Wall St climbs on soft landing hopes, Tesla boost

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U.S. stock indexes rose on Thursday after data showing a resilient labor market and better-than-expected economic growth last quarter helped ease worries of a deep recession, while Tesla’s bullish outlook boosted the tech-heavy Nasdaq.

A report from the Labor Department showed initial claims for state unemployment benefits dropped for the week ended Jan. 21, while the Commerce Department said gross domestic product (GDP) expanded at an annualized rate of 2.9% in the fourth quarter, above expectations of a 2.6% rise.

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“For almost a year, the Federal Reserve has been trying to achieve a soft landing by raising short-term interest rates just-enough to bring down inflation without causing a recession,” said Richard Flynn, managing director at Charles Schwab.

“It’s clear the economy remains relatively strong in the face of the Fed’s efforts, suggesting they’re succeeding.”

The GDP report could mark the last quarter of solid growth before the impact of the Federal Reserve’s aggressive tightening spree starts reflecting, with most economists expecting a mild recession by the second half of 2023.

Money markets are pricing in a 25-basis-points rate hike by the Fed next week, with a terminal rate of 4.9% in June, still below the 5% rate backed by many policymakers.

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After Microsoft Corp’s disappointing outlook spooked markets in the previous session, Tesla Inc’s better-than-expected quarterly results reassured investors that the EV maker could cope with a slowing economy in 2023. Tesla jumped 10.1%, boosting the S&P 500 consumer discretionary sector index.

Battered growth stocks have been gaining in January, with the S&P 500 Growth index recouping more than half of the losses logged last month.

At 9:49 a.m. ET, the Dow Jones Industrial Average was up 58.37 points, or 0.17%, at 33,802.21, the S&P 500 was up 21.49 points, or 0.54%, at 4,037.71, and the Nasdaq Composite was up 131.26 points, or 1.16%, at 11,444.62.

Keeping a lid on gains for Dow was chemical firm Dow Inc that fell 1.6% after missing Wall Street estimates for quarterly profit, and a 3.4% drop in IBM Corp after it missed annual cash flow targets.

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So far, 126 companies in the S&P 500 have reported fourth-quarter earnings, with 69% topping consensus estimates which is below the average of the past four quarters at 76%, according to Refinitiv. Analysts now see aggregate S&P 500 earnings dropping 2.7% year-on-year.

Mastercard Inc added 1.0% after reporting a better-than-expected fourth-quarter profit. Rival Visa Inc rose 0.3%.

Chevron Corp gained 2.9%, lifting the S&P 500 energy sector index by 1.1% after the oil major said it would triple its budget for share buybacks to $75 billion.

Advancing issues outnumbered decliners by a 2.42-to-1 ratio on the NYSE and by a 1.92-to-1 ratio on the Nasdaq.

The S&P index recorded 19 new 52-week highs and no new low, while the Nasdaq recorded 63 new highs and 11 new lows. (Reporting by Johann M Cherian and Shreyashi Sanyal in Bengaluru; Additional reporting by Sruthi Shankar; Editing by Arun Koyyur and Vinay Dwivedi)