Equity Indexes Wrap: Telecoms Tumble; Netflix Spared Streamer Carnage by Ad-Plan Growth

January 11, 2024 04:13 PM EST

The Dow

Salesforce (CRM) shares rose 2.8% after Baird upgraded the stock to “outperform” from “neutral,” citing its historically low valuation and potential for upside from price hikes. 

Chevron (CVX) rose 0.6% as oil ticked up after Iran seized an oil tanker in the Red Sea, raising concerns about Middle East tensions and their threat to supply.

Microsoft (MSFT) shares edged up 0.5%, putting its market value just shy of Apple’s (AAPL), which fell 0.3% Thursday.

Verizon (VZ) stock sank 3% after the EPA called on telecoms executives to meet with the agency about lead-sheathed cables. Competitor AT&T (T) dropped 3.8%.

Boeing (BA) shares fell 2.3% after the Federal Aviation Administration said it was investigating whether Boeing failed to confirm the 737 Max 9 that lost a part of its fuselage last week was manufactured according to approved designs. 

JPMorgan Chase (JPM) shares slid 0.4% ahead of its quarterly earnings report tomorrow morning. 

The S&P 500

Netflix (NFLX) added 2.9% after its president of advertising said the company’s ad-supported plan, which it launched less than a year and a half ago, had surpassed 32 million monthly active users.

Oil refiners Valero Energy (VLO) and Marathon Petroleum (MPC) rose 2.6% and 1.7%, respectively, after getting a boost from rising oil prices. 

Paramount Global (PARA) led the index’s losers, falling 5.5% after Redburn downgraded the stock to “sell.” Redburn also downgraded peer Warner Bros. Discovery (WBD), which slipped 3.9%.

Alliant Energy (LNT) lost 3.5% after analysts at BMO Capital Markets expressed confidence in the company’s fundamentals, but downgraded its stock to “market perform” due to better risk-adjusted opportunities elsewhere. It was joined by fellow utilities AES Corp. (AES), down 4.5%, and WEC Energy Group (WEC), down 4.1%. 

Lithium miner Albermarle (ALB) lost 3.2% after Deutsche Bank downgraded its stock to “hold” and expressed concern about the lithium industry’s near-term prospects. 

The Nasdaq 100

Cybersecurity stocks outperformed for a second consecutive day. Palo Alto Networks (PANW) rose 2.3%, while ZScaler (ZS) and Fortinet (FTNT) both gained 1.4%.

Nvidia (NVDA) rose 0.9% to close at a record high for the fourth straight session.

Amazon (AMZN) shares inched up 0.9% despite the company missing a deadline to offer concessions to EU regulators concerned about its $1.4 billion acquisition of Roomba-maker iRobot (IRBT).

Tesla (TSLA) lost 2.9% amid reports it would raise wages for its factory workers across the U.S. as it seeks to fend off unionization efforts spurred by last year’s autoworkers strike. 

Shares of Biogen (BIIB) fell 2.8% after European regulators said they would consult outside experts before deciding whether to approve Leqembi, the drugmaker’s Alzheimer’s treatment developed with Japan’s Eisai. 

Alphabet (GOOGL) dipped 0.1% after it said it would lay off hundreds of employees in its Assistant and hardware units. 

KB Home Stock Falls Following Earnings But Says Demand Rising as Mortgage Rates Fall

January 11, 2024 03:24 PM EST

KB Home (KB) on Thursday reported a decline in sales and profits in its fiscal fourth quarter as high mortgage rates cut into demand while lower selling prices, along with added concessions to buyers, cut into profit margins. However, the company said it’s optimistic about a recovery in the new year.

KB Home posted net income of $150.3 million, or $1.85 per share, in the three months ended Nov. 30, a 31% decline from the same period in 2022. Revenue slid 14% to $1.67 billion, the company said in a press release.

Home deliveries dropped 10% to 3,407 in the latest quarter, while the average selling price went from $510,400 to $487,300 as the company had to lower prices to attract buyers.

CEO Jeffrey Mezger said KB Home is experiencing “a meaningful sequential increase in our net orders for the first five weeks of our 2024 first quarter, as consumers are responding favorably to the recent decline in mortgage rates.” 

KB Home shares were down 0.9% at $61.75 at about 1:40 p.m. ET Thursday. Even with today’s losses, shares of KB Home have added 74% over the past year.

–Bill McColl

Netflix Shares Gain on Strong Ad-Tier Plan Take-up

January 11, 2024 02:34 PM EST

Netflix (NFLX) was the best-performing stock in the S&P 500 Thursday after an executive said the company’s ad-supported plan had attracted 23 million monthly users. 

