Stock market today: Dow extends winning streak to 6 days

US stocks were a mixed bag on Wednesday as investors tried to read the rate-cut runes and weighed a fresh batch of earnings reports for insight into the chance of a corporate America-spurred revival.

The Dow Jones Industrial Average (^DJI) rose 0.5%, or nearly 200 points, while the S&P 500 (^GSPC) closed roughly flat on the day. The tech-heavy Nasdaq Composite (^IXIC) edged down about 0.1%. The Dow has now risen for six straight trading sessions and is back above 39,000.

While stocks have notched a string of gains in recent days, the rally lost some steam Tuesday as Federal Reserve policymaker Neel Kashkari signaled that rates are likely to stay at historic highs for a while. Boston Fed President Susan Collins furthered this notion on Wednesday, saying it will take longer "than previously thought" to bring inflation down.

Uncertainty about corporate earnings also gave some investors pause as the season entered its final stretch. While techs have mainly delivered on high expectations, the focus is now on whether other sectors can match up.

On Wednesday's docket, Uber's (UBER) forecast for a key bookings metric missed the mark, dragging its shares down almost 6%. Shopify (SHOP) shares plunged nearly 19% after the e-commerce platform forecast its slowest quarterly revenue growth in two years.

In after hours, Robinhood (HOOD) shares surged as much as 7% as the company topped Wall Street's estimates for quarterly profits and revenue. Airbnb (ABNB) was a different story with shares sliding nearly 7% as the company's guidance range for current quarter revenue fell below analyst expectations.

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Amgen, Boeing, JPMorgan lead Dow to 6th day of gains

Wed, May 8, 2024 at 4:07 p.m. EDT, Josh Schafer

US stocks were a mixed bag on Wednesday as investors tried to read the rate-cut runes and weighed a fresh batch of earnings reports for insight into the chance of a corporate America-spurred revival.

The Dow Jones Industrial Average (^DJI) rose 0.5%, or nearly 200 points, while the S&P 500 (^GSPC) closed roughly flat on the day. The tech-heavy Nasdaq Composite (^IXIC) edged down about 0.1%. The Dow has now risen for six straight trading sessions and is back above 39,000.

Below is a look at the daily performance of the Dow components. Amgen (AMGN) led the gains rising nearly 2.3%.

Source: Yahoo Finance

Why defensive sectors have led the market for the last month

Wed, May 8, 2024 at 3:35 p.m. EDT, Josh Schafer

Stocks have rebounded from a rough April, led by some of the most unloved sectors over the past year that typically outperform when the economy is in a downturn.

This was again the case on Wednesday, with Utilities (XLU) rising about 0.9% compared to the S&P 500's (^GSPC) near-flat return.

Since April 16, around when the S&P 500 hit its recent bottom, Utilities has led the charge, rising nearly 12% and accounting for all of the sector's gains year to date. Consumer Staples (XLP) has risen almost 5% in that same period.

While these stocks are often tabbed with the phrase "defensive," referencing their outperformance amid sub-par economic performance, Wall Street equity strategists told Yahoo Finance a catch-up trade is the most likely reason for the surge, not recent weaker-than-expected economic data.

Considering both sectors had been among the worst performers in the S&P 500 over the last year, Truist co-chief investment officer Keith Lerner reasoned there's an aspect of the move that is merely investors rotating into an area that has yet to participate much in the recent market rally.

Utilities entered March trading at its largest discount to the S&P 500 from a valuation standpoint (using a forward price-to-earnings ratio) since 2009, per Lerner. Meanwhile, Consumer Staples had underperformed the S&P 500 by almost 30% over the last year. This presented a potential buying opportunity in both traditionally "defensive" sectors.

"With markets up so much as we're up since October, people get nervous," Lerner told Yahoo Finance. "They want to rotate into something a little more defensive, take some profit taking ... It's also just saying, 'Hey, what hasn't worked and what could have an opportunity to do some catching up or hold up better should the market correct?'"

Charles Schwab senior investment strategist Kevin Gordon concurred.

"Things had gotten so pessimistic for [Utilities] and you know, in turn, and relatedly, kind of making it more attractively valued for anyone who's looking for deeper value," Gordon told Yahoo Finance.

Here comes Warner Bros. Discovery earnings...

