GDP and Durable Goods Orders Data Lift Sentiment On Wall Street

Barry Adams
26 Jan, 2023
New York City

U.S. stocks opened higher after a flood economic reports provided more insights in the health of the economy. 

GDP in the fourth quarter rose at a faster annual pace than expected on the strength in consumer spending, business inventories and fixed investments and stable government spending. 

International goods deficit expanded in December after imports rose at a faster pace than exports. 

Stocks retained upward bias after Tesla reported a surge in sales and profit and the electric vehicle maker cautioned that the average selling price for the vehicle is expected to keep falling. 

Tesla Inc's larger vehicle discounts in the U.S. are likely to have a ripple effect in the industry as the company is expected to cross two million vehicle sales in 2023. 

Investors also digested the latest batch of earnings and American Airlines and Southwest were in focus after the release of diverging quarterly results. 

 Chevron also boosted its quarterly dividends and expanded its stock repurchase program. 

The S&P 500 index rose 0.7% to 4,045.90 and the Nasdaq Composite index advanced 1.4% to 11,474.98. 

The S&P 500 index is up 1.9% and the Nasdaq Composite is up 3.1% in the week so far. 

Crude oil price increased $2.01 to $82.16 a barrel and natural gas prices fell 22 cents to $2.84 a thermal unit. 

The yield on 2-year Treasury notes edged higher to 4.17%, 10-year Treasury notes increased to 3.47% and 30-year Treasury bonds rose to 3.62%. 

 

U.S. GDP Growth Slowed In Fourth Quarter 

The U.S. economy expanded at 2.9% annual pace in the fourth quarter, slower than 3.2% in the third quarter, the BEA said in a preliminary report. 

For all of 2022, GDP expanded 2.1% following a 5.9% rise in 2021. 

Economists are estimating a mild recession may drag the 2023 growth near zero after seven rate hikes in 2022 and interest rates running at highs not seen in nearly 40 years. 

 

U.S. Durable Goods Orders Surged In December 

U.S. durable goods orders soared 5.6% in December from previous month and orders, largest increase since July 2020. 

Transportation orders increased 16.7% and new orders excluding transportation fell 0.1%. 

Transportation equipment, also up four of the last five months, drove the increase, $15.5 billion or 16.7% to $108.1 billion.

New orders excluding defense orders rose 6.3%. 

Shipments of manufactured durable goods in December, up nineteen of the last twenty months, increased $1.4 billion or 0.5% to $277.7 billion, following a 0.4% November increase. 

Transportation equipment, up fourteen of the last fifteen months, drove the increase, $1.5 billion or 1.7% to $93.8 billion.

 

International Goods Trade Deficit Expanded In December 

The international trade deficit expanded to $90.3 billion in December, up $7.3 billion from $82.9 billion in November. 

Exports of goods for December fell $2.6 billion from November to $166.8 billion, $2.6 billion and imports fell $4.7 billion to $257.1 billion, $4.7 billion.

 

Weekly Jobless Claims Fall 

U.S. weekly jobless claims fell 6,000 from the downwardly revised previous week to 186,000 in the week ending January 21. the lowest since April and the 4-week moving average fell 9,250 to 197,000.

 

U.S. Movers 

American Airlines advanced 1.6% in pre-market trading after the company reported better-than-expected earnings on higher holiday travel demand and rising prices for travel services. 

American Airlines said the December quarter revenue soared 40% to $13.2 billion and swung to net income of $803 million from a loss of $931 million. 

Diluted earnings per share in the latest quarter was $1.14 from a loss of $1.44 in the previous year. 

CSX Corp fell 1% to $31.05 after the railroad operators reported mixed quarterly results and said price increase and higher storage revenue supported the increase in quarterly results. 

CSX Corp said fourth quarter revenue increased 9% to $3.73 billion and net income increased 9% to $1.0 billion from $934 million and earnings per share rose 17% to 49 cents from 42 cents a year ago.

Chevron Corp rose 3.5% to $185.40 after the oil explorer and refiner increased its quarterly dividends and expanded its stock repurchase program. 

Chevron Corp said its board authorized a new $75 billion stock repurchase program with no expiry date from April 1 after the ending of the $25 billion plan that will be completed at the end of March.

Chevron Corp increased quarterly dividend by 6% to $1.51 a share payable on March 10 to shareholders on record February 16, 36th consecutive year of increase in annual dividend payout per share.

