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STORY: U.S. retail sales jumped one percent in July, blowing past estimates and marking the largest increase since January of 2023.

The surprise rebound in spending comes after a 0.2% drop in June.

Data from the Commerce Department out Thursday showed receipts at motor vehicle and parts dealers surged, as did sales at electronics and appliance outlets.

Consumers also spent more last month at building material, garden equipment and furniture stores.

Sales at restaurants and bars, the only services component in the report, also rose.

Economists view dining out as a key indicator of household finances.

Strong retail sales weren't the only sign of the country's continued economic resilience.

A separate report from the Labor Department on Thursday showed the number of Americans filing new applications for unemployment benefits dropped last week for the second week in a row and erased an increase in late July, suggesting an orderly labor market slowdown remained in place.

Investors had been on edge after a jump in the unemployment rate to a near three-year high of 4.3% in July sparked fears that the economy was either in a recession or nearing a downturn.

Many increased bets that the Federal Reserve would cut interest rates by 50 basis points in September.

Thursday's reports, however, lowered those odds to below 25%, with financial markets now seeing a greater than 75% chance of a 25 basis point cut.

Investors cheered the data, with Wall Street's main indexes rallying in the Thursday morning trading.