Markets News, Jan. 22, 2024: Dow Passes 38000; S&P 500 Adds to Record as Treasury Yields, Bitcoin Retreat – Investopedia

Equity Indexes Wrap: Solar, Cybersecurity Stocks Gain While ADM, Travel Slip

1 hr 28 min ago

The Dow

Walgreens Boots Alliance (WBA) led the index higher, gaining 2.6%. It was followed by Disney (DIS), up 2.2%. 

UnitedHealth Group (UNH) rose 1.9%, rebounding from last week’s health insurance sell-off after competitor Humana (HUM) cut its full-year earnings outlook. 

Home Depot (HD) fell 1.6% after Oppenheimer downgraded the stock to “perform” from “outperform,” citing the possibility of weak consumer spending amid continued inflation.

The S&P 500

J.B. Hunt Transport Services (JBHT) rose 4.5% after an upgrade from UBS analysts. 

Western Digital (WDC) gained 4.1% after Morgan Stanley named the data storage company a top pick in anticipation of the firm separating its disk drive and flash memory card businesses. 

Enphase Energy (ENPH) rose 3.4% after peer SolarEdge (SEDG) announced plans to lay off 16% of its staff to cut costs amid a protracted slowdown in the solar energy market.

Archer-Daniels-Midland (ADM) led the index’s laggards, falling 24.4% after the agricultural commodities trader put a top executive on leave and lowered its full-year earnings outlook amid a review of accounting practices at its nutrition unit. 

Travel and leisure stocks slumped, with Carnival Corp (CCL) sliding 4%, Booking Holdings (BKNG) losing 3.1%, and Caesars Entertainment (CZR) down 2%. 

Tesla (TSLA) slipped 1.6% in the lead-up to its earnings, which are widely expected to take a hit from a year of aggressive price cuts, on Wednesday. 

The Nasdaq 100

Synopsys (SNPS) added 4.7%, continuing to rise after announcing its acquisition of Ansys (ANSS) last week.

Cybersecurity stocks outperformed, with ZScaler (ZS) rising 4.1%, Fortinet (FTNT) up 2.9%, and Crowdstrike Holdings (CRWD) gaining 2.8%.

Netflix (NFLX) added 0.6% ahead of its quarterly earnings report tomorrow. 

Gilead (GILD) tumbled 10.2% after the drugmaker said an experimental drug failed to reach the goals of a phase 3 non-small cell lung cancer treatment trial. 

Advanced Micro Devices (AMD) and PayPal (PYPL), both big winners last week, gave up some of those gains, falling 3.5% and 3.2%, respectively. 

Dow Flirts With Close Above 38,000

2 hr 23 min ago

The Dow Jones Industrial Average surged more than 200 points Monday morning to trade above 38,000 for the first time. The index retreated at midday and traded about 20 points shy of that milestone with less than an hour left in the session.

The S&P 500 was also trading at a record high Monday after clinching its first record in over two years on Friday. 

Of the indexes still to retake their post-pandemic highs, the one farthest from the mark is the small-cap Russell 2000, which on Monday traded around 1,970. It will need to rise nearly 25% to overtake its November 2021 high of 2,458.

Small caps have dramatically underperformed their large-cap peers in the last year, with the Russell 2000 up just 4.4% in the past twelve months. But they posted a strong end to the year—rising nearly 20% from their late-October lows—and are trading at a historically low valuation. 

That could set the stage, said Goldman Sachs analysts in a research note Monday, for the Russell 2000 to rally 15% in the next year.

Agriculture Giant ADM’s Stock Dives on Accounting Probe, Outlook Downgrade

3 hr 4 min ago

Agriculture commodity giant Archer-Daniels-Midland Co. (ADM) cut its outlook for the 2023 fiscal year and put a top executive on leave after it announced an investigation into its accounting practices, sending its shares skidding more than 20% in intraday trading Monday. 

The Chicago-based grain merchant on Sunday said it placed Chief Financial Officer (CFO) Vikram Luthar on leave as it investigates accounting practices and procedures in ADM’s nutrition department. The investigation was spurred by a voluntary document request from the U.S. Securities and Exchange Commission (SEC), with which ADM said it was cooperating.

