As investors continue to debate how quickly the Federal Reserve should cut interest rates, two new economic indicators on Thursday eased fears of a recession.
New Census Bureau data shows retail sales rose 1% in July, beating Wall Street expectations of 0.4%. Meanwhile, the number of new unemployment insurance claims fell more than expected last week.
New data from the Labor Department shows that 227,000 new jobless claims were filed in the week ending August 10, down from 234,000 the previous week and below economists’ expectations of 235,000. Ta.
The two reports counter concerns that a major slowdown in the U.S. economy is imminent after a weaker-than-expected July jobs report that triggered the worst stock market decline of the year. be. Stocks rose on Thursday, with all three major averages up about 1% as the S&P 500 (^GSPC) headed for its best weekly return in nine months.
“All of a sudden, things started coming together,” Yun Yu Ma, chief investment officer at BMO Wealth Management US, told Yahoo Finance. “And what looks almost like a Goldilocks scenario in terms of data is a big change from where we were a week or so ago when the market was down.”
“I think we are well on our way to a soft landing,” he said.
Economists had little concern about the details of Thursday’s retail sales report. Excluding automobiles and gasoline, sales rose 0.4% in July, beating consensus expectations for a 0.2% rise. The control group in Tuesday’s release, which excludes some volatile categories and factors into the quarter’s gross domestic product numbers, rose 0.3% in July, beating expectations for a 0.1% increase.
Automotive and parts dealers led the category growth, increasing by 3.6%, while sales at electronics and electronics stores increased by 1.6%.
“July’s retail sales report had little to grab onto for permabearers as retail sales rebounded, driven by a recovery in auto sales, but sales for the control group “The number is increasing, which is encouraging.” The Capital Economics team wrote in a note:
Investors backed off on calls for the Fed to begin easing more aggressively after a positive report on spending and data showing lower-than-expected jobless claims.
Read more: Fed’s 2024 predictions: What experts say about possible rate cuts
As of Thursday morning, markets were pricing in about a 75% chance that the U.S. Federal Reserve would cut interest rates by 25 basis points. A week ago, markets were supporting the Fed’s 50 basis point (bp) rate cut due to concerns about an impending economic downturn.
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“The Fed should soon begin normalizing policy with gradual rate cuts, but there are no signs that the economy needs significant easing,” Tom Simmons, an economist at Jefferies, said in a note to clients on Thursday. No,” he said.
People shop at a Walmart Superstore in Secaucus, New Jersey on July 11, 2024. (AP Photo/Eduardo Munoz Alvarez) (ASSOCIATED PRESS)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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