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Less than a week after the devastating global sell-off, Wall Street appears to be making a comeback.

Markets were unsettled after the Bank of Japan raised interest rates for the second time this year in late July. This caused the yen carry trade, in which investors borrow ultra-cheap yen to buy other higher-yielding assets, to start to crumble. This trend culminated last week when Japanese stocks recorded their worst day in decades. In the US, a gloomy July jobs report sparked recession fears. US stocks and bond yields plunged.

But a series of encouraging economic data this week has helped the market recoup some of the losses. The Dow is back above 40,000 points. All three major indexes are on track for their best week this year. The blue-chip index has gained 2.7% so far this week, the Nasdaq Composite 5.1% and the S&P 500 3.7%. The benchmark index has now recouped all of last week’s brutal losses and is up for the month.

Wall Street’s fear indicator, the Cboe Volatility Index (or VIX), fell to 15 after breaking above 65 last Monday, when the index also posted its biggest single-day point jump since March 2020.

“The bull market has not derailed,” Ed Clissold and Thanh Nguyen of Ned Davis Research wrote in a note Thursday. “Although further aftershocks are possible, traders appear to be moving past the initial earthquake of the yen carry trade unwinding.”

Despite the somewhat calmer mood, investors remain nervous and sensitive to economic data as they look ahead to the Federal Reserve’s next meeting in September, said Geoffrey Strotman, senior vice president at Segal Marco Advisors. The Fed will analyze the personal consumption expenditures price index for July and labor and other inflation numbers for August before announcing its next monetary policy decision on September 18.

Traders are betting on a rate cut in September, but some central bankers have recently indicated they are in a wait-and-see mode. Atlanta Fed President Raphael Bostic said Tuesday that while inflation has cooled in recent months, he wants to see more progress in bringing prices down.

“We have to make sure the trend is real,” Bostic said at an American College of Financial Services conference. “So I’m willing to wait, but (a cut) is coming.”

This week’s data signalled that inflation is indeed cooling. Consumer prices rose 2.9% in the 12 months to July, just below According to the Bureau of Labor Statistics, the increase in U.S. wholesale prices rose 3% for the first time since March 2021. The increase in U.S. wholesale prices also slowed.

The latest retail sales report contained more good news. US retail sales rose 1% month-on-month in July, following a downwardly revised decline in June. and far above economists’ expectations. This is a sign that the US consumer, a key pillar of the US economy, remains robust.

The flood of economic data has cleared the way for the September rate cut, but it is unclear whether the Fed will cut rates by a quarter or half a percentage point. Traders have cut their expectations for a half-percentage point cut in September to 30% from 51% the previous week, according to the CME FedWatch tool.

The Russell 2000 Index, which tracks U.S. small-cap stocks, rose 2.5 percent this week as traders bet that the Fed will cut interest rates in September. Small caps typically perform well after the first rate cut in a Fed easing cycle.

But before the central bank meeting, Fed Chairman Jerome Powell is scheduled to speak at an economic summit in Jackson Hole, Wyoming, next week. Powell has used the summit in the past to to indicate the Fed’s next policy move.

This sometimes led to drastic fluctuations in Markets. After last year’s speech, stocks fluctuated before eventually ending the session moderately higher. In 2022, they plunged, with the Dow falling more than 1,000 points after Powell warned of further pain from higher interest rates.

Elsewhere, crude oil prices fell this week after the Organization of Petroleum Exporting Countries lowered its forecast for global oil demand growth for both 2024 and 2025. The group now expects demand to rise by 2.11 million barrels per day in 2024, down from the 2.25 million it forecast last month, citing weakening expectations in China.

In corporate news, Starbucks shares rose 26.4% this week after the company announced Tuesday that CEO Laxman Narasimhan is stepping down, effective immediately, and will be replaced next month by Chipotle’s Brian Niccol. Niccol helped get the burrito chain back on track after an E. coli outbreak left 22 people hospitalized in 2018.

Walmart shares rose 7.7% this week after the company reported that U.S. sales at stores open for at least a year rose in the latest quarter and operating profit rose. Home Depot shares fell 2.2% after the company cut sales expectations in quarterly results on Tuesday. The company also warned that consumers are cutting back on spending on home improvement projects.

This story is evolving and will be updated.