Major Wall Street indexes jumped at Thursday’s open on upbeat data from Washington that pointed to a strengthening economic recovery.
The Dow Jones Industrial Average gained more than 550 points, or 1.6% in morning trade, while the S&P 500 and Nasdaq also each climbed higher after a rocky session on Wednesday after the Federal Reserve signaled that interest rate hikes could take place as early as March.
U.S. gross domestic product (GDP) grew in the final months of 2021 at a better-than-expected 6.9% annualized rate in the fourth quarter, up from Bloomberg economists’ consensus estimate of 5 .5%. Meanwhile, initial jobless claims fell for the first time in four weeks after hitting a three-month high in the previous reading, suggesting that some of the Omicron-related disruptions that have recently weighed on the recovery of the labor market could ease.
The Federal Reserve kept rates near zero following a two-day policy meeting that ended on Wednesday, citing plans to end the government’s asset-buying policy first. pandemic era. The Federal Open Market Committee, however, reaffirmed that it would conclude the process in early March, suggesting that the first rate hike could come in six weeks.
Investors were expecting clarity from the Fed on what steps it would take to ease inflation ahead of Wednesday’s statement, as uncertainty surrounding the pace and extent of the policy change weighed on markets. since the start of the new year.
“While offering clarity on how the Fed would begin the process of removing policy accommodation, the outcome of the meeting did not provide the necessary guidance on the timing and extent of policy change,” he said. said Charlie Ripley, senior investment strategist for Allianz. Investment Management said in a note. “Today’s meeting has fully convinced market participants that a March rally is certain, but with Chairman Powell making no timing commitments, the door is slightly open for a slower Fed.”
Amid questions about when – and by how much – short-term borrowing costs will be increased, the Federal Open Market Committee unanimously agreed that “it will soon be appropriate to increase the range federal funds rate target,” with remarks from Federal Reserve Chairman Jerome Powell signaling that the first increase will take place on March 16, after the central bank’s next scheduled meeting.
“I would say the committee is in agreement to raise the federal funds rate at the March meeting, assuming the conditions are appropriate to do so,” Powell said at a press conference. “I don’t think it’s possible to say exactly how it’s going to go, and we’re going to have to be, as I mentioned, nimble about it.
JPMorgan’s U.S. chief economist Michael Feroli said Powell’s comments were “arguably the most hawkish he has made as Fed chairman.”
Powell deflected questions about whether a 50 basis point hike was on the table, including one posed by Yahoo Finance’s Brian Cheung about whether the hikes would be gradual, but Powell indicated that the measures to the central bank may differ from their pace from when it started raising rates in 2015 due to a much stronger economy and labor market and soaring inflation.
“While remaining evasive, Powell wanted to make it clear that hiking in back-to-back meetings was a possibility, a risk we also flagged,” Feroli said.
10:00 a.m. ET: US home buying slows in last month of 2021
U.S. pending home sales, which serve as a leading indicator of the health of the housing market, fell for the second consecutive month in December.
the National Association of Realtors (NAR) Pending Home Sales Indexwhich tracks the number of homes under contract for sale, fell 3.8% in the last month of 2021 compared to November and 6.9% compared to the same month of the year.
Activity was down in all regions of the United States. Bloomberg consensus estimates reflected an expected decline in sales of 0.4% from the previous month and a decline of 4% from the same month a year ago.
“Pending home sales faded towards the end of 2021 as the dwindling housing supply left consumers with very few options,” NAR chief economist Lawrence Yun said in a statement. hurry. “Mortgage rates have risen steadily over the past few weeks, which will unfortunately eventually drive out marginal buyers.”
9:30 a.m. ET: Stocks rise on strong economic data
Here are the main market movements at the start of Thursday’s trading session:
S&P 500 (^GSPC): +43.42 (+1.00%) to 4,393.35
Dow (^ DJI): +285.29 (+0.83%) to 34,453.38
Nasdaq (^IXIC): +151.11 (+1.12%) to 13,693.23
Raw (CL=F): +$1.03 (+1.18%) at $88.38 per barrel
Gold (CG=F): -$31.60 (-1.73%) at $1,798.10 per ounce
10-year cash flow (^TNX): -1.1 bps for a yield of 1.8370%
9:12 a.m.: New orders for U.S.-made capital goods stagnate
US capital goods were unexpectedly flat in December, signaling a slowdown in business capital spending amid a shortage.
