After a Good Quarter for the S&P 500, Where Does the Index Go From Here?

The S&P 500 has had a banner quarter, with resilient corporate earnings and a boom in artificial intelligence investment helping the index to notch 21 record closes in the quarter. But what does that portend for the rest of the year? 

The index, as of Thursday afternoon, was on course to post its 14th-best first quarter since 1928. That’s a good showing, but not so good as to be ominous, according to a note from Deutsche Bank research strategist Jim Reid on Thursday.

The five best first quarters in the past 97 years (1975, 1987, 1943, 1930, and 1976) were followed by lackluster years. On average, the S&P 500 fell 8% in the last remainder of those years. In only 2 of the top 13 years did the index gain more between April and December than it did between January and March.  And the worst-performing first quarters tended to precede stellar years. In the bottom 15 years, the index rose an average of 21% in the last three quarters of the year.  “Outside of the bottom 15 the sweet spot for the rest of the year does seem to be somewhere between 5-15% in Q1. If you were in that zone, the average move over the remainder of the year was +9.3%,” writes Reid.  “There may be other reasons for the market to fall for the rest of 2024 but a strong +10% move in Q1 is unlikely to be one of them.”

MillerKnoll Stock Tumbles on Sinking Demand for Its Furniture

MillerKnoll (MLKN) shares plunged Thursday, a day after the furniture maker’s sales slumped and it warned of continued lack of demand in the current quarter.

The company reported third-quarter fiscal 2024 revenue dropped 11.4% to $872.3 million, short of forecasts. Adjusted earnings per share (EPS) of $0.45 was above estimates.

MillerKnoll noted that “overall demand patterns across much of our business have continued to be sluggish.” It blamed higher interest rates in major markets globally, continuing geopolitical concerns, and a lagging housing market in the U.S. MillerKnoll explained that considering the “demand patterns we experienced in the third quarter and what remains a generally tepid near-term macro-economic backdrop,” it predicted current-quarter sales would be between $880 million and $920 million, with adjusted EPS in a range of $0.49 to $0.57. The company also sees full-year adjusted EPS at $1.90 to $1.98. All were less than analysts had anticipated.  Shares of MillerKnoll sank about 19% to under $24.73 Thursday afternoon to slip into negative territory for 2024.

-Bill McColl

AMC Stock Plunges After Theater Chain Announces Stock Sale to Raise $250 Million

AMC Entertainment (AMC) shares tumbled in intraday trading Thursday as the theater chain operator announced another stock sale to generate cash.

AMC wrote in a regulatory filing Thursday that it had entered into an equity distribution agreement with four financial institutions to sell shares of Class A common stock “from time to time” through an at-the-market offering, to raise a total of $250 million.

AMC said the money was needed in part because last year’s strikes by Hollywood writers and actors negatively impacted first-quarter box office receipts.  

In November, shares sank when the company announced it was putting as much as $350 million of its Class A shares up for sale. That came just two months after it sold 40 million shares, bringing in $325 million. A month prior to that, AMC initiated a 1-for-10 reverse stock split to raise capital.

AMC shares sank more than 15% to $3.68 early Thursday afternoon. They hit an all-time low of $3.59 last month.

-Bill McColl

S&P 500 On Track To Have Best Q1 Since 2019

The S&P 500 on Thursday was set to record its best start to the year in five years as enthusiasm about artificial intelligence and hopes that the Federal Reserve will soon cut interest rates boosted sentiment and stocks.  The S&P 500, as of midday Thursday, had gained more than 10% in the first quarter, its highest return since 2019, when the index rose 13%. 

A thread connecting some of the index’s best-performing stocks was once again artificial intelligence. AI hype sent shares of Super Micro Computer (SMCI), which joined the index earlier this month, more than 250% higher. Nvidia (NVDA) continued its monster run, gaining about 83%. Also in the index’s top ten: Micron (MU), which credited demand for artificial intelligence with its better-than-expected earnings last week, and Meta Platforms (META). 

But unlike much of last year, it’s not just artificial intelligence driving stocks higher. As of Wednesday’s close, more than 72% of stocks in the S&P 500 had risen in the quarter. And nearly half (246) of the index’s issues traded within 5% of their 52-week highs. Meanwhile, only 6 components were within 5% of 52-week lows. Resilient earnings and anticipation of interest rate cuts have supported stocks beyond the Magnificent Seven.

However, the first quarter may have spelled the end of the Mag Seven as we know it. Tesla (TSLA) was the worst-performing stock in the index as of Wednesday, having lost nearly 28% of its value. Apple (AAPL) was also among the index’s laggards, falling about 10%.

