US stock indexes rose on Thursday as investors reacted positively to the latest jobless claims data released by the Labor Department. The report showed a significant drop of 17,000 in jobless claims from the previous week, bringing the total number to 233,000. This marked the largest decrease in claims in almost a year and came in below the estimated 240,000. The positive data provided a boost to the market and instilled confidence in the labor market following concerns raised by the weak nonfarm payroll report for July.
Chris Zaccarelli, CIO for Independent Advisor Alliance, noted that while signs of slowing growth are evident, it is hard to believe that a recession has already begun given the current GDP growth rate of +2.8%. He emphasized caution but suggested that the panic seen earlier in the month may have been exaggerated. The 10-year Treasury yield rose after the report, climbing three basis points above 4%.
The jobless claims data comes on the heels of a disappointing jobs report and a surprise rate hike by the Bank of Japan, which led to a historic three-day sell-off in the market. Investors are closely watching the Federal Reserve’s next move and are currently pricing in a 100% chance of rate cuts in September, according to the CME FedWatch tool. While some economists have called for emergency rate cuts, experts believe the Fed will likely wait until September to make any adjustments.
JPMorgan analysts raised their expectations of a recession by the end of the year to 35%, up from their previous figure of 25% at the beginning of July. This increase in recession probability reflects growing concerns about the economic outlook. The next key data point for investors will be the inflation reading next week, with the July consumer price index report set to be released on August 14.
In commodities, bonds, and crypto markets, oil futures were lower with WTI crude down slightly to $75.20 a barrel and Brent crude falling to $78.18 a barrel. Gold prices rose by 1.23% to $2,412.05 per ounce. The 10-year Treasury yield increased by three basis points to 4.003%, while Bitcoin saw a 0.37% rise to $57,592.39.
Overall, the positive jobless claims data provided a much-needed boost to the market, easing concerns about the labor market and potential recession. Investors will continue to monitor economic indicators and central bank actions in the coming weeks to gauge the health of the economy and make informed investment decisions.