Stock market today: S&P 500 hits fresh record as Tesla slides on earnings gloom

US stocks rose on Thursday despite downbeat earnings from Tesla (TSLA) and following a hotter-than-expected US economic growth reading.

Dow Jones Industrial Average (^DJI) rose 0.6% while the S&P 500 (^GSPC) rose 0.5% following the benchmark's fourth straight record close logged on Wednesday. Stocks in the tech-heavy Nasdaq Composite (^IXIC) rose about 0.2%. The S&P 500 set another closing record high finishing at 4,894.16.

An advance estimate of fourth quarter US gross domestic product (GDP) released on Thursday morning showed the economy grew at an annualized pace of 3.3% during the period, much faster than the annualized pace of 2% expected by economists.

With the S&P 500 pressing toward new highs again today, debate on Wall Street has broken out about whether stocks are overvalued.

The S&P 500 is currently trading at a trailing price to earnings ratio of 22, per recent research from Citi. That lands in the 92nd percentile of valuations on average over the last 20 years.

Citi's equity strategy team said this valuation is a "common pushback" to their constructive outlook on stocks. But they argue it shouldn't really matter.

"When we look at the relationship between the markets multiple and forward returns, it's nonexistent," Citi US equity strategy director Drew Pettit told Yahoo Finance. "The correlation between returns and PE is almost zero over the past 20 years."

BMO chief investment strategist Brian Belski agrees. He prefers not to make valuation calls because they're a "trap."

"Valuation is actually the worst metric for future performance," Belski said.

He added: "Too many people are looking at the market and they want to make these broader market calls. And they're not kind of looking at the underlying components of the market. You know, after all, the stock market is a market of stocks; you don't buy the entire market."

Belski admits the market could currently be at a stretched price. Stocks may even be due for a pullback, too, because "things are rarely linear." But when it comes to where stocks go from here in a longer-term view, Belski still sees indicators that overall path for stocks this year will be higher.

"The rhetoric that is surrounding the stock market right now in terms of growth is that growth is going to slow," Belski said. "It's the exact same story that was going on last year, same rhetoric ... There's actually no analytical evidence that we're seeing any kind of earnings slowdown."

The US economy grew at a faster rate than expected in the fourth quarter, capping off a year many expected to end in recession with one final economic surprise on Thursday.

The GDP release highlights the resilience of the US consumer despite ongoing concerns of a slowdown. It's the latest in a string of economic data releases that show the US economy ended 2023 on solid ground as investors closely watch to see if the Fed can achieve its vaunted "soft landing," in which inflation returns to the 2% goal without a severe economic downturn.

A recent reading on consumer spending came in higher than expected with December's retail sales number. And the labor market hasn't shown severe signs of cooling off, with the latest reading of weekly jobless claims hitting its lowest level since September 2022.

In recent weeks, strong data has shifted bets on Federal Reserve rate cuts. Investors now expect the first cut in May when it had been March a month ago. But the underlying reason for the cuts' inevitability, falling inflation amid a strong economy, is a bullish setup for investors, some argue.

"We see a market that's anticipating rate cuts with with the added context of a strong economy," eToro US investment analyst Callie Cox told Yahoo Finance. "That's a really good setup for stocks and ... it doesn't surprise me that stocks are near record highs because of that."

Cox added that Wednesday's preliminary reading on manufacturing was a promising sign as well. S&P Global's flash US composite PMI hit its highest level in seven months during January.

"Manufacturing isn't a big part of GDP, but it's such a strong indicator of how companies and consumers feel about the future," Cox said. "And that's why it's important. So, it seems like the vibes are coming back and as we get months behind this data, if the data can stay strong, I think that's when you start to see the market broaden out."

Paramount Global (PARA) stock climbed as much as 8% on Thursday following more M&A reports — this time on news that production studio Skydance Media wants to take all of Paramount private.

Shares leveled out by afternoon trading as investors digested the news.

According to CNBC, Skydance and financial backers Redbird Capital and KKR are working on a deal to acquire National Amusements, the holding company that houses Paramount and controls the media giant through its class A shares.

Shari Redstone currently serves as the non-executive chairwoman of Paramount Global and president of National Amusements (NAI).

To note, NAI owns approximately 10% of Paramount's equity capital value and maintains 77% of voting shares — valued at around $1 billion, although that does not account for what could be a "meaningful control premium," Wells Fargo analyst Steve Cahall wrote in a recent note to clients.

The deal, which is in early-stage talks, would be contingent on merging Skydance with Paramount, which would likely take the media company private, according to the report. Of course, it's possible talks could fall through.

Outside of Skydance, Warner Bros. Discovery (WBD) has also been rumored as a potential buyer. WBD CEO David Zaslav and Paramount CEO Bob Bakish met to discuss a possible merger back in December, Axios first reported.

Both companies declined to comment on the meeting, although Paramount has certainly become the industry's No. 1 pick for a breakup or merger due to its small size relative to competitors — which has also meant getting passed over by some consumers that only want to pay for so many streamers.

