US economy

Stocks climb as a strong economic report helps offset interest rate fears.

Stocks rose on Thursday, rebounding from back-to-back declines, as new data on the state of the economy helped investors look past their worries about the Federal Reserve’s plan to raise interest rates.

The S&P 500 rose 1.4 percent in early trading, after posting a second day of losses on Wednesday, while the Nasdaq composite rose 1.3 percent.

The gains came after the Commerce Department reported that the growth in gross domestic product — the broadest measure of the goods and services produced — expanded by 1.7 percent in the last three months of 2021. At an annual rate, the economy expanded at its fastest pace since 1984.

Economists saw several positive signals in the report. A jump in consumer spending, which the government said reflected an increase in spending on services like health care and recreation, was one. Also notable was a buildup in inventories, coming despite the supply chain headwinds that companies have said are holding them back.

“While normally such a large inventory build would be very negative for future growth, in today’s environment it points to an easing of supply-chain snarls and means consumers will have more products to purchase once the winter lull passes,” Kathy Bostjancic, an economist at Oxford Economics, wrote in a note.

In a separate report on Thursday, the Labor Department said that weekly claims for state unemployment benefits fell last week, after three consecutive weeks of increases. New claims for unemployment insurance fell to 260,000 from 290,000, a dip that might suggest a slowdown of the Omicron variant’s effects on the labor market.

“The downtrend will likely continue given demand for labor remains strong and businesses remain reluctant to lay off workers amid a persistent labor shortage,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a note.

The shift in sentiment on Wall Street, even if for just a day, stood out after a particularly volatile week. Stocks have swung between gains and losses each day this week, and on Wednesday the major indexes tumbled after the Federal Reserve fueled investor concerns that the central bank might move too quickly as it starts to raise interest rates.

The S&P 500, down about 7 percent in January, is on track for its worst month since the start of the pandemic.

Markets in Europe swung between gains and losses, with the Stoxx Europe 600 up slightly by 0.6 percent. Asian markets closed lower, following the drop on Wall Street the day before.

Oil prices continued to rise amid uncertainty in Eastern Europe, where Russia has amassed large numbers of troops near its border with Ukraine, prompting concerns that it is preparing an invasion. Heightened tension in the region jeopardizes Europe’s energy supply, because Russia provides the continent with more than 40 percent of its natural gas and 25 percent of its oil.

Brent crude, the international standard, rose 1 percent to $90.85 a barrel.

Shares for the electric vehicle maker Tesla fell more than 3 percent on Thursday after the company warned on Wednesday afternoon that supply chain troubles could put a constraint on production through the coming year.


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