US GDP rises 2.6% at an annual rate in the fourth quarter, down from growth of 3.2% in the third quarter and lower than economists had expected
Sexual misconduct allegations knock stock of Wynn Resorts
Intel drives the Dow to a 200+ point gain after well-received quarterlies
US indexes rose for the fourth week in a row, with Friday's advances taking benchmarks into uncharted territory.
The Dow Jones 30-share average closed at 26,616.71, up 224 points, while the S&P 500 ended the week at 2,873, up 34 points on the day.
The Dow's gains were driven by strong performances from chip-maker Intel Corporation (NASDAQ:INTC), which finished 10.6% higher, and 3M Co (NYSE:MM), which hardened 2.5% to US$258.63.
Intel's rise, which came on the back of strong quarterlies announced after the bell on Thursday, also provided a boost to the tech-heavy Nasdaq Composite, which closed at 7,506, up 95 points on the day.
Investors looked beyond the headline figure for US gross domestic product, which came in below expectations.
"Real GDP advanced 2.6% q/q [quater-on-quarter]in Q4, as robust domestic final sales grew by 4.3% annualized, but a wider trade deficit and slower inventory building subtracted 1.1 and 0.7 percentage points, respectively, from domestic production," noted Mickey Levy at German bank Berenberg.
"Real final domestic demand —consumption plus fixed investment and government purchases not including inventory change and changes in exports and imports —advanced by an exceptionally strong 4.3% in Q4, the third fastest pace in this economic recovery and faster than all but three quarters in the prior expansion," he added.
"Looking into 2018, increases in disposable incomes —stemming from employment gains, one-time bonuses and wage increases announced by companies, and changes in withholding schedules as part of the tax reform —will spur gains in consumer spending. We expect strong consumption to continue.
"We project strong nominal and real GDP growth momentum in 2018. Nominal GDP growth over 5% and further unemployment rate declines are expected to push average hourly wage increase over 3% in 2018, an acceleration from 2.5% yr/yr [year-on-year] currently," he added.
In Canada, the S&P TSX Composite joined the party, rising 35 points to 16,239.
Mid-session: Dow eyes triple-digit gain
The Dow Jones was heading for a triple-digit gain in lunchtime trading.
The Dow was up 99 at 26,492 while the broader-based S&P 500 was up 16 at 2,856.
Wynn Resorts Ltd (NASDAQ:WYNN) failed to participate in the advance, however, shedding 7% at US$186.25 after the Wall Street Journal ran a report on alleged sexual misconduct by its owner, the billionaire Steve Wynn.
Information technology firm Vmware Inc (NYSE:VMW), which specializes in virtual machine software emulation, was up by one-sixth on reports that PC “box-shifter” Dell inc is mulling taking a bigger stake in the company.
Discussions were said to be at an early stage.
On the forex markets, the dollar was losing ground after the gross domestic product data for the fourth quarter.
"The first look at fourth quarter US real GDP maintained a healthy, above-trend annualized rate of growth at 2.6% (2.3% for full year 2017). Admittedly below expectations, the miss was primarily due to the
drags from trade and inventories, not from a reduction in consumer or business demand," said Wells Fargo Economics Group.
Open: Stocks off to firm start despite GDP disappointment
US stocks got off to the expected firm start, shaking off the disappointment of a slowing economy in the fourth quarter of 2017.
The S&P 500 was up 9 at 2,848 and the Dow Jones index was 51 points higher at 26,446.
US gross domestic product grew at an annual rate of 2.6% in the fourth quarter, representing a slow-down from the preceding quarter's growth.
“While the headline number is a disappointment versus forecasts, the data shows that the US economy is firing on a growing number of cylinders, with Q4 growth fuelled by investment as well as consumption,” suggested Nancy Curtin, the chief investment officer at Close Brothers Asset Management.
