Stocks rise amid positive U.S. GDP

Wall Street got a boost after a better-than-expected GDP report. Economic growth slowed in the last quarter, compared with Q3, giving greater credence to the Fed’s wish to engineer a soft landing. Yet, it still grew at a 2.9% annual rate (vs. 3.2% from July to September) despite widespread fears of a looming recession and Fed’s rate hikes. The U.S. central bank raised its benchmark rate seven times last year. Recent data, including a 1.1% drop in retail sales last month, suggests that the pace of expansion is likely to further slow in the coming months. Traders now wager that the Fed will soon tone down its hawkish rhetoric. 

This positive mood pushed stock indexes higher. The S&P 500 rose 2.47% week-over-week. The Dow Jones Industrial Average was up 1.81%, or 602.59 points. The Nasdaq Composite jumped 4.32%, notching its fourth consecutive weekly gain. The tech-heavy index is up 11.04% for the month.

In Europe, the MSCI EMU gained 1.46% but the FTSE 100 was flat (-0.07%). In Asia, the Nikkei rose 3.12% while the Hang Seng added 2.92% (up 14.70% over the last four weeks). The end of the rigid Covid rules in China and the re-opening of its borders have further boosted investor sentiment.

Growth stocks’ comeback   

The more growth-oriented sectors faced the biggest pressure from rising interest rates last year. In January, battered growth stocks are showing signs of recovery in the hope that the Fed could downshift the pace of rate hikes. 

Consumer discretionary was the best sector this week (+6.38%), boosted by Tesla (TSLA, up 33.34%). The EV maker reported record profits for the fourth quarter and the full year, but tighter profit margins. Recent price cuts may have fuelled demand for its products. Tech stocks got a lift (+4.07%) from Apple (AAPL, up 5.85%). Meta Platforms (META, up 8.88%) led the run-up in communication services (+3.28%).

Defensive sectors lagged again. Health care lost 0.89%, extending its losing streak to five weeks. This sector suffered from notable outflows this week (almost $2bn with healthcare ETFs). Utilities edged down 0.49% while consumer staples managed to edge up 0.43%. All those defensive sectors are set to end the month in negative territory.