Nasdaq drops as Netflix subscriber numbers weigh on tech

  • Procter & Gamble wants to raise its sales forecast for the year
  • IBM wins on optimistic forecast, first quarter results are better
  • Netflix plummets after losing subscribers in first quarter
  • Indices: Dow up 0.71%, S&P down 0.06%, Nasdaq down 1.22%

April 20 (Reuters) – The tech-heavy Nasdaq tumbled on Wednesday as Netflix’s surprise subscriber slump weighed on both the streaming giant and other high-growth companies, including Investors feared they would face similar performance issues post-pandemic.

In contrast, the blue-chip Dow Jones was pushed to a second straight higher close on positive earnings from consumer giant Procter & Gamble (PG.N) and computer company IBM Corp (IBM.N). The duo rose 2.7% and 7.1% respectively. Read more

Netflix Inc (NFLX.O) plunged 35.1%, its biggest one-day drop in more than a decade, after blaming inflation, the war in Ukraine and fierce competition for declining subscribers and predicts greater losses to come. Read more

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The ripple effects have been felt by both fintech names and companies whose fortunes would 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 fell more than 5.5%, while household darlings Zoom Video Communications (ZM. O), Doordash (DASH.N) and Peloton Interactive (PTON.O) saw their shares fall between 6% and 11.3%.

Troubled financials included PayPal Holdings Inc (PYPL.O) and Block Inc (SQ.N), both of which fell more than 8.5%. Marqeta Inc (MQ.O) and SoFi Technologies Inc (SOFI.O) fell 5.6% and 6.2% respectively.

“Once earnings have moved all the way here, it becomes harder to get that next little bit of growth, and it’s harder to get it at the end of the cycle,” said Jason Pride, chief financial officer. private wealth investments at Glenmede.

“I think the market is starting to understand that, and will have to understand it over the course of the year.”

High-tech and growth stocks have struggled this year as investors feared that rising interest rates will hurt their future earnings. The Nasdaq is down nearly 14% year-to-date, while the benchmark S&P 500 is down 6.4%.

Overall, the earnings season has started on a high note. Of the 60 companies in the S&P 500 index that have reported results so far, 80% have exceeded earnings expectations, according to data from Refinitiv. Overall, 66% exceeded estimates.

A trader works on the floor of the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., April 11, 2022. REUTERS/Andrew Kelly/File Photo

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) fell 166.59 points, or 1.22%, to 13,453.07.

The communication services sector (.SPLRCL) fell 4.1%, although eight of the 11 major sectors of the S&P 500 advanced, led by the real estate index (.SPLRCR) which posted its best result since the 4 january. The benchmark consumer staples index (.SPLRCS) was a close second, climbing to a second straight high.

Meanwhile, the latest data points on the Federal Reserve’s monetary policy tightening plans were released in the afternoon.

Its ‘beige book’ showed the US economy grew at a moderate pace from February to early April, while San Francisco Federal Reserve Chair Mary Daly said she believed the arguments in favor of raising interest rates by half a percentage point next month were “complete”. Read more

The yield on 10-year Treasuries fell to 2.85% after a meteoric rally that pushed it near the key 3% level earlier in the session.

Tesla Inc (TSLA.O) fell 5% but was trading higher after posting record deliveries and rising revenue in its first quarter results after the close. Read more

Investors had worried about the electric carmaker’s ability to meet its ambitious 2022 delivery target after its largest factory in Shanghai closed amid 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 gain in the past seven sessions. United shares fell slightly after reporting profits after the closing bell. Read more

Volume on U.S. exchanges was 10.85 billion shares, compared to an average of 11.61 billion for the full session over the past 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.

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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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