U.S. Stocks Extended Gains to 6th Day After GDP Growth Accelerated and Inflation Slowed

Barry Adams
25 Jan, 2024
New York City

Benchmark indexes traded higher after the release of the GDP report, and investors reviewed another batch of financial results.

The U.S. economy expanded at a faster pace in 2023, defying loud predictions of a recession, driven by sustained consumer spending and robust hiring by businesses. 

The report also noted slowing inflation, as both the headline and core rate of an alternative measure of price changes slowed in the month. 

New home sales rose in December and in 2023, despite elevated home prices and mortgage rates, as buyers struggled with affordability issues, the U.S. Census Bureau report showed Thursday.

New orders for manufactured durable goods were unchanged after an increase of 5.5% in November, a separate report from the government agency noted.

The S&P 500 index and the Nasdaq Composite advanced, and both indexes are set to close higher for the sixth session in a row.

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. GDP 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.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.3% to 4,880.53, and the Nasdaq Composite rose 0.2% to 15,514.78.

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 $1.29 to $76.36 a barrel, and natural gas prices decreased 2 cents to $2.62 a thermal unit.

Gold increased by $1.07 to $2,013.66 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. 

 

European Markets In Holding Pattern After ECB Rate Decisions

Stocks in Europe gyrated ahead of an interest rate announcement and monetary policy direction by the European Central Bank.

The ECB held rates steady for the third time in a row, and the central bank provided no new insight in the future direction of rates. 

Benchmark indexes traded around the flatline, but managed to close higher and bond yields edged up. 

Brent crude oil jumped to $80 a barrel on the expectation of a demand growth recovery after the People's Bank of China injected liquidity into the financial system and politicians vowed for more "forceful" measures to stabilize financial markets.

On the earnings front, investors are looking ahead to quarterly results from Louis Vuitton, Christian Dior, SEB, Epiroc, Tryg, STMicroelectronics, and Givaudan.

 

ECB Holds Rates Steady Third Time 

The European Central Bank held its key interest rates at 22-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 were disappointed after ECB President Lagarde failed to provide any clear direction for the future rate path and if and when the central bank is likely to cut rates this year. 

 

Spain's PPI Declined 10th Consecutive Month

Spain's producer price inflation declined for the 10th month in a row in December, the National Statistics Institute, or INE, reported Thursday.

Producer prices declined by 6.3% in December from a year ago and fell from the upwardly revised 7.6% in the previous month.

The decline in energy costs drove the fall in overall producer prices, and energy prices fell by 20.6% in the month after falling by 23.5% in the previous month.

 

Europe Indexes and Yields

The DAX index increased 0.1% to 16,906.92, the CAC-40 index rose 0.1% to 7,464.20, and the FTSE 100 index inched higher by 0.03% to 7,529.73.

The yield on 10-year German bonds edged up to 2.36%; French bonds inched higher to 2.86%; the UK gilts edged higher to 4.05%; and Italian bonds inched higher to 3.94%.

The euro edged lower to $1.089, the British pound inched higher to $1.272, and the U.S. dollar gained to 86.39 Swiss cents.

Brent crude increased $1.39 to $81.43 a barrel, and the Dutch TTF natural gas decreased by €1.17 to €27.78 per MWh.

 

Europe Stock Movers

Givaudan SA rose 4.6% to CHF 3,470.0 after the maker of flavors and fragrances reported results that met market expectations.

2023 sales increased 4.1% to CHF6.9 billion, net income rose 4.3% to CHF893 million, and free cash flow jumped 92% to CHF920 million.

The company proposed a cash dividend of CHF 68 per share, an increase of 1.5% from a year ago.

Epiroc AB decreased 1.8% to SEK184.20 after the company reported mixed quarterly results.

Revenue in the fourth quarter increased 12% to SEK 15.6 billion from SEK 13.9 billion, and orders received increased 5% to SEK 14.7 billion from SEK 13.7 billion a year ago.

Profit after tax decreased 5% to SEK 2.2 billion from SEK 2.4 billion, and diluted earnings per share fell to SEK 1.87 from SEK 1.98 a year ago.

STMicroelectronics declined 2.3% to €41.63 after the semiconductor company reported revenue and earnings slightly below expectations.

Revenue in the fourth quarter declined 3.2% to $4.3 billion from $4.4 billion, net income dropped 13.8% to $1.07 billion from $1.09 billion, and diluted earnings per share fell to $1.14 from $1.32 a year ago.

The company forecast first-quarter revenue of $3.6 billion, a decline of 15.2% from a year ago and 15.9% from the previous quarter.

Full-year 2024 revenue is expected to range between $15.9 billion and $16.9 billion, and gross margin percentage is estimated between the lows and mid-40s.

