S&P 500 Completes Best Month Since 2020, Shrugging Off Fed Rate Hike

The SPDR S&P 500 ETF Trust SPY completed its best month since 2020 in July despite another aggressive Federal Reserve interest rate hike and ongoing inflation concerns.

On Wednesday, the Federal Reserve announced it's raising the fed funds interest rate target by 0.75% to a new range of between 2.25% and 2.5%, its second 0.75% rate hike in two months. Prior to June, the Fed had not raised rates by 0.75% or higher in a single month since 1994.

A day after Fed Chair Jerome Powell said he does not believe the U.S. economy is in a recession, the Bureau of Economic Analysis announced on Thursday that U.S. GDP dropped 0.9% in the second quarter. The second-quarter decline comes on the heels of a 1.6% drop in U.S. GDP in the first quarter, and two consecutive quarters of negative GDP growth is generally considered a strong recession indicator.

On Friday, the Bureau of Economic Analysis reported the personal consumption expenditures price index increased by 6.8% year-over-year in the month of June, the highest inflation reading in any month since 1982. Core PCE, which excludes volatile food and energy prices and is the Fed's preferred inflation gauge, was up 4.8%, exceeding analyst estimates of a 4.7% gain.

On Wednesday, Spirit Airlines Incorporated SAVE and Frontier Group Holdings Inc ULCC scrapped a potential merger deal first announced back in February. Within hours of the deal's termination, Spirit accepted a $3.8-billion buyout offer from JetBlue Airways Corporation JBLU priced at $33.50 per Spirit share that could potentially create the fifth-largest U.S. airline.

High Energy: Chevron Corporation CVX shares traded higher on Friday after the oil and gas giant reported record profits in the second quarter amid soaring energy prices.

Investors will get more quarterly earnings reports from PayPal Holdings Inc PYPL, Uber Technologies Inc UBER and Advanced Micro Devices, Inc. AMD on Tuesday and Occidental Petroleum Corporation OXY on Wednesday.

S&P 500 companies that generate at least half of their sales outside of the U.S. have reported 10.2% earnings growth so far in the second quarter compared to just 1.2% earnings growth for companies generating more than half of their sales domestically, according to FactSet.

Economic Numbers: In the week ahead, investors will get key economic updates on Wednesday when Eurostat releases its June Eurozone Retail Sales report and on Friday when the U.S. Labor Department releases its July jobs report.

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