Economy Grew More Than Expected in Fourth Quarter; Stocks Jump

Economy grew 6.9% on solid consumer spending

Stocks rose in early trading on Thursday, Jan. 27—further gyrating in what has been a wild week—on reports that fourth-quarter economic growth came in at a better-than-expected 6.9% on solid consumer spending.

Key Takeaways

  • Fourth-quarter economic growth came in at a better-than-expected 6.9% on solid consumer spending.
  • Growth topped estimates of 5.6% and accelerated from 2.3% in the third quarter.
  • Bond yields widened after the Federal Reserve Bank suggested that it will hike interest rates beginning in March.

Growth topped estimates of 5.6%. The Commerce Department, in its advance estimate for fourth quarter GDP, said that real gross GDP growth accelerated from 2.3% in the third quarter.

Real GDP: Percent Change From Preceding Quarter

U.S. Bureau of Economic Analysis

The Dow Jones and S&P 500 slipped yesterday after the Federal Reserve Bank announced that it was holding its benchmark interest rate near zero and suggested that it will hike interest rates beginning in March. Fed Chair Jerome Powell said the Fed has "quite a bit of room" to raise interest rates before having a negative impact on employment.

Apple Earnings, Jobless Claims

Investors will digest a slew of corporate earnings today, with Apple Inc. (AAPL), Altria Group, Inc. (MO), Comcast Corporation (CMCSA), MasterCard Incorporated (MA), McDonald's Corporation (MCD), and Southwest Airlines Co. (LUV) among companies reporting results.

The Labor Department reported initial jobless claims declined by 30,000 to a seasonally adjusted rate of 260,000 for the week ended Jan. 22, in line with economist estimates. Later this morning, the National Association of Realtors will report on pending home sales for the month of December. Its Pending Home Sales Index is expected to fall 0.2% in December after falling 2.2% in November on low housing supply.

The yield on the 10-year Treasury note rose again to 1.82% on the Fed's comments. Oil jumped, topping $88 per barrel, while the dollar strengthened against the euro. Cryptocurrencies including Bitcoin (BTC) and Ether (ETH) fell.

Today's Headlines: Quick Hits

Shares of Tesla, Inc. (TSLA) slid after the company, which reported record earnings, also remarked that supply chain problems may crimp production. CEO Elon Musk says that Tesla will focus on vehicle deliveries and not offer any new models this year as it faces continuing supply chain problems.

Intel Corporation's (INTC) shares fell after the chipmaker reported better-than-expected profits while offering mixed guidance for the first quarter. The company said that its production has been hurt by shortages of parts because of supply chain disruptions.

South Korean tech giant Samsung Electronics Co., Ltd. (005930.KS) reported its best ever revenues in the fourth quarter. Samsung has surpassed Intel to become the world's top chipmaker by revenue.

Facebook parent Meta Platforms, Inc. (FB) is winding down its Diem cryptocurrency venture, The Wall Street Journal reported. Facebook is selling the technology behind the cryptocurrency, formerly known as Libra, to Silvergate Capital for $200 million.

Deutsche Bank AG (DB) posted better-than-expected profits and said that it will start paying a dividend to shareholders for the first time since 2019. The bank said that it was affected by rising costs at its investment banking unit.

William Ackman's Pershing Square hedge fund has bought more than 3 million shares of Netflix, Inc. (NFLX) following the recent sell-off of the stock. Netflix shares had plunged following a negative reaction to the company's lower-than-expected subscriber growth in the fourth quarter.

Amazon.com, Inc. (AMZN) faces a vote by workers at its Staten Island, New York, warehouse to form a union. The National Labor Relations Board said a group of employees at the warehouse have enough support to hold an election.

Spotify Technology S.A. (SPOT) announced that it is taking down Neil Young's music. The musician, who has over 6 million monthly listeners, blamed Spotify podcaster Joe Rogan for spreading misinformation about COVID-19 vaccines.

Apple's Bright Spot: The Big Story

Apple will release its latest results after the closing bell today, and it is expected to report one of its slowest quarters for revenue growth in a year. However, one of the bright spots could be a surprise: China. Apple reached its highest ever market share in China at 23% and reclaimed first place in a ranking of top smartphone brands in the country after six years, according to a report by market research firm Counterpoint Research.

Counterpoint says that Apple benefited from its pricing strategy and a decline in competitor Huawei's market share. The change also follows Apple's release of the iPhone 13, which had a lower relative starting price at its release in China, as well as a new camera and 5G features.

Apple was followed by vivo Global and OPPO, which placed second and third for the quarter, respectively. Huawei, which has been Apple's chief competitor in the premium smartphone market, was hurt by declining sales in the wake of ongoing U.S. sanctions.

Originally written by
Danial Clark
Danial Clark
Danial Clark is an award-winning executive producer, and previously oversaw business, political and general news as a senior producer at Fox Business, Reuters, Bloomberg TV and CNBC.
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Article Sources

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  1. U.S. Bureau of Economic Analysis. "Gross Domestic Product." Accessed Jan. 27, 2022.

  2. U.S. Department of Labor. "Unemployment Insurance Weekly Claims." Accessed Jan. 27, 2022.

  3. Counterpoint Research. "Apple Reaches its Highest Ever Market Share in China." Accessed Jan. 27, 2022.

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