LONDON, UK – Wall Street stocks pushed higher on Thursday despite data that showed US economic growth is slowing, which raised fresh questions about interest rates hikes.
European and Asian markets mostly edged higher.
The dollar rose against the euro and yen after the data showed US gross domestic product rose at an annual rate of 1.1 percent in the January to March period, down from 2.6 percent in the fourth quarter last year.
While the headline growth figure slowed, consumer spending rebounded.
“The lagged effects of the 2022-23 US rate hiking cycle may finally be slowing growth,” said Ryan Brandham, Head of Global Capital Markets, North America at Validus Risk Management.
The first quarter growth figure, which came in much lower than expected, adds to lackluster US consumer confidence data which has deepened worries about a broader recession.
“A mixed bag of data today points to slower growth and stickier inflation, and the Fed is in a tough spot trying to navigate these two forces,” he added.
Yields on US government debt rose after the data was released, suggesting that the market sees the Fed will consider the strong consumer spending in the first quarter as well as a drop in weekly jobless claims on Thursday as evidence the economy can take more interest rate hikes.
“These numbers do little to put paid to the idea that the Fed is done raising rates further and keep the prospect of another 25 basis points next week very much on the cards, despite the concern over further banking failures as the likelihood increases that First Republic Bank may well follow SVB and Signature Bank into the annals of US banking failures,” said market analyst Michael Hewson at CMC Markets.
Shares in First Republic Bank, which have lost more than half of their value this week, rebounded slightly on Thursday.
Shares in Facebook-owner Meta jumped more than 14 percent after beating earnings expectations, helping lift the tech-heavy Nasdaq Composite stock index 1.6 percent.
The earnings season is in full swing and as usual paints a mixed picture.
Briefing.com analyst Patrick O’Hare said Wall Street has so far not gotten much of a boost despite a majority of companies beating expectations, which he said can be explained by the fact that overall earnings growth is still down.
“For a market trading at a premium valuation in front of the reporting period, it is tough to justify multiple expansion when there is no earnings growth and when many economic indicators are stacking up to suggest earnings estimates for future quarters are likely to be revised lower while Fed officials are lining up suggesting rates still need to go higher to tame inflation,” he said.
Japan’s Nomura bank saw its share price plunge more than seven percent after announcing its profits tumbled 76 percent to $55.3 million in the last quarter.
South Korean tech giant Samsung meanwhile reported its worst quarterly profits in 14 years, blaming slowing consumer spending and falling microchip prices.
Although the company’s first-quarter net income slumped 86 percent its stock closed higher.
But British bank Barclays rallied more than five percent, topping London’s benchmark FTSE 100 stocks index, thanks to a jump in quarterly profits.