Major stock indexes saw gains on Thursday, with the Dow Jones Industrial Average rising 0.4% and the S&P 500 closing 0.5% higher, responding to earnings reports from big corporations amid notable economic indicators. The Nasdaq Composite also added 0.3%, as investors reacted positively to the data.
This uptick follows the Federal Reserve's decision the previous day to maintain the benchmark interest rate steady as inflation pressures linger. Investors had been on alert during the preceding week, weighing the impact of Chinese firm DeepSeek's launch of an effective AI model developed at lower costs against the backdrop of U.S. tech companies.
All eyes were on tech giants as they reported earnings, with IBM shares surging 12% after exhibiting strong growth within its generative AI business. Conversely, Microsoft shares plummeted 6.2% due to lower-than-expected growth signals from its Azure cloud services, even after reporting strong earnings overall.
Consumer response to economic conditions has also been encouraging. Recent reports indicate U.S. economic growth decelerated in the fourth quarter, partly due to external factors such as Boeing strikes impacting business investments. Yet, consumer spending accelerated at its quickest rate since early 2023, indicating resilient domestic demand.
“This report will assure the Fed policy was not overly restrictive,” commented Will Compernolle, macro strategist at FHN Financial, reflecting optimism for sustained economic activity.
The Commerce Department disclosed GDP growth at 2.3% for the fourth quarter after adjusting for seasonal variations, slightly trailing the 2.6% anticipated by analysts. The total growth for the year hovered around 2.8%, up from 2.9% previously reported for 2023.
While businesses struggled with inventory management due to high consumer demand, resulting from scrambling to stock up before impending tariffs, consumer spending remained strong. This reflects households' confidence and adaptability to market changes, as evidenced by spending on both goods and services.
On the financing side, household disposable income grew 2.8% after inflation adjustments, fostering optimism about future spending patterns. The labor market is also buoyant, showing low unemployment claims with recent reports indicating initial claims for state benefits decreased by 16,000.
Yet, not all sectors are flourishing unconditionally. UPS saw shares plunge 14% following disappointing earnings results, exacerbated by declining orders from Amazon, its largest customer. The logistics giant reported net income of $1.72 billion with revenue of $25.3 billion, missing analyst estimates, prompting significant strategic adjustments.
Despite mixed performance across tech sectors, overall investor sentiments have remained cautiously optimistic. Enthusiasm around AI technologies persisted, with companies like Tesla and IBM leading conversations about future innovations and market strategies.
Looking forward, analysts underline the delicate balance necessary for economic growth amid fluctuated policies and challenges. Sung Won Sohn, Finance and Economics professor at Loyola Marymount University, emphasized the need for careful navigation of economic forces to promote resilient growth. The year 2025 holds potential pitfalls and opportunities as the economic policies under the current administration remain under scrutiny.
All these elements intertwine as the economy gears up for the upcoming quarters, with the Fed on alert to navigate interest rates carefully amid shifting indicators. How these factors will play out remains to be seen, yet the resilience of consumer spending remains key as the nation attempts to stabilize itself post-2024 adjustments.