Josh Schafer
Stock market today: S&P 500 hits fresh record, Dow jumps over 475 points
US stocks rebounded Wednesday after several days of red closings, as the S&P 500 jumped to a fresh record and the Dow surged more than 475 points.
The S&P 500 (^GSPC) was up 0.8% to close at a record of 5,248.50. The blue-chip Dow Jones Industrial Average (^DJI) rose about 1.2%, and the Nasdaq Composite (^IXIC) gained 0.5%.
The stock rebound came after a three-day losing streak for the benchmark S&P 500, which has set a new record closing high more than 20 times this year. And the gains extend beyond the start of 2024. As Yahoo Finance's Jared Blikre notes, the index is on track for its fifth-straight monthly gain — and that could be a signal it's poised to run further.
Later this week, investors will see the latest reading of the Personal Consumption Expenditures (PCE) price index. That index, which contains the Federal Reserve's preferred "core" PCE inflation measure, is set for release on Friday.
Also in focus is the return of the meme stock, the mania around companies that have become phenomena on social media. Investors need not look further than Reddit (RDDT), which as a platform has been responsible for much of the frenzy over the years. Reddit stock had doubled from its IPO price, though it fell 11% on Tuesday as the stock gained short interest due to its recent surge.
Meanwhile, shares of Trump Media and Technology (DJT), the social media startup founded by presumptive Republican presidential nominee Donald Trump, gained another 14% after Tuesday's 16% gain. But perhaps the OG meme stock, GameStop (GME), plunged 15% after reporting what one analyst called an "unsustainable" sales decline and announcing job cuts.
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A day for the laggards
The two worst-performing sectors in the S&P 500 (^GSPC) to start the year led the trade on Wednesday.
Utilities (XLU) and Real Estate (XLRE) both rose more than 2% Wednesday. Real Estate is still down more than 2% for the year while Utilities is up about 3%, lagging the S&P 500's more than 10% return to start the year.
The small-cap Russell 2000 Index (^RUT) also outperformed, rising more than 2%. For the year, the Russell has gained more than 4%.
Trending tickers Wednesday afternoon
Shares of Carnival Corporation (CCL) rose more than 1% as the company reported booking volumes. Also of note, the cruise line operator warned that the collapse of the Francis Scott Key Bridge in Baltimore could impact the company's full-year net income by $10 million.
Merck (MRK) stock rose roughly 5% after the company received FDA approval for drug that treats a threatening, but rare, lung condition.
Shares of Robinhood (HOOD) were higher by nearly 4% after the company announced the launch of its first credit card. Robinhood CEO Vlad Tenev told Yahoo Finance the credit card business has "very high margins" and is "very profitable" when discussing the launch.
Paramount debt rating downgraded to junk
Shares of Paramount Global (PARA) reversed losses after falling on the heels of another credit downgrade.
S&P Global downgraded the company's debt rating to junk, citing the rapid decline of linear television as more consumers cut the cord in favor of streaming services.
The ratings agency, which reduced its rating on Paramount to "BB+" from "BBB-", said the shift to streaming will continue to pressure Paramount's cash flow.
Paramount shares, which are down more than 20% since the start of the year, edged about 1% higher in afternoon trading on Wednesday.
The downgrade comes as the company weighs potential buyers. Most recently, Apollo Global reportedly offered $11 billion for the company's studio, according to The Wall Street Journal. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
Paramount has long been viewed as a potential acquisition target. Production studio Skydance Media has reportedly discussed a two-step deal targeting Paramount's holding company, National Amusements.
Shari Redstone, who serves as the non-executive chairwoman of Paramount Global and president of National Amusements, will ultimately determine the company's fate. National Amusements owns approximately 10% of Paramount's equity capital value and maintains 77% of voting shares — valued at around $1 billion.
Redstone has been hesitant to break up the company, with Paramount's studio business viewed as its most attractive asset amid a declining linear television ecosystem.
Paramount's studio serves as the engine behind top Hollywood hits including "Top Gun: Maverick" and "A Quiet Place," in addition to successful series like "Yellowstone."
A 'stealthy' rotation in sectors dominated March's trading action
March is just about over, and it has definitively been a month of rotation in the stock market rally.
As of Tuesday's close, Energy (XLE) had been the largest outperformer, gaining more than 9%. Meanwhile, Materials (XLB), Utilities (XLU), Communications Services (XLC), Financials (XLF), and Industrials (XLI) all beat the returns of the S&P 500 (^GSPC) for the month.
Notably, this put the year-to-date performance of Financials, Energy, and Industrials above that of the benchmark index, furthering signs of a broadening-out of a market rally that had initially largely been driven by gains in Tech and Communications Services (which contains several large tech companies).
"What's happened so far this year is more signs of a broadening under the surface," Citi US equity strategist Scott Chronert told Yahoo Finance.
Chronert added that sectors that have outperformed are typically tied to economic growth while the sectors that have lagged the S&P 500 this year like Consumer Staples (XLP) would typically be considered defensive plays utilized when investors are prepping for an economic downturn.
"What we're arguing is that that move [in stocks to start the year] is reflecting, one, conviction in the AI growth opportunity, but two, is also reflecting increased confidence in a soft landing," Chronert said.
Multiple strategists have told Yahoo Finance this rotation likely has further to run if the economic outlook remains intact or improves. If, however, the outlook dampens, the "stealthy" rotation among sectors could shift once again, according to Charles Schwab chief investment strategist Liz Ann Sonders.
"If we were to see that economic growth deterioration, even if it meant that the Fed can justify starting to ease sooner and ease more aggressively, ... even if you didn't see a major corrective phase for the indexes, you would probably see under the surface a shift away from more cyclical areas, probably back to more defensive areas," Sonders told Yahoo Finance.
