Walt Disney.

Crude prices inched up Monday and notched the biggest one-month percentage advance since January of last year, as traders braced for cuts by Saudi Arabia and Russia to tighten supplies. Brent crude futures, the global oil benchmark, rose 14% in July to $85.56 a barrel. The rally has snapped oil out of a monthslong funk caused by concern about the world economy and a surge in exports from sanctioned producers.

Investors have also been sifting through a wave of earnings results, many of which have been better than initially expected by Wall Street analysts. Around 81% of companies have been beating earnings estimates, the highest figure of the past seven quarters, according to Société Générale. Now, analysts forecast that second-quarter earnings will mark a trough for quarterly results before a rebound in profits later this year, according to DataTrek Research.
Around 81% of companies have been beating earnings estimates, according to Société Générale. Photo: BRENDAN MCDERMID/REUTERS

Later this week, traders will be parsing results from two of the biggest companies in the world, Apple and Amazon.com. Investors have piled into tech behemoths in a wager that they will benefit from a boom in artificial intelligence.

Shares of semiconductor manufacturing company ON Semiconductor were some of the top gainers in the S&P 500, adding 2.5%, after disclosing strong financial results. SoFi shares jumped 20% on Monday after reporting a strong second quarter and offering expectations-topping profit guidance for the rest of the year. Monday’s jump puts SoFi shares up nearly 150% year to date, more than making up for their 71% decline in 2022.

Still, some investors expressed caution about the big run-up in stocks this year. There is one big reason to be cautious on stocks right now, and it has nothing to do with corporate earnings or the economy, said David Sadkin, partner at Bel Air Investment Advisors, which oversees roughly $10 billion in assets. “The biggest reason for fear right now is the bullish sentiment,” Sadkin said. He said he is being conservative with where he parks his clients’ cash, allocating money to bonds and cash-like investments, especially with yields still high.

The yield on the 10-year Treasury note ascended for a third consecutive month to 3.956% in July.