Two new economic data eased recession concerns Thursday as investors continued to debate how quickly the Federal Reserve should cut interest rates.
According to New York, retail sales rose 1% in July Census Bureau dataabove Wall Street expectations by 0.4%. Meanwhile, initial claims for unemployment insurance fell more than expected last week.
New data from the Ministry of Labor showed that 227,000 initial unemployment claims were filed in the week ending August 10, up from 234,000 the week before and below the 235,000 economists had expected.
The two reports fight back against concerns about a looming significant slowdown in the US economy after a weaker-than-expected jobs report in July that led to the worst stock market sell-off of the year. Stocks rose Thursday, with all three major averages up about 1%, while the S&P 500 (^GSPC) was on track for its best weekly return in nine months.
“Suddenly things have come together,” Yung-Yu Ma, U.S. chief investment officer of BMO Wealth Management, told Yahoo Finance. “And what almost seems like a Goldilocks scenario for the data is a huge shift from what we had about a week ago when the market sold off.”
He added: “We think the soft landing is firmly in place.”
Economists had little trouble with the details of Thursday’s retail sales report. July sales, excluding cars and gasoline, rose 0.4%, above consensus expectations for a 0.2% increase. The control group in Tuesday’s release, which excludes several volatile categories and factors from gross domestic product value for the quarter, rose 0.3% in July, above estimates of a 0.1% increase.
Motor vehicle and parts dealers led the way in category profits, rising 3.6%, while electronics and appliance stores saw sales decline 1.6%.
“There was almost nothing in the July retail report for the perma-bears to latch on to, with the recovery in retail sales led by a recovery in car sales but encouragingly broad-based, with control group sales rising even further “, the newspaper said. team at Capital Economics wrote in a note.
The strong spending report, combined with data showing lower-than-expected unemployment rates, prompted investors to scale back their calls for the Fed to aggressively ease policy.
Read more: Fed Predictions for 2024: What Experts Say About the Possibility of a Rate Cut
On Thursday morning, markets were pricing in a roughly 75% chance that the Federal Reserve would cut rates by 25 basis points. A week ago, the market was in favor of a 50 basis point rate cut by the Fed amid concerns about an impending economic downturn.
“The Fed should soon begin normalizing policy with modest, gradual cuts, but there are no signs that the economy needs significant easing,” U.S. economist Tom Simons of Jefferies wrote in a letter to clients on Thursday.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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