Stocks Rise as Investors Focus on Earnings and Economic Data

U.S. stocks edged higher on Thursday as a fresh slate of economic data and corporate earnings reports continued to paint a mixed picture of the economy's direction. While some reports showed signs of improvement, others suggested that the recovery was losing momentum.

The stock market was up slightly today, with the S&P 500 adding 0.5%, the Nasdaq Composite rising 0.9%, and the Dow Jones Industrial Average up 45 points, or 0.1%.

Overall, a mixed bag of earnings reports on Wednesday saw major indexes close nearly flat. Some companies beat expectations, while others fell short. Overall, it was a fairly average day on the markets.

New data released on Thursday showed that U.S. economic growth slowed less than expected in the fourth quarter of 2022, capping off a year of slower growth following the initial rebound from the pandemic in 2021. Initial jobless claims also declined last week, indicating that the U.S. labor market remains strong despite losing some momentum in recent months.

Investors were also reviewing a new batch of corporate earnings, with Intel and Visa among the major companies still to report. Shares of Tesla, popular with individual investors, rose 9% after the electric car maker reported a record quarterly profit after the markets closed Wednesday.

Stock indexes have been on a tentative, choppy rally in recent weeks. Riskier assets have recovered some from their steep declines in 2022, on hopes that the Federal Reserve will begin to temper—and eventually halt—its interest-rate increases as inflation shows signs of easing. However, the resilience of the American economy is diminishing some of those hopes.

The central bank is expected to continue moderating its rate increases next week, after a key metric showed inflation slowed for the sixth straight month in December. The Fed’s preferred inflation gauge is due out Friday.

Economists and investors are concerned that higher interest rates are increasing the chance of a recession in the United States. However, the economy has shown greater strength than expected, boosting hopes that the Federal Reserve can avoid a so-called hard landing, in which higher rates prompt a sharp slowdown in growth.

Altaf Kassam, head of investment strategy and research for Europe, the Middle East and Africa at State Street Global Advisors, believes that inflation has reached a tipping point and is starting to turn over. This necessitates at least a pause in some monetary tightening.

The GDP report paints a mixed picture. Consumer spending, the economy’s main engine, remained solid but its pace of growth slowed from the previous quarter. Business investment ticked up at a weaker rate, with companies cutting back on equipment spending. The housing market, which has been hit by rising mortgage rates, continued to slump. Most of the report’s gains came from businesses adding to inventories, higher government spending and lower imports, analysts said.

The number of people seeking ongoing unemployment benefits rose to 1.675 million last week, an increase of 20,000. This is up from the lows seen last spring, suggesting that it is taking longer for some people to find a new job.

There has been a wave of major layoff announcements in recent weeks, which could push claims higher later this year.

Sherwin-Williams' shares took a hit, falling 8% and on pace to be the worst performer in the S&P 500, after the company announced it expects sales and profits to decline in 2023 compared to the previous year. Seagate Technology's shares jumped 10% in contrast, poised to be the best performer in the S&P 500, after the company posted results that beat analysts' expectations. Dow's stock also fell, though not as sharply, by 0.6%. The chemical company attributed this to plans to lay off approximately 2,000 staff in an effort to save around $1 billion.

The yield on the 10-year U.S. Treasury note rose to 3.494% on Thursday, up from 3.461% the previous day. The WSJ Dollar Index edged up 0.3%.

The price of bitcoin has been hovering near $23,000, boosted by a broad-based surge in digital asset prices since the start of the year. This surge has been driven by increasing interest from both institutional and retail investors.

Overseas, most global markets were up. In Europe, indexes were up across the board, with the Stoxx Europe 600 finishing 0.4% higher.

In Asia, Japan’s Nikkei 225 edged down 0.1%, while in Hong Kong, the Hang Seng Index climbed 2.4%. Markets in mainland China, Taiwan and Australia were closed for public holidays.