Wall Street's major indexes ended Thursday's trading session with significant gains, with the Nasdaq jumping more than 2%. The gains were helped by fresh retail sales data for July, which confirmed the stability of consumer spending, dispelling fears of a possible recession in the U.S. economy.
Nine of the S&P 500's 11 key sectors advanced, led by consumer staples and information technology.
July's retail sales report showed a 1.0% increase, up sharply from a downwardly revised 0.2% fall in June. The data helped ease concerns about a potential economic slowdown caused by last week's rise in unemployment.
Walmart, one of the world's largest retailers, surged 6.58% after raising its profit forecast for the second time this year, as U.S. consumers flocked to its stores in search of affordable essentials.
Rivals were also on the rise, with Target up 4.35% and Costco up 1.69%.
Separate data also helped boost investor sentiment. The number of new U.S. jobless claims unexpectedly fell last week, adding to the market's strength.
"We are seeing the wall of worry begin to crumble as sentiment improves and fundamentals are driving risk appetite," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "Retail sales data beat expectations and inflation is in the low range, creating a favorable environment for equity prices to rise."
U.S. Treasury yields rose sharply after the release of new economic data. In particular, two-year and 10-year bonds showed gains, which is due to a change in trader sentiment. The probability of the Federal Reserve cutting rates by 25 basis points has now increased to 76.5%, compared to 65% before the release of the data.
Market participants are closely watching the latest economic data this week before Federal Reserve Chairman Jerome Powell delivers a key speech next week in Jackson Hole. That event could have a significant impact on the markets as investors await cues on the future of monetary policy.
The Dow Jones Industrial Average rose 554.67 points, or 1.39%, to close at 40,563.06. The S&P 500 gained 88.01 points, or 1.61%, to close at 5,543.22. The top gainer, the Nasdaq Composite, rose 2.34%, up 401.90 points to close at 17,594.50.
Cisco Systems posted a stunning 6.8% gain after announcing plans to grow first-quarter revenue above expectations and cut 7% of its global workforce.
Nike shares rose 5.07% after billionaire investor William Ackman announced a new stake, signaling renewed interest in the sportswear maker.
Ulta Beauty soared 11.17% after news that Warren Buffett's Berkshire Hathaway investment fund had acquired a significant stake in the beauty retailer.
Advancing stocks outnumbered declining stocks by a wide margin 3.22-to-1 on the New York Stock Exchange on Thursday. The same pattern was seen on the Nasdaq, where gainers outnumbered decliners by a ratio of 2.66-to-1.
The S&P 500 posted 30 new 52-week highs and only one new low, while the Nasdaq Composite posted 76 new highs and 104 new lows. The numbers underscore a mixed market where companies continue to set new records despite continued volatility.
The situation in global markets is evolving rapidly. Past market turmoil caused by fears of a global economic downturn is quickly fading into the background. Recent data from the US has given investors confidence that the US economy is avoiding a deep crisis. This positive trend has helped calm markets and reduce fears of a possible recession.
Investors are revising their expectations for further actions by the US Federal Reserve. Previously, the probability of the Fed cutting rates by 50 basis points was estimated at 55%, but now the market is showing only a 25% chance of such a significant reduction. This is due to the fact that the recent inflation report for July has allayed fears of drastic action by the Fed.
In Asia, Japan's Nikkei Index stood out, jumping 3% on Friday to post its best weekly performance since April 2020. The index is on track to reclaim its record high despite recent wobbles.
The yen, on the other hand, remains under pressure, having fallen nearly 5% from a seven-month high last week.
It was last trading around 149 to the dollar. Despite the currency's apparent cheapness, volatility is forcing investors to rethink their yen exposure.
With market sentiment shifting, investors remain cautious, although optimism about the US economy is keeping the tone positive. How the Fed will respond to the data remains a key question, and markets will be watching closely, especially as global economic uncertainty continues.
Stock futures point to a positive opening in Europe and the US on Friday. Amid these expectations, investors are focused on UK retail sales data, which will be released in the morning hours in London. Forecasts suggest buyers will return to the market after an unexpected decline in June.
Economists and analysts continue to bet that the Bank of England may cut interest rates further this year. Such a decision is justified by easing inflation pressures and a deterioration in the economic outlook in the UK for the rest of 2024. Lower rates could support the economy, which faces new challenges.
While many central banks around the world are looking to ease monetary policy, Australia is going its own way. Reserve Bank of Australia Governor Michelle Bullock stressed on Friday that it is too early to talk about rate cuts. According to her, the country's core inflation remains too high and the bank continues to closely monitor potential risks to price increases.
The situation in global markets remains dynamic, with investors closely monitoring the actions of central banks. While the UK may be preparing for further rate cuts, Australia, by contrast, is maintaining a cautious approach. These divergent strategies reflect the different economic realities that countries face, and their possible impact on global financial markets will be in focus in the coming months.
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