Disney, DeSantis board reach settlement in Florida lawsuit
Disney (DIS) and the state of Florida reached a settlement on Wednesday to end litigation over the company's long-standing special tax district.
The district, previously known as the Reedy Creek Improvement District (RCID), allowed Disney to operate as a self-governing entity since its inception; however, Florida Governor Ron DeSantis seized control of the district last year following Disney's opposition to the state's "Don't Say Gay" law. The law forbids instruction on sexual orientation and gender identity from kindergarten through third grade.
"We are pleased to put an end to all litigation pending in state court in Florida between Disney and the Central Florida Tourism Oversight District," Jeff Vahle, president of Walt Disney World, said in a statement.
"This agreement opens a new chapter of constructive engagement with the new leadership of the district and serves the interests of all parties by enabling significant continued investment and the creation of thousands of direct and indirect jobs and economic opportunity in the State," he added.
The high-profile Florida showdown has served as a years-long overhang for Disney as it fends off proxy battles and grapples with challenges that include a declining linear TV business, slower growth in its parks business, and losses in its streaming division.
According to the settlement, both parties "now express a mutual desire to resolve all disputes" related to pending litigation in Florida's state court.
The settlement also included language that suggests Disney may drop its federal complaint against Gov. DeSantis "pending negotiations among other matters of a new development agreement between Disney and the District."
Last month, Disney filed a notice of appeal after a federal judge dismissed its free speech case against the governor, determining the company's position ultimately "lacked standing," or the right to sue DeSantis and a separate government official.
Disney filed the federal lawsuit last April, alleging DeSantis and the CFTOD board launched a "targeted campaign of government retaliation" to punish Disney for its position on "Don't Say Gay."
Read more here and check out Yahoo Finance's timeline of the saga below:
Reddit shares slump as Hedgeye initiates short position
Reddit stock fell more than 12% in afternoon trade on Wednesday following a new short report from Hedgeye Risk Management.
After the stock more than doubled from its initial IPO price, Hedgeye described shares of the social media company as "grossly overvalued" and argued the stock has reached meme stock territory.
"While we expect 1Q24 results to show positive fundamental momentum, our attention is focused on 2H24 and 1H25 where we expect a rapid deceleration in user and revenue growth," Hedgeye wrote in the report. "We see ~50% downside to it's original IPO price."
The report added: "At [$75 per share, Reddit] was the most expensive stock among internet and media peers in our coverage. To justify the price, we think RDDT would need to sustain +35% revenue growth in 1H24 (versus our 25-27%) and +30% in 2H24 (versus our 20-23%)."
Hedgeye claims Reddit's platform overall is "niche" and could struggle to gain mainstream adoption in the long term, including in international markets given the dominant language on the site is English.
Hedgeye also points out that while Reddit has formed an AI pitch to investors given a new deal with Google, its prospects in the space are "nascent" with "uncertainties around the long-term value and scalability."
Trump Media stock surges again following strong market debut
Trump Media & Technology Group (DJT) soared as much as 14% on Wednesday in its second day of trading on the Nasdaq (^IXIC).
The parent company of Donald Trump's social media platform Truth Social climbed 16% in its first official trading day on Tuesday. It went public after merging with special purpose acquisition vehicle Digital World Acquisition Corp. in a deal approved by shareholders last week.
DJT's strong debut comes amid a meme stock resurgence as some trades viewed as lacking fundamentals have seen eye-popping returns.
According to an SEC filing from DWAC, Trump Media lost $49 million in the first nine months of last year and brought in $3.4 million in revenue. At current levels, its market cap now sits around $8 billion.
Other meme-friendly names like Reddit (RDDT) and GameStop (GME) had also seen massive run-ups in recent days while riskier assets like bitcoin (BTC-USD) and commodities have soared since the start of the year.
Some names are coming back down to earth. Reddit and GameStop were down about 13% and 16%, respectively, in Wednesday's trade.
Short interest in DJT stock — bets that the stock price will fall rather than rise — is about 11% of outstanding shares, according to the latest data from S3 Partners. Average short interest in public companies sits in the 3% to 4% range.
Robinhood shares rise on credit card launch
Robinhood (HOOD) shares are up more than 3% following the launch of the company's first credit card. Robinhood CEO and co-founder Vlad Tenev sat down with Yahoo Finance's Brian Sozzi to discuss expectations for the launch.
Carnival notes potential $10 million impact from Baltimore bridge collapse
The collapse of Maryland's Francis Scott Key Bridge is expected to have ripple effects across the economy.
Carnival Corporation noted in its latest quarterly financials release on Wednesday that the accident will cause a shift in its home port and therefore could impact adjusted EBITDA and adjusted net income by $10 million for the full year 2024.
"Given the timing of yesterday's event in Baltimore and the temporary change in homeport, our guidance does not include the current estimated impact of up to $10 million on both adjusted EBITDA and adjusted net income for the full year 2024," Carnival wrote in the release.
Carnival stock was off about 3% in morning trade.
Robinhood looks to take on Amex, Mastercard, and Visa
Robinhood's (HOOD) under-the-radar pivot to a financial services super app continues.
Last night, the company took the wraps off its first-ever credit card. Shares are up 6% in the pre-market today.
As the Yahoo Finance personal team reports, the card has a few nice perks but also a couple drawbacks.
"This is not just about credit card but Robinhood's rather smart strategy to acquire sticky assets and maximizing average revenue per user/wallet," Bernstein analyst Gautam Chhugani said in a client note.
Chhugani reiterated an Outperform rating on Robinhood's stock and sees 56% upside from current levels.
I will be sitting down with Robinhood co-founder and CEO Vlad Tenev on Yahoo Finance Live around 9:40 a.m. ET; give it a watch!
