Wall Street Rebound Gathers Momentum, Stoking Global Recovery

Alexander Garcia
15 Aug, 2024
Miami

Stock market indexes on Wall Street rose sharply after retail sales and weekly jobless data showed resilient consumer spending and a healthy labor market condition. 

The S&P 500 index and the Nasdaq Composite advanced more than 1% after retail sales jumped more than expected and weekly jobless claims eased for the second week in a row from a one-year high. 

Market indexes are now trading higher than the August 2 closing level, before the global markets plunged in Monday's trading on August 5. 

 

Retail Sales Growth In July Surpassed Expectations 

Retail and food services sales, adjusted for calendar and seasonal factors but not for inflation, increased from the previous month to 1.1% in July, the Bureau of Economic Analysis reported Thursday. 

Retail sales are closely watched to gauge the level and direction of consumer spending, which dictates about two-thirds of the gross domestic product. 

Retail and food services sales rose 2.7% from last year. 

Retail trade sales were up 1.1% from June and 2.6% from last year. 

Nonstore retailers were up 6.7% from last year, while food services and drinking places were up 3.4% from July 2023.

Retail and food services sales rose the most since January 2023, with sales at motor vehicles and parts dealers rising the most by 3.6%. 

Initial jobless claims decreased from 7,000 to 227,000 in the week ending August 10, the U.S. Department of Labor reported Thursday. 

The weekly jobless claims declined for the second consecutive week after reaching a near one-year high of 250,000 in the week ending on July 27. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 1.5% to 5,534.14, the Nasdaq Composite advanced 2.2% to 17,560.29, and the Russell 2000 index surged 2.7% to 2,140.77. 

The yield on 2-year Treasury notes edged higher to 3.97%, 10-year Treasury notes increased to 3.86%, and 30-year Treasury bonds inched higher to 4.14%.

WTI crude oil increased $1.29 to $78.27 a barrel, and natural gas prices edged up 2 cents to $2.24 a thermal unit.

Gold advanced by $5.54 to $2,454.24 an ounce, and silver increased by $0.74 to $28.32. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 102.99.

 

U.S. Stock Movers

Cisco Systems jumped 7.9% to $49.03, and the networking equipment maker reported better-than-expected fiscal fourth quarter results. 

Revenue declined 10% to $13.6 billion from $15.2 billion, net income plunged 45% to $2.2 billion from $4.0 billion, and diluted earnings per share dropped to 54 cents from 97 cents a year ago. 

For the full-year fiscal 2024, revenue dropped 6% to $53.8 billion from $57.0 billion, net income plunged 18% to $10.3 billion from $12.6 billion, and diluted earnings per share decreased to $2.54 from $3.07 a year ago. 

Cisco declared a quarterly dividend of 40 cents per share payable on October 23 to shareholders on record on October 2. 

The company guided fiscal 2025 first quarter revenue to fall between $13.65 billion and $13.85 billion and earnings per share between 35 cents and 42 cents. 

The company also announced its plans to cut 7% of its global workforce. 

Walmart Inc. soared 8.8% to $74.70, and the discount retailer reported better-than-expected revenue and earnings in its latest quarter. The company lifted its annual estimate. 

Consolidated revenue in the second quarter increased 4.8% to $169.3 billion from $161.6 billion, net income plunged to $4.7 billion from $8.1 billion, and diluted earnings per share dropped to 56 cents from 97 cents a year ago. 

Walmart U.S. sales increased by 4.1% to $115.3 billion from $110.9 billion, driven by comparable sales excluding fuel sales at stores rising by 4.2%, the number of transactions increasing by 3.6%, and the average ticket size advancing by 0.6%. 

The retailer guided fiscal third-quarter sales of $159.4 billion, operating income of $6.2 billion, and adjusted earnings per share of 51 cents. 

Ulta Beauty soared 12.7% to $370.11 after Berkshire Hathaway acquired a stake in the cosmetic retailer worth $266 million. 

Snowflake Inc. declined 3.2% to $123.17 after Berkshire Hathaway sold its entire stake in the cloud service provider, according to its latest regulatory filing. 

 

European Markets Extended 3-day Rally, UK GDP Growth Slowed In Second Quarter 

European markets were little changed in Thursday's trading, and investors reviewed the latest GDP update in the UK and key economic data released by China. 

Benchmark indexes in Frankfurt, Paris, and London traded around the flatline amid weak investor sentiment and rate path uncertainties. 

The U.K.'s gross domestic product in the second quarter slowed to an increase of 0.6% after rising 0.7% in the first quarter, the Office for National Statistics reported Thursday. 

The broad-based increase in the service sector contributed to the increase in the second quarter. 

