US economic data are encouraging investors
U.S. economic data is better than expected. This is boosting sentiment on U.S. stock markets and drawing investors back to the equity markets. The Dow Jones is gaining. Among the favorites on the U.S. stock market is cosmetics company Ulta Beauty.
Surprisingly strong economic data is drawing investors back to U.S. stock markets. Simultaneously, speculation about a significant interest rate cut by the Federal Reserve (Fed) has eased, leading them to also buy dollars. They, in turn, sold U.S. government bonds. The Dow Jones Industrial Average closed 1.4 percent higher at 40,563 points. The broad-based S&P 500 and the tech-heavy Nasdaq rose even more strongly, by 1.6 and 2.3 percent, respectively.
On the foreign exchange market, the dollar index, which reflects the dollar's exchange rate against major currencies, gained 0.4 percent to 103.5 points. Sales on the bond market pushed the yield on 10-year U.S. bonds up to 3.92 percent. Their German counterparts could not escape this trend and yielded 2.25 percent.
U.S. retail sales rose by one percent in July, more than three times the expected rate, according to reports. Private consumption is considered the main driver of the world's largest economy. Additionally, the number of initial claims for U.S. unemployment benefits unexpectedly fell last week.
"U.S. economy will not slip into a recession in the short term," commented Steve Wyett, chief investment strategist at asset manager BOK, on the economic data. This means that the partial interest rate cut of half a percentage point expected from the U.S. central bank is off the table. However, he still expects the Fed to lower the key rate by a quarter percentage point in September. The commodities markets also received a boost from the U.S. data.
The U.S. oil WTI crude rose by 1.3 percent to $77.98 per barrel (159 liters). Meanwhile, market players are concerned about the ongoing conflicts in the Middle East. "It's still unclear how and whether Iran will retaliate against Israel," wrote analysts at ING Bank. Iran had threatened retaliation after the targeted killing of senior officials from the radical Islamic Hamas and Lebanese Hezbollah.
Among the favorites on the U.S. stock market is Ulta Beauty, with a share price gain of around 11 percent. Billionaire investor Warren Buffett's holding company Berkshire Hathaway has taken a stake in the cosmetics company. It also bought into aircraft parts supplier Heico and satellite radio operator Sirius XM, whose shares gained 2.5 and 3.8 percent, respectively. The entry of a star investor also boosted Nike. Hedge fund Pershing Square, run by billionaire William Ackman, publicly disclosed the purchase of a 0.2 percent stake in a mandatory filing.
The strong economic data has attracted Warren Buffett's investment in Ulta Beauty, further boosting the cosmetics company's stock price. The partial interest rate cut expected from the U.S. central bank is no longer on the table due to the robust economic performance.