President of Advertising Amy Reinhard said during the Variety Entertainment Summit at the 2024 Consumer Electronics Show that the streaming service had increased its ad-tier user base by more than 50% since November when the company reported having 15 million monthly active users.

Netflix first introduced its ad-supported tier in November 2022, when it launched at a monthly price of $6.99. Since then, the company has cracked down on password sharing and eliminated its Basic ad-free plan, sending millions of old and new users to its cheapest offering.

The ad-supported plan’s subscription growth has repeatedly exceeded expectations, helping boost Netflix’s stock by more than 60% since the plan was introduced.

Netflix shares were up 2.8% at $491.75 late Thursday afternoon.

Midday Movers

January 11, 2024 02:03 PM EST

Netflix (NFLX) shares gained as the biggest streaming provider reported it has more than 23 million monthly active users (MAU) for its ad-supported plan. Shares of rivals Warner Bros. Discovery (WBD) and Paramount Global (PARA) dropped.

Chesapeake Energy (CHK) shares advanced with the firm set to become the biggest U.S. natural gas producer by purchasing rival Southwestern Energy (SWN) for $7.4 billion. Southwestern Energy shares were up slightly.

Tensions in the Middle East sent oil futures higher, lifting shares of Valero Energy (VLO) and other energy companies.

Tesla (TSLA) shares slid following a report it was increasing pay for production workers in the U.S. as union organizers target the electric vehicle maker.

Shares of Citigroup (C) sank as the bank warned of higher fourth-quarter charges than expected linked to its exposure to Argentina and Russia, as well as its restructuring.

–Bill McColl

Tesla Stock Falls After Reports Company Raising Pay Amid Mounting Union Pressure

January 11, 2024 01:20 PM EST

Tesla (TSLA) shares tumbled during intraday trading Thursday after reports that the electric vehicle pioneer would increase wages amid a wave of automaker pay raises following the United Auto Workers (UAW) union’s efforts to organize non-union employees.

Flyers posted at a California Tesla facility said that U.S. production workers were to receive a “market adjustment pay increase” in the new year, according to a report by Bloomberg on Thursday.

Following the UAW’s deals with the Big Three, the union launched a campaign to organize non-union workers at other automakers, including Tesla.

Since then, some automakers increased employees’ wages, which could stave off union organization action. Hyundai said that it would start raising pay for workers in 2024 so that hourly wages would increase by 25% by 2028. Volkswagen also offered an 11% raise to some of its production workers.

Tesla shares were down nearly 3% in early afternoon trading Thursday. The stock has gained 83% over the past year.

–Naomi Buchanan

Hertz Stock Tumbles on EV Resales

January 11, 2024 12:44 PM EST

Shares of Hertz Global (HTZ) fell more than 3% in intraday trading Thursday after the car rental company said it would sell 20,000 electric vehicles from its fleet. 

The company expects to recognize about $245 million in depreciation expenses in the fourth quarter. It will also use a portion of the proceeds to acquire new internal combustion engine vehicles. The company expects the benefits from the sale to entirely offset depreciation expenses by the end of 2025. 

The sale, which represents about a third of the company’s EV fleet, comes as Hertz confronts muted demand for electric rentals and high costs associated with repairing EVs. “Expenses related to collision and damage, primarily associated with EVs, remained high in the quarter, thereby supporting the Company’s decision to initiate the material reduction in the EV fleet,” Hertz said in a regulatory filing Thursday. 

Downsizing its electric fleets is also expected to “better balance supply against expected demand of EVs.”

Hertz made headlines in 2021 when it said it would purchase 100,000 Teslas in a push to electrify its fleet. The deal sent Tesla shares soaring, pushing its market capitalization past $1 trillion. 

Citigroup Stock Falls as Restructuring, Argentina Exposure Prove Expensive

January 11, 2024 12:05 PM EST

Citigroup (C) shares fell more than 2% in early trading Thursday after it reported higher fourth-quarter charges than it previously disclosed linked to its exposure to Argentina and Russia, as well as its own overhaul.

Citi, which reports its fourth-quarter results Friday morning, said in a regulatory filing Wednesday that it had set aside a total of $1.3 billion in reserves for the fourth quarter tied to currency exposures in Argentina and Russia’s ongoing political and economic instability. It also announced $780 million of charges related to CEO Jane Fraser’s restructuring of the bank.

