U.S. Stocks Give Back Ground After Initial Rally

After moving sharply higher early in the session, stocks have given back ground over the course of the trading day on Thursday. The major averages have pulled back well off their highs of the session, with the Dow sliding into negative territory.

Currently, the major averages are turning in a mixed performance. While the Dow is down 65.23 points or 0.2 percent at 33,678.61, the S&P 500 is up 3.08 points or 0.1 percent at 4,019.30 and the Nasdaq is up 44.73 points or 0.4 percent at 11,358.09.

The initial rally on Wall Street came following the release of some upbeat U.S. economic data, including a Commerce Department report showing U.S. economic activity surged by more than expected in the fourth quarter of 2022.

The report said real gross domestic product shot up by 2.9 percent in the fourth quarter after spiking by 3.2 percent in the third quarter. Economists had expected GDP to jump by 2.6 percent.

The stronger than expected GDP growth reflected increases in private inventory investment, consumer spending, government spending, and non-residential fixed investment.

Meanwhile, the positive contributions were partly offset by decreases in residential fixed investment and exports.

The Labor Department also released a report showing initial jobless claims unexpectedly dipped to a nine-month low in the week ended January 21st.

The data paints a relatively positive picture of the economy but has also raised concerns about the outlook for interest rates, resulting in the subsequent pullback.

“For stocks to have a sustained rally, we still need a recession and this data is delaying hopes of that happening before the middle of the year,” said Edward Moya, senior market analyst at OANDA.

He added, “A recession will help get the job done with bringing inflation all the way down, otherwise a tentative soft landing will just keep Fed keep policy restrictive.”

The mixed performance on Wall Street also comes amid a mixed reaction to the latest earnings news from big-name companies.

Shares of Tesla (TSLA) have moved sharply higher after the electric vehicle maker reported better than expected fourth quarter results and provided upbeat guidance.

On the other hand, IBM Corp. (IBM) is posting a steep loss even though the tech giant reported fourth quarter results that beat expectations. The company also announced plans to cut 3,900 jobs.

Gold stocks have moved sharply lower over the course of the session, dragging the NYSE Arca Gold Bugs Index down by 2.2 percent. The index ended the previous session at its best closing level in over seven months.

The weakness among gold stocks comes amid a pullback by the price of the precious metal, with gold for February delivery falling $17.90 to $1,924.70 an ounce.

Considerable weakness has also emerged among airline stocks, as reflected by the 1.3 percent drop by the NYSE Arca Airline Index.

Southwest Airlines (LUV) has led the sector lower after reporting a wider than expected fourth quarter loss and warning of another loss in the current quarter.

Meanwhile, computer hardware stocks continue to see notable strength on the day, with the NYSE Arca Computer Hardware Index up by 1.2 percent after reaching its best intraday level in over a month.

Data storage company Seagate Technology (STX) is posting a standout gain after reporting better than expected fiscal second quarter results.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday, although Japan’s Nikkei 225 Index bucked the uptrend and edged down by 0.1 percent. Hong Kong’s Hang Seng Index surged by 2.4 percent, while South Korea’s Kospi jumped by 1.6 percent.

Meanwhile, the major European markets have also moved to the upside on the day. While the French CAC 40 Index has advanced by 0.8 percent, the German DAX Index is up by 0.4 percent and the U.K.’s FTSE 100 Index is up by 0.3 percent.

In the bond market, treasuries are seeing weakness as traders react to the latest batch of economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4 basis points at 3.502 percent.

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