The domestic equity markets closed the trading session higher, as stocks were able to bounce back from yesterday’s sharp declines on the heels of a plethora of corporate earnings reports and data that showed 4Q GDP growth inline with estimates. In other economic news, weekly jobless claims rose more than expected, while pending home sales fell more than anticipated. Treasuries were mostly lower following the domestic data.
The Street was treated to a large serving of domestic earnings reports, of which, Facebook and Under Armour were standout winners after both easily topped the Street’s quarterly projections, while Qualcomm and Visa also advanced in the wake of their profit reports. Dow member 3M Co offered mixed results, while fellow Dow component Exxon Mobil missed expectations.
The Dow Jones Industrial Average moved 110 points (0.7%) higher to 15,849
The S&P 500 Index advanced 20 points (1.1%) to 1,794
The Nasdaq Composite increased 72 points (1.8%) to 4,123
In moderate volume, 652 million shares were traded on the NYSE, and 2.1 billion shares changed hands on the Nasdaq
WTI crude oil gained $0.87 to $98.23 per barrel, wholesale gasoline was flat at $2.67 per gallon
The Bloomberg gold spot price decreased $24.13 to $1,243.21 per ounce
First look at 4Q GDP matches forecasts, while jobless claims rise more than expected
The first look, of three, at 4Q Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of expansion of 3.2%, after 3Q’s 4.1% growth, and inline with most street forecasts.
The growth in GDP primarily reflected positive contributions from personal consumption, exports, nonresidential and private inventory investments, along with state and local government spending, partially offset by negative contributions from federal government spending and residential fixed investment, while increased imports subtracted from the GDP calculation. Most analysts believe the trend for economic growth will gain momentum in 2014, led by a fading fiscal drag, as well as continued strength in housing and a pick-up in business capital spending.
On inflation, the GDP Price Index rose 1.3%, from the 3Q’s 2.0% advance, and compared to the anticipated 1.2% increase, while the core PCE Index, which excludes food and energy, rose 1.1%, matching expectations, and following 3Q’s 1.4% growth.
Weekly initial jobless claims rose by 19,000 to 348,000 last week, above the 330,000 expectation, after the prior week’s upwardly revised 329,000 figure. Moreover, the four-week moving average, considered a smoother look at the trend in claims, increased by 750 to 333,000, while continuing claims declined by 16,000 to 2,991,000, south of the 3,000,000 forecast.
Treasuries were mostly lower following the data, with the yield on the 2-year note nearly unchanged at 0.35%, while the yields on the 10-year note and the 30-year bond increased 2 basis points to 2.69% and 3.64%, respectively. Yields regained some of yesterday losses that stemmed from the emerging market concerns and the decision by the Federal Reserve to continue to scale-back its monthly bond purchases.
Tomorrow’s domestic economic calendar will yield readings on personal income, anticipated to increase 0.2% m/m in December, and personal spending, expected to also have grown 0.2% m/m. Also on tap, the Chicago Purchasing Manager Index is forecasted to tick slightly lower in January to a level of 59.0 from the 59.1 posted in December, with a reading above 50 denoting expansion in activity. As well, the final University of Michigan Consumer Sentiment Index for January will be released, with a reading of 81.0 expected, up slightly from the preliminary report of 80.4.
European stocks mostly positive, Asia sees pressure
The European equity markets finished mostly higher, aided by the rebound in the U.S. following a wide variety of earnings and economic reports. Traders digested yesterday’s announcement from the U.S. Federal Reserve to reduce its monthly asset purchases by another $10 billion to $65 billion. However, gains were held in check by the continued concerns toward the emerging markets, exacerbated by a report confirming that China’s manufacturing output contracted for the first time in six months.
In economic news in the region, Spain’s 4Q GDP expanded 0.3% quarter-over-quarter, matching expectations, while German unemployment change fell more than expected and a separate report showed the nation’s consumer prices fell for January.
Stocks in Asia finished broadly lower as concerns toward the emerging markets continued to fester, despite recent actions by central banks to try to stabilize the currency markets, while the Fed stayed the course with its asset purchase reductions yesterday. Japanese equities were under pressure, as yesterday’s rally in the yen weighed on export-related issues, and sentiment was exacerbated by disappointing Japanese retail sales data for December. In China, the final January HSBC/ Markit Manufacturing Index confirmed the first contraction in output for the sector since July.
The action in China came ahead of tomorrow’s beginning of the Lunar New Year holidays, which will have the mainland Chinese markets closed for a week. South Korean markets were closed for the Lunar New Year holiday.
The international economic docket for tomorrow will be dominated by a plethora of reports out of Japan. Items set to be released by the island nation include: Markit manufacturing data, housing figures, construction orders, the jobless rate, CPI data and industrial production figures. Additionally, we will receive retail sales data from Germany, consumer spending figures from France, a consumer confidence reading from the UK and CPI data for the Eurozone.