Dow rises more than 300 points as traders cheer stronger than forecast U.S. economic growth data

The Dow Jones industrial average rose on Thursday after new data indicated the economy grew faster than expected and inflation eased.

The Dow rose 378 points, or 1.2%, hanging on to an early 559-point gain. The S&P 500 was near flat, while the Nasdaq fell 1% after briefly positive trading.

US GDP increased increased at an annual pace of 2.6% During this period, the Dow Jones grew 2.3% versus the estimate. The report eased investors’ concerns about a slowdown in the first quarter of positive growth for 2022.

In addition to showing stronger-than-expected growth, the GDP report at least delivered some good news on inflation. The cost-of-living index, adjusted to reflect changing consumer behavior, rose 4.1% in the quarter, up from estimates of 5.3%. Also, headline inflation, a measure used by the Federal Reserve, rose 4.2%, down sharply from 7.3%.

That gave hope to market watchers looking for data indicating slowing inflation, which could lead to an easing of rate hikes by the Federal Reserve after its November meeting, said Cliff Hodge, chief investment officer at Cornerstone Wealth. Bond yields also retreated on the data.

“This morning’s GDP release was a Goldilocks number for risk assets,” Hodge said, referring specifically to the price index data. “This is another sign pointing to the possibility that bad inflation is behind us.”

The tech sector continued its recent woes — and in turn Nasdaq — stocks Facebook’s parent company collapsed 24% on a Weak fourth quarter forecast Third quarter earnings will disappoint on Wednesday. The company also said it will lose even more money to develop Metaverse next year. The report led many analysts to downgrade the stock.

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Traders also scrutinized earnings reports from other companies, some of which outperformed tech this week. Shares of fast food giant McDonald’s traded up 3.4%. But cigarette giant Altria Group fell 0.4% as it missed expectations on earnings and revenue per share.

“U.S. stocks are struggling for direction after a mixed set of earnings with economic data supporting the view that the economy is weakening,” said Edward Moya, senior market analyst at OANDA. “The economy still looks like it’s headed for a recession, but that could reinforce calls for a Fed pivot, which puts some more credit into equities.”

Big tech earnings continue Thursday with results from Amazon and Apple.

Stocks were coming off a mixed session on Wednesday, with the S&P 500 and Nasdaq Composite falling for the first time in four days, while the Dow was marginally higher on the day.

For the week, all major averages are in positive territory, with the Dow and S&P up more than 2% and the Nasdaq up roughly 1%. The Dow is on pace for its fourth consecutive positive week since its five-week streak ended in November 2021.

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