A series of data showing the resilience of the US economy has pushed the US stock market to its strongest week of the year. From inflation to unemployment claims and retail sales, the latest data has reassured investors and supported hopes that the world's largest economy is heading towards a scenario where price pressures are under control and the economy continues to grow strongly. The S&P 500 rose 3.7% this week, while the Nasdaq 100 rose more than 5%, representing the largest increase in both indices since November of last year.
From inflation to unemployment claims and retail sales, the latest data has reassured investors and supported hopes that the world's largest economy is heading towards a scenario where price pressures are under control and the economy continues to grow strongly. The S&P 500 rose 3.7% this week, while the Nasdaq 100 rose more than 5%, representing the largest increase in both indices since November of last year.
"The current flow of data is minimal and not enough to really impact market sentiment in the short term," said Chris Weston, research director at Pepperstone Group Ltd.
Global stocks have largely erased last week's declines, when traders worried about the Fed's slow pace of rate cuts and the inability to achieve a soft landing for the US economy.
As of press time on Friday, the Stoxx Europe 600 index rose 0.3%, marking its best single-week performance since May. U.S. stock index futures were virtually unchanged.
(Image source: Bloomberg)
The US dollar continued to fall, heading for its third consecutive week of decline and its longest losing streak in over five months. US Treasury yields fell across the board after a sharp rise on Thursday, due to strong US economic data that prompted traders to reduce bets on a sharp rate cut by the Fed in September. A 25-basis-point rate cut is still fully anticipated, with interest rate cuts expected to exceed 90 basis points by the end of 2024.
Asian stocks rose the most on Friday, with Japan's stock market also recording its best single-week performance in over a year, as the weaker yen boosted the profit prospects of exporters. The yen fell 1.3% against the US dollar on Thursday, marking its largest single-week decline since June. The yen traded at around 149, easing concerns about massive arbitrage trade closures.
In individual stock movements, Applied Materials Inc. fell in pre-market trading in the US after the semiconductor capital equipment company's forecasts disappointed bullish investors hoping for more returns from AI spending. Bayer AG rose 10% after the German company won a major victory in long-running cancer litigation over its Roundup herbicide.
The latest surge on Wall Street has helped the S&P 500 index achieve its strongest six-day rally since November 2022. Bank of America strategists say that US stocks have just recorded seven consecutive weeks of inflows, highlighting investors' continued interest in stocks. Bank of America said in a report citing EPFR Global data that about $5.5 billion flowed into US equity funds in the week ending August 14.
US officials have been trying to ease inflation by raising interest rates without causing an economic slowdown. St. Louis Federal Reserve Bank President Alberto Musalem said the time to cut interest rates has come. Raphael Bostic, President of the Atlanta Federal Reserve Bank, told the Financial Times that he "would" reduce interest rates in September.
"Soft landing is no longer a hope, it is a reality. These numbers also indicate that the recent market volatility is not a real economic growth panic. It is just normal summer seasonal fluctuations that have been amplified by financial market volatility," said David Russell of TradeStation.
On the commodity front, gold looks set for a weekly rise. Oil prices fell as the market weighed strong US economic data, the possibility of an Iranian or proxy attack on Israel, and weak Chinese demand prospects.
(Source: Bloomberg)