Wed, May 8, 2024 at 2:40 p.m. EDT, Alexandra Canal

Warner Bros. Discovery (WBD) will report first quarter earnings before the bell on Thursday as the media giant works to pare down its debt amid a declining linear TV business and an unfavorable ad market. Investors will also closely be watching for any updates on NBA media rights after a Wall Street Journal report said the company is at risk of losing those rights to competitor NBCUniversal (CMCSA).

On Monday, WBD CEO David Zaslav did not elaborate on the status of ongoing talks while speaking at the annual Milken Institute conference in Beverly Hills.

"We continue to be in constructive negotiations with the NBA," he said. "It’s a great league. The TNT team does a terrific job. And we love the NBA."

The company has struggled in recent quarters with profits hit by a weak linear advertising environment and pressure on affiliate fees, or the fees pay-TV providers pay to network owners to carry their channels. That's likely to impact first quarter EBITDA with full-year adjusted EBTIDA at risk of falling below $10 billion, according to the latest Bloomberg estimates. That's $4 billion below what analysts had expected at the time of its merger.

Here's what Wall Street expects for the first quarter, according to Bloomberg estimates:

• Revenue: $10.27 billion versus $10.70 billion in Q1 2023

• Adj. loss per share: -$0.24 versus -$0.44 in Q1 2023

• Subscriber net additions: 1.25 million versus 1.6 million in Q1 2023

"WBD has an important year ahead, and 1Q probably will not be a good start," Macquarie analyst Tim Nollen wrote in a note to clients ahead of the results.

Still, the analyst said the company has some momentum with its upcoming sports streaming partnership with Disney (DIS) and Fox (FOXA), along with its Max streaming service recently launch in markets outside of the US, including Latin America and Europe.

In February, the company revealed its direct-to-consumer streaming unit turned a profit for full-year 2023, posting $103 million in EBITDA compared with a loss of about $2.1 billion in full-year 2022.

The company is reportedly aiming for more cost cuts and further streaming price hikes. According to Bloomberg, cost-cutting plans could include layoffs after WBD slashed 2,000 jobs over the past year. The company did not immediately respond to Yahoo Finance's request for comment.

A bullish call for the US economy

Wed, May 8, 2024 at 1:50 p.m. EDT, Josh Schafer

An update to the Atlanta Fed GDPNow indicator shows the tool projecting 4.2% economic growth in the second quarter as of Wednesday morning, up from a prior forecast of 3.3% on May 2.

This would be a noted move higher from the 1.6% growth seen in the advance estimate reading of first quarter economic growth.

The Atlanta Fed's projection tool takes in real-time data to extrapolate out what economic growth will look like for the quarter, and as seen in the chart below from Bloomberg, a tick higher in private inventory investments appears to be the driver right now.

A chart from Bloomberg shows how a rise in private inventory investments has contributed to a pop in the Atlanta Fed's GDP projection tool.

Trending tickers on Wednesday afternoon

Wed, May 8, 2024 at 12:59 p.m. EDT, Josh Schafer

Shopify (SHOP) led the Yahoo Finance trending tickers page on Wednesday as shares fell nearly 20% following the company's latest earnings release. The company's revenue and profit guidance for the current quarter came in weaker than Wall Street had expected. The company guided for revenue growth in the current quarter of a high teens percentage, lower than the typical mid-20s revenue growth Shopify has produced in the past several quarters.

Uber (UBER) stock dropped more than 8% as the company provided weaker current guidance than expected and a surprise profit miss. Uber reported a net loss of $654 million in the prior quarter; Wall Street analysts had expected a net profit of $503.1 million.

Intel (INTC) shares slipped about 3% as the company warned it now sees its revenue falling below the midpoint of its previously issued guidance as a new US ban on chip exports to Huawei Technologies weighs on sales.

Reddit stock (RDDT) popped 3% Wednesday after the company said in its first-ever quarterly earnings report that it expects better-than-expected sales growth in the current quarter and further progress on profitability.

Fed's Collins warns rates will likely stay higher for longer

Wed, May 8, 2024 at 11:54 a.m. EDT, Josh Schafer

Boston Fed president Susan Collins became the latest Fed official to warn that interest rates are likely to stay high for longer than "previously thought" in comments on Wednesday.

"The recent data lead me to believe this will take more time than previously thought," Collins said in a speech at the Sloan School of Management at the Massachusetts Institute of Technology. "There is no pre-set path for policy."

Yahoo Finance's Jennifer Schonberger reports:

Collins believes that improvements in supply chains that helped cool inflation quickly last year may not continue this year, and that slower economic growth will be needed to bring down demand and therefore inflation.

