The economy expanded at a 3.3% annualized rate during the fourth quarter, trouncing all estimates. Economists had expected a 2.0% pace. For the year, the economy expanded by 2.5%, the greatest annual growth since 2021. The third quarter expanded at a 4.9% annual rate.
The data wrapped a year in which the economy showed surprising stamina, defying expectations by many Wall Street economists that the country was poised to slip into a recession.
The growth engines were a 2.8% increase in household spending, a growth rate nominally higher than expectations. Other major contributors were inventories and net exports, which added 0.5% to the growth rate. Government spending added another 0.5% to the growth rate.
The pricing components either met expectations or were lower than the consensus view.
Initially both equities and Treasuries advanced off the data especially as the pricing data that largely met expectations. Swap contracts that anticipate Fed interest rate moves continue to fully price in a first move in May while increasing the expected total this year to 138 bps.
Today was the 7-year Treasury auction, the largest since 2022. It was not a disaster as the Wednesday’s 5-year Treasury auction, perhaps the result that it was “cheapened up” before the auction commenced. Demand was viewed as “ok.”
Commenting about the “Velocity of Change,” TSLA lost over $90 billion in value yesterday. Since the start of the year, shares lost more than a quarter of their value, making it the only losing stock so far in 2024 among the Magnificent Seven.
Yesterday’s loss in TSLA was more than the value of CVS, Citigroup or Altria.
On January 1, TSLA was the fifth largest company in the S & P 500 and is now struggling to stay in the top 10 according to Bloomberg.
Commenting about the market close, Treasuries maintained their gains and the yield curve steepened. Equites—led by the NASDAQ surrendered most of their gains, perhaps under the guise the market is overbought and maybe fearing additional earnings disappointments in the “Magnificent Seven.”
Last night the foreign markets were mixed. London was up 1.17%, Paris up 2.05% and Frankfurt up 0.19%. China was up 0.14%, Japan down 1.34% and Hang Seng down 1.60%.
Dow and NASDAQ futures are flat and down 0.50% following INTC’s disappointing outlook. The 10-year is off 1/32 to yield 4.12%.
