Despite concerns about a slowing economy, stocks rallied on Thursday, marking a significant comeback for major indexes. The Nasdaq Composite and S&P 500 both achieved a six-day winning streak, boosted by strong retail sales and encouraging labour data that eased recession fears. The Dow Jones Industrial Average also made impressive gains, surging over 550 points
Despite concerns about a slowing economy, stocks rallied on Thursday, marking a significant comeback for major indexes. The Nasdaq Composite and S&P 500 both achieved a six-day winning streak, boosted by strong retail sales and encouraging labour data that eased recession fears. The Dow Jones Industrial Average also made impressive gains, surging over 550 points as investor confidence was reignited. This rally comes on the heels of favourable inflation reports and robust earnings from key companies like Walmart and Cisco Systems, highlighting a renewed sense of optimism in the markets as they recover from recent volatility.
Key Takeaways:
Nasdaq and S&P 500 Extend Winning Streak: The Nasdaq Composite jumped 2.34% to close at 17,594.50, while the S&P 500 rose by 1.61% to end the day at 5,543.22, continuing its own six-day winning streak. Both indexes have shown remarkable resilience, with the S&P 500 now just 2% below its record high after rebounding roughly 8% from its intraday low on August 5.
Dow Jones Surges Over 550 Points: The Dow Jones Industrial Average made a significant leap, rising 554 points, or 1.39%, to close at 40,563.06. This surge was fuelled by stronger-than-expected retail sales data and a drop in jobless claims, which eased recession fears.
Retail Sales Exceed Expectations: US retail sales saw a robust 1% increase in July, far exceeding the forecasted 0.3% rise. This marks the most substantial monthly gain in nearly 18 months, signalling strong consumer spending. The surge was led by a 3.6% rebound in motor vehicle and parts sales, alongside gains in electronics (1.6%) and food and beverage outlets (0.9%).
US Jobless Claims Hit One-Month Low: Initial claims for unemployment benefits fell by 7,000 to 227,000 for the week ending August 10, marking the lowest level in a month. Continuing claims also dropped by 7,000, reaching 1.864 million. This data suggests that the labour market remains relatively stable, countering fears of an impending recession.
European Markets Boosted by US Data: European stocks benefited from the positive momentum in the US markets, with the Stoxx 600 index rising 1.15%. The technology sector led the gains, up 2.54%, reflecting strong global interest in tech stocks. The FTSE 100 in the UK climbed 0.80% to 8,347.35, while France's CAC 40 closed 1.2% higher at a two-week peak of 7,422. The European markets were lifted by encouraging US retail sales data and inflation figures, which eased investor concerns about economic slowdowns on both sides of the Atlantic.
Asian Markets Rally on Mixed Economic Data: Asian markets largely moved higher, with Japan’s Nikkei 225 rising 0.78% to close at 36,726.64, marking its fourth consecutive day of gains. The rally in Japan was driven by stronger-than-expected GDP growth in the second quarter, which showed a 0.8% increase quarter-on-quarter, surpassing expectations of a 0.5% rise. However, China presented a mixed picture; while retail sales grew by 2.7% year-on-year, beating forecasts, industrial output slightly missed expectations, growing by 5.1%. Despite these mixed signals, the broader Topix index in Japan also gained 0.73%, reflecting investor optimism in the region. Meanwhile, Hong Kong’s Hang Seng index saw marginal declines, and Australia’s S&P/ASX 200 edged up by 0.19%. South Korea and India markets were closed for a public holiday.
Crude Oil Rebounds Amid Easing Recession Fears: US crude oil futures rose by 1.30%, closing at $77.98 per barrel, while Brent crude gained 1.43%, reaching $80.89 per barrel. This rebound followed two days of losses and was driven by the strong retail sales data, which eased some of the recession fears that had recently weighed on the market.
UK Economy Grows 0.6% in Q2: The UK economy expanded by 0.6% in the second quarter of the year, aligning with expectations and marking continued growth following a 0.7% increase in the first quarter. While economic activity stalled in June, with GDP flatlining, the construction and production sectors showed positive contributions, rising by 0.5% and 0.8%, respectively.
FX Today:
Euro Under Pressure as Dollar Strengthens: The EUR/USD pair dropped to 1.0950, closing down by 0.37% at 1.0971 after stronger-than-expected US retail sales and jobless claims data strengthened the dollar. The pair struggled to maintain its position above the 1.1000 mark, indicating a potential shift in momentum. From a technical perspective, the 20 Simple Moving Average (SMA) at 1.0890 serves as immediate support, while resistance is now set at 1.1005. The EUR/USD's future trajectory will likely hinge on upcoming US economic indicators and the pair's ability to hold above the critical 1.0950 level.
