Tesla surge helps boost Nasdaq, S&P; Dow weighed down by IBM

U.S. stocks on Thursday had pared their opening gains, as investors digested quarterly results from a host of companies including Tesla while parsing through mixed economic data.

The Nasdaq Composite (COMP.IND) was up 0.61% to 11,382.42 points after opening more than 1.5% higher. Tesla (TSLA) boosted the tech-heavy index as shares of the electric vehicle maker jumped more than 9% after CEO Elon Musk estimated a 2023 production rate of around 2M cars.

“Ultimately, Tesla is firmly back on the road to growth and maintains an enviable market position,” Hargreaves Landsdown analyst Sophie Lund-Yates said. “However, there are some clouds gathering on the horizon on both an economic and industry level. Both of those have the potential to seriously squeeze margins.”

The benchmark S&P 500 (SP500) gained 0.23% to 4,025.32 points. The Dow (DJI) was 0.06% lower to 33,724.95 points. The blue-chip index was weighed down by a retreat in shares of IBM (IBM) after the IT giant’s quarterly results disappointed.

Of the 11 S&P sectors, six were trading in the green, led by Energy and Consumer Discretionary. Materials and Consumer Staples topped the losers.

In the major economic news of the day, the initial estimate for U.S. Q4 GDP growth came in at +2.9%, stronger than the expected +2.7% figure. However, GDP growth decelerated from Q3.

“In short, the Q4 headlines flatter the underlying picture – inventories contributed 1.5p to growth, while foreign trade added 0.6pp; neither are sustainable sources of growth,” Pantheon Macroeconomics’ Ian Shepherdson said in a note.

“We think final demand growth will be minimal in the next couple quarters, with headline GDP falling. Whether this eventually is declared a recession will depend on what happens to employment and incomes, but they are both likely to soften markedly, at least. And note that the near-stalling in final demand does not reflect the full impact of the Fed’s tightening, so these data reinforce our view that further rate hikes are unnecessary,” Shepherdson added.

Furthermore, December durable goods orders came in at 5.6%, above the expected 2.5% level. The number of Americans filing for weekly jobless claims fell by 6K to 186K, hitting a 9-month low and pointing to continued resilience in the labor market.

“We expected the drop in jobless claims – the consensus appeared to ignore quite strong seasonal patterns – and they likely will remain close to their current level for another couple weeks, before gradually starting to creep higher. The surge in layoff announcements point unambiguously to much higher claims in Q2,” Shepherdson said.

Additionally, December new home sales topped estimates at 2.3% M/M to 616K compared to the 614K forecasted number.

Turning to the bond markets, rates were higher. The 10-year Treasury yield (US10Y) rose 5 basis points to 3.51%. The 2-year yield (US2Y) rose 5 basis points to 4.19%.

Earnings news also continued to garner a chunk of the spotlight on Thursday. Maker of paints and coatings Sherwin Williams (SHW), maker of spices and seasoning McCormick (MKC) and Southwest Airlines (LUV) were among the top percentage losers on the S&P 500 (SP500) after their results failed to impress. Conversely, data storage company Seagate (STX) surged to the top of the S&P after better-than-expected numbers.

Among other active stocks, Tesla’s rally helped broader electric vehicle stocks.

Qualtrics (XM) surged more than 25% after SAP said it’s exploring the sale of its remaining stake in the company.