The Stock Market Rallies After Data Calms Economic Slowdown Fears

U.S. stock indexes surged on Thursday following new data indicating that retail spending increased last month, easing some concerns among investors about a potential economic slowdown.

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The S&P 500 rose by 1.6%, marking its sixth consecutive day of gains. The Nasdaq Composite, which is dominated by technology stocks, saw a 2.3% increase, while the Dow Jones Industrial Average climbed 1.4%, adding approximately 550 points.

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Three key data releases helped reassure investors that consumer spending, a critical component of the U.S. economy, remains robust. Retail sales, which track spending in stores, online, and at restaurants, increased by a seasonally adjusted 1% in July compared to the previous month, surpassing economists' expectations. Additionally, weekly jobless claims were slightly lower than anticipated, and Walmart reported strong sales for its most recent quarter. Walmart executives noted that they have not observed any signs of weakening demand, leading to a 6.6% rise in the retailer's shares.

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"The data we've seen over the past 24 hours couldn't be better," said Gina Bolvin, president of Bolvin Wealth Management Group. "We're not in a recession, and economic growth is going to continue."

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Investors had been concerned about a potential economic slowdown after recent reports indicated that job growth had slowed significantly in July and that major U.S. retailers like Home Depot, McDonald's, and Disney had issued warnings about declining consumer spending. However, the latest data provided a more optimistic outlook, reinforcing expectations that the Federal Reserve might lower interest rates by a quarter of a percentage point at its upcoming September meeting. According to CME data, traders in interest-rate futures were placing a 77% likelihood of a quarter-point rate cut next month, up from 64% the previous day. The probability of a larger half-point cut, which some investors had considered necessary to cushion the economy, declined.

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Wall Street's "fear gauge," the Cboe Volatility Index (VIX), dropped to 15.23, its lowest level since late July, indicating reduced investor anxiety.

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Among individual stocks, Ulta Beauty saw its shares jump by 11.2%, making it the best-performing stock in the S&P 500. This surge followed the disclosure that Warren Buffett's Berkshire Hathaway had taken a stake in the beauty company after the market closed on Wednesday.

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Cisco Systems also experienced a significant gain, with its shares climbing 6.8% after the networking-equipment company announced plans to reduce its workforce by 7%, or roughly 6,000 employees.

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In the bond market, the yield on the benchmark 10-year Treasury note edged up to 3.924% from 3.821% the previous day. Bond yields and prices typically move in opposite directions.

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Internationally, the pan-European Stoxx Europe 600 index rose by 1.1%, reflecting broad gains across the continent. Meanwhile, China’s Shanghai Composite increased by 0.9% following data that showed stronger-than-expected growth in retail sales, though this was offset by a decline in property investment.

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