Technology companies led gains in the S&P 500 index in July, helping push both the Communications Services and Information Technology sub-sectors higher as Twitter Inc., Facebook Inc. and Alphabet Inc. all posted better-than-expected second-quarter earnings.
Communications stocks posted a total return of 3.4% in July, while information technology rose 3.3%, helping the broader S&P 500 to a 1.4% advance, its second consecutive monthly gain. Twitter registered the biggest gain among stocks on the index with a 21.2% advance after it reported an 18% year-over-year increase in revenue and monetizable daily users by 14% to 122 million.
Rick Pendergraft, founder of independent investment research firm Pendergraft Research, said in an interview that big tech's strong earnings results have defied largely bearish sentiments on Wall Street, adding to much of the gains seen for the S&P 500 in July.
"Low expectations made it much easier for these companies to clear the hurdle," Pendergraft said.
Twitter's revenues came in at $841 million for the second quarter, ahead of the expected $829.1 million, while the number of monetizable daily active users — users who see adverts — rose 14% year over year to 139 million.
Facebook also beat expectations with total revenue of $16.9 billion, a rise of 28% year over year. However, the subsequent gain in the share price was paired by the announcement of an FTC investigation into the company's business practices.
The three weakest performing stocks were all in healthcare, with Align Technology Inc. (-23.6%), Nektar Therapeutics (-20%) and Illumina Inc. (-18.7%) propping up the S&P 500. The healthcare sector was 1.6% down on the month.
The energy sector had the toughest month, losing 1.8% overall amid a decline in oil prices, with Cabot Oil & Gas Marketing Corp., Apache Corp. and Cimarex Energy Co. among the bottom 10 shares. Oil prices have subsequently taken a further knock as the threat of further U.S. tariffs on Chinese goods adds to anxiety about global growth.