In a significant turnaround, US equity indexes experienced a robust uplift in midday trading this Thursday, driven by stronger-than-expected retail sales data that exceeded projections. This increase effectively tempered speculations surrounding a possible 50 basis-point interest-rate reduction this month, while also alleviating concerns regarding a potentially severe economic slowdown. The Nasdaq Composite rose impressively by 2.1%, reaching 17,551.2.
Meanwhile, the S&P 500 climbed 1.4% to 5,530.3, and the Dow Jones Industrial Average gained 1.2%, settling at 40,483.8. Conspicuously, all market sectors demonstrated positive movements, with the notable exceptions being real estate and utilities. The consumer discretionary and technology sectors emerged as the clear frontrunners in this upward trajectory. Recent data from the Census Bureau revealed that spending surges in sectors such as automobiles and electronics were instrumental in boosting US retail sales.
Specifically, retail sales experienced a 1% increase in July, following a downwardly adjusted decline of 0.2% in June. Economists had anticipated a modest rise of 0.4%, based on a survey conducted by Bloomberg. On an annual basis, retail sales displayed a commendable increase of 2.7% in July, indicating the resilience of consumer spending amidst economic pressures. TD Economist Shernette McLeod articulated that this rebound is noteworthy, especially in light of the growing pressures faced by consumers, including diminishing savings and stagnating wage growth.
Despite the current enthusiasm, McLeod cautioned that consumer spending may still face headwinds as the year progresses towards 2024. Stifel's analysis reinforced the notion that consumer engagement remains a critical driver of economic growth, offering a sense of optimism amid broader economic uncertainties. Meanwhile, Treasury yields exhibited an upward trend, with the 10-year treasury yield advancing by 11 basis points, reaching 3.93%.
The two-year yield soared by 16 basis points to 4.11%, reflecting a burgeoning sense of optimism that the economy is steering away from a hard landing. Notably, the CBOE Volatility Index (VIX) lessened by 3.5%, landing at 15.63, as it continues to retreat from earlier high levels observed in July, when dismal nonfarm payroll results hinted at severe economic repercussions. The expectations for a 50 basis-point reduction in US interest rates on September 18 diminished significantly, dropping to 24% by Thursday afternoon from 36% at the previous day's close and a daunting 55% from just a week earlier.
This decline underscores a market consensus following this week's soft yet not alarming inflation figures, suggesting that the Federal Reserve is unlikely to initiate its policy easing journey with a drastic measure. On the commodities front, West Texas Intermediate crude oil prices surged by 1.8% to $78.36 per barrel, reflecting dynamic shifts within the energy market. In corporate developments, shares of Ulta Beauty ($ULTA) skyrocketed by nearly 12% intraday, marking it as a top performer on the S&P 500 after Berkshire Hathaway (BRK.A) revealed its acquisition of a stake in the renowned beauty retailer.
Moreover, Cisco Systems ($CSCO) experienced a notable 7% jump in its share price, ranking among the top gainers on the S&P 500, Nasdaq, and Dow indices, following the release of its fiscal Q4 results, which experienced a less severe drop in non-GAAP earnings and sales than analysts had forecasted. Cisco also presented a restructuring plan aimed at enhancing its operational efficiency. On the precious metals front, gold prices edged up by 0.6%, reaching $2,495.52 per ounce, while silver saw an impressive increase of 4.3%, priced at $28.51. Overall, the market's response to the latest data reveals underlying confidence in the economy's resilience, at least in the short term, as consumers continue to drive growth despite prevailing challenges..