Stocks stabilized after a choppy start to Thursday's session, with the main indexes climbing into the close. In focus were a heavy batch of economic data as well as a number of high-profile earnings reports.
The Census Bureau's release of June retail sales data was the marquee event on today's economic calendar. The report showed that retail sales rose 0.6% from May to June. This is much better than the 0.9% decline seen in May and the 0.2% increase economists expected.
"Consumers are flexing their spending muscle again," says Gina Bolvin, president of Bolvin Wealth Management Group.
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Today's report "shows that the American shopper is alive and well – and that matters for markets," Bolvin adds. "Strong retail sales are like oxygen for the economy, and Wall Street is breathing a sigh of relief today."
Indeed, the Dow Jones Industrial Average climbed 0.5% to 44,484. The S&P 500 rose 0.5% to 6,297 and the Nasdaq Composite added 0.7% to 20,884 – new record highs for these two indexes.
Also helping lift sentiment were weekly jobless claims, which came in at a better-than-expected 221,000 – their lowest level since April.
President Donald Trump has made it well known that he'd prefer the Fed to start cutting rates sooner rather than later. But today's strong economic data only increased expectations the central bank will stay on hold at its policy meeting later this month.
According to CME Group's FedWatch, futures traders are now pricing in a 97.4% chance the central bank keeps the federal funds rate at its current range of 4.25% to 4.5% at its next meeting – up from 92.8% one week ago.
PepsiCo, TSM lead post-earnings gainers
Over on the earnings calendar, soft drink and snack maker PepsiCo (PEP) reported higher-than-expected second-quarter earnings and revenue and reiterated its full-year forecast.
Shares rose 7.5% in reaction, making PEP one of the best-performing S&P 500 stocks of the day.
Taiwan Semiconductor Manufacturing Company (TSM) was also in the green after earnings, gaining 3.4% as sizzling demand for artificial intelligence (AI) chips sparked a 61% year-over-year surge in Q2 profit.
The company also forecast 38% year-over-year revenue growth for its third quarter, well above analysts' estimates.
"TSM faces actual and potential tariff impacts," says Argus Research analyst Jim Kelleher, though he adds that the company "could also benefit from the recent thaw between the U.S. and China."
And the analyst expects solid growth for the company over the long term "as generative AI moves into the mainstream and electronic device demand accelerates."
Kelleher has a Buy rating and a $290 price target on the semiconductor stock, representing implied upside of 17% to current levels.
Starbucks stock gets slapped with a new Sell rating
Starbucks (SBUX) rose 0.7%, extending a rebound off the blue chip stock's early May lows. Shares are now up 16% since May 9 on a total return basis (price change plus dividends) and have gained nearly 26% in the past 12 months.
But Jefferies analyst Andy Barish thinks Starbucks has run too far, too fast, and downgraded the coffee chain to Underperform (Sell) from Hold. Barish also has a $76 price target on SBUX, which is nearly 18% below current levels.
"We think the stock has surpassed reasonable expectations for improving fundamentals, in our view," Barish writes in a note to clients, adding that credit and debit card data, as well as foot traffic, suggest downside to earnings estimates.
The analyst adds that "complex people and operational issues could take a longer time than expected for management to make progress on," while significant investments could weigh on earnings.
Such a bearish outlook toward Starbucks is relatively rare. Of the 35 analysts covering SBUX who are tracked by S&P Global Market Intelligence, 10 say it's a Strong Buy, six have it at Buy and 17 rate it at Hold. Just two say it's a Sell.
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