In an impressive display of resilience, US equity indexes rallied significantly, spearheaded by the technology sector, while government bond yields also climbed in the wake of a notable decline in weekly jobless claims. This development has dampened speculation surrounding a sharp economic slowdown for the US.
The Nasdaq Composite surged 2.8%, closing at 16,657.7, while the S&P 500 followed suit with a 2.3% rise to 5,317.5, and the Dow Jones Industrial Average saw a 1.7% increase to 39,423.3 during midday trading on Thursday. This broad-based rally saw all sectors participate, with technology, communication services, and industrials emerging as the standout performers.
The CBOE's Volatility Index (VIX), often referred to as the fear gauge in investment circles, experienced a substantial dip of 9.3%, resting at 25.26. This decline reflects the market's confidence as macroeconomic indicators do not support claims of a decelerating economy, especially in light of last week's disappointing nonfarm payroll numbers for July.
The most recent data showed US initial jobless claims decreasing by 17,000 to 233,000 for the week ending on August 3, representing a decrease from an upwardly revised figure of 250,000 in the previous week. Analysts had anticipated a smaller reduction, projecting jobless claims to drop to about 240,000.
The economists at Stifel, including Lindsey Piegza, noted that "an unexpected drop in jobless claims offers a welcome positive indication of labor market conditions, softening concerns of more precipitous weakness following a rather discouraging jobs report." Furthermore, wholesale inventories remained unchanged in June from a prior increase of 0.2%, as anticipated by a survey conducted by Bloomberg, following a slightly higher increase of 0.5% in May.
Treasury yields predominantly rose, with the 10-year yield increasing by 4.9 basis points to 4.01%, while the two-year yield was also up by 4.5 basis points, reaching 4.04%. These changes indicate a prevailing risk-on sentiment among investors. Turning to corporate updates, Morgan Stanley revealed in a note released on Thursday that Monster Beverage's ($MNST) revenue growth has decelerated in both Q2 and July, closely reflecting a downturn presently transpiring within the energy drink sector.
They added, "Softness is particularly acute in the energy category given its correlation to the more macro-sensitive gas and convenience channel, which is currently experiencing declining consumer traffic. This is particularly detrimental for Monster Beverage given its focus on lower to middle-income consumers." As a result, shares of Monster Beverage plummeted more than 12% during intraday trading, positioning them among the poorest performers in both the S&P 500 and Nasdaq indexes.
McKesson ($MCK) reported overnight that its fiscal Q1 sales did not meet forecasts, resulting in a nearly 12% drop in share value during intraday trading, marking it as the steepest decliner within the S&P 500. Conversely, Eli Lilly ($LLY) raised its full-year outlook on Thursday after posting second-quarter results that surpassed expectations, driven by heightened demand for its diabetes treatment, Mounjaro, and weight-loss medication, Zepbound.
Shares of Eli Lilly soared 8.4% intraday, emerging as the top gainer on the S&P 500. On the commodity front, West Texas Intermediate crude oil experienced a modest increase of 1.1%, reaching $76.09 a barrel, while gold prices surged by 1.2% to $2,461.61 per ounce, and silver advanced 2.5%, hitting $27.62..