US STOCKS-Wall Street gains but caution prevails as third-quarter starts

Franchise

01/07/2022 19:47

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    * U.S. factory activity decelerates more than expected in
June
    * Kohl's tumbles after calling off sale to Franchise Group
    * Micron's downbeat forecast sparks chip sell-off 
    * Indexes: Dow up 0.74%, S&P 0.65%, Nasdaq 0.41%

 (New throughout, updates prices, market activity and comments;
adds NEW YORK dateline, changes byline)
    By Stephen Culp
    NEW YORK, July 1 (Reuters) - Wall Street gained ground in
light trading on Friday, the first session of the second half of
2022, as investors headed into the long holiday weekend looking
for the next market-moving catalyst.
    All three major U.S. stock indexes bounced off session lows,
and were last modestly 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 long summer weekend, so it’s
not a big volume day," said Tim Ghriskey, senior portfolio
strategist Ingalls & Snyder in New York.
    Market participants now look to the second-quarter earnings
season, the Labor Department's June employment report, and the
Federal Reserve's monetary policy meeting expected later in
July.
    The microchip sector dropped sharply after Micron Technology
Inc  MU.O  warned of cooling demand.  urn:newsml:reuters.com:*:nL1N2YI0P4
    Micron's shares slid 2.7%, pulling the Philadelphia SE
Semiconductor index  .SOX  down 3.8%.  urn:newsml:reuters.com:*:nL1N2YI1GM
    Worries over waning 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 both new orders input prices.
    ISM's report seemed to back the view that the economy is
cooling and inflation appears to be past its peak. This has
raised questions about whether the Fed will have wiggle room for
a dovish pivot after its second straight 75 basis point interest
rate hike expected in July.
    "The Fed is going to need to see a lot more evidence to
change its mind about further continued interest rate hikes,"
Ghriskey added. "There’s still a lot of uncertainty about the
economy and inflation despite early signs that inflation may
have peaked."
    The Dow Jones Industrial Average  .DJI  rose 227.33 points,
or 0.74%, to 31,002.76, the S&P 500  .SPX  gained 24.73 points,
or 0.65%, to 3,810.11 and the Nasdaq Composite  .IXIC  added
45.03 points, or 0.41%, to 11,073.77.
    Of the 11 major sectors in the S&P 500, utilities  .SPLRCU 
were enjoying the largest percentage gains, while tech  .SPLRCT 
was down the most.
    Second-quarter reporting season begins in several weeks, and
130 of the companies in the S&P 500 have pre-announced. Of
those, 45 have been positive and 77 have been negative, a weaker
negative/positive ratio than a year ago, according to Refinitiv
data.
    The prospect of profit margins taking a hit from bruising
inflation and waning consumer demand will have market
participants listening closely to forward guidance.
    Analysts now expect aggregate second-quarter S&P 500
earnings growth of 5.6%, down from the 6.8% projected at the
beginning of the quarter, per Refinitiv.
    Meta Platforms Inc  META.O  fell 1.5721% after the Facebook
parent's CEO Mark Zuckerberg warned employees to brace for a
deep economic downturn.  urn:newsml:reuters.com:*:nL1N2YH27A
    Department store chain Kohl's Corp shares  KSS.N  tumbled
17.3% following its decision to halt talks of a possible sale to
Franchise Group  FRG.O .  urn:newsml:reuters.com:*:nL4N2YI0RF
    Advancing issues outnumbered declining ones on the NYSE by a
1.70-to-1 ratio; on Nasdaq, a 1.27-to-1 ratio favored advancers.
    The S&P 500 posted one 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)
 ((stephen.culp@thomsonreuters.com; 646-223-6076;))