US Treasury Yields Climb Above 3.5% after GDP Grows More than Expected

U.S. Treasury yields rose and the major stock index futures edged higher after a report showed the U.S. economy finished 2022 in sound shape even as recession fears loom.

Fourth Quarter GDP Rises More than Expected

Fourth-quarter gross domestic product, the sum of all goods and services produced for the October-to-December period, rose at a 2.9% annualized pace, the Commerce Department reported Thursday. Economists surveyed by Dow Jones had expected a reading of 2.8%.

The report also showed quarterly growth was slightly slower than the 3.2% pace in the third quarter.

Once again consumer spending carried the economy, rising 2.1% during the period. However, this was down slightly from 2.3% in the previous period but still positive.

The second part of the report showed inflation readings moved considerably lower. The personal consumption expenditures price index increased 3.2%, in line with expectations but down sharply from 4.8% in the third quarter. Excluding food and energy, the chain-weighted index rose 3.9 down from 4.7%.

Weekly Jobless Claims Fall

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 186,000 for the week ended Jan. 21. The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 20,000 to 1.675 million for the week ended Jan. 14.

US Durable Goods Orders Surge Much More Than Expected in December

A report released by the Commerce Department on Thursday showed new orders for U.S. manufactured durable goods soared by much more than expected in the month of December.

The Commerce Department said durable goods orders spiked by 5.6 percent in December after tumbling by 1.7 percent in November.

Economists had expected durable goods orders to surge by 2.5 percent compared to the 2.1 percent slump that had been reported for the previous month.

Immediate Reaction

Treasury yields rose after the release of the reports, which likely means traders may still have some lingering doubts over whether the Fed will raise rates by 25 or 50 basis points at next week’s meeting. The data is strong enough to suggest the Fed still has some wiggle room to raise its terminal rate beyond 5.0% or perhaps even past June.

Despite the uptick in yields, the major U.S. stock index futures are trading at their highs, pointing toward a higher cash market opening. Gold weakened on the news.