Wall Street’s main indexes gained Thursday after data showing strong economic performance in the fourth quarter boosted hopes of a soft landing, while Tesla’s warning of a sharp drop in growth this year pulled its shares to an eight-month low.

The economy grew 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 a Commerce Department report.

“The stronger-than-expected GDP sort of increases the chance of perhaps a soft landing,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“It just seals the fact that the Fed is likely not going to be cutting rates anytime within the next six months,” Cardillo said.

Another set of data showed initial jobless claims for the week ended Jan. 20 rose to 214,000, higher than the estimated 200,000 figure.

At 9:45 a.m. ET, the Dow Jones Industrial Average was up 81.36 points, or 0.22%, at 37,887.75, the S&P 500 was up 15.31 points, or 0.31%, at 4,883.86, and the Nasdaq Composite was up 49.29 points, or 0.32%, at 15,531.21.

However, at of 10:32 a.m. ET, Tesla skidded 9.96% to $187.09 a share and was on track to lose about $50 billion in value following its warning. The consumer discretionary sector fell 1.1% and was the worst performer among S&P 500 sectors.

EV makers Rivian Automotive and Lucid Group also fell 4.1% and 7.3%, respectively.

“Any significant attempt (of Tesla) to boost sales and revenue from here on will probably come at the cost of further falls in operating margin, on having to compete with BYD in China — one of its biggest markets — as well as increased competition elsewhere,” said Michael Hewson, chief market analyst at CMC Markets.

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 benchmark S&P 500 closed at record levels for a fourth straight session on Wednesday, after hitting an intraday all-time high for the third time in less than a week.

Keeping optimism in check, Humana sank 11.7% as it became the latest health insurer to forecast disappointing annual profit, dragging the S&P 500 healthcare sector by 0.5% to a one-week low.

Dow-Jones component UnitedHealth shed 4.5% and Cigna lost 2.8%.

Among other big movers, Boeing fell 4.5% after the U.S. Federal Aviation Administration barred the troubled planemaker from expanding production of its 737 MAX narrowbody planes.

American Airlines flew 7% as the carrier forecast largely upbeat annual profit, while Southwest Airlines gained 2.5% following a narrower-than-expected fourth-quarter loss.

Comcast added 4.3% as the media giant topped quarterly revenue estimates, while IBM jumped 10.6% after forecasting full-year revenue growth above estimates.

Advancing issues outnumbered decliners by a 4.58-to-1 ratio on the NYSE and by a 2.45-to-1 ratio on the Nasdaq.

The S&P index recorded 31 new 52-week highs and one new low, while the Nasdaq recorded 54 new highs and 34 new lows.


© 2024 Thomson/Reuters. All rights reserved.

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