Stocks soar, and bond yields rise as robust retail and labour data signal economic resilience
Stocks surged, and bonds fell as strong retail spending and labour market data highlighted the strength of the US economy, easing fears of a potential recession, according to BNN Bloomberg.
The S&P 500 extended its rally, gaining 6.6 percent over six days, marking its best performance since November 2022. Treasury yields rose sharply, particularly in shorter maturities, as retail sales exceeded expectations and jobless claims hit their lowest levels since early July.
Walmart Inc., often seen as an indicator of economic health, saw its stock rise on a solid outlook. This boost, combined with positive economic data, led swap traders to reduce their expectations of aggressive Federal Reserve rate cuts.
Bret Kenwell of eToro noted, “We’re back to an environment where good news is good news and bad news is bad news,” indicating that the strong retail sales figures eased concerns about a possible recession.
The S&P 500 climbed 1.6 percent, the Nasdaq 100 rose 2.5 percent, and the Russell 2000, representing smaller firms, also increased by 2.5 percent. Meanwhile, Wall Street’s fear gauge, the VIX, dropped to around 15.
In bond markets, the yield on 10-year Treasuries rose eight basis points to 3.91 percent, with traders scaling back expectations for a significant rate cut in September. The US dollar also strengthened, with the Bloomberg Dollar Spot Index rising 0.2 percent.
Despite the market's positive momentum, some analysts urged caution. Steve Sosnick of Interactive Brokers compared the market's readiness to a scene from ‘The Godfather,’ where characters “go to the mattresses,” suggesting that investors are bracing for potential volatility.
He pointed out that while there is ongoing debate about the nature of the economic landing—whether it will be hard, soft, or bumpy—market participants are prepared for various outcomes.
David Russell at TradeStation observed that a soft landing for the economy is increasingly becoming a reality. He argued that the recent market volatility was more reflective of typical summer seasonality rather than a genuine economic slowdown.
Chris Zaccarelli at Independent Advisor Alliance echoed this sentiment, stating that the strong retail sales data should alleviate some of the pessimism that had dominated earlier in the month.
In the corporate sector, Autodesk Inc. faced scrutiny over its sales strategy, while Deere & Co. reported better-than-expected results, affirming its profit outlook. Nike Inc. saw a surge in its stock after Pershing Square Capital Management disclosed a new stake in the company.
Additionally, Seagram Co. heir Edgar Bronfman Jr. is reportedly close to making an offer for Paramount Global, potentially sparking a bidding war.
Key economic events this week include Japan's tertiary index, US housing starts, and consumer sentiment data from the University of Michigan.
