Recovery Rally Lifts S&P 500, Russell 2K, Nasdaq Composite 2%

Alexander Garcia
08 Aug, 2024
Miami

Investors appear to shake off economic anxieties earlier in the week following the release of jobs market data. 

Stock market indexes advanced in Thursday's trading following the less-than-expected increase in jobless claims, soothing fears of weakening labor market conditions. 

The S&P 500 index and the Nasdaq Composite advanced 2% after recession fears eased following the weaker-than-expected increase in jobless claims.

The weekly jobless claims have declined considerably from the pandemic-high but have been creeping up in the last seven months after reaching a low of 194,000 in the second week of January. 

U.S. Initial jobless claims increased by 17,000 to 233,000 in the week ending on August 3, the Department of Labor reported in its weekly update on Thursday. 

Initial claims in the previous week were revised higher to 250,000. 

Continuing claims, which lag by one week, increased by 6,000 to 1,87 million, the highest since January 2021. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index gained 1.8% to 5,291.07, the Nasdaq Composite advanced 2.2% to 16,549.23, and the Russell 2000 index declined 1.4% to 2,070.88. 

The yield on 2-year Treasury notes edged lower to 3.97%, 10-year Treasury notes increased to 3.93%, and 30-year Treasury bonds advanced to 4.24%.

WTI crude oil decreased $0.90 to $76.15 a barrel, and natural gas prices edged up 5 cents to $2.17 a thermal unit.

Gold increased by $35.65 to $2,420.67 an ounce, and silver increased by $0.87 to $27.49. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 103.04.

 

U.S. Stock Movers 

Warner Bros. Discovery dropped 10% to $6.93 after the media company reported disappointing second-quarter results, and the company took a one-time write-down of $9.1 billion. 

Bumble Inc. declined 40.5% to $4.79 after the online dating platform reported weaker-than-expected revenue in the second quarter.

Duolingo soared 7.2% to $173.0 after the online language learning app developer reported better-than-expected quarterly results. 

Eli Lilly increased 12.1% to $865.0 after the pharmaceutical company reported better-than-expected second-quarter earnings. 

The company also raised its full-year outlook due to the strong demand for its obesity drug Zepbound and diabetes treatment Mounjaro. 

 

European Markets Struggle Near Multi-month Lows 

European markets struggled to get traction after two days of gains, as caution prevailed in global market trading. 

Benchmark indexes in Paris, London, and Frankfurt traded down amid stagnant domestic economic conditions, weak consumer confidence compounded by a fragile economic recovery in China, and the growing possibility of a U.S. economic slowdown. 

Investors were cautious, and an additional batch of mixed earnings did little to improve market sentiment. 

China is set to release its official consumer and producer price inflation updates on Friday, and the initial jobless claims are also closely watched in the U.S. later in the day. 

The European Central Bank can keep its rate cut plan intact if there is increased confidence that inflation is on a sustainable downward path, ECB Governing Council member and Bank of Finland governor Olli Rehn commented on Thursday. 

Global markets gyrated after a string of U.S. economic data suggested a possible economic downturn and a weakening of labor market conditions. 

Market volatility spiked to a level not seen since 1987, after the Bank of Japan lifted its interest rates, forcing the unwinding of the yen carry trade and strengthening the yen to an 8-month high. 

 

Europe Indexes and Yields

The DAX index increased by 0.4% to 17,680.40; the CAC-40 index fell by 0.3% to 7,247.45; and the FTSE 100 index declined by 0.3% to 8,144.97. 

The yield on 10-year German bonds edged lower to 2.23%, French bonds inched lower to 2.97%, the UK gilts inched higher to 3.94%, and Italian bonds decreased to 3.67%.

The euro edged down to $1.09; the British pound inched lower to $1.268; and the U.S. dollar weakened to 85.80 Swiss cents.

Brent crude increased $0.61 to $79.02 a barrel, and the Dutch TTF natural gas rose by €1.54 to €40.27 per MWh.

 

Europe Stock Movers

Zurich Insurance Group decreased 2.5% to CHF 452.0 despite the Swiss reinsurance company reporting first-half earnings that surpassed market expectations. 

Beazley PLC jumped 12.5% to 716.50 pence after the UK-based insurance company reported its first-half results and revised its 2024 combined ratio estimate. 

Allianz increased 1.3% to €252.50 after the German insurance company reported better-than-expected second quarter earnings and reiterated its annual outlook. 

Siemens AG declined 0.8% to €154.64 after the German industrial company reported better-than-expected operating earnings and confirmed its full-year outlook.

Uniper SE declined 4.2% to €40.58 after the German utility company agreed to sell significant future hydropower production as a part of its hedging strategy. 

Deutsche Telekom increased 2.2% to €24.45 after the wireline and wireless telecom service provider reported in-line core earnings in the second quarter and raised its free cash flow outlook.

Sandoz Group dropped 6.2% to CHF 33.56, and the generic and biosimilar medicines maker reported first-half net income slumped 36%. 

Persimmon plc increased 2.5% to 1,575.50 pence after the UK-based home builder said it plans to build near the top end of the previously announced target range in 2024. 

