Nasdaq declines as Netflix earnings send shudder through tech

A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, US, April 11, 2022. REUTERS / Andrew Kelly / File Photo

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  • Procter & Gamble up on raising FY sales forecast
  • IBM gains on upbeat forecast, Q1 results beat
  • Netflix slumps after Q1 subscriber loss
  • Indexes: Dow up 0.66%, S&P fell 0.05%, Nasdaq off 1.17%

April 20 (Reuters) – The tech-heavy Nasdaq fell on Wednesday as streaming giant Netflix’s first drop in subscribers in a decade shook investor confidence in other high-growth companies, fearful they may face similar post-pandemic performance issues.

Positive earnings from consumer giant Procter & Gamble (PG.N) and IT firm IBM Corp (IBM.N) provided momentum though to the other Wall Street benchmarks, with the blue-chip Dow topping 1% in early-afternoon trading and the S&P 500 trading flat.

Netflix Inc (NFLX.O) plunged 36.6%, set for its worst day since October 2004, after it blamed inflation, the Ukraine war and fierce competition for the subscriber decline and predicted deeper losses ahead. read more

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Streaming peers Walt Disney (DIS.N), Roku (ROKU.O) and Warner Bros. Discovery (WBD.O) all dropped more than 5%, while megacap stocks such as Amazon.com Inc (AMZN.O), Alphabet Inc ( GOOGL.O) and Meta Platforms Inc (FB.O) declined 1.5% to 7.9%.

Financial technology names also suffered from the ripple effects: PayPal Holdings Inc (PYPL.O), Block Inc (SQ.N), Marqeta Inc (MQ.O) and SoFi Technologies Inc (SOFI.O) all slumped between 6.2% and 8.4 %.

“The Netflixes of the world, the Pelotons of the world are looked at with more skepticism as the market questions the success they have from a fundamental standpoint during the pandemic,” said Keith Buchanan, senior portfolio manager at Global Investments in Atlanta.

“But the rest of the market space, more value and small cap oriented industries are holding up better than the tech space.”

Market-leading technology and growth stocks have suffered this year as investors worry that rising interest rates will dent their future earnings. The Nasdaq is down 13.9% so far this year, while the benchmark S&P 500 is down 6.4%.

The communication services sector (.SPLRCL) declined 4.1% on Wednesday, although eight of the 11 major S&P 500 sectors gained. The real estate index (.SPLRCR) led advancers, in line for its best finish since Jan. 4, while consumer staples (.SPLRCS) traded at a record high.

Overall, the earnings season has started on a strong note. Of the 60 companies in the S&P 500 index that have reported results so far, 80% exceeded profit expectations, as per Refinitiv data. Typically, 66% beat estimates.

Procter & Gamble gained 2.7% after raising its annual sales view and IBM Corp jumped 7.2% as it forecast hitting the top end of its 2022 revenue growth estimate. read more

At 2:43 pm ET (1843 GMT), the Dow Jones Industrial Average (.DJI) rose 229.1 points, or 0.66%, to 35,140.3, the S&P 500 (.SPX) lost 2.32 points, or 0.05%, to 4,459.89 and the Nasdaq Composite (.IXIC) dropped 159.62 points, or 1.17%, to 13,460.04.

The yield on 10-year Treasury note receded to 2.87% after a blistering rally that pushed it close to the key 3% level earlier in the session.

Meanwhile, the latest data point on the Federal Reserve’s monetary policy tightening plans, its “Beige Book”, showed the US economy expanded at a moderate pace from February through early April and there was little respite for businesses from high inflation and worker shortages. read more

United Airlines Holdings Inc (UAL.O) gained 1.1% ahead of its results. The S&P 1500 Airlines index (.SPCOMAIR) has risen for six of the past seven sessions, getting a boost from news that the Biden administration was dropping mask mandate on public transportation. read more

Tesla Inc (TSLA.O) fell 4.4% ahead of its first-quarter results after the closing bell. Investors will keep an eye on whether the electric automaker maintains its ambitious 2022 delivery target as its biggest factory in Shanghai grapples with a COVID-19 shutdown and new plants slowly ramp up output. read more

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Reporting by Bansari Mayur Kamdar, Sruthi Shankar and Amruta Khandekar in Bengaluru and David French in New York; Editing by Marguerita Choy and Aditya Soni

Our Standards: The Thomson Reuters Trust Principles.

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