Topline
The stock market rebound continued Thursday thanks to the latest batch of data depicting a healthier U.S. economy than feared, as major stock indexes almost entirely wipe out losses from the brutal selloff which occurred at the start of August.
Traders work the floor of the New York Stock Exchange on Wednesday.
Key Facts
The blue chip Dow Jones Industrial Average rose 470 points, or 1.2%, by late morning, while the benchmark S&P 500 gained 1.4% and the tech-concentrated Nasdaq rallied 2%.
The rally came after several positive developments before Thursday’s open, including July retail sales which came in much stronger than forecasted, weekly initial unemployment claims which were lower than expected and strong earnings from Walmart, the U.S.’ largest public company by revenues.
The “blowout” retail sales “should lay to rest all of the doom and gloom that was expressed at the beginning of this month,” said Chris Zaccarelli, Independent Advisor Alliance’s chief investment officer, in emailed comments.
The chilling losses from a few weeks back are hardly evident across the three major indexes, with the S&P up 8% from its Aug. 5 low, the Nasdaq up 11% from its August bottom and the Dow up 5% from its nadir this month, gaining about 1,900 points.
Among the most notable risers Thursday were Walmart (shares up 7%), Ulta Beauty (11%), Cisco (8%) and Amazon (4%).
Surprising Fact
The S&P is on pace for its best week since November, up more than 3%.
Key Background
Stocks remain comfortably below their all-time closing highs achieved last month, with the Dow still in a 2% drawdown, the S&P a 3% one and the Nasdaq a 6% one. Still, that pullback is far better than the sharp losses which came a few weeks ago, when the Nasdaq was mired in an almost 15% correction. The summer slide came as investors fretted over the possibility of a recession, peaking Aug. 2 when the U.S. reported a surprise jump in unemployment to the highest jobless rate since 2021. The retail sales and weekly jobless claims data are the latest in a stretch of more encouraging U.S. economic data, as better inflation data earlier this week and last week’s unemployment claims update both caused strong stock bounces previously. All three indexes are still up significantly this year, with the S&P’s 15% return well above its historic average of about 10%.
Contra
Restored faith in the economy and the stock market bounceback likely mean the Federal Reserve will be less aggressive in cutting interest rates, unwelcome news for prospective borrowers and fixed income investors alike. The market prices in just a 26% chance of a 50 basis-point cut at the Fed’s September meeting, down from 85% last Monday, according to CME FedWatch Tool. And just 75 basis points of cuts are prices in as the most likely scenario by year’s end, down from last Monday’s 125 basis points.
Further Reading
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