U.S. stocks trade mostly higher as bond yields fall back; Netflix plunges nearly 40%

U.S. stock indexes were trading mostly higher Wednesday morning, as investors tried to shake off disappointing results from Netflix Inc. and focused on more earnings reports and an update on economic conditions from the Federal Reserve due later in the session.

How are stocks trading?
  • The Dow Jones Industrial Average DJIA, +0.90% gained 260 points, or 0.8%, to 35,174.
  • The S&P 500 SPX, +0.41%  advanced 0.2% to 4,471
  • The Nasdaq Composite fell 0.6% to 13,539

On Tuesday, stocks finished sharply higher across the board, with major indexes bouncing after consecutive losing sessions.

What’s driving the markets?

Stock indexes rose as Treasury yields pulled back. The yield on the 10-year Treasury note TMUBMUSD10Y, 2.879% fell to 2.874% from a Tuesday close of 2.941%, which was its highest since December 13, 2018.

“Investors have priced in an aggressive rate hike path but recession risk has declined. That backdrop helps explain why rate hike expectations moved higher yesterday while stocks gained and inflation expectations fell,” analysts at 22V Research said in a Wednesday note.

“There has been a dramatic factor re-risking following a dramatic de-risking,” the analysts wrote. “Earnings Turbulence, Value, Momentum, and Leverage have had 90th percentile+ returns over the last couple of weeks while Growth, Profitability and Quality of Earnings had 10th percentile- returns,” according to the note.

Related:  U.S. stocks fall as Treasury yields continue to surge

U.S. existing-home sales fell 2.7% in March from February to a seasonally-adjusted, annual rate of 5.77 million, the National Association of Realtors said Wednesday. Compared to a year ago, sales were down 4.5%. Economists polled by MarketWatch had projected existing-home sales of 5.75 million.

The Federal Reserve’s Beige Book is due at 2 p.m. Before that, investors will hear from San Francisco Fed President Mary Daly, Chicago Fed President Charles Evans, and Atlanta Fed President Raphael Bostic.

Investors have been also keeping a close eye on earnings news rolling out from several companies. In the spotlight was Netflix NFLX, -35.68%, which tumbled 38% Thursday morning.

The streaming content provider late Tuesday reported a net loss of 200,000 paid subscribers in the first quarter, against the 2.5 million net additions expected by analysts, also in line with the company’s own expectations.

Related:  Dow futures rise as the August jobs report comes in as expected

Company executives announced they would further move to crack down on subscribers sharing passwords and a possible lower-priced subscription tier. Several Wall Street analysts moved to downgrade their ratings and cut price targets on the shares.

The next big earnings name to report will be electric-car maker Tesla Inc. TSLA, -2.23%, due after the closing bell Wednesday.

On the geopolitical front, a pivotal battle for control of Ukraine’s eastern industrial heartland of coal mines and factories was underway with Russia continuing to barrage cities across the country. Moscow also issued a new ultimatum to the Ukrainian defenders in Mariupol to surrender Wednesday.

And in France, incumbent French President Emmanuel Macron and far-right contender Marine Le Pen will square off Wednesday evening in a potentially decisive television debate ahead of Sunday’s runoff presidential vote.

What companies are in focus?
  • Shares of other streaming video companies in addition to Netflix also fell, with Walt Disney Co. DIS, -3.80% down 4.5%, Warner Bros. Discovery Inc. WBD, -5.23%  down 6%, and Paramount Global  PARA, -9.98%  was down 12.2%. Stock in streaming device maker Roku Inc. ROKU, -5.78% tumbled 7%.
  • Shares of Procter & Gamble Co. PG, +2.54% rose 2.7% after the consumer products company reported fiscal third-quarter profit and sales that beat expectations and raised its sales guidance.
  • Baker Hughes BKR, -7.50% fell 8% Wednesday morning, after the oil services company reported first-quarter profit and revenue that missed expectations, citing a “very volatile” market environment and continued supply chain constraints.
Related:  This Could Be A Grinding, Multi-Year Bear Market Like Japan
What are other assets doing?
  • The ICE U.S. Dollar Index DXY, -0.60%,  a measure of the currency against a basket of six major rivals, was down 0.7%
  • Bitcoin  BTCUSD, 0.74%  was up 0.2% to trade around $41,630.
  • Gold for June delivery  GCM22, -0.21%  shed 0.2%, to $1,954 an ounce.
  • U.S. crude CL00 was down 0.2% to $101.87. Oil fell 5% on Tuesday to settle at the lowest in a week as traders weighed a Libyan supply outage, China’s COVID lockdowns, and the surging U.S. dollar.
  • In European equities, the Stoxx Europe 600  SXXP, +0.89%  was up 0.9%, while London’s FTSE 100  UKX, +0.27%  gained 0.2%.
  • The Shanghai Composite  SHCOMP, -1.35%  finished down by 1.4%, while Japan’s Nikkei 225  NIK, +0.86% gained 0.9%.

Leave a Comment