Aug 1 (Reuters) – Wall Street tumbled on Monday, with declines in energy companies weighing on gains at Boeing (BA.N) as investors digested the U.S. stock market’s biggest monthly gains in two years.

Stocks gave up some of last week’s strong rally, fueled by bets that the Federal Reserve might not be as aggressive with interest rate hikes as some had feared.

Also helped by stronger-than-expected second-quarter results, the S&P 500 and Nasdaq posted their biggest monthly percentage gains in July since 2020.

Some investors became more cautious on Monday following this recent rally.

“There are still a lot of questions about whether we’re really out of the woods economically, and we probably aren’t,” said Tom Martin, senior portfolio manager at GLOBALT Investments in Atlanta. “We’re not even close to the (economic) effects of the Fed raising interest rates.”

The Federal Reserve says it aims to tame inflation and calm demand with interest rate hikes, but some investors and analysts fear its aggressive moves could drive up unemployment and cripple the economy.

U.S. manufacturing activity slowed less than expected in July, with signs that supply constraints are easing, according to a report. Read more

The data follows surveys indicating that factories across Asia and Europe struggled to gain momentum in July amid falling global demand and tough COVID-19 restrictions in China. slowed down production. Read more

Oil prices fell on demand concerns, which in turn weighed on the energy sector. The S&P 500 Energy Index (.SPNY) fell 3% and was the biggest drop among 11 sectors.

Data on factory activity will be followed on Friday by the monthly U.S. jobs report, which will be analyzed for clues about the Fed’s next steps in its fight against decades-high inflation.

The US central bank has raised interest rates by 2.25 percentage points so far this year and has pledged to be data-driven in its approach to future hikes.

Boeing Co (BA.N) gained around 6% after Reuters reported that the US aviation regulator had approved the aircraft manufacturer’s inspection and modification plan to resume deliveries of 787 Dreamliners. Read more

Wall Street fell in 2022, but the earnings season showed companies were much more resilient in the second quarter than expected. Of 283 S&P 500 companies that reported results, 78% beat earnings estimates, according to Refinitiv data. The long-term average is 66%.

As of 1:52 p.m. ET, the S&P 500 was down 0.58% at 4,106.36 points.

The Nasdaq fell 0.52% to 12,325.94 points, while the Dow Jones Industrial Average fell 0.36% to 32,728.07 points.

Meanwhile, U.S. House of Representatives Speaker Nancy Pelosi was scheduled to visit Taiwan on Tuesday. China has warned that its military will “never sit idly by” if it visits the self-governing island claimed by Beijing. Read more

PerkinElmer Inc (PKI.N) jumped 6.3% after the medical diagnostics company said it would sell some of its business and brand name to private equity firm New Mountain Capital for a up to $2.45 billion in cash. Read more

Falling stocks outnumbered rising stocks in the S&P 500 (.AD.SPX) by a ratio of 2.0 to one.

The S&P 500 posted 5 new highs and 31 new lows; the Nasdaq recorded 55 new highs and 87 new lows.

Reporting by Aniruddha Ghosh, Devik Jain and Bansari Mayur Kamdar in Bengaluru, and Noel Randewich in Oakland, California; Editing by Aurora Ellis

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