ADM also updated its outlook for 2023, saying it now expects to deliver adjusted earnings per share (EPS) of $6.90, lower than the earnings “in excess of $7 per share” it forecast in October. The company is also delaying its fourth-quarter earnings report, which was due this week.

–Terry Lane

Netflix Looks to Accelerate Revenue and Subscriber Growth for Q4

3 hr 47 min ago

Netflix Inc. (NFLX) is predicted to post its fastest year-over-year revenue growth in two years when the streaming giant reports earnings results for the fourth quarter of 2023, amid a ramp-up in interest in the company’s lower-priced ad-supported plan and a continued crackdown on password sharing.

Analysts expect Netflix to report net income of $983.9 million, up substantially from just over $55 million a year prior, and earnings per share of $2.25 compared with $0.12 for the final quarter of 2022. Revenue is expected to reach a record high of $8.7 billion, up 11% YOY.

Netflix lost net subscribers for the first time in 2022, following a surge in viewership during the pandemic. Since that time, it has posted uneven net subscriber additions in its bid to return to growth.

However, the $6.99 ad-supported plan that the company announced late in 2022 has accelerated subscriber growth. The company said earlier this month that this subscription tier had reached 23 million active users, up from 15 million in November.

–Nathan Reiff

Solar Stocks Surge as SolarEdge Lays Off 16% of Its Staff to Cut Costs

4 hr 26 min ago

SolarEdge Technologies (SEDG) shares gained over 3% in intraday trading Monday after the maker of solar power equipment said it would slash its workforce to cut costs as demand slumps. Shares of other solar stocks, including Sunrun (RUN), Enphase Energy (ENPH), and First Solar (FSLR), also rose.

The company said it would be laying off 900 employees, or about 16% of its staff, with about 500 coming from its various manufacturing sites.

CEO Zvi Lando said that the job cuts and other moves to reduce expenses were needed for SolarEdge “to align our cost structure with the rapidly changing market dynamics.”

In November, SolarEdge reported its third quarter sales plunged 27% from the prior quarter, with Lando saying that drop reflected “a slow market environment, which has resulted in high inventory of our products in the distribution channels, in particular in Europe.”

The broader solar industry has been hurt by high home prices and mortgage rates, which make solar panels less attractive. In addition, a drop in the amount of compensation California homeowners receive for sending electricity back to the grid reduced demand in that state, the biggest U.S. market for solar.

–Bill McColl

Earnings Season Is Off to a So-So Start

5 hr 9 min ago

As of Monday morning, 52 companies in the S&P 500 representing 13% of the index’s total earnings had reported their results. 

With 56% of reporting companies beating earnings per share estimates and 60% beating sales estimates, this quarter’s results are trailing the index’s historical average (67% beat on earnings; 64% on sales), according to Bank of America Securities analysts. The results are also well off last quarter—at this point last October, 75% of reporting companies had beat on earnings and 61% had topped sales estimates. 

And, with the S&P 500 trading at a record high, even those companies that have topped estimates haven’t seen much benefit. The average gain on earnings beats so far this season has been just 20 basis points, whereas earnings misses have sparked declines averaging 500 basis points.

Some companies reporting earnings this week include Verizon (VZ), Procter & Gamble (PG) and Tesla (TSLA). The latter is expected to say fourth-quarter earnings improved from the prior quarter but remained lower than the same period a year ago due to substantial price cuts.

Verizon, meanwhile, is likely to say earnings declined by more than a third—and that’s not including the $5.8 billion write-down, announced last week, of its business connectivity unit.

Procter & Gamble is likely to report lower net income as it books a portion of the $2.5 billion in restructuring costs and impairment charges it announced in December. 

Grayscale Bitcoin ETF Outflows Total $2 Billion

6 hr 8 min ago

Grayscale’s Bitcoin Trust ETF (GBTC) has seen more than $2 billion in outflows in the week and a half since its long-awaited conversion to an exchange-traded fund.

Several spot Bitcoin ETFs debuted on Jan. 11 after the Securities and Exchange Commission approved 11 funds in a major win for crypto enthusiasts. 

