[New York Stock Market] End of US Recession Concerns?…Nasdaq Up 2.34%

The three major indices of the U.S. New York stock market all closed higher on the 15th (local time). This was influenced by retail sales exceeding market expectations and weekly unemployment claims falling below market forecasts, alleviating concerns about an economic recession.

On this day in the New York stock market, the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 40,563.06, up 554.67 points (1.39%) from the previous trading day. The S&P 500, focused on large-cap stocks, rose 88.01 points (1.61%) to 5,543.22, and the tech-heavy Nasdaq index jumped 401.89 points (2.34%) to close at 17,594.5.

[Image source=AFP Yonhap News]

All three major indices are trading higher than at the close on July 2, when concerns about an employment shock were spreading following the release of the July employment report. This marks a recovery to levels before the global stock market crash on the 5th.

The retail sales announced on this day recorded figures that surpassed market expectations. According to the U.S. Department of Commerce, July retail sales, seasonally adjusted, rose 1% month-over-month to $709.7 billion. This significantly exceeded both the previous month’s 0.2% decline and the market forecast of a 0.3% increase.

Retail sales account for about one-third of total U.S. consumption and two-thirds of the gross domestic product (GDP). It is a key indicator that investors watch as it reflects Americans' spending power in a high-interest-rate environment. Surpassing market expectations, it showed that despite concerns about economic slowdown, U.S. consumer spending still maintains solid resilience.

According to the U.S. Department of Labor, weekly new unemployment insurance claims for the period August 4?10 were 227,000 on a seasonally adjusted basis. This was a decrease of 7,000 from the previous week and below the market expectation of 236,000.

Stephanie Ross, Chief Economist at Wolf Research, said, "Strong retail sales and unemployment claims remind us that the sky is not falling on the U.S. economy." She added, "Economic momentum has cooled, but it does not seem to be heading straight into a recession."

Aditya Barve of Bank of America (BoA) stated, "The July retail sales data aligns with the economic outlook for a soft landing. We maintain the view that the Federal Reserve (Fed) will cut interest rates twice by 0.25% each in September and December this year."

Alberto Musalem, President of the Federal Reserve Bank of St. Louis, said on the same day that the appropriate time to cut rates is approaching. Raphael Bostic, President of the Atlanta Fed, said in a foreign media interview that he is open to cutting rates in September.

Currently, the market is viewing the possibility of a baby step (0.25 percentage point cut) higher than a big cut (0.5 percentage point cut). According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on this day reflected a 23.5% chance that the Fed will cut rates by more than 0.50 percentage points at the September FOMC meeting.

Walmart, the largest U.S. retailer and a Dow component, posted solid quarterly results and raised its annual earnings outlook on this day. Walmart reported that its second-quarter sales increased 4.8% year-over-year to $169.34 billion. Adjusted earnings per share (EPS) rose sharply by 9.8% year-over-year to $0.67, beating market expectations on both sales and EPS. Walmart’s stock price rose 6.58% compared to the previous day.

Major tech stocks all closed higher. Electric vehicle maker Tesla and AI leader Nvidia rose 6.34% and 4.05%, respectively, from the previous day. Nvidia rose for the fourth consecutive trading day, regaining the $3 trillion market capitalization level. Amazon (4.4%), Apple (1.35%), and Microsoft (1.18%) also all advanced. Network equipment maker Cisco Systems jumped 6.8%. Cisco announced after the previous day’s close that its fiscal fourth-quarter earnings and sales exceeded expectations and that it would cut 7% of its global workforce.

Cosmetics company Ooltabeauty surged 11.17% after it was reported that Berkshire Hathaway, led by Warren Buffett, invested in the company.

U.S. Treasury yields showed an upward trend. The 2-year U.S. Treasury yield, sensitive to monetary policy, rose 14.4 basis points (1 bp = 0.01 percentage point) from the previous trading day to 4.091%, while the 10-year U.S. Treasury yield, a global bond yield benchmark, moved up 0.5 basis points to 3.917%.

Following the better-than-expected U.S. retail sales report, oil prices rose on expectations of increased demand. Concerns about demand decline, which had recently pressured oil prices, eased. West Texas Intermediate (WTI) crude on the New York Mercantile Exchange closed at $78.16 per barrel, up $1.18 (1.53%) from the previous trading day. Brent crude, the global oil price benchmark, closed at $81.04 per barrel, up $1.28 (1.60%) from the previous day.