Stocks rose slightly on Thursday, making back some of the steep losses in the previous session, as retail giant Walmart’s strong result and positive economic data helped lift investor sentiment.
The Dow swung higher briefly to a rise of 120 points in the morning after a spokesperson at China’s Ministry of Foreign Affairs, said Beijing “hopes the U.S. will meet China halfway and implement the consensus reached by the two leaders during their meeting in Osaka,” fueling optimism for a resolution between the two countries.
Investors digested a slew of economic data Thursday that showed a relatively strong U.S. economy. Retail sales rose solidly in July and beat expectations, which is a sign of consumer optimism. U.S. productivity also grew at a healthy 2.3% rate in the second quarter.
“I think the trade war is completely driving the market; the data doesn’t necessarily matter much because it’s all about what the forward-looking trade war outlook is,” said Brent Schutte, chief investment strategist at Northwestern Mutual. “The market is confused about what the likely outcome is. In the past there’s been pronouncements of positive steps that led nowhere, which I think leads the market to still be skeptical.”
The trade tensions are not showing signs of slowing as China said Thursday that it has to take necessary countermeasures for the latest U.S. tariffs on $300 billion of Chinese goods, adding the U.S. tariffs violated a consensus reached by leaders of two countries.
Thursday’s session follows the Dow’s 800-point loss on Wednesday amid a recession signal from the bond market. The stock market took a huge hit in the previous session with the Dow plunging in its fourth-largest point drop ever to a two-month low. The Dow’s 3% fall was the worst this year. The S&P 500 also slid nearly 3%.
Still, many believe the positive data Thursday relieved some of the recession fears.
“The economic data this morning are having a calming effect on the equity markets,” said Larry Adam, chief investment officer of Raymond James’ private client group. “Yesterday with all these growing fears of a global recession including the U.S., those numbers today showed the consumer particularly continued to be fairly robust here.”
Walmart reported better-than-expected earnings and raised its outlook for the full year, sending its stock 5.5% higher Thursday.
Cisco shares plunged 7% after it said future earnings would be lighter than expected because of a “significant impact” from the U.S.-China trade war. The tech giant also said China revenue fell 25% last quarter on an annualized basis.
Shares of General Electric dropped more than 10% after Madoff whistleblower Harry Markopolos said he has discovered “an Enronesque business approach that has left GE on the verge of insolvency. “
The massive sell-off Wednesday was triggered by a bond market phenomenon where the yield on the benchmark 10-year Treasury note briefly broke below the 2-year rate. The inversion of this key part of the yield curve has been a reliable indicator of economic recessions.
“The 2-10 inversion is sending a massively negative signal that stocks are having a difficult time ignoring,” Adam Crisafulli, a J.P. Morgan managing director, said in a note Wednesday.
President Donald Trump has repeatedly blamed the Federal Reserve for market volatility and the economic slowdown, however, CNBC reported Trump and economic advisor Peter Navarro are only two people holding this view in the White House.
This week, Trump decided to delay tariffs on certain Chinese goods while outright removing some items from the tariff list, a move to avoid any negative impact on the holiday shopping season. The announcement sent the Dow rallying more than 300 points on Tuesday. Those gains were lost in the big sell-off Wednesday.
The deferral “helps China more than us, but will be reciprocated,” Trump said Wednesday.
Investors also remained on edge about the increasingly violent protests in Hong Kong. The Hong Kong government announced plans to implement stimulus measures to help its sagging economy. The government also cut its growth forecast to potentially flat for the rest of the year, down from the already anemic 0.5% growth it was expecting.
It’s been a volatile and poor week for stock investors. The S&P 500 fell 1.2% on Monday, followed by a 1.5% rebound in the next session, and then came Wednesday’s brutal sell-off of 2.9%. This kind of consecutive whiplash — down 1%, up 1% and down 2% — is relatively rare, occurring only 19 times the last 30 years, Bespoke Investment Group said. This jarring action usually doesn’t lead to a positive longer term outcome, Bespoke found, with S&P 500 returns 6 months out averaging a decline