Last night I left off with the question of whether the market today would be more focused on IBM doing well or Netflix doing badly. Well, with Netflix being a FAANG stock with all the discussion all these years about what happens to the market if one of these really heavy hitters goes south, it should go without saying that the market was much more focused on Netflix today which, after last night’s after-hours report of their historic and enormous loss of subscribers, that both Netflix and the market would go south.  And that’s what happened.  

Netflix fell 35%, its largest one day drop in over a decade and it brought the Nasdaq down 166 points.  It also brought down its streaming peers, some as much as 11 percent. Meanwhile, on the other side of town, the Dow did indeed benefit from IBM’s good news and today also P&G with a very respectable rally of 249 points.  Q1 continues going strong with now 80% of 60 companies reporting in and exceeding estimates.  And the Fed’s Beige Book added to the good news with its data showing the economy expanded at a moderate pace.  Volume remains below average at 10.8 billion. 

Wed  April 20, 2022  4:49 PM

Nasdaq drops as Netflix subscriber numbers weigh on tech

By David French

DJ: 34,911.20  +499.51       NAS: 13,619.66  +287.30       S&P: 4,462.21  +70.52     4/19

DJ: 35,160.79  +249.59       NAS: 13,453.07  -166.59        S&P: 4,459.45  -2.76        4/20

April 20 (Reuters) - The tech-heavy Nasdaq dropped on Wednesday as Netflix's surprise decline in subscribers weighed on both the streaming giant and other high-growth companies, which investors feared may face similar post-pandemic performance issues.  By contrast, the blue-chip Dow was driven to a second-successive higher close by positive earnings from consumer giant Procter & Gamble (PG.N) and IT firm IBM Corp (IBM.N). The duo rose 2.7 and 7.1% respectively. read more  Netflix Inc  (NFLX.O)  plunged 35.1%, its largest one-day fall in over a decade, after it blamed inflation, the Ukraine war and fierce competition for the subscriber decline and predicted deeper losses ahead. read more  The ripple effects were felt both by financial technology names and companies whose fortunes were seen to have been boosted by pandemic trends such as lockdown measures.

Streaming peers Walt Disney (DIS.N), Roku (ROKU.O) and Warner Bros Discovery (WBD.O)all dropped more than 5.5%, while stay-at-home darlings Zoom Video Communications (ZM.O), Doordash (DASH.N) and Peloton Interactive (PTON.O)saw their shares fall between 6% and 11.3%.

Suffering financials included PayPal Holdings Inc (PYPL.O) and Block Inc (SQ.N), which both fell more than 8.5%. Marqeta Inc (MQ.O) and SoFi Technologies Inc (SOFI.O) declined 5.6% and 6.2% respectively.  "Once profits move so far, it becomes harder to get that next little bit of growth, and it's harder to obtain it in the late cycle," said Jason Pride, chief investment officer of private wealth at Glenmede.  "I think the market is beginning to comprehend that, and will need to comprehend that as we go through the year."  Market-leading technology and growth stocks have struggled this year as investors worry that rising interest rates will dent their future earnings. The Nasdaq is down nearly 14% so far this year, while the benchmark S&P 500 is down 6.4%.

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.

The Dow Jones Industrial Average (.DJI) rose 249.59 points, or 0.71%, to 35,160.79, the S&P 500  (.SPX) lost 2.76 points, or 0.06%, to 4,459.45 and the Nasdaq Composite (.IXIC) dropped 166.59 points, or 1.22%, to 13,453.07.  The communication services sector (.SPLRCL) declined 4.1%, although eight of the 11 major S&P 500 sectors gained, led by the real estate index (.SPLRCR)which posted its best finish since Jan. 4. The consumer staples benchmark (.SPLRCS) was just behind it, climbing to a second-straight record close.

Meanwhile, the latest data points on the Federal Reserve's monetary policy tightening plans were released in the afternoon.  Its "Beige Book" showed the U.S. economy expanded at a moderate pace from February through early April, while San Francisco Federal Reserve President Mary Daly said she believes the case for a half-percentage-point interest rate hike next month is "complete". read more  The yield on 10-year Treasury note receded to 2.85% after a blistering rally that pushed it close to the key 3% level earlier in the session.

Tesla Inc (TSLA.O) fell 5%, but was trading higher after posting record deliveries and higher revenue in its first-quarter results after the close. read more  Investors had been concerned about the electric automaker's ability to meet its ambitious 2022 delivery target after its biggest factory in Shanghai was shut as part of the city's COVID-19 lockdown.  United Airlines Holdings Inc (UAL.O) gained 1.2%, helping the S&P 1500 Airlines index (.SPCOMAIR) to a sixth advance in the past seven sessions. United's shares dipped marginally after it reported earnings after the closing bell. read more

The volume on U.S. exchanges was 10.85 billion shares, compared with the 11.61 billion average for the full session over the last 20 trading days.

The S&P 500 posted 70 new 52-week highs and three new lows; the Nasdaq Composite recorded 88 new highs and 164 new lows.