U.S. Stocks Pull Back Off Best Levels But Continue To See Modest Strength

(RTTNews) - Stocks moved mostly higher in early trading on Thursday but have given back ground over the course of the session. The major averages have pulled back off their highs of the session, with the Dow and the Nasdaq briefly dipping below the unchanged line.

Currently, the major averages are posting modest gains. The Dow is up 63.91 points or 0.2 percent at 37,870.30, the Nasdaq is up 18.08 points or 0.1 percent at 15,500.00 and the S&P 500 is up 12.35 points or 0.3 percent at 4,880.90.

The early strength on Wall Street came following the release of a Commerce Department showing stronger than expected U.S. economic growth as well as a slowdown in the pace of consumer price growth in the fourth quarter of 2023.

The report said gross domestic product shot up by 3.3 percent in the fourth quarter after surging by 4.9 percent in the third quarter, while economists had expected GDP to jump by 2.0 percent.

The stronger than expected GDP growth partly reflected a continued surge in consumer spending, which shot up by 2.8 percent in the fourth quarter after spiking by 3.1 percent in the third quarter.

On the inflation front, the Commerce Department said the personal consumption expenditures price index increased 1.7 percent in the fourth quarter compared with a 2.6 percent jump in the third quarter.

Excluding food and energy prices, the PCE price index increased 2.0 percent in the fourth quarter, the same as in the third quarter.

"The headline data are the perfect mix of strong consumption and dropping inflation," said Jamie Cox, Managing Partner for Harris Financial Group. "This is exactly what you want to see if you are running the Fed and want to move rates lower this year."

Meanwhile, the Commerce Department also released a report showing new orders for U.S. manufactured durable goods unexpectedly came in unchanged in the month of December.

The report said durable goods orders were virtually unchanged in December after surging by an upwardly revised 5.5 percent in November.

Economists had expected durable goods orders to jump by 1.1 percent compared to the 5.4 percent spike that had been reported for the previous month.

Excluding orders for transportation equipment, durable goods orders increased by 0.6 percent in December after climbing by 0.5 percent in November. Ex-transportation orders were expected to inch up by 0.2 percent.

A separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits rebounded by more than expected in the week ended January 20th.

The Labor Department said initial jobless claims climbed to 214,000, an increase of 25,000 from the previous week's revised level of 189,000.

Economists had expected initial jobless claims to rise to 200,000 from the 187,000 originally reported for the previous week.

Buying interest has waned over the course of the session, however, as traders look ahead to the release of a closely watched report on personal income and spending on Friday.

The personal income and spending report includes readings on inflation said to be preferred by the Federal Reserve and could have a significant impact on the outlook for interest.

Among individual stocks, tech giant IBM Corp. (IBM) continues to a standout gain, soaring by 10.3 percent after reporting fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Meanwhile, fellow Dow component Boeing (BA) has plunged by 6.0 percent after Bank of American downgraded its rating on the aerospace giant to Neutral from Buy.

A steep drop by health insurer UnitedHealth (UNH) is also limiting the upside for the Dow after rival Humana (HUM) provided disappointing guidance.

Sector News

Airline stocks have moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 3.2 percent.

A substantial increase by the price of crude oil is also contributing to significant strength among oil stocks, as reflected by the 1.4 percent gain being posted by the NYSE Arca Oil Index.

Telecom stocks are also seeing considerable strength after falling sharply on Wednesday, driving the NYSE Arca North American Telecom Index up by 1.3 percent.

Interest-rate sensitive utilities and commercial real estate stocks have also moved notably higher, while some weakness is visible among healthcare and brokerage stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index closed just above the unchanged line, while Hong Kong's Hang Seng Index jumped by 2.0 percent and China's Shanghai Composite Index surged by 3.0 percent.

The major European markets also showed modest moves to the upside after the ECB left interest rates unchanged. While the U.K.'s FTSE 100 Index closed marginally higher, the German DAX Index and the French CAC 40 Index both inched up by 0.1 percent.

In the bond market, treasuries have climbed firmly into positive territory in reaction to the U.S. economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.0 basis points at 4.138 percent.