Jan 25 (Reuters) – Wall Street’s main indexes gained on Thursday after data reflecting strong economic performance in the fourth quarter boosted hopes of a soft landing, while Tesla’s growth warning kept a lid on investor enthusiasm.
The economy grew much faster than expected at 3.3% in the quarter on strong consumer spending, defying dire predictions of a recession in 2023 after the Federal Reserve aggressively raised interest rates, according to the Commerce Department’s advance report.
“It is supporting that sort of Goldilocks narrative with growth looking pretty strong and the general feeling that inflation is still trending down,” said Chhad Aul, chief investment officer and head of multi-asset solutions at SLGI Asset Management.
Another data showed initial jobless claims for the week ended Jan. 20 rose to 214,000, higher than the estimated 200,000 figure.
At 11:33 a.m. ET, the Dow Jones Industrial Average (.DJI), opens new tab was up 102.50 points, or 0.27%, at 37,908.89, the S&P 500 (.SPX), opens new tab was up 22.93 points, or 0.47%, at 4,891.48, and the Nasdaq Composite (.IXIC), opens new tab was up 92.65 points, or 0.60%, at 15,574.57.
However, Tesla (TSLA.O), opens new tab skidded 10.5% to an eight-month low and was on track to lose about $50 billion in value after warning of a sharp slowdown in sales growth this year.
The consumer discretionary sector (.SPLRCD), opens new tab fell 0.9% to a one-week low.
EV makers Rivian Automotive (RIVN.O), opens new tab and Lucid Group (LCID.O), opens new tab also fell 3.3% and 8.0%, respectively.
Tesla’s growth warning could fan worries over the rich valuations of heavily weighted megacap companies – also known as the “Magnificent 7” – that have been the key driver of a Wall Street rally since late 2023.
“The rest of the megacap space is still screaming ahead so far this year, so even when one of the ‘Magnificent 7’ is under some pressure, you still have the rest of the group supporting the broader market,” Aul added.
The benchmark S&P 500 closed at a record level for a fourth straight session on Wednesday, after hitting an intraday all-time high for the third time in less than a week.
Humana (HUM.N), opens new tab sank 12.6% as it became the latest health insurer to forecast disappointing annual profit, dragging the S&P 500 healthcare sector (.SPXHC), opens new tab down by 0.9%, the worst hit among the S&P 500 sectors.
Dow-Jones component UnitedHealth (UNH.N), opens new tab shed 5.6% and Cigna (CI.N), opens new tab lost 3.9%.
IBM (IBM.N), opens new tab jumped 12.7% after forecasting full-year revenue growth above estimates, while Comcast (CMCSA.O), opens new tab added 3.8% as the media giant topped quarterly revenue estimates.
American Airlines (AAL.O), opens new tab flew 8.5% as the carrier forecast largely upbeat annual profit.
Earnings beat have been scaling down since the season’s start, but remains above the long-term average of 67%. Of the S&P 500 companies that have reported earnings so far, 82% have surpassed expectations, LSEG data showed.
Among other big movers, Boeing (BA.N), opens new tab fell 6.5% after the U.S. Federal Aviation Administration barred the troubled planemaker from expanding production of its 737 MAX narrowbody planes.
Advancing issues outnumbered decliners by a 2.53-to-1 ratio on the NYSE and a 1.55-to-1 ratio on the Nasdaq.
The S&P index recorded 43 new 52-week highs and two new lows, while the Nasdaq recorded 73 new highs and 80 new lows.
