Strong economic data boosts US stocks, easing concerns of a recession

The dollar weakened on Tuesday as strong economic statistics allayed concerns about a recession and increased investors’ willingness to take risks. U.S. equities rose broadly.

The Nasdaq gained 1.8%, its greatest one-day percentage increase in a month, thanks to tech-related megacaps, especially those participating in a burgeoning AI craze. All three main U.S. stock indexes also concluded comfortably in the black.

In spite of the Federal Reserve’s attempts to cool demand in order to control inflation, an unexpected increase in new orders for American-made durable goods, strong figures on new house sales, and consumer confidence all contributed to assuaging concerns about an impending recession.

According to Thomas Martin, senior portfolio manager at GLOBALT Investments in Atlanta, “the economic data today was particularly strong.” “With that as a backdrop, there has been a change in tenor for the outlook for the market and a fear of missing out on the rally.”

Martin said, “What little correction there was might have given people a better feeling about being in the market today.”

The strong statistics would seem to open the door for another 25 basis point increase in interest rates at the conclusion of the July Federal Reserve meeting.

“Pretty much no matter what happens between now and then (the Fed is) going to hike 25 basis points, because if they don’t the market is really going to think the Fed’s done and the Fed doesn’t want that,” said Martin.

According to CME’s FedWatch program, financial markets are putting in a 77% chance of that happening. It is still unclear whether the Fed will end its current tightening cycle or continue it in September and beyond.

President of the European Central Bank Christine Lagarde, the Fed Chairman Jerome Powell’s equivalent in Europe, said on Tuesday that the ECB is unable to declare an end to rate rises in the face of persistently rising inflation.

The Nasdaq Composite increased 219.90 points, or 1.65%, to 13,555.67, the S&P 500 increased 49.59 points, or 1.15%, to 4,378.41, and the Dow Jones Industrial Average up 212.03 points, or 0.63%, to 33,926.74.

As investors banked on further policy stimulus from China, European markets overcame early losses to conclude with a nominal gain, helped by luxury goods and financials, but hawkish remarks from Lagarde restrained advances.

The global stock market index MSCI increased by 0.89% while the pan-European STOXX 600 index increased by 0.05%.

Emerging market stocks increased by 0.60%. While Japan’s Nikkei fell by 0.49%, the largest MSCI index of Asia-Pacific equities outside of Japan ended the day 0.81% ahead.

Data showing U.S. economic growth caused the dollar to weaken versus a basket of other currencies, while the euro rose as a result of Lagarde’s remarks.

The euro increased by 0.52% to $1.0961 while the dollar index decreased by 0.21%.

At 144.03 per dollar, the Japanese yen declined by 0.34% against the US dollar, while sterling was last trading at $1.275, up 0.30% on the day.

U.S. Treasury rates increased as economic data that was better than anticipated reduced fears of a recession.

The yield on benchmark 10-year notes recently decreased by 11/32 to 3.762% from 3.719% late on Monday.

The 30-year bond’s price recently dropped 10/32 to 3.8368% yield from 3.819% late on Monday.

In the wake of positive surprises in U.S. economic indices and ahead of data on energy demand anticipated later in the afternoon, crude prices declined.

U.S. crude decreased 2.41% to conclude at $67.70 a barrel, while Brent increased 2.59% on the day to close at $72.26 per barrel.

Positive economic data tarnished the glitter of the safe-haven commodity, causing gold prices to decline.

The spot price of gold fell 0.5% to $1,912.89 per ounce.