US benchmark equity indexes posted gains on Thursday as Q4 economic growth decelerated sequentially, but not at a pace expected by the market, with signs that the Federal Reserve’s campaign to put a brake on growth is having an impact.
The Nasdaq Composite rose 1.8% to 11,512.4, while the S&P 500 rose 1.1% to 4,060.4. The Dow Jones Industrial Average edged 0.6% higher to 33,949.4. Barring consumer staples, all sectors notched gains, led by energy and consumer discretionary.
In economic news, US real gross domestic product in Q4 increased at a 2.9% annualized pace, according to an advance estimate released by the Bureau of Economic Analysis. The consensus on Econoday was for a 2.7% rise. In Q3, real GDP advanced by 3.2%. For 2022, GDP rose 2.1% annually, compared with a 5.9% gain in 2021.
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As the drag from the Fed’s tightening policy kicks into “higher gear,” margins will likely “squeeze” in the first half, unleashing “a full-blown layoff cycle and recession around the middle of next year,” Jefferies said in a note.
New-home sales in the US increased more than expected in December. Single-family home sales rose 2.3% on a monthly basis to a seasonally adjusted annual rate of 616,000 from November’s revised print of 602,000, according to the Census Bureau and the Department of Housing and Urban Development. The consensus on Econoday was for 614,000. Annually, new-home sales plunged 26.6% in December.
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Orders for US durable goods rose more than projected in December amid a sharp rise in transportation orders led by civilian and defense aircraft. Orders for tangible items with an average life of at least three years rose 5.6% to $286.89 billion last month following a 1.7% decline in November, the Census Bureau said. The consensus on Econoday was for a gain of 2.8%.
US initial jobless claims fell to 186,000 in the week ended Jan. 21 from 192,000 in the prior week and compared with expectations for a jump to 205,000 in a survey of analysts compiled by Bloomberg. The four-week moving average slid 9,250 to 197,500, a seventh straight decline.
The Chicago Fed’s National Activity index improved slightly to minus-0.49 in December from minus-0.51 in November, while the Kansas City Fed’s manufacturing index improved to minus-1 in December from minus-4 in November.
The US 10-year yield rose 3.6 basis points to 3.5% and the two-year rate moved up 5.4 basis points to 4.19%.
West Texas Intermediate crude oil futures advanced 1.1% to $81.04 per barrel.
In company news, Tesla (TSLA) was the top gainer on the S&P 500 and the Nasdaq, up nearly 11%, after the electric vehicle maker reported Q4 earnings that exceeded Wall Street estimates.
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International Business Machines (IBM) reported mixed Q4 results as earnings rose, but revenue stayed nearly flat due to a strengthening US dollar. The firm reportedly joined the list of major technology companies to announce staff cuts, with plans to lay off 3,900 workers, or 1.5% of its total workforce. Its shares dropped 4.5%, the worst performer on the Dow and among the worst on the S&P 500.
Gold fell 0.7% to $1,946.60 per troy ounce, while silver rose 0.4% to $24.03 per ounce.