The Commerce Department said Thursday that last month’s unchanged reading for non-military capital goods orders excluding aircraft followed a 0.3% gain in November. Printing serves as a closely guarded proxy for corporate spending plans.
Economists had expected orders to rise 0.4%, according to Bloomberg consensus estimates.
8:30 a.m. ET: U.S. economy grows at an annualized rate of 6.9%, beating forecasts
U.S. gross domestic product (GDP) grew in the final months of 2021, with continued strong consumer spending helping to fuel growth and offset early negative impacts from the spread of the Omicron variant.
The Bureau of Economic Analysis reported Thursday that the U.S. economy grew at a better-than-expected 6.9% annualized rate in the fourth quarter, up from Bloomberg economists’ consensus estimate of 5 .5%.
Growth in the fourth quarter rebounded more than expected from the disappointing rate of expansion in the third quarter, when GDP grew at an annualized rate of 2.3%, its weakest since mid-2020.
8:30 a.m. ET: U.S. jobless claims trend lower as Omicron disruption begins to ease
Initial jobless claims fell for the first time in four weeks after hitting a three-month high in the previous reading, suggesting that some of the Omicron-related disruptions that have recently weighed on the labor market recovery could subside.
The Labor Department reported another 260,000 people filed new claims for the week ending Jan. 22, slightly less than the expected 265,000 reflected in Bloomberg consensus estimates. Last week, initial jobless claims hit a three-month high amid further virus-related disruptions.
Even though the spread of Omicron may slow, payrolls will be a bit slower to respond to falling COVID cases than real-time activity data, according to Pantheon Macroeconomics chief economist Ian Shepherdson.
7:00 a.m. ET: Southwest Airlines takes off with its first quarterly profit in two years
Southwest Airlines Co’s (LUV) fourth-quarter results reflect the Texas-based carrier posted its first quarterly profit in two years in the last three months of 2021, buoyed by holiday travel before the Omicron outbreak . The company also said it expects to be profitable in 2022.
Southwest, however, is forecasting a loss in the current quarter through March due to suppressed revenue gains and increased costs related to Omicron disruptions. The airline expects to be profitable in the last three quarters of the year.
“With the downward trend in COVID-19 cases, the worst seems to be behind us,” said new CEO Bob Jordan. Jordan is expected to take over as the company’s sixth chief executive next month.
Southwest shares were mostly flat in premarket trading at $43.77 apiece.
7:00 a.m .: Futures on the three main indices swing before the open
Here’s how stock futures fared in pre-market trading on Thursday morning:
S&P 500 Futures Contracts (ES=F): +9.75 points (+0.22%), to 4,351.25
Dow futures (JM=F): +39.00 points (+0.11%), to 34,094.00
Nasdaq futures contracts (NQ=F): +61.00 points (+0.43%) to 14,219.50
Raw (CL=F): +$0.89 (+1.02%) at $88.24 per barrel
Gold (CG=F): -$18.90 (-1.03%) to $1,810.80 per ounce
10-year cash flow (^TNX): +0.00 bps for a yield of 1.8480%
6:00 p.m. ET Wednesday: Stock futures rise as investors ponder Fed comments
Here are the main moves in post-trade trading ahead of the overnight session:
S&P 500 Futures Contracts (ES=F): +8.25 points (+0.19%), to 4,349.75
Dow futures (JM=F): +31.00 points (+0.09%), to 34,086.00
Nasdaq futures contracts (NQ=F): +44.00 points (+0.31%) to 14,202.50
Raw (CL=F): +$0.23 (+0.26%) at $87.12 per barrel
Gold (CG=F): -$10.80 (-0.59%) at $1,818.90 per ounce
10-year cash flow (^TNX): +6.5 bps for a yield of 1.8480%
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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