Stock markets rallied after retailers'good performance showed strong consumer demand in the United States, and minutes from last month's Federal Reserve meeting showed that policymakers had debated a bigger cut in interest rates.
U.S. stocks rose sharply after retailers Target and Lowe's reported better-than-expected results. Target's share price soared 20.4% after raising its full-year earnings forecast and 10.4% after home improvement retailer Lowe's reported higher-than-expected earnings.
Strong consumer spending in the United States has helped ease fears of an impending recession. Two-year and 10-year Treasury yields reversed briefly last week, heightening fears of a slowdown. Although the yield curve reversed briefly again on Wednesday, this time it had almost an impact on the stock market.
"As long as the employment environment is as healthy as it is now, it's hard to shake people's confidence," says JJ Kinahan, chief market strategist at TD Ameritrade. "Ultimately, as long as people have jobs, they go out and spend money."
The minutes of the Federal Reserve's policy meeting on July 30-31 showed that policymakers debated a bigger rate cut. At that meeting, the Federal Reserve announced a 25-point cut in interest rates. Some participants tended to cut interest rates by 50 basis points, but the Federal Open Market Committee (FOMC) unanimously wanted to avoid giving the outside world the impression that it was on the path to further rate cuts.
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