The S&P 500 (^GSPC) extended its record-setting rally as focus turned to the day's stream of earnings for insights into the health of corporate America and the economy.
The S&P 500 rose nearly 0.3% to hit a new closing high of 4,864.61. The Nasdaq Composite (^IXIC) also popped Tuesday, rising 0.4% while the Dow Jones Industrial Average (^DJI) fell about 0.2% after the blue-chip index broke above 38,000 for the first time on Monday.
After a tech-driven rally pushed the market to new record highs, earnings in other sectors served as the key market movers on Tuesday.
An earnings disappointment weighed on the Dow as 3M (MMM) tumbled more than 10% on Tuesday after the company's 2024 profit outlook came in below Wall Street's expectations.
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Consumer Staples (XLP) and Communications Services (XLC) were the biggest gainers in the S&P 500, with staples rising rising more than 1% as investors digested quarterly results from Procter & Gamble (PG) and Verizon (VZ), among others.
Elsewhere on the earnings front, an upbeat 2024 profit forecast from United Airlines (UAL) helped lift its shares by 5% on Tuesday. Shares of other airlines, including Delta (DAL) and American Airlines (AAL), rose after the forecast, which came even as United warned of a hit from the grounding of its Boeing 737 Max 9 planes.
Netflix (NFLX) is also in focus, with the streaming giant reporting earnings after the bell. The company on Tuesday announced a deal with TKO Group's WWE (TKO) that will bring WWE's flagship program, Raw, to the streaming service, beginning January 2025. TKO shares rose nearly 15% on the news.
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Josh Schafer
S&P 500 hits a new high
The S&P 500 (^GSPC) extended its record-setting rally as focus turned to the day's stream of earnings for insights into the health of corporate America and the economy.
The S&P 500 rose nearly 0.3% to hit a new closing high of 4,864.61. The Nasdaq Composite (^IXIC) also popped Tuesday, rising 0.4% while the Dow Jones Industrial Average (^DJI) fell about 0.2% after the blue-chip index broke above 38,000 for the first time on Monday.
Myles Udland
Can you smell ... what the board is cooking?
News early Tuesday that Netflix (NFLX) and TKO Group (TKO), which owns WWE, would partner to bring Raw to the streaming service drew most of the headlines and sent shares of TKO up more than 16%.
But another release out this morning saw TKO shake up its board and add one of the biggest stars of this era to its director ranks.
Dwayne "The Rock" Johnson was added to TKO's board, effective today, in a deal that will also see Johnson secure ownership of the trademarked name "The Rock."
"I'm very motivated to help continue to globally expand our TKO, WWE, and UFC businesses as the worldwide leaders in sports and entertainment," Johnson said in a release, "while proudly representing so many phenomenal athletes and performers who show up every day putting in the hard work with their own two hands to make their dreams come true and deliver for our audiences. I've been there, I’m still there, and this is for them."
In an SEC filing, TKO also disclosed that as part of its licensing deal with Johnson, The Rock will be granted $30 million worth of company stock.
TKO also announced that Brad Keywell, co-founder of Groupon, will join its board.
Josh Schafer
Not all stocks are expensive with stocks at market highs
Major indexes in the stock market are at market highs, and many Wall Street strategists have pointed out the S&P 500 (^GSPC) trading at more than 21 times forward earnings is a historically high valuation for the stock market.
But new analysis from the team at UBS out on Tuesday shows not everything is too expensive right now.
Strategist Patrick Palfrey highlighted that 77% of S&P 500 companies trade at a discount to their January 2022 levels (the previous market high). Of those companies, 55% of them currently have a lower price-to-earnings ratio than they had at the previous market top.
Now, while one could see that as a buying opportunity in the stocks not back to 2021 levels, it does come with an important caveat. Analysis from Bespoke Investment Group last Friday showed 75% of the S&P 500's gains this year have been driven by Microsoft (MSFT) and Nvidia (NVDA).
Both of those stocks are trading near all-time highs with valuations higher than they were in January 2021.
As of January 19th, NVIDIA $NVDA and Microsoft $MSFT had accounted for about 75% of the S&P 500's gain this year, while the 20 largest stocks in the index accounted for 110% of the index's upside move. The remaining ~480 stocks were acting as a drag. pic.twitter.com/b8EvAIWfhj
Staples, Communications Services lead market action
After a tech rally has pushed the market to new record highs, earnings in other sectors are the key market movers on Tuesday.
Consumer Staples (XLP) and Communications Services (XLC) were the biggest gainers in the S&P 500 (^GSPC), rising more than 0.5%, in afternoon trade as investors digested quarterly results from Proctor & Gamble (PG) and Verizon (VZ), among others.
Broadly, the Dow Jones Industrial Average (^DJI) was down about 0.5% after the blue-chip index broke above 38,000 for the first time on Monday. The S&P 500 and the tech-heavy Nasdaq Composite (^IXIC) both slipped just below the flatline.
Dani Romero
D.R. Horton weighs on homebuilder stocks amid jitters over rising rates, incentives
Homebuilder stocks have been one of the brightest spots in the market's rally, but news out Tuesday shows the sector remains sensitive to interest rates and their influence on the housing market.
