Stocks gained Thursday, with equities resuming advances even after a new print on U.S. economic activity came in weaker-than-expected. The Nasdaq Composite and S&P 500 each set record closing highs.
Investors on Thursday digested some key new economic prints, including the first estimate of third-quarter U.S. gross domestic product (GDP) and weekly unemployment claims. The GDP report showed the economy decelerated to expand at the slowest rate in over one year for the July through September quarter, with the Delta variant and supply-side constraints capping economic activity. GDP rose at a 2.0% annualized rate, missing estimates for the 2.6% pace consensus economists anticipated.
"The market is right to look through some of the third-quarter weakness. A lot of what we've seen lately in terms of softness in the data is not really a destruction or disappearance of demand, it's simply a matter of supply chains that are forcing demand into the future," Simona Mocuta, State Street Global Advisors chief economist, told Yahoo Finance Live. "There is still a lot of strength ahead of us. There is a lot of money waiting on the sidelines in consumer savings and checking accounts that I think bodes well for 2022."
A major factor fueling stocks higher has been the bevy of strong corporate earnings results reported to date.
Some of the biggest equity index components and largest companies in the U.S. posted much better-than-expected sales and revenue growth compared to last year, reflecting strong demand trends across various pockets of the economy despite shortages. Shares of mega-cap technology companies Alphabet (GOOGL) and Microsoft (MSFT) each set record highs on Wednesday after these companies posted their earnings results Tuesday. Investors are set to receive more earnings reports from companies including Apple (AAPL) and Amazon (AMZN) later on Thursday.
With a positive earnings picture now in view, a lingering question for investors remains how quickly the Federal Reserve will move on monetary policy. While the Federal Reserve has telegraphed that it will most likely begin its asset-purchase tapering process before the end of the year, the timing for when the central bank will begin to raise interest rates from current near-zero levels is still up in the air. Investors are set to receive more commentary on this front after the Federal Reserve's next policy-setting meeting next week.
Many have suggested these rate hikes will come sooner and more quickly than members of the Federal Reserve have currently signaled, given persistent inflationary pressures seen in the economic data and reinforced in company earnings calls over the past several weeks. This move, however, would raise the cost of borrowing for companies and pressure valuations especially for high-growth stocks.
"The big debate now is how quickly the Fed moves towards actually raising rates," Kathy Jones, managing director at Charles Schwab, told Yahoo Finance Live. "The expectation in the market has really shifted to expecting as many as two rate hikes in 2022 and three in 2023 and beyond. That’s a pretty aggressive pace of tightening versus where we were just a couple of months ago."
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4:09 p.m. ET: S&P 500, Nasdaq log record closes as more earnings top estimates: Wall Street awaits Apple, Amazon results
Here were the main moves in markets as of 4:09 p.m. ET:
Gold (GC=F): +$1.10 (+0.06%) to $1,799.90 per ounce
10-year Treasury (^TNX): +3.9 bps to yield 1.5680%
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2:34 p.m. ET: Facebook rebrands under new name 'Meta,' will change ticker to MVRS in December
Facebook (FB) CEO Mark Zuckerberg announced on Thursday that the social media company will be rebranding under the new name "Meta," and that it will begin trading under the new ticker MVRS starting December 1.
Facebook's name change comes after days of speculation that the company would be renaming itself to better reflect its focus on building out the metaverse and virtual and augmented reality services. In its earnings report earlier this week, Facebook said it planned to start breaking out operating results for Facebook Reality Labs starting with the fourth quarter. This means Facebook will provide sales and operating profit for both its Family of Apps including Facebook, Instagram and WhatsApp, as well as for Facebook Reality Labs' virtual reality offerings.
Shares of Facebook extended earlier gains, advancing more than 3.5%, following the announcement.
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10:09 a.m. ET: Pending home sales post surprise drop in September, dropping by most since April
Pending home sales unexpectedly declined in September as housing market activity began to cool heading into the final months of the year. Still-tight inventory levels continued to weigh on purchase behavior.
Contract signings for homes in the U.S. fell by 2.3% in September compared to August, following an 8.1% monthly advance during the previous month, according to new data from the National Association of Realtors on Thursday. Consensus economists were looking for pending home sales to rise by 0.5%, according to Bloomberg data.
“Contract transactions slowed a bit in September and are showing signs of a calmer home price trend, as the market is running comfortably ahead of pre-pandemic activity,” Lawrence Yun, NAR’s chief economist, said in a press statement. “It’s worth noting that there will be less inventory until the end of the year compared to the summer months, which happens nearly every year.
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9:30 a.m. ET: Stocks open higher after mixed economic data
Here's where markets were trading after the opening bell:
9:08 a.m. ET: Q3 GDP disappoints, new weekly jobless claims fall to fresh pandemic-era low
New economic data out Thursday morning came in mixed, with a comprehensive look at economic activity in the third quarter missing estimates, while weekly jobless claims improved to a fresh pandemic-era low.
Third-quarter gross domestic product expanded at a just 2.0% annualized rate for the July through September period, slowing markedly from the prior quarter's 6.7% rise and marking the slowest pace since the second quarter of 2020. Consensus economists were looking for a 2.6% increase in GDP. A deceleration in personal consumption served as a major weight to GDP, with this slowing to rise at an only 1.6% annualized rate compared to 12.0% in the second quarter.
More timely economic data exceeded estimates, however. Weekly initial jobless claims for the period ended Oct. 23 came in at 281,000, dropping by 10,000 compared to the prior week. This marked the lowest level since March 2020, as first-time jobless filings closed in on their pre-pandemic levels. New claims had averaged just over 200,000 throughout 2019.
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7:21 a.m. ET: Stock futures point to a higher open
Here's where markets were trading Thursday morning:
S&P 500 futures (ES=F): +15.75 points (+0.35%), to 4,560.25
Dow futures (YM=F): +94 points (+0.27%), to 35,483.00
Nasdaq futures (NQ=F): +98.25 points (+0.63%) to 15,685.50
Here's where markets were trading as the overnight session kicked off Wednesday evening:
S&P 500 futures (ES=F): +5.5 points (+0.12%), to 4,550.00
Dow futures (YM=F): +46 points (+0.13%), to 35,435.00
Nasdaq futures (NQ=F): +14 points (+0.09%) to 15,601.25
NEW YORK, NEW YORK - OCTOBER 25: Traders work on the floor of the New York Stock Exchange (NYSE) on October 25, 2021 in New York City. Stocks trended up in early trading as investors look to quarterly earnings from tech companies and automakers. (Photo by Spencer Platt/Getty Images) ·(Spencer Platt via Getty Images)