“Trump’s tax reforms have bolstered business confidence and could help the economy kick up into another gear. Apple’s reaction in February will be closely watched as a bellwether for the behaviour of the country’s other cash-heavy corporations. If it reacts to the reforms by significantly increasing on-shore investment, it could indicate other firms will follow suit. Further increases to capex, combined with a steady rise in consumer spending, could turbo-charge already solid growth,” she added.
In corporate news, drugs maker AbbVie Inc (NYSE:ABBV) headed higher after releasing its fourth-quarter results.
The stock was up 7.5% at US$116.42 after the firm revealed fourth-quarter net revenues rose 13.9% from a year earlier to US$7.74bn.
AbbVie raised its previously announced adjusted earnings per share (EPS) guidance range for the full-year 2018 from US$6.37 - US$6.57 to US$7.33 - US$7.43 to reflect the impact of US tax reform and a stronger operating performance.
Aspen Insurance Holdings Limited (NYSE:AHL) tumbled 10.6% to US$36.925 after it said it expected to record an underwriting loss of around US$245mln for the fourth quarter of 2017, reflecting natural catastrophe losses – the wildfires in California - as well as an increased frequency of mid-sized and attritional losses primarily in Aspen’s Insurance segment. The latter included property and fire-related losses in the UK and the US and, to a lesser extent, cyber losses and an increase in a previously reported surety loss.
Chief executive officer Chris O'Kane described performance in 2017 as deeply disappointing.
Pre-open
US gross domestic product increased at an annual rate of 2.6% in the fourth quarter of 2017, slowing down from the 3.2% growth seen in the third quarter.
“President Donald Trump will be disappointed today after the fourth-quarter GDP figures showed his initial targets have fallen short of the mark, but the US is still on a sound financial footing,” suggested Dennis de Jong, the managing director of forex trading platform UFX.
“The Trump administration had targeted 3% growth but despite the latest figures falling below expectations, the President still has reasons to be bullish.
“Although the markets remain resilient, Trump’s 'America First' message that he is asserting in Davos could push potential trading partners away. With global politics still on a knife-edge, there’s still the potential for the slightest trigger to see traders reach for the panic button,” de Jong suggested.
The disappointment does not seem to have derailed the bull run, as spread betting quotes pointed to a firm opening for stock market benchmarks.
The Dow Jones index was expected to open at around 26,437, up around 44 points, while the broader-based S&P 500 was seen opening its account at 2,849, up 10 points or so.
On the corporate front, industrial holding company Honeywell International Inc (NYSE:HON) edged up 61 cents to US$162.45 in pre-market trading after fourth quarter earnings per share came in a penny above the consensus market forecast of US$1.84.
The company raised 2018 earnings guidance to reflect recent changes in US tax legislation.
"Fourth-quarter sales grew six percent organically, leading to full-year organic sales growth of four percent, driven by robust growth in Aerospace after-market, UOP, Advanced Materials, and Intelligrated,” said Darius Adamczyk, the president and chief executive officer of Honeywell.
Fast-moving consumer products maker Colgate Palmolive Company (NYSE:CL) was friendless in screen-based trading ahead of the opening bell after delivering below par results.
READ Colgate-Palmolive shares fall as it quarterly earnings fall and sales miss expe ctations
Chief executive Ian Cook warned that growth in 2018 would be challenged but the company will maintain its focus on “brand building and increased productivity”.
“Based on current spot rates, we expect a mid-single-digit net sales increase and low to mid-single-digit organic sales growth in 2018, with improvement in organic sales growth versus the second half of 2017,” he said.
Lear Corporation (NYSE:LEA) managed to top forecasts with its fourth quarter earnings, resulting in a share price surge to US$196 from last night's close of US$191.65.
The supplier of seating and electrical units to the car industry reported earnings per share of US$4.38, up from US$3.80 the year before and 10 cents better than the consensus forecast.
Revenue rose 15.5% to US$5.36bn from US$4.64bn the year before.