Shares of D.R. Horton (DHI) sank by 9% Tuesday midday after the homebuilder reported weaker-than-expected quarterly orders and posted first quarter earnings per share that missed analyst estimates. Investor reaction also dragged down the SPDR S&P Homebuilders ETF (XHB) by as much as 3%.
Both XHB and D.R. Horton closed at record highs on Monday.
Specifically, D.R. Horton said on its call with analysts it would be cautious in making changes to its concession strategy — which consists of mortgage rate buydowns that hurt margins but make homes more affordable for buyers — should mortgage rates stall in marching lower.
"The use of those rate buydowns is not just new to us over the last 12 months," CEO Paul Romanowski said on Tuesday. "We've been 24-plus months utilizing that incentive. So I believe on a go-forward basis, staying competitive to not only the new home market, but especially to the resale market for us, and the ability to have a lower monthly payment for same cost of home is advantageous. So we have no plan in the near term to stop utilizing it even if we see rates shift down."
This commentary differs from that offered by KB Home (KBH) earlier this month, which hinted at a pullback in incentives for the first quarter of this year.
But longer-term interest rates, which feed into mortgage rates, have risen of late as investors grow less optimistic about interest rate cuts from the Federal Reserve kicking off in March.
And despite the weaker print from D.R. Horton, new construction has been a key source of boosting housing inventory as supply on the resale market slumped to the worst level in decades last year. In response, homebuilders across the country have been rolling out juicer incentives to spark buyer interest and ease the sticker shock of higher rates and home prices.
Ines Ferré
Oil futures waver as Libya restarts production, cold temperatures impact US production
Oil futures wavered on Tuesday after Libya restarted production at its largest oil field while freezing temperatures across North Dakota continued to impact output.
West Texas Intermediate (CL=F) dropped as much as 1% before recovering, trading near $75 per barrel by midday. Brent futures (BZ=F) also fell but pared losses to climb above $80 per barrel after rising almost 2% in the prior session.
Meanwhile a cold snap across the US recently knocked off production of almost 200,000 barrels of crude per day in North Dakota.
"Still, unless we see escalation of tensions in the Red Sea that actually curtails oil sales, the upside to crude prices looks limited," said Dennis Kissler, senior vice president at BOK Financial, on Tuesday.
Netflix to host WWE's Raw in live sports entertainment push
Netflix (NFLX) and TKO Group Holdings' WWE (TKO) announced a new partnership early Tuesday that will bring WWE’s flagship program Raw to the streaming service, beginning January 2025.
The 10-year deal marks Netflix's first big venture into the world of live sports entertainment while Raw will be leaving linear television for the first time since its inception 31 years ago. The program currently airs on NBCUniversal's USA Network and draws in 17.5 million unique viewers a year, according to the companies.
While financial stipulations of the deal were not disclosed, multiple reports said the agreement is valued at more than $5 billion.
Shares of TKO, which also serves as the parent company of UFC, soared more than 20% in early market trading. Netflix shares traded flat at the open after jumping roughly 2% in premarket trading.
Wells Fargo analyst Steve Cahall described the move as a "logical next step" in a reaction note to clients.
"It adds to NFLX's ability to continue to look for growth beyond paid sharing as new content = more ads and/or more subs," he said. "We think NFLX's #1 focus is driving scale in ads as it needs reach and frequency to carve out a seat at the top table with US ad buyers."
Still, the analyst noted WWE is not quite the same as major sports rights given the financial gap between the two entities sits at about $500 million annually. "The inevitable question is 'when will NFLX get into live sports?', but we think that's still years away," he said.
The news comes as TKO also announced Dwayne "The Rock" Johnson to its board of directors. Netflix, meanwhile, is set to report quarterly earnings after the bell on Tuesday.
Earnings are driving the market action on Tuesday morning as results from several companies disappointed Wall Street analysts and sent the Dow Jones Industrial Average (^DJI) lower.
3M Company (3M) tumbled nearly 10% on Tuesday as the company's 2024 profit outlook came in below Wall Street's expectations.
General Electric (GE) beat earnings expectations for the prior quarter but its stock fell about 2% in morning trade after its profit outlook for the current quarter came in lower than analysts had projected.
Johnson & Johnson (JNJ) shares fell more than 2% as the company noted it's in "progress" to reach a settlement with 43 state attorneys general to resolve claims on J&J's marketing of its talc product. The Wall Street Journal has reported that J&J will pay $700 million to settle the investigation.
Verizon (VZ) had a different earnings story with shares rising nearly 5% in morning trade. The wireless carrier added 449,000 postpaid phone net additions, well above Wall Street estimates for 232,000 additions.
Josh Schafer
Stocks open mixed
US stocks hit pause on a record-setting rally as focus turned to the day's stream of earnings for insight into the health of corporate America and the economy.
The Dow Jones Industrial Average (^DJI) was down about 0.1% after the blue-chip index broke above 38,000 for the first time on Monday. The S&P 500 (^GSPC) 0.1% to hold near a record close, while the tech-heavy Nasdaq Composite (^IXIC) also popped.
Key Dow components 3M and Johnson & Johnson weighed on the major average as the stocks fell following quarterly earnings reports.
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