Sector Update: Consumer Stocks Rise in Late Afternoon Trading

US benchmark equity indexes were higher ahead of Thursday's close as traders analyzed the latest set of corporate earnings and awaited Apple's results.

The S&P 500 was up 0.4% at 6,064.2, while the Dow Jones Industrial Average rose 0.3% to 44,851.8. The Nasdaq Composite added 0.2% to 19,686.2. Barring technology, all sectors were higher, led by utilities and real estate.

Shares of IBM and Mastercard rose after the companies reported their latest quarterly financial results, while Comcast saw a drop.

IPhone-maker Apple is scheduled to report results after the closing bell, along with payments giant Visa and chipmaker Intel .

The US 10-year yield fell 2.7 basis points to 4.53%, while the two-year rate dropped 1.5 basis points to 4.21%.

West Texas Intermediate crude oil was up 0.4% at $72.88 a barrel.

By Dean Seal

United Parcel Service is getting a makeover as it pulls away from Amazon.com and the U.S. Postal Service. It could be more costly than management thinks.

The Atlanta company plans to slash its Amazon volumes in half by June 2026 and is bringing in-house the slice of packages that it used to hand off to the Postal Service for last-mile delivery. Those changes will require a reconfiguration of the UPS delivery network to account for what will ultimately be fewer packages moving on its planes, trucks and delivery vehicles.

While the goal is to eliminate a chunk of low-margin business from Amazon, UPS will have to contend with disruptions that accompany the overhaul for the next 18 months, according to analysts, which will likely weigh on margins if it can't pare down the network in tandem with the volume loss.

"This is a large operating leverage hole that UPS needs to fill, especially since it will be insourcing SurePost, at challenging mix, during the same period," Morgan Stanley analyst Ravi Shanker said in a research note on Thursday.

UPS has been trying to scale back its business with Amazon for years. The retail giant made up 11% to 12% of UPS's annual revenue since 2019, though the contribution jumped to over 13% in 2020 when the pandemic drove up Amazon orders.

The new plan accelerates the drawdown fivefold. The pace seems to have roused concerns about the company's ability to right-size its network at the same pace that volumes fall, Stifel analyst Bruce Chan said.

"I think a lot of investors don't feel that management has a lot of execution credibility," Chan said.

UPS does stand to benefit from the other side of the revamp. In addition to trading away the lower-margin business, UPS expects to reduce its labor costs as well as its vehicle and aircraft fleet with a smaller network. It is also launching efficiency initiatives during the retooling aimed at generating about $1 billion in savings.

Chief Financial Officer Bryan Dykes told analysts on Thursday that UPS's guidance, which forecasts a drop in revenue this year but a lift in operating margin, assumes that the company can take out fixed costs in lock-step with the drop in Amazon volumes. Margins should expand even further as UPS sheds even more Amazon deliveries in 2026, he said.

Investors seem less confident. UPS shares sank 18% to $190.96 on Thursday, their lowest level since mid-2020. Stephens analyst Daniel Imbro said the market may have preferred a more cautious outlook that assumed some potential disruption along the way.

"If anything doesn't go smoothly, that could be a potential headwind," Imbro said.

Write to Dean Seal at dean.seal@wsj.com

Consumer stocks were higher late Thursday afternoon, with the Consumer Staples Select Sector SPDR Fund (XLP) rising 1% and the Consumer Discretionary Select Sector SPDR Fund (XLY) climbing 1.5%.

In corporate news, Uber and Lyft are under investigation by the US Federal Trade Commission for allegedly illegally coordinating efforts to limit driver pay in New York City, Bloomberg reported. Uber shares decreased 0.2% and Lyft was rising 1.1%.

US benchmark equity indexes were higher intraday as markets parsed the latest set of corporate earnings and awaited Apple's results.

The Dow Jones Industrial Average was up 0.6% at 44,974 after midday Thursday, while the S&P 500 rose 0.5% to 6,068.1. The Nasdaq Composite added 0.1% to 19,645.2. Barring technology, all sectors were in the green, led by utilities and real estate.

In company news, IBM shares were up nearly 13%, the best performer on the S&P 500 and the Dow. The company delivered a fourth-quarter earnings beat late Wednesday.

Mastercard posted better-than-expected fourth-quarter results Thursday amid robust consumer spending. The payments giant's shares were up 4% intraday.

Comcast shares declined 12%, the worst performer on the Nasdaq and among the worst on the S&P 500. The media and connectivity giant logged a sharper fourth-quarter loss in domestic broadband subscribers than it previously expected, and said there's likely no competitive relief in sight.

