Fourth-quarter GDP is weaker than expected, but strategists say it isn't likely to upend a market mostly trending higher in January
The Dow and S&P 500 on Friday afternoon extended trade to all-time highs after a reading of fourth-quarter gross domestic product came in slightly softer than expected but likely healthy enough not to derail the perception that the U.S. economy is on firm footing.
Continue Reading Below
Meanwhile, the U.S. dollar pared some of its early losses after Treasury Secretary Steven Mnuchin on CNBC on Friday said a strong buck is in the best interest of the U.S., and as President Donald Trump delivered a keynote speech at World Economic Forum in Davos, Switzerland, highlighting the strength of the domestic economy and offering a moderated stance on international trade.
What are the main benchmarks doing?
The Dow Jones Industrial Average rose 115 points, or 0.4% to 26,505. Shares of Intel Corp. and 3M Co. were contributing the lion's share of the Dow's advance, more than 60 points.
Meanwhile, the S&P 500 index climbed about 19 points, or 0.7%, to 2,858, setting a new intraday record peak of its own, on the back of a 1.5% gain in the health-care sector and a 0.9% rally in technology. Both the S&P 500 and the Nasdaq set intraday all-time highs.
The tech-laden Nasdaq Composite Index , meanwhile, rose 50 points, or 0.7%, to 7,461, and was trading above its closing high set on Jan. 23.
On Thursday (http://www.marketwatch.com/story/dow-set-to-open-at-fresh-record-as-bank-of-america-warns-of-frothy-market-2018-01-25), the Dow rose 140.67 points to end at 26,392.79 and the S&P 500 edged up 1.71 points to 2,839.25. The Nasdaq Composite Index meanwhile, declined 3.89 points to 7,411.16.
For the week, the Nasdaq, S&P 500 and the Dow are looking at a 1.7% weekly gain.
What are the drivers for the markets?
Consumers and businesses powered the economy to a 2.6% rate of growth in the final three months of 2017 (http://www.marketwatch.com/story/gdp-grows-26-in-fourth-quarter-but-falls-short-of-wall-streets-mark-2018-01-26), but declining inventories and a wider trade deficit kept the U.S. from hitting the 3% mark for the third quarter in a row for the first time in 13 years.
Economists surveyed by MarketWatch had forecast a 3% increase in gross domestic product, the official scorecard for the U.S. economy.
Still, the reading may be viewed as healthy enough to maintain what has been a mostly bullish run for U.S. equities, amid better-than-expected corporate results and expectations for a pro-business legislative regime under Trump.
A weaker dollar, which has been around three-year lows despite coming off its lowest levels, also has been a catalyst for gains in shares of multinational companies, because it can boost sales and revenues from buyers using other currencies.
Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
What are strategists saying?
Ian Winer, head of equities at Wedbush Securities, said the fourth-quarter reading of GDP is solid enough to keep markets riding higher, combined with corporate tax cuts that are still being interpreted by Wall Street.
"I think clearly on the headline it's slightly disappointing but I think people who believe in the president and the tax reform and all that stuff aren't all that concerned with Q4 gross domestic product," Winer said. "I think the bull case is still in place," he said.
He also said the GDP reading may make the Federal Reserve less likely to adopt a more hawkish posture and lift interest rates at a more accelerated pace than the three hikes expected this year.
"I think a lot of it is the dollar. When you look at the dollar weakening as it has that is going to have a positive effect," on multinationals, said Brad McMillan, chief investment officer for Commonwealth Financial Network.
He also said tax legislation "is going to have an enormous positive effect on earnings as investors gradually incorporate higher earnings growth expectations because of the lower taxes."
Which stocks look like key movers?
Shares of Wynn Resorts Ltd. (WYNN)fell about 9% (http://www.marketwatch.com/story/wynn-resorts-shares-slide-6-on-report-of-sexual-misconduct-by-owner-steve-wynn-2018-01-26) Friday, after The Wall Street Journal said (https://www.wsj.com/articles/dozens-of-people-recount-pattern-of-sexual-misconduct-by-las-vegas-mogul-steve-wynn-1516985953) owner, the billionaire casino mogul Steve Wynn, has a long history of sexual misconduct.
Honeywell International Inc.(HON) reported Friday a fourth-quarter net loss (http://www.marketwatch.com/story/honeywell-tops-profit-and-sales-expectations-boosts-earnings-outlook-2018-01-26)of $2.41 billion, or $3.18 a share, compared with a profit of $1.03 billion, or $1.34 a share, in the same period a year ago. Its shares were up 1.1%.
Colgate-Palmolive Co.(CL) shares fell 5.8% (http://www.marketwatch.com/story/colgate-palmolive-shares-slide-after-concerns-about-challenging-2018-2018-01-26) after the company reported fourth-quarter results that were weaker than forecast.
Intel Corp.(INTC) jumped nearly 9.3% after the chip maker's earnings topped Wall Street expectations (http://www.marketwatch.com/story/intel-shares-rally-after-strong-data-center-growth-tops-street-view-2018-01-25) late Thursday.
Read:Intel promises chip fix, sees no financial impact from Spectre and Meltdown (http://www.marketwatch.com/story/intel-promises-chip-fix-sees-no-financial-impact-from-spectre-and-meltdown-2018-01-25)
Shares of Starbucks Corp.(SBUX) were down 6.3% after reporting same-store sales below expectations (http://www.marketwatch.com/story/starbucks-shares-fall-after-company-narrowly-misses-sales-expectations-2018-01-25) and missing sales forecasts late Thursday.
VMware Inc.'s stock (VMW) was up 17% after The Wall Street Journal reported (http://www.marketwatch.com/story/dell-explores-moves-including-possible-ipo-deal-with-vmware-2018-01-25) that Dell Inc. could be exploring a deal to buy the cloud computing company. Dell may also be considering an IPO, the article said.
Nike Inc.(NKE) shares rose 0.8% after a report that William Ackman's Pershing Square Capital Management LP has taken a stake in the athletic-gear maker (http://www.marketwatch.com/story/bill-ackmans-pershing-square-announces-stake-in-nike-2018-01-25).
Starbucks Corp. (SBUX) shares were down 6.3% after the company reported same-store sales (http://www.marketwatch.com/story/starbucks-shares-fall-after-company-narrowly-misses-sales-expectations-2018-01-25) below expectations and narrowly missed sales forecasts.
What are other assets doing?
The ICE U.S. Dollar Index (http://www.marketwatch.com/story/dollar-falls-further-as-mnuchin-defends-weak-buck-comments-2018-01-25)fell 0.3% to 89.08, resuming a move lower (http://www.marketwatch.com/story/trump-boost-fades-for-dollar-as-investors-brace-for-gdp-data-2018-01-26) but paring some its worst levels after Mnuchin's comments. Still, the buck is on track for the biggest weekly loss since May last year, according to FactSet.
Read:Investors shouldn't be surprised when Trump administration talks down the dollar (http://www.marketwatch.com/story/dont-be-so-surprised-by-mnuchins-endorsement-of-a-weak-dollar-2018-01-24)
Opinion:Making America great again by destroying the dollar is bad for the average U.S. investor (http://www.marketwatch.com/story/making-america-great-again-by-destroying-the-dollar-is-bad-for-the-average-american-investor-2018-01-25)
Gold futures were falling firmly (http://www.marketwatch.com/story/gold-slides-in-wake-of-dollar-supportive-comments-by-trump-2018-01-26), while oil futures were roughly flat. European stocks, meanwhile, rose modestly, while Asian markets closed mixed.
(END) Dow Jones Newswires
January 26, 2018 13:12 ET (18:12 GMT)
Continue Reading Below