In a tumultuous week on Wall Street, stocks made a significant comeback on Thursday, driven by a reassuring update on the health of the US labor market. The S&P 500 rose 2.3%, while the tech-heavy Nasdaq rallied nearly 2.9%. The Dow Jones Industrial Average was up almost 1.8%, or more than 650 points.
Jobless Claims Fall, Boosting Market Sentiment
The number of initial jobless claims fell to 233,000 in the week ending August 3, down from 250,000 the previous week and below economists’ forecasts. This unexpected drop provided a fresh jolt to the market, which had seen a comeback attempt falter on Wednesday.
Earnings and Economic Outlook
Despite recession fears, the fundamental case for stocks remains intact. S&P 500 earnings are set to grow more than 11% in the second quarter, marking the highest year-over-year earnings growth rate reported by the index since Q4 2021. According to Evercore ISI’s Julian Emanuel, “Earnings drive stocks in the long term… [Earnings] estimates holding relatively steady for 2024 and 2025, despite some signs of strain in the U.S. economy, bodes well as we head into an historically contentious election.”
Chip Stocks Lead the Charge
Nvidia (NVDA) stock surged 6% on Thursday, along with other chip stocks, as tech led the market rebound. Analysts have shrugged off concerns over a possible delay in Nvidia’s next-generation chip, citing urgent demand across the board and increased spending on data center infrastructure by Big Tech companies.
CEO Confidence
In a survey of 130 CEOs conducted by the Conference Board, 70% said they do not expect a recession in the next 12 months, a significant shift from last year’s survey. While recession chatter has picked up, consensus is not calling for an economic downturn.
Market Movers
- Nvidia (NVDA): +6.13%
- Eli Lilly (LLY): +9.1%
- Advanced Micro Devices (AMD): +5.5%
- Broadcom (AVGO): +6.2%
- Intel (INTC): +5.3%
Quote of the Day
“The bottom line here is that both earnings and margins are extremely healthy just now, so US companies should be able to sustain high levels of profitability even if we do see a recession over the next 12 months.” – Nicholas Colas, DataTrek co-founder
