US stocks stabilize on strong retail sales

Consumer spending boosted the US economy in July, raising stocks on Thursday after Wednesday's 800-point and easing immediate fears of a recession.

Retail sales, including brick-and-mortar stores, e-commerce and restaurants, increased at a seasonally adjusted 0.7 percent in July from June. Excluding cars, retail sales were up 1 percent in July, the US Commerce Department reported.

Consumer spending, which represents about two-thirds of the US economy, grew 1.8 percent May-through-July compared with the previous three months.

Overall, the US gross domestic product, the value of all goods and services, grew at an annual rate of 2.1 percent in the second quarter compared with 3.1 percent in the first quarter, the Bureau of Economic Analysis reported.

The market rallied on the solid retail report in early trading, turned negative in the afternoon and rallied before the close. It was a sharp rebound from Wednesday when fears about the bond market dove stocks lower.

The Dow Jones Industrial Average closed at 25,579.39, up 99.97 points of 0.39 percent. The Nasdaq composite closed at 7,766.62, down 7.32 points, or 0.09 percent.

"There are emerging signs about weakening fundamentals with slowing economic growth worldwide," Andrew Karolyi, a professor economics and the Harold Bierman Jr distinguished professor of management at Cornell University, told China Daily. "In the short-run what we are seeing is heightened uncertainty about what is ahead.''

Walmart, the world's largest retailer, said second-quarter sales at domestic stores and websites operating at least 12 months increased 2.8 percent driven by strong grocery sales. The company reported second-quarter revenue of $130.4 billion, up 1.8 percent from a year ago. Walmart has reported growth for 20 quarters, or five years, an achievement unmatched by any other retail chain.

In China, Walmart said same-store sales increased 3 percent, and Chinese e-commerce giant Alibaba Group Holding Ltd reported a 42 percent increase in sales and more than doubled profit in its latest quarter despite the domestic economy being weakened by the US-China trade dispute. The company's shares rose 3 percent to $166.97 in New York trading.

US industrial output declined 0.2 percent in July as the manufacturing sector continued to be buffeted by the on-going US-China trade dispute, underscoring the importance of consumer spending in the US economy.

Disposable income increased 4.9 percent to $193.4 billion in the second quarter compared with an increase of $190.6 billion, or 4.8 percent, in the first quarter.

But personal savings totaled $1.32 trillion in the second quarter, according to the government figures, compared with $1.37 trillion in the first quarter, suggesting consumers are still spending.

Belinda Robinson contributed to this story.