Panic over?Earlier this morning, US stock index futures were building on yesterday’s impressive, and broad-based gains. On Thursday investors rushed in to hoover up equities with the mid-cap Russell 2000 leading the way to finish 2.5% higher. Tech wasn’t far behind, with the NASDAQ adding 2.3%. The Dow and the S&P 500 gained 1.4% and 1.6% respectively. The gains came on the back of a strong set of Retail Sales numbers, and on another dip in weekly Jobless Claims. Add these to the positive inflation numbers earlier in the week and it gave investors all the excuse they needed to rush back into the market. The data is just what the Federal Reserve needs to justify a rate cut next month. Inflation continues to drift back towards its 2% target, while the labour market enjoys a ‘Goldilocks’ situation. The Unemployment Rate has ticked higher, taking some of the tightness out of the sector, but not by enough to scare the horses by raising fears of an imminent recession. This also means that the market has gone back to pricing in a 25 basis point cut in September, rather than the panicky 50 basis points forecast earlier this month. Both the S&P and NASDAQ have now recorded six successive positive sessions, and are back to where they were at the end of July, before the market rout. Yesterday also saw a big move across US Treasuries. Yields soared as investors dumped bonds and put the money back to work in equities. This indicates a strong recovery in risk appetite with sentiment towards stocks turning positive once again. But it also should be a little bit of a warning sign that this sharp turnaround could be a tad overdone. Nothing goes up in a straight line forever. Yet the NASDAQ 100 and S&P 500 have now gained 13% and 9% respectively from their lows on 5th August. Those gains may be enough to entice early buyers to book some decent profits.
