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By Nicholas
Jasinski | Thursday, January 27 Reversal
Streak. The path of least
resistance in the stock market these days is down. Another
morning rally fizzled by the afternoon, with major indexes closing
in the red. The S&P
500 lost
0.5%, the Nasdaq Composite slid 1.4%, and the Dow
Jones Industrial Average ticked down less than 0.1%.
All three indexes had been solidly in positive territory until about midday. Today's early gains were catalyzed by
fourth-quarter U.S. gross domestic product data, which showed a 6.9%
annual growth rate. That compared with economists’ consensus estimate of
5.5% and the third quarter’s 2.3% growth rate. It brings the U.S.
economy's full-year 2021 expansion to 5.7%, its fastest since
1984. But as investors and economists dug into the
details of the report, they found less to like under the surface. Almost five
points of the fourth quarter's 6.9% GDP growth came from building up
inventory. Essentially, retailers and wholesalers were replenishing their
supplies after months of robust demand and hard-to-come-by goods. On the bright side, the Omicron surge of
Covid-19 didn't put much of a dent in the U.S. economy. But inventory
restocking isn't a sustainable source of growth either. Barron's Megan
Cassella wrote: The better-than-expected
growth from October to December was driven by strong consumer spending at the
start of the quarter and a surge in inventories at the end. But with
continued pandemic uncertainty and inflationary pressures weighing on
consumer demand, and inventory rebuild in particular likely to be at least
partly reversed in early 2022, the growth outlook moving forward could be far
less rosy, economists warn. 'The result flatters to
deceive,' Matthew Sherwood, global
economist at the Economist
Intelligence Unit, said of the
fourth-quarter data. 'While a surprisingly buoyant fourth quarter usually
sets up the economy for possibly even stronger growth the following year, we
do not expect this to be the case this time round.' Back on Wall Street, the parade of
fourth-quarter results continued today. Apple was the highlight after the bell, with
better-than-expected revenue and earnings driven by strong iPhone sales. Eric
Savitz covered those results here. Comcast, McDonald's,
Mastercard,
Southwest
Airlines, Robinhood
Markets, Visa, Deutsche
Bank, and Blackstone
were among the other big names that reported today. It's still early, but fourth-quarter
earnings have so far been exceeding estimates—as they tend to do every
quarter. The problem for more companies has been their 2022 guidance. Just look at robotics and semiconductor
test equipment maker Teradyne, which beat on
both the top and bottom lines today. But management's guidance
missed by a mile, sending shares tumbling 22% today. Well-known supply chain bottlenecks, cost
inflation, and labor shortages are the most common headaches cited by
management teams so far. And that's adding some gloom to what has otherwise
been on track for a record earnings season. |
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DJIA: -0.02% to 34,160.78 The Hot Stock: ServiceNow +9.1% Best Sector: Energy +1.1% |
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