Capital expenditure in 2024 is expected to be around $2.5 billion.

 

China Stocks Ride Higher On Stimulus Hopes, Tesla Suppliers and EV Makers Turn Lower In Asia 

Asian markets generally advanced in Thursday's trading on the hopes that the People's Bank of China and Chinese government will soon announce more concrete policy measures to support financial markets.

In overnight trading, market indexes on Wall Street closed higher after a tech rally supported the rise of the S&P 500 index and the Nasdaq 100 index to record levels.

Electric vehicle components and electric display makers in Tokyo, Shanghai, and Seoul declined after Tesla reported weaker-than-expected earnings in the fourth quarter.

Moreover, Tesla guided a "notable decline in sales volume" in 2024 on global macroeconomic headwinds and rising competition from low-priced Chinese electric vehicle makers.

European markets also advanced following the rise in U.S. stocks, and tech stocks soared by as much as 5%.

Crude oil prices traded higher amid ongoing tensions in the Middle East and Red Sea, and merchant ships continued to avoid transporting through troubled waters.

 

Nikkei Struggled to Get Traction on BoJ Policy Shift Worries

The Nikkei 225 advanced 0.2% to 36,290.62 after falling as much as 0.2% in the morning session.

The Nikkei has been volatile over the last two days, hovering near a 34-year high on the basis of growing worries that the Bank of Japan is likely to end its ultra-loose monetary policy sooner than expected.

The Japanese yen edged higher near 147 against the U.S. dollar, and investors are awaiting the release of Tokyo inflation data on Friday.

Electric vehicle components and suppliers declined after Tesla reported weaker-than-expected earnings in the fourth quarter and guided a sharp decline in unit sales volume in 2024.

Nidec Corp. declined 3.7%, Disco Corp. jumped 1.7%, and Panasonic Holdings dropped 2.2%.

 

South Korea's 2023 GDP Growth Slowed

South Korea's gross domestic product growth was unchanged from the previous quarter, after government spending accelerated but consumer spending growth remained muted.

The gross domestic product in the fourth quarter increased by 0.6% from the previous quarter, matching the rate in the third and second quarters, the Bank of Korea reported Thursday.

On an annual basis, the economy expanded at a faster pace of 2.2% from the 1.4% rate increase in the previous quarter.

Government spending accelerated to 0.4% from 0.2% in the previous quarter, and consumer spending edged up 0.2% from unchanged.

Export growth slowed to 2.6% from 3.4% in the previous quarter, and import growth eased to 1% from 2.3%, respectively.

For all of 2023, the economy expanded by 1.4%, and economic growth slowed for the second year in a row, after expanding at 2.2% in 2022 and 4.3% in 2021.

In stock trading, the KOSPI index decreased 0.07% to 2,468.0 and extended this year's loss to 7.5%.

 

China Indexes Extended Rally to Third Day

China stocks rebounded for the third day in a row after investors put more faith in the recently announced stimulus measures.

The CSI index advanced 1.8% to 3,334.94, and the Hang Seng index soared 1.9% to 16,193.49 and extended the 3-day gain to over 5%.

The People's Bank of China lowered its bank reserve requirement for the first time in four months, injecting as much as $140 billion of liquidity into its financial system.

Moreover, the central bank also permitted banks to accept commercial real estate as collateral to seek funding to repay existing debts.

The move was widely welcomed by investors, but the measures are likely to fall short of reviving consumer confidence and market sentiment in the long term.

Alibaba Group advanced 0.8%, Tencent jumped 2.8%, Baidu advanced 3.2%, China Resources Land added 1.4%, and Longfor Group advanced 4.8%.

Li Auto, Xpeng, and Nio declined between 1.5% and 4.9% after Tesla earnings were below market expectations and the electric vehicle maker guided a decline in sales volume in 2024.

 

India Indexes Faced Headwinds After Mixed Quarterly Results

Stocks in Mumbai edged lower, and investors reviewed a flood of corporate earnings results.

The Nifty and the Sensex indexes traded down, and banks were in focus after Canara Bank, Bank of Baroda, and Indian Bank reported strong quarterly results.

Tech Mahindra dropped following the decline in revenue and profit, and Bajaj Auto faced headwinds from the persistent weakness in export sales growth.

The Sensex index decreased 287.67 points to 70,772.64, and the Nifty index fell 63.20 points to 21,390.75.

On the Mumbai stock exchange, 156 stocks traded at their 52-week highs and 8 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds increased to 7.17%, and the Indian rupee edged lower to ₹83.13 against the U.S. dollar.

Financial markets in India are closed on Friday to mark the Republic Day.