In a significant upswing for US equity markets, benchmarks displayed robust growth on Thursday, as Treasury yields also surged. The latest economic data and corporate earnings provided a much-needed boost to investor sentiment. The Nasdaq Composite soared by 2.3%, closing at 17,594.5, while the S&P 500 recorded a gain of 1.6%, finishing at 5,543.2.
The Dow Jones Industrial Average experienced an increase of 1.4%, ending the day at 40,563.1. Notably, sectors such as consumer discretionary and technology were the standout performers, while real estate lagged, being the only sector to register a decline. The utilities sector remained relatively stable with little change throughout the day.
From an economic perspective, US retail sales exceeded expectations for July, as reported by the Census Bureau. Growth was predominantly driven by increased spending on automobiles and electronics, contributing positively to consumer confidence and overall economic health. On Wednesday, official data revealed that the annual consumer inflation rate unexpectedly slowed in the previous month.
This development has bolstered expectations regarding potential adjustments to the Federal Reserve's monetary policy, with analysts contemplating a possible easing approach as early as September. "Employment trends appear to be slowing, and with inflation showing more favorable behavior in recent reports, it would require a significant jolt from retail sales to change the current trajectory regarding rate cuts," stated TD in a client note on Thursday.
The financial services firm maintains an outlook anticipating three quarter-point rate cuts from the Fed throughout the remainder of the year. Moreover, the weekly unemployment insurance applications in the US saw an unexpected drop. However, the four-week moving average for ongoing claims remained at a peak level not seen since November 2021, according to the Department of Labor.
Meanwhile, confidence among US homebuilders remains subdued, maintaining its lowest level since December 2023. Elevated interest rates and high home prices continue to dampen sentiment in the housing market, as indicated by data from the National Association of Home Builders and Wells Fargo. In the manufacturing sector, New York's activity showed a contraction, which was less severe than expectations for August.
Conversely, reports indicated that the Mid-Atlantic region of the US posted a surprising negative reading, reflecting declines in new orders and shipments. On the Treasury yields front, the two-year yield surged by 14.6 basis points, reaching 4.09%, while the 10-year rate increased by 9.9 basis points to settle at 3.92%.
Turning to corporate news, shares of Cisco Systems ($CSCO) experienced a significant boost, climbing 6.8% and making it the leading performer on the Dow. This surge followed the company’s release of fiscal fourth-quarter results, which, although showed a year-over-year decline, surpassed analyst expectations.
The networking equipment maker also announced a restructuring plan projected to affect around 7% of its global workforce. Walmart ($WMT) also performed commendably, ranking as the second-highest gainer on the Dow with a 6.6% increase. The retail giant raised its full-year expectations, surpassing initial forecasts, following second-quarter results that exceeded market estimates across all segments.
In another noteworthy update, Deere ($DE) upheld its guidance for full-year net income amid declining fiscal third-quarter results, which still managed to outpace Wall Street expectations. Consequently, shares rallied by 6.3%. On the downside, Fair Isaac ($FICO) saw its shares decline by 4.2%, marking the sharpest drop in the S&P 500 for the day.
In the commodities market, West Texas Intermediate crude oil prices rose by 1.3%, reaching $77.96 per barrel. Precious metals also experienced upward movement, with gold increasing by 0.5% to $2,492.80 per troy ounce, and silver jumping an impressive 3.9% to $28.40 per ounce..