In a significant turn of events, US equity indexes experienced a notable rise amidst an increase in government bond yields, after the latest weekly jobless claims report indicated a more substantial decline than analysts had anticipated. This unexpected development serves to temper any justifications for speculation regarding a sharp slowdown in the US economy.
The Nasdaq Composite Index surged 2.2%, reaching a value of 16,546.7, while the S&P 500 climbed 1.8% to settle at 5,293.4. Additionally, the Dow Jones Industrial Average recorded a 1.4% increase, rising to 39,310.6 shortly after midday on Thursday. This impressive upward momentum was bolstered by a broad-based rally across all sectors, led predominantly by technology, communication services, and industrials during intraday trading.
Further insights from the CBOE's Volatility Index (VIX), often referred to as the 'fear gauge,' reveal an 11% drop, bringing it down to 25.01. This decrease occurred as macroeconomic data failed to substantiate narratives suggesting that the US economy is on a path of deceleration, especially following the release of last week's disappointing nonfarm payroll figures for July. In terms of economic indicators, initial jobless claims in the US decreased by 17,000, bringing the total to 233,000 for the week ending August 3, in contrast to an upward adjustment of the previous week's figure to 250,000.
Analysts had anticipated a more modest decrease, projecting initial claims to drop to around 240,000, according to a survey conducted by Bloomberg. Furthermore, wholesale inventories remained unchanged in June, consistent with a 0.2% increase in the advance reading, which aligns with expectations from Bloomberg's compiled analysis, while following a slightly larger 0.5% increase in May. Notably, the yields on most Treasury bonds rose, reflecting an overall risk-on sentiment in the market; the 10-year Treasury yield increased by 2.1 basis points to reach 3.99%, while the two-year rate climbed 3.5 basis points to settle at 4.03%.
On the corporate front, financial services giant Morgan Stanley reported on Thursday that Monster Beverage Corporation ($MNST) had experienced a slowdown in revenue growth for the second quarter of the year which has continued into July. This trend correlates with observed weaknesses within the broader energy drink sector.
Morgan Stanley highlighted that the softness is particularly prominent in the energy category, which tends to be influenced by macroeconomic factors affecting gas and convenience channels, reporting a notable decline in consumer traffic. Consequently, shares of Monster Beverage suffered a staggering 11% drop intraday, making it one of the worst performers on both the S&P 500 and Nasdaq indexes. Similarly, McKesson Corporation ($MCK) disclosed that its fiscal first quarter sales growth fell short of market expectations, resulting in a plunge of 12% in its share price during intraday trading, marking it as the steepest decliner on the S&P 500.
However, not all corporate news was negative; Eli Lilly and Company ($LLY) raised its full-year earnings outlook after clocking in stronger-than-expected results for the second quarter. This uptick has been driven by elevated demand for Eli Lilly’s Mounjaro diabetes treatment alongside its weight-loss medication, Zepbound.
As a result, shares of Eli Lilly surged 7.6% intraday, establishing it as the top gainer on the S&P 500 for the day. In commodity markets, West Texas Intermediate crude oil saw a modest increase, rising by 1.1% to a price of $76.04 per barrel..