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The major US stock indexes held steady on Thursday, with the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) narrowly reaching record highs as investors cheered Disney’s (DIS) upbeat earnings report and digested other corporate results.
The S&P 500 moved up 0.06% for a fresh record high close of 4,997.91. The benchmark index once again closed just a few points shy of hitting 5,000. The Dow Jones Industrial Average rose 0.13% to hit a new record high of 38,726. Meanwhile the tech-heavy Nasdaq (^IXIC) rose about 0.2%.
The small-cap Russell 2000 Index (^RUT) was an outperfomer on Thursday, rising almost 1.5% after having been a laggard during this year’s market rally that has continued many of the themes that predominated in 2023.
Stocks have rallied as robust economic data and upbeat earnings have lifted spirits on Wall Street, helping the benchmark S&P 500 close in on the key psychological level of 5,000. But some investors are questioning whether gains can be sustained, given the concentrated group of megacaps driving them.
Shares in Arm (ARM) soared more than 47% after a strong sales outlook, boosting hopes that AI and tech will keep buoying the market. The chipmaker gave a surprisingly bullish forecast based on its expansion into new areas. Also providing cheer, Disney (DIS) shares rose more than 11% as investors welcomed its earnings beat and deals with Taylor Swift and Fortnite maker Epic Games.
Meanwhile, traders have scaled back on bets on a March interest rate cut thanks to a drumbeat of caution from central bank officials. On Thursday, Richmond Fed President Tom Barkin said it would be smart for the central bank to “take our time” on rate cuts.
Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards
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S&P 500 ekes out a new record high
The major US stock indexes held steady on Thursday, with the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) narrowly reaching record highs as investors cheered Disney’s (DIS) upbeat earnings report and digested other corporate results.
The S&P 500 moved up 0.06% for a fresh record high close of 4,997.96. The benchmark index once again closed just a few points shy of hitting 5,000. The Dow Jones Industrial Average rose 0.13% to hit a new record high of 38,726. Meanwhile the tech-heavy Nasdaq (^IXIC) rose about 0.2%.
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Four stocks driving the S&P 500 higher is a feature, not a bug
The S&P 500 (^GSPC) is creeping closer toward 5,000 for the first time ever. Once again, the stocks boosting the index are the biggest members of the benchmark average.
In 2023, the “Magnificent Seven” stocks led most of the gains. But with Apple (AAPL), Alphabet (GOOGL, GOOG), and Tesla (TSLA) trading choppier to start the year, it’s largely been a market of four stocks in 2024.
Amazon (AMZN), Meta (META), Microsoft (MSFT), and Nvidia (NVDA) have produced a nearly 20% return to start the year, per an analysis from Yahoo Finance’s Jared Blikre. The returns in these four stocks alone account for roughly 69% of the S&P 500’s gain this year.
This has become a popular talking point among strategists who say the major average is set to fall as contributions narrow to just a few names.
Zooming out, however, the market-cap weighting of the S&P 500 can be taken a different way.
Goldman Sachs equity strategist Ben Snider points out the outsized gains from these companies have been an overall good thing for index investors, who have benefited from the large tech names pulling the major average higher.
Snider added that, while the degree to which these few stocks are dragging the major index higher is currently abnormally high, the idea that a few stocks lead S&P 500 gains isn’t a new concept. In fact, Snider argues, it’s been a feature, not a bug, of the benchmark index.
“That’s part of why the S&P 500 or the US equity market broadly has been so strong over the years, which is the new companies grow and they become larger weights in the index, and they drag the market higher with them,” the analyst said. “And eventually there will be disruptors and new technologies that emerge and new businesses that emerge. And those will become larger, and then it will be their turn to drag the market higher.”
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One chart shows how housing stocks are ‘dependent’ on mortgage rates
Softening mortgage rates are expected to boost housing demand this year — which could drive housing stocks higher.
Bespoke Investment analyst Jake Gordon pointed out in a note that housing related stocks like the homebuilders trade are in “sync with mortgage rates, suggesting lower rates would be bullish for those stocks.”
He is basing his conclusion on a look at the performance of the iShares US Home Construction ETF (ITB) over the past year compared to the inverted national average for a 30-year fixed mortgage.
