Top line
The stock market recovery continued on Thursday thanks to the latest data showing a healthier U.S. economy than feared, as major stock indices almost completely erased losses from the brutal sell-off in early August.
Traders work on the trading floor of the New York Stock Exchange on Wednesday.
Key data
The blue-chip Dow Jones Industrial Average rose 390 points, or 1%, by about 10 a.m. EDT, while the benchmark S&P 500 rose 1.1% and the technology-focused Nasdaq gained 1.7%.
The gain came after several positive developments ahead of Thursday’s market open, including significantly stronger-than-forecast July retail sales, lower-than-expected weekly initial jobless claims and strong earnings from Walmart, the U.S.’s largest publicly traded company by sales.
The “explosive” retail sales “should put an end to any doom and gloom expressed earlier this month,” said Chris Zaccarelli, chief investment manager at the Independent Advisor Alliance, in an emailed comment.
The shocking losses of the last few weeks are barely noticeable in the three major indices: The S&P has risen 8 percent since its low on August 5, the Nasdaq has risen 11 percent since its low in August and the Dow has risen 5 percent since its low this month, gaining around 1,900 points.
The biggest gainers on Thursday included Walmart (shares up 6%), Ulta Beauty (9%), Cisco (9%) and Amazon (4%).
Surprising fact
The S&P is on track for its best week since November, up more than 3%.
Important background
Stock prices remain well below their all-time highs from last month, with the Dow still down 2%, the S&P down 3% and the Nasdaq down 6%. Still, this decline is far better than the sharp losses a few weeks ago, when the Nasdaq was mired in a nearly 15% correction. The summer decline came as investors worried about the possibility of a recession. It peaked on August 2, when the U.S. reported a surprise rise in unemployment to the highest rate since 2021. The retail sales and weekly jobless claims data are the latest in a string of more encouraging U.S. economic data, after better inflation data earlier this week and last week’s jobless claims update both sent stocks up sharply. All three indexes are still well up this year, with the S&P’s 15% return well above its historical average of about 10%.
Contra
Restored confidence in the economy and the recovery in equity markets are likely leading the Federal Reserve to cut interest rates less aggressively — unwelcome news for prospective borrowers and bond investors alike. According to the CME FedWatch tool, the market is pricing in just a 26% chance of a 50 basis point rate cut at the Fed’s September meeting — down from 85% last Monday. And by year-end, a rate cut of just 75 basis points is priced in as the most likely scenario — down from 125 basis points last Monday.
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