Stocks rise after America's economy grew more than expected

American Airlines, JetBlue and Alaska Air all reported profitable fourth quarters, although JetBlue and Alaska disappointed investors.

JetBlue reported earnings per share of 22 cents, a bit better than the 20 cents forecast by analysts surveyed by Refinitiv. But it also warned it expects a loss of between 35 cents to 45 cents a share, far worse than the forecast of a 4 cent a share loss.

JetBlue also was the first US airline to report a full-year loss. While most airlines enjoyed a return to profitability due to a strong rebound in demand and fares across the industry, JetBlue reported losses in the first half of the year as it wage a bidding war for Spirit Airlines.

American Airlines, which had given bullish guidance for the quarter earlier this month, exceeded the raised expectations, earning $1.17 a share, 3 cents better than forecast and enough to give it a profit for the year.

Alaska Air reported EPS of 92 cents, 2 cents less than forecasts.

Shares of Alaska were narrowly lower in pre-market trading on the miss, while JetBlue was off 1% on its guidance. American shares were up 1%

All airlines had reported losses a year earlier as the surge in Covid cases at that time depressed demand for travel. Those losses continued in the first quarter of 2022. But the industry has been broadly profitable since then, although Southwest reported a large fourth quarter loss earlier Thursday on its December service meltdown.

Southwest Airlines reported a loss for the fourth quarter because of the company’s service meltdown over the holiday travel season, and it warned the costs from those problems will result in another loss in the first quarter.

The airline was forced to cancel more than 16,700 flights between December 21 and 29, roughly half its schedule during that period. It had already announced that would cost it somewhere between $725 million and $825 miilion. Thursday, Southwest said that resulted in an adjusted net loss in the quarter of $226 million. Still it managed to report an adjusted annual profit of $723 million, a turn around from $1.3 billion it lost in 2021.

It said it expects another loss in the first quarter due to the continued impact and costs associated with meltdown. The first quarter is typically the slowest and least profitable period for US air travel. However, Southwest said it is encouraged by strong bookings for March.

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Investors were gearing up for the first reading of fourth-quarter GDP.

Economists are expecting the economy grew by 2.6% on an annualized basis in the final quarter of 2022, which would be down from the third quarter's 3.2% growth. The slowdown is partly due to shoppers pulling back amid higher interest rates, and exports falling as consumers shifted their spending from goods to services. 

Stocks: US stocks were mixed ahead of a big day of major economic reports, including the first look at fourth-quarter GDP. Dow futures were down 15 points. S&P 500 futures rose 0.2%. Nasdaq Composite futures were 0.5% higher.

Fear & Greed Index: 64 = Greed

Oil & gas: US oil prices rose 0.9% to $81 barrel. Average US gas prices rose to $3.50 a gallon.

A full-blown debt ceiling crisis has the potential to stop the US economy in its tracks, according to the top economist at Goldman Sachs.

“If there were any doubt about the US government’s ability or willingness to make interest and principal payments on time, that could have very, very adverse consequences,” Jan Hatzius, the chief economist at Goldman Sachs, told CNN in an interview.

The United States hit the debt ceiling last week, forcing Treasury Secretary Janet Yellen to make accounting maneuvers to avoid breaching that $31 trillion borrowing limit.

If Congress fails to lift the debt ceiling in time, Hatzius said investors will worry there is a chance of a missed payment on US Treasuries – which are “maybe the most important asset in the global economy.”

Unlike many of its peers on Wall Street, Goldman Sachs is relatively bullish on the US economy, with Hatzius telling CNN that America will likely avoid a recession through the 2024 presidential election.

However, a debt ceiling crisis is a key risk to that optimistic outlook.

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Tesla reported record profits for the fourth quarter and the full year, but its profit margins were tighter due to higher costs, recent price cuts, and sales in the quarter that were weaker than hoped.

The leading electric vehicle maker posted adjusted earnings of $1.19 per share in the quarter, up from 85 cents a share a year earlier, and its previous record of $1.07 a share in the first quarter. Analysts surveyed by Refinitiv had forecast EPS of $1.13.

For the full year, the company had adjusted earnings per share of $4.07, up from $2.26 in 2021.

But the closely-watched automotive gross margin fell to 25.9% from 27.9% in the third quarter and 30.6% in the fourth quarter a year ago.

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