Pound Recovers Amid Positive US Economic Data: The GBP/USD pair managed to bounce back, trading above 1.2850 following the release of strong US retail sales data. The recovery was supported around 1.2790, with the pair bouncing off the 1.2800 level. Despite this positive movement, GBP/USD encountered resistance near 1.2850, failing to break higher and secure a new two-week high. The pair remains confined within a tight trading range, with 1.2900 as key resistance and 1.2800 as critical support.
Yen Weakens as Dollar Gains Momentum: The USD/JPY pair advanced to 149.27, reaching a two-week high following strong US economic data that reduced fears of an economic slowdown. The positive data shifted expectations away from a significant Fed rate cut, driving the pair above the key resistance level at 149.36. The pair is now targeting the psychological 150.00 mark, with support found around 148.22, reflecting the continued bullish sentiment in the market.
Gold Steady Despite Rising Treasury Yields: Gold held its ground above $2,450 during Thursday's American session, even as the 10-year US Treasury yield climbed to 3.921%. After briefly dipping toward $2,430 in response to stronger-than-expected US economic data, the precious metal quickly recovered. Technical indicators suggest a neutral-to-bullish outlook, with support around $2,438.80. Resistance is seen at $2,471.10, and a break above this level could open the door for further gains toward $2,495.00.
Market Movers:
Walmart Shares Jump After Strong Earnings Report: Walmart’s stock surged 6.6% after the retail giant exceeded Wall Street’s expectations in its quarterly earnings report. The company not only topped analyst estimates but also raised its full-year outlook, forecasting sales growth between 3.75% and 4.75% and adjusted earnings of $2.35 to $2.43 per share.
Ulta Beauty Soars on Berkshire Hathaway Investment: Ulta Beauty’s stock surged by over 11% after a regulatory filing revealed that Warren Buffett’s Berkshire Hathaway took a stake worth $266 million in the beauty retailer during the second quarter. While the bet is relatively small compared to Berkshire’s overall equity portfolio of more than $300 billion.
Cisco Systems Gains on Strong Earnings and Workforce Cuts: Cisco Systems saw its shares rise 6.8% after reporting better-than-expected fiscal fourth-quarter results. The company’s announcement of a global workforce reduction, amounting to 7% of its employees, also contributed to the positive market reaction. Cisco is implementing a restructuring plan that will result in $1 billion in pretax charges.
Dell Technologies Climbs After JPMorgan Upgrade: Dell Technologies’ stock advanced 7.1% after JPMorgan added the company to its focus list, citing potential upside following a recent pullback in the stock. The market responded positively to this endorsement, as investors were reassured by the potential for future growth, despite a recent downgrade in the price target by Citi.
Lumentum Holdings Surges on Strong Earnings: Lumentum Holdings saw its stock soar by 14.8% after posting better-than-expected fiscal fourth-quarter results. The company reported earnings of 6 cents per share, excluding items, significantly beating the FactSet estimate of 2 cents per share. Revenue also exceeded forecasts, coming in at $308.3 million compared to the expected $301.4 million, driving the stock sharply higher.
Deere Jumps on Positive Quarterly Results: Deere’s shares increased by 6.3% after the agricultural machinery manufacturer reported strong fiscal third-quarter results. The company earned $6.29 per share on $11.39 billion in revenue, surpassing the expected profit of $5.63 per share on $10.84 billion in revenue, according to LSEG. These robust figures highlighted Deere’s solid performance, leading to a significant boost in its stock price.
Dillard’s Plummets on Disappointing Earnings: Dillard’s shares fell sharply by 10.8% after the department store chain reported disappointing quarterly results. Earnings per share dropped to $4.59 in the fiscal second quarter, down from $7.98 per share a year ago, while revenue missed estimates. The company’s management highlighted a challenging consumer environment and higher expenses.
As the markets close out a volatile week, the resilience of major indexes like the Nasdaq Composite, S&P 500, and Dow Jones underscores a renewed investor confidence driven by strong US retail sales and labour data. Despite ongoing concerns about economic slowdowns, particularly in Europe and Asia, the positive momentum in US markets, coupled with robust corporate earnings from giants like Walmart and Cisco Systems, has fuelled a broad-based rally. With inflation showing signs of easing and the labour market remaining stable, the investors remain vigilant amid the ever-changing economic landscape.