Hikma Pharma soared 7.5% to 1,978.0 pence after the company posited strong half-year results and revised its full-year 2024 estimate. 

PageGroup declined 1.9% after the UK-based recruiting company reported a decline in revenue and earnings in the first half amid "challenging" market conditions. 

Entain PLC jumped 8.8% to 569.80 pence after the gambling group raised its annual outlook. 

 

Japan Indexes Turned Lower and Current Account Surplus Widened

The market rally in Tokyo lost steam as investors stayed cautious after a week of volatile trading and the strengthening of the yen. 

The Nikkei 225 and the Topix indexes dropped more than 0.7%, and the yen continued to drift lower amid worries about the future rate path. 

Calmness returned to financial markets in Tokyo after deputy governor Shinichi Uchida reassured investors that the central bank would refrain from raising rates amid volatile market conditions. 

However, investors turned cautious on Thursday following the weak close in New York in overnight trading, and artificial-intelligence-linked stocks failed to rebound. 

The summary of opinions from the latest policy meeting of the Bank of Japan in July showed some members urged even larger rate increases. 

Closer to home on the economic front, the current account surplus widened to 1.533 trillion in June from 1.519 trillion in the corresponding month a year ago, the Ministry of Finance reported Thursday. 

The current account surplus rose for the 17th month in a row, following faster increases in exports than imports. 

The surplus in goods increased to 556.3.9 billion yen from 328.0 billion a year ago, driven by a 5.9% increase in exports faster than a 3.4% rise in imports.

Meanwhile, the deficit in secondary income decreased to 120.7 billion from 132.4 billion. 

The primary income surplus narrowed to 1,473.7 billion from 1,680 billion in the previous year, and the gap in the services account slightly widened to 375.8 billion from 356.2 billion. 

 

Japan Stock Movers 

The Nikkei 225 stock average decreased 0.7% to 34,829.31, and the Topix index dropped 1.2% to 2,458.63. 

Advanced chipmakers turned lower, tracking volatile trading in New York. 

Advantest, Tokyo Electron, Screen Holdings, Disco Corp., and Softbank declined between 3% and 7%. 

Sumco Corp. plunged 15.8% to ¥1,687.0 after the Japanese semiconductor company reported a decline in earnings in the June quarter. 

Net sales declined 5.4% to ¥104.7 billion, and net income plunged 37% to ¥7.56 billion from a year ago, respectively. 

Financial stocks were among the leading decliners after gyrating by more than 15% in previous trading sessions. 

Mitsubishi UFJ Financial, Sumitomo Mitsui Financial, and Mizuho Financial Group fell between 1% and 3%. 

Shiseido dropped 15.3% to ¥3,810.0 after the Japanese cosmetics company said weak China demand hit sales and earnings in the June quarter. 

Shiseisdo stock plunged the most in several decades after its earnings were negatively impacted by weak demand in China. 

Revenues in the June quarter were 259.1 billion, and net income was 3.3 billion yen. 

Revenue in the first half increased by 14.3% to 508.5 billion yen from 494.2 billion yen, and net income dropped to a breakeven point from 11.8 billion yen a year ago. 

However, the company retained its full-year sales estimate of 1 trillion yen, net income of 22 billion yen, and annual dividend of 60 yen per share. 

 

China Stocks Attempt to Rise Above Global Market Volatility 

Investor sentiment recovered after a week of tumultuous trading, and market indexes rebounded for the second session in a row. 

The Hang Seng index gained 0.7%, and the CSI 300 index advanced 0.4% in cautiously optimistic trading in Hong Kong and Shanghai. 

Technology, financial, real estate developers, and industrial companies were among the most actively traded companies.

Investors are looking forward to the release of official consumer and producer price inflation data on Friday. 

Consumer price inflation is expected to be positive, suggesting that demand may pick up after months of caution, but producer price inflation is expected to show a price deflation trend for the second year in a row. 

Global market sentiment was positive as investors in Japan, Europe, and the U.S. returned to add stock positions after worries about the U.S. economic slowdown eased and the sharp reversal in correction in the AI-fueled tech rally halted. 

 

China Stock Movers 

The Hang Seng index increased 0.7% to 16,998.45, and the CSI 300 index rose 0.4% to 3,355.96. 

Black Sesame International Holding dropped 25% to HK $21.10 after the chip designer for autonomous vehicles raised HK $1.04 billion, or $133 million, through the sale of 37 million shares in a Hong Kong listing. 

The company priced its offering at the bottom end of its filing range at HK $28 per share. 

Xiaomo, Tencent Holdings, and SAIC Motor Corp. are among the company's leading stockholders. 

Alibaba Group Holding increased 1.9% to HK $77.90, Tencent Holdings advanced 2.7% to HK $373.0, Meituan was unchanged at HK $105.90, and Baidu added 0.6% to HK $81.75. 

China Merchants Bank increased 1.7% to HK $32.10, China Mingsheng Banking declined 0.4% to HK $2.69, and HSBC Holdings declined 0.22% to HK $63.10.