U.S. GDP Growth Surpassed Expectations, ECB Holds Rates Third Time

Barry Adams
25 Jan, 2024
New York City

Benchmark indexes were little changed in early trading and investors reviewed another batch of financial results. 

The S&P 500 index and the Nasdaq Composite edged slightly higher after both indexes closed higher in five previous consecutive sessions. 

Better-than-expected earnings from Netflix supported the market advance, but in Thursday's trading Tesla dropped sharply after the company warned that vehicle sales volume may lag in 2024 compared to 2023. 

Airlines were in focus as well after American Airlines and Southwest reported better-than-expected quarterly results. 

American jumped 4%, Alaska Air Group advanced 0.4%, Southwest Airlines gained 1.5%. 

Alaska Air said grounding of Boeing 737 Max 9 will cost the company $150 million and reported fourth-quarter loss of $2 million compared to a profit of $22 million a year ago. 

 

U.S. Economic Growth Surpassed Expectations 

The U.S. economy expanded at a faster-than-expected pace of 3.3% in the final quarter of 2023, the U.S. Bureau of Economic Analysis reported Thursday.

The interest rate tightening campaign is taking a toll on economic growth, but tight labor market conditions are still supporting the increase in wage and consumer spending.

The growth in the fourth quarter slowed from 4.9% in the third quarter.

For the full year 2023, the U.S. economy expanded 2.5% from the previous year.

 

ECB Holds Rates Steady Third Time 

The European Central Bank held its key interest rates at multi-year highs for the third consecutive time in a row.

The move was widely anticipated, and the accompanying statement noted that inflation has been on a declining trend and previous interest rate increases are affecting financial conditions.

The central bank held its deposit facility rate at 4% and its main refinancing lending facility rate at a 22-year high of 4.5%.

Investors are looking forward to comments from ECB President Lagarde and getting deeper insights about the interest rate path in the near future.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.1% to 4,902.73, and the Nasdaq Composite rose 0.2% to 15,674.24.

The yield on 2-year Treasury notes increased to 4.36%. 10-year Treasury notes declined to 4.14%, and 30-year Treasury bonds edged down to 4.38%.

WTI crude oil increased $0.53 to $75.66 a barrel, and natural gas prices increased 18 cents to $2.82 a thermal unit.

Gold increased by $1.37 to $2,013.92 an ounce and extended this week's gains after the U.S. dollar drifted slightly lower in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.27.

 

U.S. Stock Movers

Tesla declined 8% to $191.10 after the company reported quarterly results and issued a weak 2024 unit sales outlook.

The company said the vehicle volume growth rate in 2024 may be notably lower than the growth rate achieved in 2023 as the company prepares to launch the next-generation vehicle built at its factory in Texas.

Boeing declined 4.2% to $205.11 after the Federal Aviation Authority halted the company's plan to expand its production of 737 Max jets but also approved the company's plan to bring the Max 9 back into service.

IBM increased 7.3% to $186.59 after the technology company reported better-than-expected quarterly results.

American Airlines increased 4.3% to $14.53 after the international carrier reported quarterly results.

Full-year revenue surged 7.8% to record $52.8 billion from $48.9 billion, net income jumped to $822 million from $127 million, and diluted earnings per share advanced to $1.21 from 19 cents a year ago.

Alaska Air increased 0.5% to $36.02 after the regional airline reported mixed quarterly results. 

Revenue in the fourth-quarter increased 3% to $2.6 billion from $2.5 billion, net income swung to a loss of $2 million from a profit of $22 million, and diluted earnings per share were (0.02) cents compared to 17 cents a year ago.