US stocks closed higher after the release of GDP data. As investors focused on a slew of economic data releases and company announcements, U.S. stocks moderately increased. The stock market rebound, however, which was fueled by tech mega-caps, signalled that even while the Federal Reserve still had a path to a soft landing, the possibility of a recession this year is still very much alive.
The US fourth-quarter gross domestic product growth topped projections although corporate earnings turned out to be mixed, boosting the Dow by 205 points and increasing the S&P 500 and Nasdaq 100 by 1.10% and 1.76%, respectively. Since early December, the S&P 500 closed at its highest level.
Elon Musk hinted at the possibility of Tesla Inc. producing 2 million vehicles in 2023 as the company’s valuation surpassed $500 billion, driving gains in the Nasdaq 100. Tesla experienced a nearly 11% increase in earnings after reporting strong revenue and earnings and raising the 2023 estimates. Among the losers, IBM slumped 4.5% after announcing that it will lay off workers because it had not reached its annual cash target despite a rise in revenue.
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Analysts had predicted a 2.6% growth in Q4 2022, but the American economy grew by 2.9% instead, giving rise to optimism that a soft landing for the economy is still feasible despite the Federal Reserve’s relentless monetary tightening. The GDP contracted in each of the first two quarters of 2022, but according to data released on Thursday, the economy grew by 2.1% annually in 2022.
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Up until the end of 2022, the US gross domestic product increased more quickly than anticipated, but growth is threatened by the largest rate increases in decades and signs of decreasing underlying demand. Next week, on February 1, the Fed is anticipated to raise interest rates by 25 basis points as speculation grows that the central bank is nearing the conclusion of its tightening cycle. Officials, however, are indicating that rates will remain high for the remainder of this year.
Meanwhile, initial unemployment claims surprisingly dropped to nine-month lows, while durable goods orders also beat forecasts.
After the major averages extended their winning streak on Thursday during regular trading, US stock futures declined on Friday as investors awaited additional economic data and earnings reports that may help determine future growth and monetary policy.