The stock market has experienced a significant turnaround, securing its best week of the year by reversing the early August sell-off. This reversal is attributed to signals indicating a still-strong US consumer and labor market. The Nasdaq Composite (^IXIC) and the S&P 500 (^GSPC) rose by about 1%, while the Dow Jones Industrial Average (^DJI) also saw a notable gain. The Nasdaq 100 (^NDX) has fully recouped its losses from early August, with the index now flat for the month of August.

Mortgage rates have risen slightly, with the average rate on the 30-year fixed-rate mortgage increasing to 6.49% from 6.47% last week. However, this slight increase is seen as a precursor to potential rate cuts by the Federal Reserve next month. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell to 39 in August, the lowest level since December, due to high interest rates and record home prices. Despite this, builders have cut home prices to boost sales, with 33% reporting price reductions, the highest share so far this year.

The stock market’s recovery is also influenced by the lifting of restrictions on Chinese investors buying shares of Alibaba Group Holding Ltd., which could lead to an inflow of up to $20 billion into the company. This development is expected to provide a much-needed boost to Alibaba’s stock. Overall, the market’s performance suggests that investor sentiment has shifted from recession fears to a more optimistic view of the US economy’s resilience.