Narrow tech-led rally worries investors

The S&P 500 is up 2.5% to start 2024, while the tech segment has risen 5.9%. The 10 other sectors are trading an average of 15% below their all-time highs, and none has set a new record in January.

The tech sector is riding the mania over artificial intelligence and has propelled the broader market to a record close in five of the last six trading sessions.

However, with just a handful of big stocks responsible for most of the market’s gains, the market becomes more vulnerable to a downturn if a few of those heavyweights stumble, they say.

For example, if six of the biggest tech stocks were to pull back to their 200-day moving averages, it would knock about 5% off the S&P 500

Netflix delivers blockbuster performance

Netflix (NFLX:NASDAQ) delivered a blockbuster performance last quarter. The streaming giant added a swath of new subscribers in the latest quarter—about 13 million, roughly 50% more than Wall Street expected.

Netflix also struck a new 10-year deal with WWE, getting rights to the show “WWE Raw” and others. The deal, valued at more than $5 billion, comes as Netflix ramps up its investment in live programming.

Shares of WWE parent TKO Group surged 16% Tuesday, the day the deal was announced.

Netflix shares leapt 16.8% for the week.

United Airlines’ quarterly results lifted air carrier stocks.

United Airlines (UAL:NASDAQ) on Tuesday beat analysts’ earnings expectations, reporting a $600 million profit for the final three months of 2023.

United said it saw durable demand for travel, with growing revenue both from premium offerings and for its basic economy seats that compete with offerings from budget carriers.

On Thursday, American Airlines and Southwest Airlines both reported better-than-expected quarterly results. Alaska Air Group did as well, but the company said it had a “challenging start to 2024” after a door plug blew off on a Boeing-made plane on Jan. 5.

United shares gained 8.4% for the week.

Big Blue posts profit

IBM (IBM:NYSE) on Wednesday said its profit jumped in the latest quarter, thanks to accelerating demand for the legacy tech giant’s artificial-intelligence platform, Watsonx.

Chief Executive Arvind Krishna said client demand for AI is accelerating, and IBM’s book of business for Watsonx roughly doubled from the previous quarter. The company launched the platform last year.

The company said revenue rose 4% from a year earlier to $17.38 billion, while profit increased more than 20% to $3.29 billion.

IBM shares jumped 7.8% this week, with the stock closing above $190 since June 2013.

Tesla warns of slow growth

Tesla (TSLA:NASDAQ) said growth would slow this year and that its profit margin took a hit in the fourth quarter. The electric-vehicle maker faces softening consumer demand, shrinking margins and intensifying competition from rival EV makers.

Chief Executive Elon Musk also reiterated his desire for greater control over Tesla, saying he wants enough to have strong influence and deter activist shareholders.

On Jan. 15, Musk wrote on the social-media platform X, which he owns, that unless he controls around 25% of Tesla, he would prefer to build artificial intelligence and robotics products elsewhere.

Tesla shares sank 12% Thursday, its worst day in more than a year. The stock finished the week 13.6% lower.

American Express customers still spend

Amex card members are still spending, despite higher interest rates and a cooling economy.

While its quarterly earnings and revenue missed Wall Street expectations, American Express (AXP:NYSE) gave a stronger-than-expected outlook for 2024 and said robust consumer spending boosted its results in the latest quarter.

The credit-card giant expects its affluent cardholders to continue the trend this year, forecasting full-year revenue growth of 9% to 11%.

Meanwhile, Visa (V:NYSE) also said that consumer spending remained resilient, but the company said extreme-weather conditions caused a January slowdown in U.S. payments volume growth.

American Express shares gained 9.3% this week, while Visa shares finished 1.6% lower.