U.S. stock indexes were set to open higher on Thursday after data showing a resilient labor market and better-than-expected economic growth last quarter helped ease worries of a deep recession, while Tesla’s bullish outlook added to the cheer.
A report from the Labor Department showed initial claims for state unemployment benefits dropped to a seasonally adjusted 186,000 for the week ended Jan. 21, lower than 192,000 from the week before.
Separately, the Commerce Department said gross domestic product (GDP) increased at an annualized rate of 2.9% in the fourth quarter, above expectations of a 2.6% rise.
“For almost a year, the Federal Reserve has been trying to achieve a soft landing by raising short-term interest rates just-enough to bring down inflation without causing a recession,” said Richard Flynn, managing director at Charles Schwab.
“It’s clear the economy remains relatively strong in the face of the Fed’s efforts, suggesting they’re succeeding.”
The GDP report could mark the last quarter of solid growth before the impact of the Federal Reserve’s aggressive tightening spree starts reflecting, with most economists expecting a mild recession by the second half of 2023.
Money markets are pricing in a 25-basis-points rate hike by the Fed next week, with a terminal rate of 4.9% in June, still below the 5% rate backed by many policymakers.
After Microsoft Corp’s (MSFT.O) disappointing outlook spooked markets in the previous session, Tesla Inc’s (TSLA.O) better-than-expected quarterly results reassured investors that the EV maker could cope with a slowing economy in 2023.
Tesla jumped 8.7% in premarket trading, lifting other EV makers such as Rivian Automotive (RIVN.O), Lucid Group (LCID.O) and NIO between 4% and 5.4%.
Growth stocks have been on a winning spree in January, with the S&P 500 Growth index (.IGX) recouping more than half of the losses logged last month.
Keeping a lid on gains for Dow e-minis was chemical firm Dow Inc (DOW.N) that slid 3.3% after it missed Wall Street estimates for quarterly profit, hurt by higher energy costs, weaker demand and supply chain disruptions.
Software firm IBM Corp (IBM.N) slid 2.3% after it missed annual cash flow targets and also flagged slowing growth in its software and consulting businesses.
At 8:49 a.m. ET, Dow e-minis were up 81 points, or 0.24%, S&P 500 e-minis were up 22.25 points, or 0.55%, and Nasdaq 100 e-minis were up 121.75 points, or 1.03%.
Mastercard Inc (MA.N) added 0.9% after reporting a better-than-expected fourth-quarter profit, supported by resilient spending volumes. Rival Visa Inc (V.N) rose 0.4%.
Chevron Corp (CVX.N) gained 3.6% after the oil major said it would triple its budget for share buybacks to $75 billion.
American Airlines (AAL.O) climbed 1.3% on expectations of higher profit for the full year, buoyed by strong demand for air travel, while Southwest Airlines Co (LUV.N) slipped 2.9% on warning of a loss in the first quarter.