Still, she remains optimistic that inflation can be brought back to the Fed's goal of 2% in a reasonable amount of time and with a job market that remains healthy.

Other Fed officials this week have also shown they favor holding rates at current levels for longer.

New York Fed president John Williams said Monday that "policy is in a very good place [now] and we have the time to collect more, so steady as she goes."

Minneapolis Fed president Neel Kashkari said Tuesday that he believes rates will likely need to be held at current levels for an "extended period" but also didn't rule out a hike if inflation stalls near 3%.

"I think it’s much more likely we would just sit here for longer than we expect or the public expects right now until we see what effect our monetary policy is having," Kashkari said at the Milken Institute conference in Los Angeles.

The comments this week from various Fed officials come after the Fed’s interest rate-setting committee decided last week to keep its benchmark rate in a range of 5.25%-5.50%, a 23-year high, at the conclusion of its two-day policy meeting.

The fed funds rate has been in this range since July 2023.

Reddit stock rises after first quarterly report

Wed, May 8, 2024 at 11:10 a.m. EDT, Josh Schafer

Reddit (RDDT) stock popped as much as 5% Wednesday after the company said in its first-ever quarterly earnings report that it expects better-than-expected sales growth in the current quarter and further progress on profitability.

Reddit said in its release on Tuesday that it expects Q2 revenue in the range of $240 million to $255 million, above Wall Street's estimates for $228 million. The social media company also said it sees adjusted EBITDA in the current quarter in the range of $0 to $15 million. The Street had been expecting a loss of $13 million.

Reddit's daily active users hit 82.7 million, up 9% from the prior quarter and faster than analysts had projected.

"Reddit delivered a strong first quarter post its IPO, in our view," Citi analyst Ronald Josey wrote in a note to clients on Wednesday. "Importantly, we believe improving engagement trends are lasting."

After initially soaring following its public offering in late March, Reddit shares tanked in the following weeks, falling from a peak of about $74 per share to just below $40 as concerns over the company's lofty valuation and future potential revenue streams mounted.

But the report from the company that once hosted fodder for meme stock targets highlighted a trend recently seen in other names favored by retail traders. Reddit stock is moving higher after a quarter JPMorgan analyst Doug Anmuth described as "strong," but not surging higher to a point that's hard for analysts to reason with.

"We expect trends to remain strong through the year given recent tailwinds, and we raise our 2024 & 2025 revenue estimates by 11% & 12%, respectively," Anmuth wrote.

Anmuth maintained a Neutral rating on the stock while raising his price target to $57 from $47, noting that shares appear "fairly valued" right now.

Read more on Reddit's AI opportunities here.

Tesla slides after report of DOJ probe

Wed, May 8, 2024 at 10:13 a.m. EDT, Josh Schafer

Tesla stock (TSLA) slipped nearly 3% on Wednesday morning after Reuters reported that US prosecutors are investigating whether the automaker committed securities or wire fraud by "misleading investors and consumers about its electric vehicles' self-driving capabilities."

Reuters reported that the Justice Department is specifically looking into whether CEO Elon Musk and others misled drivers by suggesting cars using Tesla's Full Self-Driving system could drive themselves without any potential need for human intervention.

Stocks open lower, yields move higher

Wed, May 8, 2024 at 9:33 a.m. EDT, Josh Schafer

US stocks tipped lower on Wednesday as investors tried to read the rate-cut runes and weighed a fresh batch of earnings reports for insight into the chance of a corporate America-spurred revival.

The Dow Jones Industrial Average (^DJI) fell 0.1%, or about 50 points, while the S&P 500 (^GSPC) ticked down 0.4%. The tech-heavy Nasdaq Composite (^IXIC) dropped about 0.6%.

Meanwhile, the 10-year Treasury yield (^TNX) edged higher, coming off a three-week low, to hit 4.49%.

Reddit's quarter, digested

Wed, May 8, 2024 at 7:28 a.m. EDT, Brian Sozzi

Lots to digest from Reddit's (RDDT) quarter last night, but the stock's 13% pop higher in premarket trading makes sense to me.

The company hit adjusted operating profitability for the first time. Capital expenditures are crazy low versus rivals like Meta (META). International sales are accelerating. Ad market commentary was favorable. And the company is making important changes to how the platform runs, which in part is helping its Google rankings.

I would add a hat tip to Reddit's exec team for starting its earnings call with questions from its community. Maybe this is something Boeing's (BA) management team should be doing...