Stocks were choppy Thursday as investors took in an onslaught of corporate earnings reports. Caution could also be setting in ahead of next week's key inflation update, especially as expectations for a March or May rate cut have dropped dramatically in recent days.
The Dow Jones Industrial Average rose 0.1% to 38,726, while the while the Nasdaq Composite added 0.2% to 15,793. The S&P 500 struggled against the psychologically significant 5,000 level, briefly toppling it in intraday action before closing just below here at 4,997.
Investors have one eye trained on the January Consumer Price Index (CPI) report, due out ahead of Tuesday's open. The results of the next CPI report "may determine whether the stock market will be able to keep setting new record highs in the near term," says Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley.
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Recent data has shown the U.S. economy remains resilient even as the Fed keeps its federal funds rate at a 23-year high in order to tame inflation. As such, futures traders are now pricing in an 18% chance the Fed will cut rates by a quarter-percentage point in March, down from 38% one week ago, per CME Group's FedWatch Tool. The probability for a May rate cut is also falling, currently at 52% vs last week's 60%.
Arm stock jumps nearly 50% after earnings
Today, it was all about earnings, with several stocks making major event-driven moves. Arm Holdings (ARM), for one, skyrocketed 47.9% after the chipmaker reported a fiscal third-quarter revenue beat and lifted its full-year outlook. The company cited strong royalty and license revenue, as well as "increasing demand for new technology driven by all things AI [artificial intelligence]."
Additionally, Arm noted that "the broader semiconductor market is showing signs of recovery, particularly in smartphones which returned to strong growth" over the three-month period.
Arm held its initial public offering (IPO) back in September and it was tough sledding for the semiconductor stock in those first two months. However, ARM stock is now up more than 130% since late October.
Disney pops on dividend news, Epic Games investment
Walt Disney (DIS) was another big mover, with the Dow Jones stock jumping 11.5% after the media and entertainment giant reported earnings of $1.22 per share on revenue of $23.5 billion. While DIS beat on the bottom line, its top-line results fell just shy of analysts' expectations for revenue of $23.8 billion.
There was certainly plenty to unpack in Disney's earnings report. While Disney+ subscribers fell by 1.3 million after the company hiked prices on its streaming service, Hulu subscribers increased by 1.2 million. Additionally, DIS boosted its quarterly dividend by 50% to 45 cents per share after reinstating it in December following a three-year suspension. The board also approved a $3 billion stock buyback program.
Meanwhile, DIS said it's investing $1.5 billion in "Fortnite" creator Epic Games, which follows yesterday's headlines of a new sports streaming deal for Disney-owned ESPN.
"In a little over a year since returning to the company as CEO, Bob Iger's actions are already having an impact," says BofA Securities analyst Jessica Reif Ehrlich (Buy). "While several big picture questions remain, we are incredibly encouraged by DIS’ progress on several strategic and financial initiatives which are reflected in its fiscal Q1."
PayPal sinks as CEO warns of "transition year"
Not all of today's earnings reports were as encouraging. PayPal (PYPL) slumped 11.2% after its fourth-quarter results. While the digital payments company beat on both its top and bottom lines in Q4, it gave weak full-year guidance.
In the subsequent earnings call, CEO Alex Chriss said fiscal 2024 is "going to be a transition year, focused on execution to position the business for long-term success."
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