The company boasts a current market cap of just around $9 billion, compared to Disney's (DIS) $171 billion and Netflix's (NFLX) nearly $240 billion.

On the heels of the M&A chatter, Paramount announced layoffs in an internal memo on Thursday, citing the need to "operate as a leaner company and spend less."

"As it has over the past few years, this does mean we will continue to reduce our workforce globally. These decisions are never easy, but are essential on our path to earnings growth," the memo read. No specific numbers or timeline was provided.

The memo, obtained by Yahoo Finance, also revealed the company will work to drive streaming profitability and maximize content "with the biggest impact" in 2024. That means producing less international content.

Read more here.

Tesla stock (TSLA) led the Yahoo Finance trending tickers page on Thursday as shares fell nearly 13% in afternoon trade. The electric vehicle maker reported fourth quarter earnings that missed Wall Street estimates on Wednesday evening and issued a downbeat full-year production outlook.

IBM (IBM) shares soared more than 10%, reaching a 10-year high for the stock. The company's revenue and earnings per share results came in better than analyst estimates partly driven by demand for generative AI products.

Humana (HUM) stock tumbled more than 12% on Thursday after the company projected adjusted profit for the year in a range of $22 to $26. Wall Street analysts had been hoping for $34.50.

Real Estate, Communication Services, and Technology stocks were the biggest leaders during mid-day trading.

The Dow Jones Industrial Average (^DJI) was up around 100 points at 12:00 p.m. Eastern, while the S&P 500 (^GSPC) rose 0.4%. Stocks in the tech-heavy Nasdaq 100 (^NDX) rose about 0.6%.

The gains came after a hotter-than-expected preliminary GDP print, showing the US economy continues to grow.

Tesla (TSLA) shares, down 11%, were dragging on the Consumer Discretionary (XLY) sector, after the electric vehicle giant warned of "notably" slower EV production growth. The company's latest quarterly missed on profit.

Airline stocks rose on Thursday, buoyed by better-than-expected quarterly results and clearance from aviation regulators for Boeing 737-9 Max aircraft to return to service once each of them is inspected.

American Airlines (AAL) stock gained more than 8% after issuing better-than-expected 2024 guidance Thursday morning.

Southwest (LUV) shares rose but pared back gains after the carrier posted adjusted earnings of $0.37 per share versus Wall Street estimates for $0.12 per share.

Alaska Airlines (ALK) stock rose despite a financial hit of $150 million stemming from the grounding of its Boeing 737 Max 9 planes after a mid-air incident involving a door plug earlier this month.

On Wednesday the Federal Aviation Administration (FAA) approved an inspection and maintenance process that must be performed on each of the grounded Boeing 737-9 Max aircraft.

"Upon successful completion, the aircraft will be eligible to return to service," read the FAA statement.

Oil futures rose on Thursday morning following the release of a hotter-than-expected US economic growth print.

West Texas Intermediate (CL=F) gained more than 1% to cross $76 a barrel level. Brent (BZ=F), the international benchmark price, rose more than 1%, surpassing $81 per barrel.

Prices rose to session highs after an advance GDP reading showed the US economy grew at an annualized rate of 3.3%, beating economist estimates for growth of 2.2%.

Oil futures continued their gains from the prior session following the release of US stockpiles, which showed a large drop last week.

US production also declined by 1 million barrels per day last week amid freezing temperatures across oil-producing states, according to the latest Energy Information Administration data.

Government data also shows refineries were impacted by freezing temperatures, operating at 85.5% capacity last week.

Equities opened higher Thursday after a preliminary economic growth reading in the US came in hotter than expected.

The Dow Jones Industrial Average (^DJI) was up 0.3%, while the S&P 500 (^GSPC) opened 0.4% higher following the benchmark's fourth straight record close logged on Wednesday. The tech-heavy Nasdaq Composite (^IXIC) rose 0.4%.

An advance estimate of fourth quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 3.3% during the period, much hotter than the annualized pace of 2% expected by economists.

Equities rose despite a downbeat earnings release from Tesla (TSLA) on Wednesday. The EV giant missed on profit in its latest quarter and warned of "notably" slower production growth. Tesla shares fell about 7% on Thursday morning.

The US economy continues to impress.

The first look at fourth quarter GDP growth released Thursday showed the economy grew at an annualized pace of 3.3% in the final three months of 2023. Economists had expected growth to come in at a rate of 2%, according to data from Bloomberg.

With this reading, the initial estimate on cumulative GDP growth for 2023 shows the economy grew 2.5% last year, an acceleration from the 1.9% growth seen in 2022. The economy grew in all four quarters of the year and has now expanded for six quarters in a row.

In its release, the BEA said the fourth quarter's growth was driven by "increases in consumer spending, exports, state and local government spending, nonresidential fixed investment, federal government spending, private inventory investment, and residential fixed investment."