Stocks slip as rally takes breather

Stock market rally hits pause in some areas

Stocks pulled back on Monday after a blistering rally in November, with the key monthly jobs report on the horizon.

The S&P 500 (^GSPC) lost 0.5%, while the Dow Jones Industrial Average (^DJI) shed 0.1%, or roughly 40 points. The tech-heavy Nasdaq Composite (^IXIC) fell about 0.8%, leading the way down.

Still, interest rate-sensitive sectors like Real Estate and small caps rose on Monday as investors have increasingly priced in that interest rate cuts may be coming sooner than many had initially thought. The Real Estate sector has now risen eight straight days while the small-cap Russell 2000 Index has gained for four straight trading sessions.

Don’t panic if the stock market rally takes a breather

After a rip-roaring rally in November, many high-flying areas of the stock market this year are taking a break on Monday.

Both Information Technology and Consumer Discretionary are down around 1%, but RBC Capital Markets head of US equity strategy Lori Calvasina told Yahoo Finance Live some sort of a pullback is to be expected.

“It feels like we have moved very far, very quickly,” Calvasina said. “It would not be surprising to me to see the rally take a breather at some point in time, and that does not mean you have to be doom and gloom for the next 12 months. “

Calvasina pointed to the recent drawdown investors saw starting in August, highlighting that by November sentiment had flipped again and stocks once again moved higher.

Below is a look at the sector performance for Monday.

2024 could be a year of a ‘dramatic move’ in the S&P 500

While debate roars on about when rate cuts are coming from the Federal Reserve, there appears to be increased certainty from investors that cuts are starting in the first half of 2024. For investors, this could mean big swings in the market as the Fed’s first will likely come because inflation has continued on its downward trajectory or some part of economic growth has turned negative due to the Fed’s tightening.

This has Truist’s co-CIO Keith Lerner warning clients that there’s a fair chance the benchmark index doesn’t safely land between their “baseline total return” estimates for a 5% to 10% return in the S&P 500.

“History suggests that the probability of a much more dramatic move is elevated, and this is yet another reason for investors to be prepared to shift as the year progresses,” Lerner wrote in the firm’s 2024 investment outlook, which was released on Monday.

Truist’s analysis shows that since 1989, the year following the first Fed rate cut has driven the S&P 500 up greater than 10% four times and lower than 10% twice.

Netflix on password sharing crackdown: ‘It was good to take it slow’

Netflix (NFLX) said its password sharing crackdown will continue to be a slow burn — but that slow and steady is exactly what the company’s aiming for.

“We’re completely satisfied with the pace of it,” co-CEO Ted Sarandos said at a UBS media conference on Monday, explaining the rollout was “deliberately slow” to account for various country-to-country learnings.

“How you nuance the language, how you nuance the offer, how you pace it out [to be] locally compliant with regulatory models — it was good to take it slow,” he reiterated. “At our core, we’re an A/B test culture. This kind of gives us a series of A/B tests that we could do around the world on this.”

The company rolled out its password-sharing crackdown to US subscribers in May after first announcing the initiative in October 2022.

The stock has gained more than 20% since that time period — despite many users expressing their concerns over the controversial initiative.

Amid the crackdown, the company reported a surge in third quarter subscriber numbers of nearly 9 million, handily beating expectations of 6.2 million.

The company said the higher-than-expected growth was “due to the roll out of paid sharing, strong, steady programming and the ongoing expansion of streaming globally.” The company had added just 2.41 million paying users in the prior-year period.

Netflix said it expects fourth quarter subscriber net additions “to be similar” to the third quarter’s results.

Uber rises after S&P announcement

Uber stock is getting a lift.

The ride-sharing app is set to join the S&P 500, the S&P Dow Jones Indices announced on Friday after the closing bell. Shares rose nearly 5% on Monday in reaction to the news.

“We expect index inclusion to help UBER attract a more diverse investor set, potentially helping reduce volatility in the stock,” Jefferies equity analyst John Colantuoni wrote in a research note on Monday.

Uber cleared the final hurdle to be included in the benchmark index when it delivered positive GAAP net income over the trailing year when it reported earnings in November. The stock has now more than doubled since its June 2022 lows and is close to setting an all-time high.

Analysis from Jefferies shows that companies that are added to the S&P 500 usually add 11.2% on average between the close of markets before the announcement and the day the stock is actually added to the S&P 500.

Carvana shares soar as JPM upgrades stock

Carvana (CVNA) has been on a bumpy ride this year but JPMorgan thinks the worst may be in the rearview mirror for the car retailer.

“The known unknowns around the CVNA story are better appreciated by investors today in our view and it is possible CVNA can execute its way through this uncertain macro and used car industry phase in a way that limits downside to near- and medium-term estimates,” JPMorgan analyst Rajat Gupta wrote in a new research note on Monday.

JPMorgan boosted its price target to $40 from $25 while moving up its rating to Neutral from Underweight.

The stock soared nearly 20% on Monday.

Stocks lose steam in afternoon trading

Despite November’s robust rally and hopes that the worst of inflation’s sting is behind us, investors are weighing the uncertainties heading into the new year. Strategists’ forecasts for 2024 offer a range of views on the market outlook, including split opinions on whether valuations are realistic or overplayed.

The S&P 500 (^GSPC) lost 0.7%, while the Dow Jones Industrial Average (^DJI) shed 0.3% or roughly 100 points. The tech-heavy Nasdaq Composite (^IXIC) fell 1%. Bonds are also in retreat. The 10-year Treasury yield (^TNX) was up 6 basis points to about 4.29%.

Virgin Galactic stock tanks after Richard Branson signals no more investments

Virgin Galactic (SPCE) founder Richard Branson said he wouldn’t be investing any more cash into his space travel company, sending the stock downward by as much as 15% on Monday, reports Yahoo Finance’s Ines Ferré.

“We don’t have the deepest pockets after COVID, and Virgin Galactic has got $1 billion, or nearly,” Branson told the Financial Times. “It should, I believe, have sufficient funds to do its job on its own.”

The billionaire founded Virgin Galactic in 2004 and helped take the startup public via a SPAC merger in 2019.

Last month the stock skyrocketed almost 20% in one day after the company announced it would cut 18% of its workforce and shift focus to a new spacecraft expected to be more profitable. A higher interest rate environment has prompted capital-intensive space-related companies like Virgin Galactic to devise ways to survive turbulent times.

Virgin Galactic’s stock is down more than 40% so far this year. Shares had rallied nearly 50% over the past month prior to Monday’s drop.

Crypto is having another 2023 moment

Bitcoin (BTC-USD), the dominant cryptocurrency, surpassed $42,000 Monday, reaching a new high for the year and seemingly moving past the industry’s recent array of scandals that have weighed heavily on digital assets.

Investor sentiment has turned more optimistic in recent weeks, sending the value of digital tokens and the shares of crypto companies climbing. Investors are particularly interested in the potential for regulators to approve a crypto exchange-traded fund, giving investors greater exposure to digital assets without the full risk of owning them directly. The Securities and Exchange Commission is expected to weigh in on the applications next month.

Markus Thielen, head of research at DeFi Research.com, recently told Yahoo Finance Live that ETF approvals may push the price of bitcoin near $60,000, as investors move some of their funds…