“As shown, since the summer the two lines have basically been moving in tandem,” he wrote. “When rates have risen, ITB has fallen and when rates have fallen, ITB has risen. Even only looking at the past few months, ITB’s plateau has come right as the decline in mortgage rates stopped.”
US Home Construction ETF (ITB) vs. 30 Year Fixed Rate Mortgage National Average (Source: Bespoke Investment Group) Data from Freddie Mac showed the 30-year fixed mortgage reached 6.64% on Thursday, up from 6.63% the week prior. That’s still lower than October’s near 8% peak. Last week, the Fed left rates unchanged and indicated it won’t begin cutting them until it sees further progress on inflation.
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S&P has quiet day as investors look for 5,000
With investors closely watching to see if the S&P 500 (^GSPC) will close beyond the psychologically significant level of 5,000 for the first time ever, the benchmark index has barely moved on Thursday.
Analysis from Yahoo Finance’s Jared Blikre shows the S&P 500 has traded within a roughly 21 basis point range on Thursday. That’s the third-lowest range of moves seen in the benchmark over the past two and a half years.
As of 3 p.m., the S&P 500 was up just 0.06%.
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Tesla resumes Giga Berlin production
Tesla (TSLA) shares are up about 1% as reports say the electric vehicle maker is set to restart production at Giga Berlin on Feb. 12.
Yahoo Finance’s Pras Subramanian reports:
Tesla (TSLA) has confirmed that it will restart operations at Giga Berlin following a production halt due to ongoing Houthi militia attacks on component suppliers using Red Sea transport routes.
According to German outlet Oldenburger Onlinezeitung (via Electrek), Giga Berlin plant manager André Thierig said production will resume on Feb. 12 after a shutdown that began in late January.
Thierig said that “the supply chains are intact again,” noting that Tesla has “the necessary security that all necessary production parts are available in sufficient quantities to be able to fully restart.”
Last month Tesla said supplier components coming from Asia would have to shift routes from the Red Sea and Suez Canal to around the Cape of Good Hope in South Africa, leading to longer lead times and gaps in supply chains.
Tesla’s Giga Berlin exclusively builds the Model Y SUV for European and other select markets. Though the factory isn’t as productive as Tesla plants in Shanghai and Fremont, Calif., it did reach 5,000 Model Ys produced in a week in May of last year, and Thierig said prior to the shutdown Giga Berlin reached 6,000 units per week. “Yes, we have broken this milestone,” Thierig said to Oldenburger Onlinezeitung.
Thierig said the the temporary production halt will not set Tesla back from reaching 6,000 units a week again as the factory ramps back up. According to Tesla, Giga Berlin has an installed annual capacity of 375,000 vehicles, whereas Giga Shanghai sits at over 950,000 units.
A two- or three-week shutdown means around 10,000-15,000 Model Y vehicles or so could be affected —which isn’t too glaring considering Tesla produced 1.846 million vehicles globally last year.
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Disney shares surge more than 12% post-earnings
Disney (DIS) shares surged on Thursday following the company’s upbeat earnings report.
On Wednesday, the company said it will boost its cash dividend by 50% as earnings came in above estimates while streaming losses narrowed.
Disney reported adjusted earnings of $1.22 a share — a significant beat compared with the $0.99 analysts polled by Bloomberg had expected. The company also guided to full-year fiscal 2024 earnings of $4.60 a share, an increase of at least 20% versus 2023.
Revenue came in at $23.5 billion, a slight miss compared with the $23.8 billion expected.
It announced a cash dividend of $0.45 a share, an increase of 50% versus the last dividend paid in January. The dividend will be payable on July 25 to shareholders of record at the close of business on July 8.
The board also approved a new share repurchase program, targeting $3 billion in purchases in fiscal 2024.
Disney has been grappling with challenges that include a declining linear TV business, slower growth in its parks business, and losses in streaming. Last year, activist investor Nelson Peltz renewed his push to shake up the board as the stock price hit multiyear lows.
CEO Bob Iger has committed to various cost cuts to combat those challenges. The company said Wednesday it’s on track to meet or exceed its $7.5 billion annualized savings target by the end of fiscal 2024, adding it will “continue to look for further efficiency opportunities.”
The company also revealed a slew of new announcements.
Notably, Disney said it plans to invest $1.5 billion in Fortnite maker Epic Games, which Iger called Disney’s “biggest entry ever into the world of video games.”
