The stock market saw a positive uptick on Thursday as investors reacted to surprising data on retail sales and jobless claims. Retail sales in July jumped 1%, exceeding analyst expectations of 0.3%. This increase was primarily driven by strong spending in the auto and electronics sectors. The unexpected surge in retail sales was seen as a positive sign for the economy, with Chris Zaccarelli, head of investments at Independent Advisor Alliance, noting that it should dispel any concerns of a downturn.
On the other hand, jobless claims for the previous week came in lower than expected at 227,000, marking a 7,000 decrease from the week before. This decline in jobless claims further reassured investors, especially after July’s jobs data showed weaker than anticipated results. The combination of robust retail sales and a decrease in jobless claims painted a more optimistic picture of the economy, helping to boost investor confidence.
Following the release of this data, Treasury yields rose, with the 10-year bond yield increasing by 12 basis points to 3.947%. This rise in yields indicated that investors were scaling back their expectations for a significant 50 basis point rate cut from the Federal Reserve next month. The positive economic indicators also came on the heels of Wednesday’s consumer inflation figures, which showed a cooling in inflation to 2.9% in July, the lowest level in over three years.
The Bureau of Labor Statistics highlighted that housing inflation played a significant role in the rise in core CPI, accounting for 90% of the increase. While inflation remains above the Fed’s 2% target, the steady progress in cooling inflation without causing a sharp increase in unemployment rates is a positive development. Investors are now anticipating a rate cut by the Fed in September, with a 65% chance of a 25 basis point cut and a 36% chance of a 50 basis point cut, according to the CME FedWatch tool.
In the commodities market, oil futures saw an increase, with WTI crude rising 1.6% to $78.17 a barrel and Brent crude, the international benchmark, climbing 1.5% to $80.95 a barrel. Gold prices also rose by 0.32% to $2,487.50 per ounce. Additionally, the 10-year Treasury yield rose by 12 basis points to 3.947%, while Bitcoin saw a 0.37% increase to $57,592.39.
Overall, the positive data on retail sales and jobless claims, coupled with the easing of inflation, has provided a boost to investor sentiment and confidence in the economy. The market’s reaction to these indicators suggests a more optimistic outlook for the future, with expectations of a potential rate cut by the Federal Reserve in the coming months.