Oil surged, the U.S. dollar gained ground, gold eased, and Wall Street climbed higher on Thursday as upbeat U.S. economic data cooled fears of a recession and recalibrated expectations around the Federal Reserve’s next move.
The U.S. dollar held firm against the euro, pulling the common currency down from its seven-month peak. This comes after U.S. retail sales in July rose more than expected, signaling robust consumer demand and reducing speculation that the Fed may deliver a large 50-basis-point rate cut next month.
Initial jobless claims also dropped more than forecast, reflecting a labor market that’s slowing in an orderly manner — supporting the case for a more gradual monetary easing.
EUR/USD fell 0.36% to 1.0973, down from 1.10475, the year’s high on Wednesday.
The U.S. Dollar Index climbed 0.42% to 103.03, rebounding from last week's eight-month low.
GBP/USD gained 0.17% to 1.2849, buoyed by a 0.6% UK GDP growth in Q2.
The yen weakened slightly to 149.13/USD, staying above July’s 38-year low of 161.96.
“This morning’s data runs counter to the recent market narrative that the Fed is behind the curve,” said Peter Vassallo of BNP Paribas Asset Management. “Short-term U.S. rates surged in response.”
Gold trimmed early gains after upbeat U.S. data pushed the dollar and Treasury yields higher.
Spot gold rose 0.3% to $2,454.40/oz after climbing 0.9% earlier in the session.
U.S. gold futures settled 0.5% higher at $2,492.40/oz.
“The strong retail sales report shifts sentiment,” said Chris Gaffney of EverBank. “The dollar is regaining strength, making gold less attractive.”
Meanwhile, industrial metals rallied, with:
Silver up 2.6% to $28.30/oz
Platinum jumping 3.8% to $954.65
Palladium adding 0.5% to $940.04
“Precious metals used in industry are getting a lift on expectations of stronger demand,” Gaffney added.
Oil prices surged after strong U.S. economic data eased fears of a hard landing. However, gains were capped by concerns over global demand, particularly from China.
Brent crude rose $1.28 (1.6%) to $81.04/bbl
WTI crude gained $1.18 (1.5%) to $78.16/bbl
“The data suggests we're heading for a soft landing,” said Bob Yawger of Mizuho.
Rising tensions in the Middle East and the ongoing Russia-Ukraine conflict added to upward price pressure. Meanwhile, China's factory output slowed in July and refinery throughput dropped for a fourth straight month.
U.S. stocks closed sharply higher, led by tech and consumer discretionary shares, after July’s retail sales data pointed to resilient spending.
Dow Jones rose 554.67 pts (1.39%) to 40,563.06
S&P 500 gained 88.01 pts (1.61%) to 5,543.22
Nasdaq jumped 401.90 pts (2.34%) to 17,594.50
Retail giant Walmart surged 6.58% after raising its full-year profit outlook. Rivals Target and Costco followed suit, climbing 4.35% and 1.69%, respectively.
“Retail sales beat expectations, CPI is contained — it’s a bullish setup,” said Terry Sandven of U.S. Bank Wealth Management. “The wall of worry is beginning to crumble.”
Notable movers:
Cisco Systems +6.8% after strong Q1 revenue forecast.
Nike +5.07% on news billionaire Bill Ackman has taken a new stake.
Ulta Beauty +11.17% following Berkshire Hathaway’s investment.
Treasury yields spiked after stronger-than-expected U.S. retail sales dimmed the chances of a sharp rate cut.
10-year yield: +10 bps to 3.921%
2-year yield: +14 bps to 4.093%
“This reinforces the narrative of a still-growing U.S. economy,” said Scott Helfstein of Global X. “Low unemployment and resilient household balance sheets are keeping consumers engaged.”
After Thursday’s data, Fed rate cut expectations shifted decisively:
CME FedWatch Tool now shows a 74.5% chance of a 25 bps cut in September.
Odds of a 50 bps cut have dropped to 25.5%.
“The remaining bets on a half-point cut have been crushed,” said Karl Schamotta of Corpay. “The Fed is likely to ease cautiously, not aggressively.”
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