IPhone maker Apple is scheduled to report results after Thursday's closing bell, along with payments giant Visa and chipmaker Intel .

The US 10-year yield fell 3.3 basis points to 4.52% intraday, while the two-year rate dropped 1.5 basis points to 4.21%.

In economic news, the US economy grew at an annual rate of 2.3% in the fourth quarter, slower than a Bloomberg-compiled consensus of 2.6%. In the third quarter, the economy grew 3.1%.

Pending home sales in the US unexpectedly declined in December after four consecutive months of gains, the National Association of Realtors said.

"After four straight months of gains in contract signings, one step back is not welcome news, but it is not entirely surprising," NAR Chief Economist Lawrence Yun said. "High mortgage rates have not significantly dented housing demand due to greater numbers of cash transactions."

West Texas Intermediate crude oil was up 0.5% at $72.96 a barrel intraday.

Gold rose 1.8% to $2,845 per troy ounce, while silver jumped 3.5% to $32.50 per ounce.

By Dean Seal

United Parcel Services is going to do a lot less business with its biggest customer, Amazon.com.

UPS on Thursday projected a decline in revenue for the current year, with a key factor being plans to phase out more than half of the business it does with Amazon over the next 18 months.

The online retailer's business accounted for nearly 12% of UPS's total revenue last year, or about $1.07 billion. The loss of revenue, as well as volume of packages that helped fill planes and delivery trucks, will force a significant realignment of the Atlanta company's massive delivery network and affect results.

Shares of UPS plunged 14% to $115 on Thursday. The stock hasn't traded this low since mid-2020.

For the current year, UPS expects total revenue of $89 billion, down about 2.3% from 2024. Analysts had expected $95 billion, according to FactSet.

UPS said it has reached a deal in principle with Amazon to cut its shipping volume by more than 50% by June 2026.

One reason that UPS is looking to wean itself from Amazon is that profit margins on that business are tight and eat into its profitability, Chief Executive Carol Tome said. "Amazon is our largest customer, but it's not our most profitable customer," she said on Thursday's earnings call.

Amazon spokesperson Kelly Nantel said UPS requested the reduction in volume to address its own operational needs.

"We certainly respect their decision," Nantel said. "We'll continue to partner with them and many other carriers to serve our customers."

UPS's main rival, FedEx, in 2019 went through the process of eliminating Amazon from its delivery network, turning its focus to shipping products for other customers. The move came as Amazon was building up its own delivery network to handle its packages. In 2023, data showed that Amazon was shipping more packages than both FedEx and UPS.

UPS has also been trying to scale back its business with Amazon in recent years, though the new plan accelerates that timeline. "The speed of the glide down is five times faster than our initial glide-down efforts," Chief Financial Officer Brian Dykes said.

As it sheds Amazon packages, UPS plans to reconfigure its U.S. network with expected cuts to labor hours and the size of its vehicle and aircraft fleets. It is launching initiatives to increase efficiency during the overhaul that should generate $1 billion in savings, executives said.

UPS is also insourcing deliveries through SurePost, its home-delivery service for smaller packages. UPS used to drop packages with the U.S. Postal Service for last-mile delivery, but it ended the arrangement on Jan. 1 following a change in the agency's operating model that would have driven up costs for UPS and potentially affected service.

"The value proposition of an increased cost as well as deteriorating service, well, that didn't work for us," Tome said.

Executives said they want to reorient UPS toward markets that offer more growth, including healthcare, business-to-business shipping, small and medium-sized businesses and international deliveries.

Evercore ISI analysts Jonathan Chappell and Alex Johnson said the SurePost insourcing deal was well known but that the accelerated volume reduction with Amazon was a surprise.

"UPS will realign its network for this volume loss, but the speed at which it will unfold will negatively impact near-term results," the analysts said in a research note.

The company's 2025 guidance includes an operating-margin target of about 10.8%, which would be an increase from the 9.3% it hit in 2024.

The plans came as UPS reported that revenue rose 1.5%, to $25.3 billion, in the fourth quarter, just missing analyst forecasts for $25.41 billion.

Domestic-package revenue, which makes up more than two-thirds of the total top line, was up 2.2% as it made more revenue per piece shipped and saw increases in air cargo. International revenue rose 6.9% from a jump in average daily volume.

Earnings came in at $1.72 billion, or $2.01 a share, up from $1.61 billion, or $1.87 a share, in the same quarter a year earlier.

Stripping out one-time items, quarterly adjusted earnings were $2.75. Analysts polled by FactSet had been expecting $2.53 a share.

Write to Dean Seal at dean.seal@wsj.com