Wall Street advanced in choppy trading on Thursday as investors grappled with an onslaught of economic data and a string of mixed corporate earnings, all while eyeing the clock as it ticks down toward next week’s Federal Reserve monetary policy meeting.
While all three major U.S. stock indexes were green, megacap momentum stocks, buoyed by Tesla Inc’s (TSLA.O) earnings beat and upbeat sales forecast, helped put the Nasdaq in the lead.
A raft of data showed the U.S. economy fared better in the fourth quarter than analysts expected, and the labor market remains tight, despite some signs of weakening demand. This is a double-edged sword for investors, as it could embolden the Fed to keep key interest rates at restrictive levels for longer.
While financial markets have largely priced in a 25 basis point rate from the central bank next Wednesday, that sentiment is not unanimous.
The data “suggests a 50-basis-point rate hike next week and 25 basis points in March, and then possibly an end to the tightening cycle,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “I think the Fed wants to make sure that the markets don’t get ahead of themselves.”
“(The Fed tightening) hasn’t worked its way through the system, but you’re beginning to see cracks in consumption and inflation,” Cardillo added. “I’m sure the Fed is going to take note of that.”
Fourth-quarter earnings season has hit full stride, with more than one fourth of the companies in the S&P 500 having reported. Of those, 69% have beaten consensus estimates, up from 67% on Wednesday, according to Refinitiv.
Analysts now see aggregate fourth quarter earnings falling 2.7%, worse than the 1.6% year-on-year decline seen on Jan. 1, but an improvement over the 3% annual decline as of Wednesday, per Refinitiv.
The Dow Jones Industrial Average (.DJI) rose 87.4 points, or 0.26%, to 33,831.24, the S&P 500 (.SPX) gained 24 points, or 0.60%, to 4,040.22 and the Nasdaq Composite (.IXIC) added 122.49 points, or 1.08%, to 11,435.85.
Among the 11 major sectors of the S&P 500, energy (.SPNY) led the percentage gainers, boosted by rising crude prices due to signs of increasing demand from China.
Tesla Inc (TSLA.O) provided the most upside muscle to the S&P 500 and the Nasdaq, its shares jumping 9.4% in the wake of its earnings report.
Chevron Corp (CVX.N) announced it would triple its budget for share buybacks, which sent the oil major’s stock up 4.4%.
Among losers, IBM Corp (IBM.N) fell 4.3% in the wake of its announcement that it would cut jobs divest some assets after falling short of its annual cash target.
Southwest Airlines Co (LUV.N) slid 4.0% after warning of current quarter losses.
And despite forecasts of strong demand for air travel in 2023, the broader S&P 1500 Airlines index was off 1.6%.
That might have something to do with Mastercard Inc’s (MA.N) disappointing current quarter revenue forecast, cited an expected diminishing pent-up travel demand. The consumer payments company’s shares were down 1.7%.
Mastercard rival Visa Inc (V.N) is due to post results after the bell, as is chip bellwether Intel Corp (INTC.O).
Advancing issues outnumbered declining ones on the NYSE by a 1.72-to-1 ratio; on Nasdaq, a 1.18-to-1 ratio favored advancers.
The S&P 500 posted 22 new 52-week highs and no new lows; the Nasdaq Composite recorded 89 new highs and 26 new lows