Walgreens Trading Volume Surges After Reporting Steep Loss Despite Revenue Beat

Walgreens Boots Alliance (WBA) reported fiscal second-quarter revenue that beat estimates, though it posted a steep loss as it incurred billions of dollars in impairment charges.

The retail pharmacy giant posted revenue of $37.1 billion, above analyst estimates compiled by Visible Alpha, and narrowed its full-year adjusted earnings per share (EPS) guidance to a range of $3.20 to $3.35 from the previous range of $3.20 to $3.50.

For the quarter, Walgreens posted a loss of $6.85 per share, widening from the prior quarter's loss of 8 cents per share, because of nearly $6 billion in impairment charges, mostly from the reduction in goodwill value of VillageMD. Walgreens acquired an almost two-thirds stake in the company in October 2021 with a $5.2 billion investment, as one of a number of investments to expand beyond retail and into the wider healthcare space.

Walgreens shares were little changed late Thursday morning after swinging between big gains and losses earlier in the session. More than 15 million shares changed hands in the first two hours of the session, about 120% of the stock's average daily volume over the last 65 days.

Home Depot Buys SRS Distribution for $18.25B in Move To Expand Pro Market

Shares of Home Depot (HD) dipped Thursday after it said it would acquire SRS Distribution, a company that distributes roofing materials and other construction products to a network of contractors, in a $18.25 billion deal as Home Depot looks to expand its share of the professional contractor market.

The home improvement retailer said it plans to fund its purchase of SRS Distribution through a combination of cash on hand and debt, and expects the deal to be closed by the end of its 2024 fiscal year. Home Depot estimated its total addressable market will be about $1 trillion once the deal closes, representing a boost of about $50 billion.

Home Depot shares were down about 1.4% at $380.38 Thursday morning. They've gained nearly 10% so far this year, and over 35% in the last 12 months.

-Aaron McDade

Chemours Stock Drops As Accounting Probe, Soft Outlook Overshadow Earnings Beat

Shares in chemicals maker Chemours (CC) were down more than 12% in early trading Thursday as the disclosure of further details relating to an internal accounting probe and a soft current-quarter outlook overshadowed quarterly results that came in ahead of expectations.

In late February, the company placed its three most senior executives, including former CEO Mark Newman, on administrative leave, revealing about a week later that an internal review found they had manipulated accounting records, in part, to meet cashflow targets linked to incentive compensation.

The company said that “material weaknesses” identified in its internal review did not contribute to any material misstatements in its financial statements but did result in immaterial revisions in several reporting periods between 2021 and 2023.

In its latest quarter ending Dec. 31, the Teflon maker reported adjusted earnings of 31 cents per share, comfortably ahead of the 25 cents a share consensus view, with the bottom line benefiting from lower costs. Revenue in the period of $1.36 billion improved 1.7% from a year earlier and topped the $1.32 billion forecasted by analysts.

-Timothy Smith

Stocks Making the Biggest Moves Premarket

Gains:

• RH Inc. (RH): Shares of the home furnishings retailer jumped 9% after projecting revenue growth would pick up later in the year despite contracting slightly in the current quarter.
• Snowflake Inc. (SNOW): Shares of the cloud data warehousing software maker rose about 3% after a regulatory filing showed CEO Sridhar Ramaswamy acquired about $5 million worth of the company’s stock. 
• Coinbase Global (COIN): Shares of the cryptocurrency exchange rose more than 1% as the price of bitcoin climbed back above $70,000. 
  

Losses:

• MillerKnoll Inc. (MLKN): Shares of the furniture maker tumbled 15% after its fiscal third-quarter revenue fell short of analyst estimates. It also forecast lower-than-expected fourth-quarter earnings and sales. 
• Reddit Inc. (RDDT): Shares of the social media platform slid 4% after tumbling 11% yesterday. Shares traded as high as $74.90, more than double its IPO price, earlier in the week. 
• Palantir Technologies Inc. (PLTR): Shares of the data analytics software firm fell 1% after an analyst at Monness, Crespi, Hardy & Co. downgraded the stock to sell, citing its “excessive” valuation following the stock’s AI-fueled run-up. 

Stock Futures Little Changed Heading Into Last Day of Q1

Futures contracts connected to the Dow Jones Industrial Average were less than 0.1% higher in premarket trading on Thursday.

S&P 500 futures were also effectively flat.

Nasdaq 100 futures were little changed, as well.