The New York bank lender said it expects to take a $1.7 billion charge to replenish the Federal Deposit Insurance Corporation’s (FDIC’s) deposit insurance fund after last March’s regional banking crisis.

Citi shares were down 2.6% midday Thursday. They have gained around 6% over the past year.

–Fatima Attarwala

Microsoft Briefly Overtakes Apple as Most Valuable U.S. Company

January 11, 2024 10:54 AM EST

Microsoft (MSFT) on Thursday briefly retook its title as the most valuable company in the United States from Apple (AAPL), which claimed the superlative from Microsoft in November 2021. 

Microsoft stock jumped as much as 2% Thursday morning, bringing its market capitalization to more than $2.87 billion. Meanwhile, Apple shares slipped, pushing its valuation below that threshold. 

The reversal may have been short-lived as Microsoft stock retreated from its intraday highs, but the company’s AI-fueled rally has helped it close a more than $200 billion gap in the last year, and analysts remain bullish. Of the 52 analysts covering Microsoft, 41 rate the stock a “buy,” the highest possible rating. Six assign it a positive “overweight” rating, while five are neutral on the stock.

Meanwhile, Apple has been hit by several analyst downgrades this year amid concern about demand for the iPhone, its best-selling product. Just 25 of the 54 analysts covering Apple assign it a rating of “overweight” or better, while 15 are neutral, and four rate the stock “underweight” or “sell.”

Bitcoin Surges as Spot ETFs Debut

January 11, 2024 10:18 AM EST

Bitcoin (BTCUSD) soared Thursday morning before paring gains as long-awaited spot Bitcoin ETFs hit exchanges, opening the door for billions of dollars to flow into the crypto asset. 

The price of Bitcoin jumped to nearly $49,000, its highest since December 2021, as eleven Bitcoin ETFs from providers including BlackRock, Fidelity, and Invesco, began trading on the NYSE Arca, Cboe BZX, and Nasdaq. They are the first exchange-traded funds to directly track the price of Bitcoin rather than Bitcoin futures contracts.

With nearly a dozen funds premiering today, providers have temporarily lowered or waived fees in bids to attract inflows and gain a lead in the highly competitive space.

The funds are widely expected to open the cryptocurrency up to billions of dollars of retail and institutional investors’ money that has sat on the sidelines due to concerns about securely holding cryptocurrencies and trading on exchanges not overseen by the SEC. 

With Thursday’s gains, Bitcoin’s total market capitalization briefly stood at about $960 billion, making the cryptocurrency more valuable than all but five U.S. companies. 

Stocks Making the Biggest Moves Premarket

January 11, 2024 09:19 AM EST

Gains:

• Coinbase Global (COIN): Shares of the crypto exchange rose 3% after the Securities and Exchange Commission approved eleven spot Bitcoin ETFs, for several of which Bitcoin will be the asset custodian.
• Chesapeake Energy Corp. (CHK): Shares of the oil and natural gas producer rose more than 2% after the company said it would merge with Southwestern Energy (SWN) in an all-stock $7.4 billion transaction. Southwestern shares dipped about 2%.
• Infosys Ltd. (INFY): Shares of the Indian tech company rose nearly 2% after it reported quarterly earnings that were mostly in line with expectations. It also narrowed and lowered the high end of its full-year revenue guidance amid a slowdown in client spending. 

Losses: 

• Hertz Global Holdings Inc. (HTZ): Shares of the car rental company fell 4% after saying it would sell a third of its electric vehicle fleet due to weak demand and the cost of repairs.
• KB Home (KBH): The homebuilder’s shares fell more than 3% after it said home sales and average prices fell in the fourth quarter from last year.
• Citigroup Inc. (C): Shares of the bank fell more than 1% after the company said previously disclosed charges tied to restructuring and a drop in the Argentine peso would far exceed prior forecasts.

Inflation Ticked Up in December

January 11, 2024 08:47 AM EST

U.S. consumer prices rose 0.3% in December, an acceleration from last month when prices rose 0.1% and a bigger increase than economists were expecting. Shelter costs contributed more than half of the Consumer Price Index’s (CPI) increase last month.

The core index, which excludes volatile food and energy prices, rose 0.3%, putting the annual core inflation rate at 3.9%. That’s a slowdown from November, but a smaller one than economists predicted.

Futures Gain Ahead of December Inflation Report

January 11, 2024 08:22 AM EST

Futures contracts connected to the Dow Jones Industrial Average were unchanged a little over an hour before markets opened after giving up earlier gains.

S&P 500 futures traded 0.1% higher.

Nasdaq 100 futures were up about 0.4%.

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