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US Stocks Hit Best Level in 8 weeks 01/26 15:53
Stocks rose Thursday to send Wall Street to its highest level in nearly
eight weeks following reports suggesting the economy and corporate profits may
be doing better than feared.
NEW YORK (AP) -- Stocks rose Thursday to send Wall Street to its highest
level in nearly eight weeks following reports suggesting the economy and
corporate profits may be doing better than feared.
The S&P 500 climbed 1.1% to clinch its highest finish since Dec. 2. The Dow
Jones Industrial Average gained 205 points, or 0.6%, while the Nasdaq composite
rallied 1.8%.
More swings may still be ahead, as Wall Street digests a growing torrent of
earnings and economic reports. Markets have veered up and down recently as
worries about a severe recession and drop-off in profits battle against hopes
the economy can manage a soft landing and the Federal Reserve may ease up on
interest rates.
Thursday's headline report showed the overall economy held up better through
the last three months of 2022 than economists expected, even with the weight of
all the rate hikes the Fed approved last year to combat inflation. According to
the U.S. government's first of three estimates on it, the economy's growth
slowed to an annual rate of 2.9% in the quarter, which was stronger than the
2.3% that economists had forecast.
Other reports showed that orders for long-lasting goods from factories
strengthened by more than expected in December and fewer workers applied for
jobless claims than expected last week.
Strong data give hope the economy can withstand last year's blizzard of rate
hikes by the Fed, plus at least one more expected next week, without crashing
to a deep recession. Higher rates intentionally slow the economy by making it
more expensive to borrow to buy a home, a car or anything else on credit. They
also drag down prices for stocks and other investments.
But a stronger-than-expected economy, particularly in the job market, can
also carry risks. It could push the Fed to keep rates higher for longer in
order to ensure inflation really is crushed. The Fed has already been saying
repeatedly that it plans to do just that, at least through the end of the year,
though many investors don't seem to be buying it.
The yield on the 10-year Treasury, which helps set rates for mortgages and
other loans crucial for the economy, rose to 3.49% from 3.45% late Wednesday.
The two-year yield, which tends to more closely track expectations for Fed
actions on interest rates, rose to 4.18% from 4.13%.
While Thursday's report on the economy may have been encouraging at first
blush, it included some concerning signals of slowdown underneath. It's also
backward looking, said Megan Horneman, chief investment officer at Verdence
Capital Advisors.
"The first half of this year is going to be tough," she said, pointing to
recent weakness in both the manufacturing and services sectors of the economy.
But she added she's "in the camp that says it will be relatively short and
shallow because if you look at the foundation of the economy coming into this
slowdown, there are a lot of things that are much stronger than you tend to see
in past recessions."
She cited the very low unemployment rate and relatively strong balance
sheets at companies and households, among other things.
On the earnings front, reports from some big tech-oriented companies helped
build optimism a day after worries flared following forecasts from Microsoft
widely seen as discouraging.
Tesla jumped 11% after the electric-vehicle maker reported stronger profit
for its latest quarter than analysts expected. Seagate Technology rose 10.9%
after it reported stronger revenue and earnings than expected.
Steelmaker Nucor was also among the top-performing stocks in the S&P 500,
rising 8.4% after beating Wall Street's profit and revenue forecasts.
Chevron rose 4.9% after it raised its dividend and approved a program to buy
back up to $75 billion of its stock. Both moves put cash directly in the
pockets of shareholders, which caught criticism from Washington. White House
spokesman Abdullah Hasan suggested oil companies instead "use their record
profits to increase supply."
On the losing end of Wall Street was Sherwin Williams. It fell 8.9% after
reporting weaker revenue for its latest quarter than expected. It also gave a
forecast for profit this upcoming year that fell well short of analysts'
expectations, as a weakened housing industry weighs on demand for paint.
IBM dropped 4.5% despite reporting profit and revenue that met Wall Street's
expectations. Analysts pointed to some below-forecast numbers related to how
much cash it's generating.
Southwest Airlines fell 3.2% after it said it lost more money than expected
during its latest quarter, which was marred by more than 16,700 flight
cancellations last month. It also said it expects to turn in a loss for the
first three months of 2023.
All told, the S&P 500 rose 44.21 points to 4,060.43. The Dow climbed 205.57
to 33,949.41, and the Nasdaq composite gained 199.06 to 11,512.41.
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