Las Vegas Sands soared 4% after the operator of casinos in Las Vegas, Singapore and Macao reported a rebound in activities in Singapore. 

Revenue in the December quarter increased to $1.1 billion from $1.0 billion and net loss widened to $274 million from $194 million and diluted loss per share expanded to 22 cents from 17 cents a year ago. 

Levi Strauss soared 5.5% after the maker of denim apparel reported better-than-expected quarterly results. 

Fiscal fourth quarter revenue ending in November decreased 6% to $1.6 billion and net income fell 1% to $151 million and diluted earnings per share 38 cents from 37 cents a year ago. 

Southwest Airlines fell 2.4% to $25.98 after the company swung to a quarterly loss following the cancellation of 1,6700 flights during the holiday period. 

Southwest Airlines said revenue in the December quarter increased 22% to $6.2 billion and swung to a net loss of $220 million or 37 cents from a profit of $68 million or 11 cents a share.

Tesla Inc soared 8.5% to $156.49 after the electric vehicle maker reported record quarterly revenues and profit and record production and deliveries of vehicles despite the market struggles in China. 

Tesla Inc said electric vehicles production surged 44% from a year ago to 439,701 in the December quarter and deliveries rose 31% to 405,278.

Tesla Inc said revenue in the December quarter increased 37% to $24.3 billion and net income soared 59% to $3.7 billion and diluted earnings per share rose to $1.07 from 68 cents a year ago.

 

Europe Indexes Swing to Positive Territory 

European indexes advanced following upbeat earnings updates and hopes of softer rate hike in the U.S. also supported the market sentiment. 

STMicroelectronics, Thales, Worldline, Sartorius, Infineon Technologies and Zalando advanced after the release of earnings updates. 

Pernod Ricard and Essilor Luxottica fell on earnings worries.  

The DAX index increased 0.07% to 15,093.20, the CAC-40 index rose 0.7% to 7,096.34 and the FTSE 100 index inched up 0.07% to 7,751.26. 

The euro traded at $1.0889, the British pound edged up to $1235 and the Swiss franc advanced to 91.94 U.S. cents. 

Brent crude oil rose 6 cents to $86.75 a barrel and the Dutch TTF natural gas futures increased a fraction to 56.71 per MWh. 

The yield on 10-year German Bunds traded at 2.18%, French bonds at 2.64%, UK Gilts at 3.45% and Italian bonds at 4.14%. 

 

Asian Markets Trade Higher 

Financial markets in Asia opened higher and benchmark indexes in Tokyo trimmed losses but indexes in Seoul and Hong Kong soared. 

Market sentiment was positive in the region on the hopes that the U.S. Federal Reserve may slow rate hike pace on the waning wage and price inflation and optimism about the latest U.S. economic data scheduled to be released later in the day. 

Investors are awaiting the release of fourth quarter GDP and durable goods orders data. 

The Nikkei 225 average declined 0.1% to 27,362.75 and the yen eased to 129.81 against the U.S. dollar.

Toyota Motor Corp fell 0.6% to ¥1,893.0 after the company said founder's grand-son Akio Toyoda stepped down from the leadership role to make way for a younger leader.

Exporters traded higher after the yen weakened. 

Canon edged up 0.2% to ¥2,945.50 and Panasonic Holdings Corp increased 2.2% to ¥1,197.50. 

Softbank Corp closed unchanged and Fast Retailing, the parent of Uniqlo, edged down 0.1%. 

 

Japan's Wholesale Inflation Eased

Producer price index, a measure of wholesale inflation, increased at a slower pace of 1.5% in December after rising at 1.7% in November, said the Bank of Japan. 

On a monthly basis, the wholesale inflation slowed to 0.1% from 0.2$ rise in November. 

In 2022, producer prices increased 1.7%. 

 

Toyota Motor Akio Toyoda Steps Down

Toyota Motor appointed Lexus President Koji Sato as the next chief executive of the company, after Akio Toyoda decided to step down and assume chairman role.

 

Hang Seng Index Rebounds, India Markets Closed 

Financial markets in India were closed for the Republic Day holiday and markets in mainland China and Taiwan are closed to celebrate Lunar New Year. 

The Hang Seng index soared 2.4% to 22,566.78 after the market reopened and on the hopes that the ending of the "zero-Covid" policy will revive domestic demand. 

The Kospi Index in Seoul increased 40 points or 1.60% to close at 2,468.65 and traded between 2,426.40 and 2,468.65.