The service sector expanded by 0.8%, with scientific and research activities soaring by 11%; manufacturing sector activities decreased by 0.1%, driven by a fall in transportation equipment by 1.8%; and textile, apparel, and leather products declined by 6.6%. 

Construction activities shrank by 0.1% in the second quarter. 

Government spending increased by 1.4%, and household spending rose by 0.2%. 

Investors also reviewed China's retail sales, industrial output, and new home price updates. 

Retail sales rebounded to an increase of 2.7% from a year ago, after falling to a 2% increase in June from 3.7% in May, the National Bureau of Statistics reported. 

Retail sales rose for the 18th month in a row, driven by a rising demand for beverages, sports and recreational goods, and communication equipment. 

Industrial output edged slightly lower to 5.1% in July from 5.3% in June, the statistical agency reported in a separate report on Thursday. 

New home prices in 70 of the largest cities declined 4.9% from a year ago in July, extending the decline to the 13th month in a row, the statistical agency said in a note on Thursday. 

 

Europe Indexes and Yields

The DAX index increased by 1.6% to 18,183.24; the CAC-40 index rose by 1.2% to 7,423.37; and the FTSE 100 index advanced by 0.8% to 8,347.35. 

The yield on 10-year German bonds edged lower to 2.19%, French bonds inched down to 2.92%, the UK gilts edged lower to 3.85%, and Italian bonds inched up to 3.57%.

The euro edged down to $1.10; the British pound inched lower to $1.281; and the U.S. dollar weakened to 86.62 Swiss cents.

Brent crude increased $1.25 to $81.24 a barrel, and the Dutch TTF natural gas rose by €0.73 to €39.60 per MWh.

 

Europe Stock Movers

Admiral Group soared 7% to 3,009.0 pence after the home and vehicle insurer reported better-than-expected first-half results. 

Rank Group jumped 7.2% to 75.05 pence, and the parent company of Bingo Mecca swung to profit in the year ending in June, driven by higher revenue. 

Adyen NV advanced 8.7% to €1,236.80, and the Dutch payment solution provider reported strong first-half results and announced its plans to expand its business in India. 

Orsted AS decreased 6.8% to DKK 393.60, and the largest offshore wind farm operator reported weaker-than-expected results because of significant impairment charges. 

Net loss in the second quarter expanded to DKK 1.7 billion from DKK 538 million, driven by impairment losses of DKK 3.2 billion linked to the FlagshipONE project in Northern Sweden and delays related to the onshore substation Revolution Wind project near the shores of Rhode Island, U.S.A. 

Geberit AG dropped 3.5% to CHF 509.80 after the Swiss sanitary products maker reported quarterly results. 

Revenue in the second quarter increased by 4.4% to CHF 800.7 million from CHF 769.1 million, net income advanced by 4.1% to CHF 159.8 million from CHF 153.5 million, and earnings per share rose to CHF 4.82 from CHF 4.55 a year ago. 

The sanitary products company estimated 2024 sales in local currencies to match the previous year and the EBITDA margin to ease to 29%. 

The company also announced a stock buyback plan of CHF 300 million over the next two years. 

 

 

Japan's Second Quarter GDP Rebounds as Private Consumption Rises 

Japan market indexes extended gains for the fourth session in a row after economic growth rebounded in the second quarter. 

The Nikkei 225 Stock Average and the Topix index advanced 0.8% after the faster-than-expected increase in GDP growth in the second quarter bolstered market sentiment. 

GDP in the second quarter expanded by 0.8% on a quarterly basis, reversing the 0.6% decline in the first quarter, the Cabinet Office reported Thursday. 

The second quarter data is preliminary, and the estimate is likely to be revised in the coming months. 

On an annualized basis, economic growth rebounded to an increase of 3.1% in the second quarter from the decline in the first quarter of 2.3%. 

The first quarter annualized growth rate was revised from a decrease of 2.9%. 

Private consumption, which includes consumer spending, increased 1.0% from the previous quarter and expanded for the first time in five quarters. 

Durable goods purchases, including appliances and automobiles, soared 8.1%, and the purchase of non-durable goods, which includes food and beverage items, edged up 0.8%. 

However, service spending was unchanged in the quarter. 

The faster rise in imports was a drag on the economy, after exports rose 1.4% and imports advanced 1.7%. 

Government spending inched slightly higher by 0.1%, and public investment expanded by 4.5%. 

Japan has struggled to regain its economic growth momentum since the collapse of the asset bubble nearly three decades ago, and the economy continues to bounce between periods of decline and short spurts of growth. 

The yen held firm at 147.23 against the U.S. dollar after the release of the GDP data. 

 

Japan Movers 

The Nikkei 225 stock average increased 0.8% to 36,721.55, and the Topix index advanced 0.8% to 2,602.50. 

Tech companies advanced following the softer increase in consumer price inflation data in the U.S. 

