Stock Market Today: Netflix Earnings Hit Tech Stocks, While Bitcoin Falls
Stocks had their worst week since the early days of the pandemic as a disappointing earnings report from Netflix spooked tech investors. It’s just one in a long list of concerns for the stock market.
“Weak advice from a few top tech companies such as Netflix … weighed on sentiment,” wrote Mark Haefele, chief investment officer of UBS Global Wealth Management.
Any chance of a robust rebound was scuttled by Netflix’s earnings report (ticker: NFLX) on Thursday night. The streaming giant reported earnings of $1.33 per share, beating estimates of 82 cents per share, on revenue of $7.7 billion, in line with expectations. But the company also reported fewer new subscribers, with just 8.28 million in Q4 2021, compared to 8.5 million in Q4 2020. Worse still, Netflix guided 2.5 million in the current quarter, although below analyst estimates for 6.93. million. The stock fell 21.8% on Friday.
That’s making investors in other consumer-facing internet names nervous about growth, which has been strong for much of the pandemic.
(AMZN) fell 6%, while
(PINS) fell 7.8% and
(FB) fell 4.2%.
“Subscriber numbers have been a real blow and investors are being forced to adjust to the reality that it is nowhere near the momentum the past two years were expected to generate,” wrote market analyst Craig Erlam. senior at Oanda.
Worries for the stock market — and tech stocks in particular — go beyond Netflix’s earnings report, however.
Bond yields rose all year, with the exception of Friday. This is because long-term annual inflation expectations are above 2% – which means that long-term bond yields should also be at or above this level – and the Federal Reserve is about to raise interest rates and to withdraw money from the bond market to avoid this inflation.
Higher long-term bond yields make future earnings less valuable – and many tech companies are valued on the basis that they will rake in sizable profits many years into the future. The Nasdaq, however, is now firmly in correction territory and is about 14% below its all-time high reached in late November. The index also saw its largest one-week percentage decline since the week ending March 20, 2020, when it fell 12.6%.
Other stocks are also under intense pressure, as Fed rate hikes often hamper economic growth.
The Dow Jones and S&P 500 are about 7% and 8% below their all-time highs in January, respectively. The S&P 500 also had its worst weekly performance since the week ending March 20, 2020. That’s not all: The S&P 500 ended Friday below its 200-day moving average, indicating that investors are now less comfortable buying stocks at prices consistent with their longer term. -long-term trends.
Weakness in the stock market spread to other risky assets on Friday. WTI crude oil futures fell more than 2.5% to around $84 a barrel, prompting the
Energy Select Sector SPDR
Fund (XLE) down 2%. Cryptocurrencies also fell, with Bitcoin dropping 5.9% to below $39,000. The smaller Ether pair fell 8.6%.
As for oil, traders are bracing for a higher supply. As demand has surged – and the price has already risen nearly 30% since a low linked to Omicron in November – oil producers are building up inventories. Crude inventories rose 515,000 barrels last week, according to the Energy Information Administration. Gasoline inventories increased by 5.9 million barrels.
The decline in cryptocurrencies can mainly be attributed to Russia, where they are popular among citizens. The country is also a hub for mining, the process that generates new digital currency tokens. The Russian central bank has proposed banning crypto mining as part of a broader ban that includes preventing people from trading or transacting with the likes of Bitcoin.
Elsewhere, new earnings reports also reveal that inflation continues to drive up business costs, hurting their profit margins. It doesn’t exactly help the stock prices of companies that haven’t yet released a report. Several companies “cited higher costs as impacting profitability, compounding margin issues,” wrote Tom Essaye, founder of Sevens Report Research.
And although the results beat estimates, investors could demand even higher earnings than seen so far. The overall earnings result on the S&P 500 at the start of the fourth-quarter reporting season beat expectations by 5.9% on Friday morning, according to Credit Suisse. Well Fargo also reported that on Friday morning, the average trading day stock price reaction after earnings was a 0.3% increase.
Overseas, the pan-European Stoxx 600 fell 1.8% and Tokyo’s Nikkei 225 slipped 0.9%.
Here are five stocks moving on Friday:
(PTON) increased by 11.7%. Shares fell 24% on Thursday following reports that the company, which makes home workout equipment including bikes and treadmills, was halting production. The company’s CEO dismissed the report as false.
(CSX) fell 3.2% after the company reported earnings of 42 cents per share, beating estimates of 41 cents per share, on sales of $3.4 billion, above expectations for $3.3 billion. Higher costs were part of the equation, with labor and incidental costs up $115 million year-over-year. Fuel costs doubled to $282 million. These higher costs caused the company’s year-over-year operating profit margin to decline.
(PPG) fell 3.1% after the company reported earnings of $1.26 per share, beating estimates of $1.20 per share, on sales of $4.19 billion, over above expectations of $4 billion. Its raw material costs have increased by 30% year-on-year.
Knowledge base home
(KBH) fell 2.3% after being upgraded to buy from neutral at Seaport Research Partners.
(DVN) fell 5.2% after being downgraded to Neutral from Buy at Goldman Sachs.