Surprising unemployment figures support US indices
For the first time in eleven months, there's been a decrease in initial jobless claims in the USA, temporarily easing fears of a recession. U.S. indices are up, and oil and gold prices are increasing.
The release of new unemployment data has boosted U.S. stock markets. The Dow Jones Industrial Average of blue-chip stocks closed 1.8% higher at 39,446 points on Thursday. The Nasdaq, which is tech-heavy, advanced 2.9% to 16,660 points. The S&P 500, which is broad-based, rose 2.3% to 5,319 points.
The weekly U.S. initial jobless claims provided relief. They came in at 233,000, marking a significant decrease not seen in around eleven months. Economists polled by Reuters had expected 240,000. Disappointing job market data at the beginning of the month had sparked fears of a U.S. recession, but positive data from the crucial services sector has since tempered these fears.
Given the rising expectations of swift interest rate cuts by the U.S. Federal Reserve, investors were closely watching the weekly unemployment data. The U.S. central bank aims to tame inflation without stifling the economy. It kept the federal funds rate within the range of 5.25 to 5.50 percent at the end of July. Subsequently, concerns about the state of the economy surged at the stock market. JPMorgan has increased the probability of a U.S. recession by the end of the year from 25 to 35 percent, citing waning pressure on the labor market.
"Markets may have calmed down, but this rollercoaster week is far from over," warned analyst Matt Britzman of Hargreaves Lansdown, cautioning against excessive optimism. While current geopolitical crises in the Middle East and the Ukraine war are taking a backseat, they remain present.
Easing Recession Fears Boost Oil Prices
Oil prices showed gains following the previous day's significant increases. Prices for WTI and Brent rose by up to 1.2 percent. Easing fears of a U.S. recession are driving up demand expectations. Market participants also pointed to ongoing geopolitical risks. The gold price surged, with the price of an ounce of gold rising by 1.7 percent. The process of investors selling gold to offset losses in other asset classes has concluded, and they are now buying it again due to geopolitical crises.
Eli Lilly stood out among individual stocks with a more optimistic outlook. The pharmaceutical company's shares gained more than nine percent. Bumble stocks plummeted by 29 percent after lowering its revenue forecast. The dating app provider now expects revenue growth of one to two percent for the full year, down from the previously projected eight to eleven percent. Under Armour shares rose by more than 19 percent, as the U.S. sportswear retailer surprised with a profitable start to its fiscal year. Warner Bros Discovery shares fell by nearly nine percent, as the media conglomerate has to write off $9.1 billion due to the decline of its traditional TV business.
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The positive unemployment data has led to increased investor interest in Wall Street, with major indices like the Dow Jones, S&P 500, and Nasdaq seeing significant gains. The rising expectations of interest rate cuts by the Federal Reserve have contributed to the boost in stock prices on Wall Street.
The easing of recession fears has also influenced the oil market, leading to an increase in prices for WTI and Brent. Furthermore, the gold price has surged as investors seek safe-haven assets due to ongoing geopolitical risks.