Advantest, Tokyo Electron, Socionext, Lasertec, and Screen Holdings increased between 1% and 5%. 

Financial stocks also participated in the market advance in the hopes that the faster GDP increase may provide additional support to policymakers looking to increase interest rates. 

Sumitomo Mitsui Financial, Mitsubishi UFJ, and Mizuho Financial gained between 0.5% and 1.4%. 

Kawasaki Heavy Industries soared 7.3% to ¥4,845.0 after the company reported a record June quarter profit amid rising demand and reiterated its annual outlook. 

Dentsu Group soared 10.3% to ¥4,266.0 despite the advertising agency lowering its annual outlook. 

The company lowered its annual earnings outlook and now expects net income of 36.7 billion yen compared to the previous estimate of 61.7 billion yen. 

However, the company retained its annual sales outlook at 1.36 trillion yen. 

Net sales for the second quarter increased 17% to 348.03 billion yen, and net income plunged to 10 million yen from 3.44 billion in the quarter a year ago. 

 

China Indexes Advance After Key Earnings and Economic Reports 

Stocks in Shanghai and Hong Kong advanced following a mixed batch of key economic data. 

The Hang Seng index gained 0.4% and the CSI 300 index advanced more than 1% after China's statistical agency released retail sales, industrial output, and home price data for July on Thursday. 

Retail sales rebounded to an increase of 2.7% from a year ago, after falling to a 2% increase in June from 3.7% in May, the National Bureau of Statistics reported. 

 

China Retail Sales Growth Expanded 18th Consecutive Month 

Retail sales rose for the 18th month in a row, driven by a rising demand for beverages, sports and recreational goods, and communication equipment. 

On a monthly basis, retail sales rebounded to 0.4% in July from a downwardly revised 0.1% decline in June. 

Retail sales have been under pressure after rising between 7% and 20% a year between 2001 and 20219, as consumer confidence continues to decline following the protracted property market collapse. 

Industrial output edged slightly lower to 5.1% in July from 5.3% in June, the statistical agency reported in a separate report on Thursday. 

 

China New Home Price Decline Accelerated to Nine-Year High

New home prices in 70 of the largest cities declined 4.9% from a year ago in July, extending the decline to the 13th month in a row, the statistical agency said in a note on Thursday. 

The prices declined at the fastest pace since June 2015, and the property market rout spread from the second-tier cities to the top-tier cities. 

The decline in home prices accelerated in Beijing to 3.3% from 2.4% in the previous month, in Shenzhen to 8.0% from 7.3%, in Guangzhou to 9.9% from 9.3%, and in Chongqing to 4.9% from 3.4%. 

Shanghai recorded a price increase of 4.4%, matching the rate of increase in the previous month. 

Monthly home prices eased for the third month in a row (0.7% in July), and the decrease was the largest since October 2014. 

The residential property market is likely to remain depressed for the rest of the decade, amid falling demand, a lack of policy support for new construction, weak financial positions of property developers, and shifting demographic patterns. 

 

China Stock Movers 

The Hang Seng index increased 0.4% to 17,171.01, and the CSI 300 index advanced 1.1% to 3,347.40. 

Samsonite SA dropped 12.8% to HK $18.52, and the travel goods maker plans a second listing in the U.S., expands its investor base, and improves stock liquidity. 

Samsonite stock has fallen about 25% in the year so far and plunged nearly 40% from its peak in March. 

CK Infrastructure Holdings declined 0.8% to HK $55.90 after the largest infrastructure company based in Hong Kong received approval for a secondary stock listing in London. 

Last week, a consortium led by the company's energy unit agreed to acquire a portfolio of 32 wind farms located in England, Scotland, and Wales from insurer Aviva for £350 million. 

The company also reported a 2% increase in its earnings in the first half, driven by higher sales in its UK-based portfolio of properties. 

UK-based infrastructure assets accounted for the largest earnings driver for the company and generated 36% of the company's earnings. 

 

Tencent Holdings Net Income Jumped 79% In Second Quarter

Tencent Holdings declined 0.8% to HK $370.80, despite the diversified Internet platform company reporting a 79% increase in profit in its latest quarter. 

Revenue in the second quarter increased 8% to 161.1 billion yuan, or $22.6 billion; profit jumped 79% to 48.4 billion yuan, or $6.8 billion; and free cash flow soared to 40.4 billion yuan, or $5.7 billion. 

In the second quarter, diluted earnings per share increased to 4.99 yuan from 2.69 yuan in the period a year ago. 

During the second quarter, the company repurchased approximately 103.7 million shares on the Hong Kong Stock Exchange for approximately HK$ 37.5 billion and paid HK$ 31.7 billion for the final dividend in respect of the year ended December 2023.