The S&P 500 index closed its best week of the year, rising by 3.9% over five days. This surge in the stock market was fueled by a series of positive economic data points that boosted investor confidence. The week started off with two key inflation readings that indicated a cooling of pricing pressure in the US economy. Consumer inflation came in below 3% for the first time in three years, signaling a more stable economic environment.
Following the positive inflation data, there was a surprise 1% jump in retail sales, indicating strong consumer spending. Additionally, jobless claims figures hit a five-week low, further supporting the narrative of a healthy economy. The week culminated with the release of the University of Michigan’s consumer sentiment survey for August, which showed an increase in consumer optimism for the first time in five months.
The S&P 500 and the Nasdaq edged 0.2% higher on Friday, while the Dow Jones Industrial Average rose by 97 points. The 10-year Treasury yield fell by 3 basis points to 3.89%, down 6 for the week as investors scaled back expectations for aggressive rate cuts from the Federal Reserve. This shift in sentiment reflects a more balanced outlook on the economy’s future trajectory.
Goldman Sachs analysts emphasized the importance of maintaining faith in the market despite recent volatility. They believe that a soft landing is likely for the US economy, with continued expansion and decelerating inflation being the most probable outcomes. The upcoming economic symposium at Jackson Hole, Wyoming, will provide further insights into the Federal Reserve’s policy direction for September. While markets are anticipating a rate cut, the likelihood of a significant 50-basis-point move has decreased following the week’s positive data releases.
In commodities, West Texas Intermediate crude oil fell by 1.8% to $76.72 a barrel, while Brent crude, the international benchmark, declined by 1.5% to $79.78 a barrel. Gold traded higher at $2,463.30, reflecting a shift in investor sentiment towards safe-haven assets. The 10-year Treasury yield dipped by 3 basis points to 3.88%, indicating a more cautious approach to interest rate expectations. Bitcoin also saw a rise of 3.75% to $59,710, showcasing renewed interest in digital assets.
Overall, the positive economic data points released throughout the week have bolstered investor confidence and set the stage for a more stable market environment. While uncertainties remain, the general consensus is that the US economy is on track for a soft landing, with continued growth and controlled inflation being the most likely outcomes. Investors will continue to monitor upcoming events and data releases for further insights into the market’s trajectory.
