The latest labor market data in the USA has helped alleviate worries about the economic slowdown of the world's largest economy, resulting in a strong rebound in the stock market and a drop in bond prices.

Data shows that the number of first-time unemployment benefit applications in the United States last week decreased by close to the largest amount in a year, and economic anxiety has subsequently eased. All major sectors increased on Thursday, the largest increase since November 2022. US government bonds fell across the board, with short-term bonds leading the decline. At the close, the S&P 500 index rose 2.3%. The Nasdaq Composite Index rose 3.1%. Small-cap stocks rose 2.4%, and big-cap tech stocks led the gains. The yield on the 10-year US Treasury bond rose four basis points to 3.99%. Swap dealers further reduced their bets on the Federal Reserve's further easing in 2024. Cryptocurrencies soared, rising over 10%, as investors reinvested in risk assets in the financial market. $S&P 500 Index (.SPX.US)$Last week's economic data raised concerns, with investors believing that the Federal Reserve took too long to wait for rate cuts, endangering the prospect of a 'soft landing', and the market has been in a low state ever since. Combined with these factors such as anxiety, excessive positions, poor technology stock returns, and poor seasonality, it triggered market volatility. "The unemployment claim data brings some good news," said Chris Zaccarelli of Independent Advisor Alliance. "We are cautious, but we think the panic that began earlier this month is exaggerating." Steve Sosnick of Interactive Brokers had an important question for the buyers: "Are you the people who demanded an emergency rate cut of 50 basis points loudly on Monday?" He added: "Can we say that today's (Thursday's) numbers have quelled the upcoming recession panic? Absolutely not. Can we say that stock traders are still focused on buying low and chasing the upward trend? Absolutely yes. Does the latter indicate that we urgently need interest rate cuts to maintain market stability? Come on, stop complaining."

As of the close, the S&P 500 index rose 2.3%.$NASDAQ 100 Index (.NDX.US)$Small-cap stocks rose 2.4%.$Russell 2000 Index (.RUT.US)$Small-cap stocks rose 2.4%.$NVIDIA (NVDA.US)$Big-cap tech stocks led the gains.10-year US government bonds fell four basis points to 3.99%. $Bitcoin (BTC.CC)$Cryptocurrencies soared, rising over 10%, as investors reinvested in risk assets in the financial market.

Last week's economic data raised concerns, with investors believing that the Federal Reserve took too long to wait for rate cuts, endangering the prospect of a 'soft landing', and the market has been in a low state ever since. Combined with these factors such as anxiety, excessive positions, poor technology stock returns, and poor seasonality, it triggered market volatility.

"The unemployment claim data brings some good news," said Chris Zaccarelli of Independent Advisor Alliance. "We are cautious, but we think the panic that began earlier this month is exaggerating."

"Do you guys who demand an emergency rate cut of 50 basis points loudly on Monday?" asked Steve Sosnick of Interactive Brokers, raising an important question for the buyers.

"Can we say that today's (Thursday's) numbers have quelled the upcoming recession panic? Absolutely not," he added. "Can we say that stock traders are still focused on buying low and chasing the upward trend? Absolutely yes. Does the latter indicate that we urgently need interest rate cuts to maintain market stability? Come on, stop complaining."

"This is quite a week," said Liz Young Thomas of SoFi. "Ups and downs, all around. We recognized how sensitive the market is to US economic data, the breadth of yen carry trades and investors' habit of cutting interest rates to solve everything." Nevertheless, Thomas believes there will be more volatility in the future, and the remaining time of this year needs to digest further cooling economic and profit data.

"Volatility may be unnerving, but it can also be an opportunity to re-examine your asset allocation and check your comfort level with risk levels so that you can consider a range of possible outcomes," concluded Thomas.

For Neil Duttaat of Renaissance Macro Research, the question now is whether the Federal Reserve should loosen policy as soon as possible and whether there will be large-scale early action.

"We rose today (Thursday) because of the unemployment claims data!" said Duttaat. "This is very unusual. What do you think will happen if some negative surprises appear in next week's data? This will only intensify people's views that the Federal Reserve is lagging behind the curve."

JPMorgan: The Federal Reserve's lack of 'urgency' puts the stock market at risk.

Despite recent stock market turbulence that has cleared some bubbles, if growth continues to slow and the Federal Reserve shows 'no sense of urgency' in easing monetary policy, the US stock market could still face much more serious downward risks.

According to Dubravko Lakos-Bujas of JPMorgan, the stock market is no longer a 'one-way trade upwards', instead increasingly focusing on a two-way debate around the risks of economic growth downturn, the Federal Reserve's timing, excessive positions, high valuations, and rising election and geopolitical uncertainties. For Lakos-Bujas, given extreme positions and momentum compression, the US stock market is susceptible. This has been a risk that JPMorgan's strategy team has been warning about since last year, even though the market has been rising.

As for the rotation of the stock market in July, investors have poured into small-cap stocks and areas of the stock market that are less favored, which is consistent with the 'decompression within the cycle' rather than the start of a complete cycle momentum impact.

The latest market pullback is driven by concerns over slowing growth and a repricing of the possibility of an economic contraction. Economists led by Bruce Kasman of JPMorgan had previously raised the odds of a US recession by the end of this year to 35%, up from 25% in early last month. The view of the bank is that the Federal Reserve will cut rates by 50 basis points at its meetings in September and November, followed by another 25 basis point cut at subsequent meetings, until it is convinced that the economy is headed in the right direction. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.

UBS Group: Wall Street's panic index is sending a buy signal

With the stock market's volatility this week, many traders are contemplating the future trend, but Solita Marcelli, chief investment officer at UBS Group, remains confident in the US stock market's continued rise in the coming months.

The CIO of the bank's wealth management division said that recent market volatility has not shaken her basic view of the stock market in 2024. She noted that the Fed's first rate cut is coming, and with steady economic growth, the S&P 500 index will average about 17% higher over the next 12 months after the Fed starts to relax its policies. She said "So I think the market can be supported.""There are some reverse buy signals as well."

She added that earlier this week, the Chicago Mercantile Exchange's volatility index, the VIX, briefly surged to multi-year highs, providing traders, especially those holding cash and waiting, with buying opportunities. She said that after a surge in the VIX index for three months, six months and 12 months, returns on the US stock market would typically be higher than average. Marcelli said:"There will be some volatility along the way, but I think there's still some good upside here."

Marcelli said UBS Wealth had always advised clients to maintain full allocations to US stocks in the latest market volatility, citing four key factors supporting a favorable backdrop: healthy earnings growth, investment in artificial intelligence, an anti-inflationary environment, such as cooling housing, and the monetary easing policy that the Fed is about to implement.

Although investors this quarter are concerned about corporate spending on AI, the chief information officer, who was once an analyst in Swiss Credit Technology in the early 21st century, still believes that the risk of investing too much cash is "insignificant" compared to the risk of missing out on the potential for AI transformation. The UBS team estimates that the market for AI will exceed trillions of dollars in the coming years.

She also said that if the eurozone avoids a recession, small and medium-sized companies there will perform better than those in the United States, given that policy easing there has already begun.

David Lefkowitz, head of US stocks at UBS Wealth, raised his latest year-end target for the S&P 500 Index to 5,900 points in mid-July, implying an increase of about 11% from Thursday's level. The strategist also said that the Fed's interest rate cut in investment and innovation frenzy could further stimulate the "animal spirit" and push the index up to 6,200 points by the end of 2024.

Editor/Somer