Barron's Daily: S&P 500 Is Nearing a Record High. This Could Derail It in 2024.

It’s been quite the year for stocks, and one that could end with a cherry on top—a record high for the S&P 500.

The index begins the final two trading days of 2023 just 0.3% off its all-time high reached in January 2022. The Dow Jones Industrial Average has gone one better, closing at a record Wednesday.

Santa Claus may have been and gone but the year-end rally is proving to be the gift that keeps giving. But it was Federal Reserve Chairman Jerome Powell, rather than Kriss Kringle, who provided the Christmas cheer for stocks. At the central bank’s final meeting of the year, Powell and his colleagues shared forecasts for several rate cuts in 2024—three according to median projections.

Markets have taken that and run with it, pricing in a first cut as early as March. But the shift in rate expectations, and subsequent acceleration of the stock market rally, poses a problem heading into 2024.

The risk is now skewed to the downside. It’s unlikely a scenario plays out in which the Fed cuts rates any earlier than March. However, it’s perfectly plausible that economic data, or indeed a difference of opinion among Fed officials, leads to a delay in lowering borrowing costs.

It’s not just the timing of the first cut that is crucial for the longevity of the stock market rally, but the extent of cuts in 2024. The market disagrees with the Fed, seeing between six and seven quarter-point cuts next year, according to the CME’s FedWatch tool.

For all the year-end cheer, the rally’s path ahead looks fraught with risk and uncertainty.

—Callum Keown

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New York Times Sues Microsoft, OpenAI for Copyright Infringement

A row has erupted over content used to ‘train” artificial intelligence models. The New York Times sued Microsoft and OpenAI, alleging Microsoft’s Copilot and OpenAI’s ChatGPT unlawfully have used the newspaper’s content without its permission to create artificial-intelligence products that compete with the Times.

• The publication is seeking damages and the prevention of the continued alleged copyright of its content. The Times also said it has been trying to negotiate with Microsoft and OpenAI for months on the issue without a resolution. Neither Microsoft nor OpenAI responded to a Barron’s request for comment.
• The lawsuit said: “Defendants’ generative artificial intelligence tools rely on large-language models that were built by copying and using millions of The Times’s copyrighted news articles, in-depth investigations, opinion pieces, reviews, how-to guides, and more.”
• It said its journalism is the work of thousands of journalists, whose employment costs hundreds of millions of dollars a year, and alleges each defendant has wrongfully benefited from nearly a century of that work, which remains protected by copyright law.

What’s Next: Innovations always push new boundaries and test legal principles. Advances in artificial intelligence do that but also open other cans of worms. This lawsuit is the latest challenge for Microsoft and OpenAI and is unlikely to be the last. What’s likely is that courts will be needed to help establish parameters around accepted practices in an area in which lawmakers are struggling to keep pace with technological changes.

—Angela Palumbo and Rupert Steiner

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Amazon to Launch Ads on Prime Video Next Month

Amazon will introduce adverts on Prime Video from the end of next month as it looks to increase the revenue generated from its streaming content.

• The e-commerce company is also launching an ad-free option, for an extra $2.99 a month, starting Jan. 29, the day ads will start appearing on movies and TV shows. Customers in the U.K. and Germany will begin seeing ads from Feb. 5.
• Live events, such as sports, will include ads even for people who buy the ad-free option, while they won’t appear on content purchased or rented.
• “This will allow us to continue investing in compelling content and keep increasing that investment over a long period of time,” the company said in a statement. “We aim to have meaningfully fewer ads than linear TV and other streaming TV providers.”
• The move will enable the company to better monetize its Prime membership base, which has grown to more than 200 million people. Some of those members will inevitably pay the extra to remove them, while the introduction of ads on Amazon’s most popular content will also bring in revenue.

What’s Next: Amazon’s introduction of ads on Prime Video could shake up both the old school media players and the disrupters. The move could contribute to the continued decline in traditional TV advertising, as well as allow Amazon to grab advertising dollars from its streaming rivals Disney and Netflix, which both already have cheaper ad-supported tiers.

—Callum Keown

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Movie Theaters Earned $161 Million Over Extended Christmas Weekend

Audiences gave movie theaters a $161 million gift, shelling out $66.4 million for tickets on Christmas Day, which fell on Monday, on top of the $95 million theaters earned over the weekend, according to Comscore’s preliminary estimates. Box office sales still fell short of prepandemic levels.

• The top-grossing weekend movie was Warner Bros. Pictures’ Aquaman and the Lost Kingdom, an action adventure starring Jason Momoa, with $38.3 million through Monday. Aquaman also performed well internationally, with a total cumulative take of $118.5 million, BoxOfficeMojo said.
• Warner Bros.’ The Color Purple, based on the novel by Alice Walker, was the top film on Christmas Day, with $18.1 million in domestic ticket sales. Amazon MGM Studios’ The Boys in the Boat, about the University of Washington’s rowing team, hauled in another $5.7 million.
• So far this year, the domestic box office has earned more than $8.8 billion through Dec. 25, Comscore said. That’s 20.5% more than last year’s $7.3 billion, but 20% less than the $11.0 billion that movie theaters raked in during 2019.
• The top 10 grossing films in North America through Christmas, according to Comscore, were: Warner Bros’ Barbie, with $636 million; Comcast -owned Universal Pictures’ The Super Mario Bros. Movie, ($575 million); and Sony Pictures’ Spider-Man: Across the Spider-Verse ($381 million).

What’s Next: Films opening in early 2024 include: Paramount Pictures’ Mean Girls (Jan. 12); Paramount’s Bob Marley: One Love (Feb. 14); WBD’s Dune: Part Two (March 1); Universal Pictures’ Kung Fu Panda 4 (March 8); and Sony Pictures’ Ghostbusters: Frozen Empire (March 29).

—Janet H. Cho

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—Newsletter edited by Zoe Szathmary, Patrick O’Donnell, Rupert Steiner