On the content side, the company said Disney+ will be the exclusive streaming home for “Taylor Swift: The Eras Tour (Taylor’s Version).” The concert film will feature five additional acoustic songs, including “Cardigan.”
Meanwhile, an animated “Moana” sequel will hit theaters in November as Disney leans deeper into sequels and franchises amid a struggling box office.
Disney also announced a firmer timeline for the company’s over-the-top (OTT) ESPN streaming service, revealing the platform will launch in fall 2025.
The development comes after news broke that Disney’s ESPN will team up with Warner Bros. Discovery (WBD) and Fox (FOXA) to launch a new sports streaming service, which is expected to debut sometime this fall.
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Trending tickers on Thursday afternoon
Arm Holdings (ARM) led the Yahoo Finance trending tickers page on Thursday afternoon as shares rocketed nearly 60%. The massive move higher came after the chipmaker set revenue guidance for the current quarter in a range of $850 million to $900 million, well above analyst expectations of $778 million.
Disney (DIS) stock popped more than 12% following a better-than-expected quarterly earings report after the bell on Wednesday. Disney said it will boost its cash dividend by 50% as the entertainment giant reported fiscal first quarter earnings that beat expectations while streaming losses narrowed.
PayPal (PYPL) stock dropped roughly 11% after the company’s full-year outlook fell short of expectations. PayPal forecasted flat profit growth for 2024 in what the company defined as a “transition year.”
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Stocks mixed, Nasdaq touches 52-week high
Stocks were mixed on Thursday. The Nasdaq Composite (^IXIC) touched a 52-week high by 11:45 a.m. Eastern as shares of Marvel (MRVL), Global Foundries (GFS), and Lululemon (LULU) all jumped more than 3%.
The S&P 500 (^GSPC) was trading just below the flatline after the major benchmark closed just a few points shy of the 5,000 level for the first time ever on Wednesday.
The Dow Jones Industrial Average (^DJI) opened slightly higher, but declined 0.3% during morning trading.
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NYCB stock wavers amid lender’s efforts to shore up confidence
New York Community Bank (NYCB) stock was volatile on Thursday morning as investors accessed the lender’s latest efforts to shore up confidence.
As Yahoo Finance’s David Hollerith points out, on Wednesday the bank shared a financial update, announced the appointment of a new executive chairman, Alessandro “Sandro” DiNello, and held a call with analysts intended to encourage confidence.
“We have seen virtually no deposit outflow from our branches,” DiNello told analysts Wednesday. The former bank examiner said “building confidence” with Wall Street about NYCB’s deposits and liquidity would be the bank’s No. 1 priority going forward.
The stock fell as much as 7% at Thursday’s open. Shares are down about 56% since late January when the lender cut its dividend and posted a surprise loss.
Read more here.
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Oil gains 2% on Middle East tensions, lower US production forecast
Crude futures opened higher on Thursday after the US killed a militant commander in Iraq and Israel rejected a Hamas ceasefire proposal.
West Texas intermediate (CL=F) gained about 2% trading above $75 per barrel, while Brent futures (BZ=F) also rose by about the same amount to hover above $80 per barrel.
“The geopolitical Red Sea risk is returning to crude,” said Dennis Kissler, senior vice president at BOK Financial.
Houthi rebels in support of Palestinians have been targeting attacks on vessels, prompting major cargo companies to avoid the Red Sea region that connects to the Suez canal, a critical pathway between Asia and Europe.
Recent data from the Energy Information Administration (EIA) showed draws in both distillates and gasoline inventories. The sharp decline signals higher demand, helping maintain upside pressure on crude prices.
The EIA also cut its domestic output forecast for 2024, forecasting it would not reach the record levels of December 2023 until February 2025.
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Stocks little changed as S&P nears 5,000 landmark
Stocks opened near the flatline on Thursday after hitting a fresh record high in the prior session.
The S&P 500 (^GSPC) slipped almost 0.1% after the major benchmark closed just a few points shy of the 5,000 level for the first time ever.
The Dow Jones Industrial Average (^DJI) opened slightly higher, while the tech-heavy Nasdaq (^IXIC) hugged the flatline.
Disney (DIS) stock rose as much as 12% after the company reported narrower-than-expected losses in its entertainment division.
The entertainment company also announced its new over-the-top (OTT) ESPN streaming service will launch in fall 2025.