Grayscale’s is still the largest of those funds, with more than $23 billion under management. But the fund, which was launched in 2013 as a trust, has a decade head-start on competitors like BlackRock and Fidelity, whose ETFs have seen steady inflows. BlackRock’s iShares Bitcoin Trust (IBIT) passed $1 billion in assets last week, reaching that milestone in just five days of trading. 

Since the ETFs launched a little over a week ago, the price of Bitcoin has tumbled from more than $47,000 to just over $40,000 on Monday morning. 

Macy’s Gains After Rejecting Takeover Bid

7 hr 4 min ago

Shares of Macy’s (M) rose in early trading Monday after the department store rebuffed an unsolicited $5.8 billion takeover offer. 

The company said in a statement Sunday that it had received a $21 per share acquisition offer from real estate investment firm Arkhouse Management and asset manager Brigade Capital Management on Dec. 1, 2023. 

“Following careful consideration and efforts to gather additional information from Arkhouse and Brigade, the Board determined that Arkhouse and Brigade’s proposal is not actionable and that it fails to provide compelling value to Macy’s, Inc. shareholders,” said CEO Jeff Gennette.

Specifically, the Board judged Arkhouse and Brigade’s proposal, which called for the firms to pay 25% of the acquisition price in cash, relied too heavily on financing. “Your proposed overall leverage is well in excess of what could likely be achieved in today’s marketplace and sustainable for a company in our sector,” the Macy’s Board said in a letter to Arkhouse and Brigade. 

Macy’s shares surged to nearly $21 in mid-December following reports of the proposed acquisition. But the stock had retreated to less than $18 by last Thursday when the company announced layoffs affecting more than 2,300 employees, part of a years-long restructuring kicked off by COVID-19.

Shares were up more than 4% at $18.36 early Monday.

Stocks Making the Biggest Moves Premarket

8 hr 11 min ago

Gains:

• Spirit Airlines (SAVE): Shares of the low-cost carrier rose 3% after it and JetBlue appealed a court decision last week blocking their $3.8 billion merger.
• Celsius Holdings (CELH): The energy drink maker’s stock added 3% after it announced plans to expand to Canada, the U.K., and Ireland.
• Macy’s Inc. (M): Shares of the department store rose more than 1% after it rejected a $5.8 billion takeover bid from real estate investor Arkhouse Management and hedge fund Brigade Capital.

Losses:

• Archer-Daniels-Midland Co. (ADM): Shares of the agricultural trading company fell more than 16% after it put its chief financial officer on administrative leave and cut its full-year earnings outlook pending an investigation of its accounting practices.
• Gilead Sciences Inc. (GILD): Shares of the pharmaceutical company tumbled 7% after it said its medication Trodelvy failed to meet the objectives of a phase 3 trial for the treatment of non-small cell lung cancer.
• Chinese stocks: U.S.-listed shares of Chinese tech companies slumped amid concerns about the world’s second-largest economy’s growth prospects amid prolonged deflation and an ailing real estate sector. E-commerce giants Alibaba (BABA) and PDD Holdings (PDD) both fell nearly 3%. 

Chart to Watch: Texas Instruments Stock Benefits From Higher Chip Sales Hopes

8 hr 37 min ago

Shares in analog semiconductor maker Texas Instruments (TXN) jumped 4% Friday after UBS upgraded the Dallas-based company’s stock to “buy” from “neutral” on expectations of growing chip sales.

Analyst Timothy Arcuri says the company sits well positioned relative to its rivals to benefit from increasing lead times—how long it takes companies to fill an order—across the semiconductor industry this year at a time when pricing remains elevated.

The Texas Instruments share price broke below a trading range in late September but subsequently staged a V-shaped recovery that kicked off in early November. Friday’s trading action saw the stock break above a flag on above-average volume—a chart pattern indicating a continuation of the current move higher.

If the stock continues to climb, monitor how the price responds to the $185 area, where it may face resistance from the top trendline of the previous trading range.

–Timothy Smith

Stock Futures Rise as Equities Look to Extend Friday’s Rally

9 hr 11 min ago

Futures contracts connected to the Dow Jones Industrial Average were up 0.2% in early trading Monday.

S&P 500 futures gained nearly 0.4%.

Nasdaq 100 futures were up almost 0.7% about an hour before markets opened.