Dow rises 150 points, Nasdaq advances 1.2% in midday trade as investors digest GDP report, earnings

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U.S. stocks rose in midday trade Thursday, after swinging between gains and losses earlier in the session, as fourth-quarter gross domestic product came in slightly stronger than expected, boosting investor confidence that the economy will make a soft landing in 2023.

How are stocks trading

  • The S&P 500 rose by 25 points, or 0.6%, to 4,041.
  • Dow Jones Industrial Average gained 145 points, or 0.4%, to 33,890.
  • Nasdaq Composite advanced 132 points, or 1.2%, to 11,446.

The Dow Jones Industrial Average finished Wednesday’s session up 10 points after falling roughly 400 points at the lows earlier in the session. Still, all three averages remain higher for the week, with the tech-heavy Nasdaq on track for its fourth straight weekly advance, what would be its longest such streak since August.

What’s driving markets

U.S. stock indexes are trading higher Thursday afternoon, reversing earlier losses after a flurry of economic data which included a report on fourth-quarter U.S. GDP came in stronger than economists had expected.

Investors were also focused on the latest batch of corporate earnings which helped to brighten the outlook following disappointing results and guidance from Microsoft Corp. earlier in the week.

The economy grew at a robust 2.9% annual pace to close out 2022, according to the first estimate of fourth quarter GDP, released Thursday morning. Investors heralded it as the latest sign that the U.S. economy is holding up well despite the Federal Reserve’s aggressive interest-rate hikes.

“Thursday’s GDP report suggests that the economy is relatively strong even in the face of aggressive measures by the Federal Reserve to calm inflation,” said Carol Schleif, chief investment officer at BMO Family Office, in emailed commentary.

Markets cheered the latest data as evidence that the U.S. economy might achieve a soft landing, rather than slumping into a recession, as signs of waning inflation might spur further aggressive interest-rate hikes by the Federal Reserve.

“The market was bracing for the data to be a little bit worse,” said Christopher Zook, chairman and chief investment officer of CAZ Investments.

Others pointed to signs of weakness in the details of the data. Economists from Jefferies pointed out in a note to clients that the growth in domestic demand was just 0.8%, less than the prior quarter, after removing the contribution from trade and inventories.

“Bottom line, despite the acceleration in top line growth in the second half, demand is actually cooling under the surface,” said Jefferies Economists Aneta Markowska and Thomas Simons in a note to clients.

See also: U.S. economy doesn’t look as good as GDP suggests

While the economic data made headlines, corporate earnings reports released late Wednesday and before the bell on Thursday remained the market’s primary concern, Zook said. Investors celebrated a surge in Tesla Inc. TSLA shares after the firm released well-received results that showed record quarterly profits.

The labor market is also showing signs of strength despite more reports of layoffs in the technology, finance and media sectors, as the number of Americans filing for unemployment benefits fell to their lowest level since April. Investors also digested durable goods orders for December.

Data from the Commerce Department showed U.S. new home sales rose for the third month in December, climbing 2.3% to a seasonally-adjusted rate of 616,000, from a revised 602,000 in the prior month.

As for the Federal Reserve, the central bank is expected to slow the pace of interest rate hikes when it next week raises its policy rate by 25 basis points to a range of 4.5% to 4.75%.

More corporate earnings are expected Thursday, with results due out from McDonald’s Intel Visa Dow and Northrop Grumman

In aggregate, companies are reporting earnings 2.4% above expectations, according to data from Refinitiv. Earnings typically outperform Wall Street’s generally conservative forecasts, however, and the outperformance seen so far this earnings season is smaller than the long-term historical average.

Companies in focus

  • Tesla rose 9.3% on Thursday after the electric-car maker reported better-than-expected profits and said it was on track to deliver about 1.8 million vehicles this year.
  • Southwest Airlines fell 4.1% after the air carrier reported a wider than expected fourth quarter loss and warned of another loss in the current quarter, while apologizing for the “operational disruptions” during the holiday travel season.
  • IBM was down 4.5% though the Big Blue increased revenue more than 6% in 2022, the biggest sales increase in more than a decade.
  • Archer Daniels Midland  said Thursday the agribusiness’s fourth-quarter profit rose to $1.02 billion, or $1.84 a share, from $782 million, or $1.38 a share, in the year-ago quarter. The company’s shares was nearly flat.
  • American Airlines gained 0.8% after the air carrier reported the most quarterly profit since before the COVID pandemic. 

—Jamie Chisholm contributed to this article.

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