Wall Street falters in mixed trade of economy and profits

Stocks are teetering on mixed trading on Wall Street after reports suggested the economy and corporate earnings are doing better than expected.

The S&P 500 was up 0.5 percent in early afternoon trading, and the Dow Jones was up 0.1 percent after erasing an earlier gain of 177 points. The Nasdaq Composite rose 0.8 percent. It sets up the Australian stock market to open higher, with futures pointing to a 10-point gain, or 0.1 percent, at 5.06am AEDT on the open. The ASX was closed on Thursday for the Australia Day holiday.

More fluctuations could be yet to come as each of the reports guiding the market had both positives and negatives for investors. Markets have been bobbing lately as worries of a deep recession and falling earnings battle hopes that the economy will pull off a soft landing and the Federal Reserve could ease interest rates. A day earlier, stocks fell out of the gate on heavy losses, only to roar all the way back to end almost flat.

Thursday’s headline report showed that the broader economy has held up better than economists expected for the final three months of 2022, even with the weight of all the rate hikes the Fed approved over the past year to fight inflation. Economic growth slowed to an annual rate of 2.9 percent in the quarter, but that was still stronger than the 2.3 percent forecast by economists.

Other reports showed that durable goods orders from factories rose more-than-expected in December and fewer-than-expected workers filed jobless claims last week.

That strength gives hope that the economy can weather the blizzard of rate hikes by the Fed over the last year, plus at least one more expected next week, without falling into a deep recession. Higher interest rates intentionally slow the economy by making it more expensive to borrow to buy a home, car, or anything else on credit. They also drag down the prices of stocks and other investments.

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But a stronger than expected economy, particularly in the labor market, can also pose conflicting risks. It could push the Fed to keep rates higher for longer to ensure inflation is really crushed. That would dashed Wall Street hopes that the Fed could cut rates later this year. Such hopes have been a key reason stock prices have remained as strong as they have been, and the S&P 500 is close to its best in nearly eight weeks.

The yield on the 10-year Treasury bond, which helps set interest rates on mortgages and other loans vital to the economy, rose to 3.49 percent from 3.45 percent late Wednesday. The two-year yield, which tends to be more in line with expectations for Fed rate action, rose to 4.19% from 4.13%.