Consumer confidence in the U.S. economy surged as major stock indexes closed higher on Thursday, with the Nasdaq leading the way, climbing over 2%. The boost came on the heels of July’s retail sales data, which showcased a robust consumer spending pattern, easing concerns about a looming recession in the largest global economy.
Investors reacted positively to the 1.0% rise in retail sales, which followed a previously revised 0.2% drop in June. The unexpected increase alleviated fears of a significant economic downturn, particularly after a recent rise in unemployment. The retail sector’s strength was evident, as nine of the 11 major sectors in the S&P 500 saw gains, led by consumer discretionary and information technology stocks.
Retail giant Walmart posted a remarkable 6.58% increase in its stock price after it once again revised its annual profit forecast upwards, attributing the surge to the steady flow of consumers seeking affordable essentials. Competitors like Target and Costco also saw their shares rise, with gains of 4.35% and 1.69%, respectively. Additionally, a separate report revealed a surprising drop in new unemployment claims, further supporting the market’s optimism.
“The prevailing sentiment is increasingly optimistic as economic fundamentals align with a risk-on approach,” said Terry Sandven, Chief Equity Strategist at U.S. Bank Wealth Management. “With retail sales surpassing expectations and consumer price levels staying within manageable limits, the market environment is conducive to rising equity prices.”
The bond market also reacted, with yields on two-year and 10-year Treasury notes inching up. This shift in yield reflected an increased likelihood of a 25-basis-point rate cut by the Federal Reserve, with trader expectations for a cut rising to 76.5%, up from 65% before the data release. Investors remain focused on the economic reports ahead, particularly as they anticipate Federal Reserve Chairman Jerome Powell’s upcoming speech at the Jackson Hole symposium next week.
The Dow Jones Industrial Average climbed 554.67 points, or 1.39%, to 40,563.06, while the S&P 500 gained 88.01 points, or 1.61%, reaching 5,543.22. The Nasdaq Composite made the largest leap, advancing 401.90 points, or 2.34%, to close at 17,594.50.