Retail sales in the United States showed a strong improvement in July, partially easing recession fears that had emerged earlier in the month. The uptick in sales, coupled with other positive economic indicators, is boosting investor confidence in financial markets, benefiting equities and emerging market currencies.
Retail sales surged by 1% month-over-month in July 2024, marking the most significant increase since January 2023 and exceeding the anticipated 0.4% growth. This rebound is in sharp contrast to the downward revision of -0.2% for June, which had raised concerns about the robustness of U.S. consumer spending—a critical component of the economy.
The sales boost was broad-based across various categories. Vehicle and auto parts dealers led the growth with a 3.6% increase, followed by a 1.6% rise in electronics and appliance stores. Other sectors showing gains included grocery stores (1%), building materials (0.9%), and health and personal care (0.8%). Conversely, some categories saw declines, such as miscellaneous stores (-2.5%) and sporting goods, hobby, musical instruments, and book stores (-0.7%).
This retail sales rebound is mitigating worries about a potential recession, which had been fueled by earlier unemployment data showing a rise to 4.3%, the highest rate in years. However, recent improvements in initial jobless claims, which have dropped to a one-month low, suggest the labor market remains relatively strong.
Financial markets responded positively, with the Nasdaq 100 advancing over 2% on the day, reflecting renewed risk appetite. Emerging market currencies, such as the Mexican peso, have also benefited from the positive U.S. economic data, owing to the close trade relationship between the two economies.
Additionally, economic growth reports from the United Kingdom and Japan have bolstered global market confidence. In the U.K., GDP grew by 0.6% in Q2 2024, driven by a strong services sector. Japan’s GDP increased by 0.8% in Q2, reversing a previous decline and indicating a robust economic recovery supported by rising private consumption and business investment.
U.S. equity markets also saw gains, with the S&P 500 rising 1.3%, reflecting optimism that U.S. consumer resilience and strong global economic performance are supporting market stability. The yield on the U.S. 2-year Treasury note increased by more than 10 basis points, surpassing 4%, consolidating its rebound from an annual low of 3.65% earlier in August. This rise in yield reflects strong economic data challenging expectations of aggressive Federal Reserve interest rate cuts.
In summary, the July retail sales data, alongside improvements in the labor market and positive economic growth in the U.K. and Japan, have rejuvenated global economic confidence. These developments have positively impacted financial markets, boosting equities and emerging market currencies. Attention now turns to the Federal Reserve’s response to this data in its upcoming September meeting, with expectations for moderate interest rate adjustments.
The NASDAQ 100 index has shown a significant rebound after breaking below the 23.60% Fibonacci retracement level of the upward movement initiated from the 2022 lows. Despite this correction, the index failed to reach the 38.20% retracement level. However, the NASDAQ 100 found support at the 61.80% Fibonacci expansion level of the previous upward structure, which also began from the 2022 lows. This level has served as a key support point, driving the recent bullish movement.
With the current momentum, the market’s focus is on the 100% Fibonacci expansion level, around 19,549 points. This level has proven to be a key target in the ongoing bullish trend. Above this level, the next to consider is the psychological and crucial 20,000-point mark, which, if reached, could serve as a significant barrier in the short term.
The overall technical structure suggests that as long as the index remains above the key support level at 17,452 points, corresponding to the 61.80% expansion level, the bullish trend remains intact. A sustained break above the 19,549-point level could be the catalyst for a new push towards the 20,000-point mark, further consolidating the index’s recovery after the recent correction.
