Wall Street’s major stock indexes ended mixed Wednesday after another day of choppy trading, while Netflix lost more than a third of its value after reporting its first subscriber loss in more than a decade and predicting more grim times ahead.
The S&P 500 slipped 0.1% after a late-afternoon fade, while the Nasdaq fell 1.2%. The Dow Jones Industrial Average rose 0.7%, having received a bump from IBM, which added 7.1% after reporting quarterly results that beat analysts’ estimates.
Netflix slumped 35.1% a day after the streaming giant reported its first decline in subscribers in more than a decade. The company also said it expects a steeper decline during the current quarter. Netflix is now considering changes that it has long resisted, including minimizing password sharing and creating a low-cost subscription option supported by advertising. The stock is now down 67% from the all-time high it reached in November.
The skid in Netflix, one of Wall Street’s Big Tech high flyers in recent years, weighed heavily on the S&P 500, outweighing gains elsewhere in the benchmark index, and hit the communication services sector the hardest, pulling it 4.1% lower.
“While it is in communication services, it is also a discretionary stock, clearly, in that it’s one of those things people buy because they want, not because they have to,” said Randy Frederick, vice president of trading & derivatives at Charles Schwab.
Technology stocks, retailers and other companies that rely on consumer spending also weighed on the market. Chipmaker Nvidia fell 3.2% and Amazon dropped 2.6%.
Health care stocks made some of the biggest gains. CVS rose 2.7% and medical device maker Boston Scientific added 3%.
Banks and household product makers also bucked the market’s overall decline. JPMorgan Chase rose 0.4%, while Charmin and Dawn maker Procter & Gamble rose 2.7% after beating analysts’ quarterly earnings forecasts.
Tesla rose 4% in after-hours trading after reporting first-quarter net earnings that were over seven times greater than a year earlier. The electric vehicle and solar panel company benefited from strong sales despite global supply chain kinks and pandemic-related production cuts in China.
All told, the S&P 500 slipped 2.76 points to 4,459.45, and the Nasdaq fell 166.59 points to 13,453.07. The Dow rose 249.59 points to 35,160.79.
Smaller company stocks held up better than the broader market. The Russell 2000 added 7.42 points, or 0.4%, to 2,038.19.
Investors continue focusing on the latest round of corporate earnings as they try to determine how companies are dealing with rising inflation and cost pressures. American Airlines and Union Pacific are due to report results on Thursday.
Inflation has been putting increasing pressure on a wide range of industries and increasingly squeezing consumers. Rising prices have prompted the Federal Reserve and other central banks to raise interest rates in order to help temper inflation’s impact. The Fed has already announced a quarter-percentage point rate hike and Wall Street expects a half-percentage rate hike at its next meeting in two weeks.
“The market knows the Fed’s going to hike rates a bunch,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. “But, the market is feeling pretty good that once we get to neutral, then in 2023 maybe you don’t go a lot further.”
Interest rates are considered “neutral” when they neither push nor restrict economic growth. Currently, investors expect rate hikes to increase the benchmark interest rate to a range somewhere between 2.50% and 3% by the end of the year, according to CME Group’s FedWatch tool.
Bond yields have been rising throughout the year as Wall Street prepares for higher interest rates. The yield on the 10-year Treasury note eased to 2.84% from 2.91% late Tuesday, but it’s still near its highest level since late 2018.
Higher bond yields have been pushing up mortgage rates and increasing pressure on an already tight housing market. The National Association of Realtors reported Wednesday that sales of previously occupied U.S. homes fell in March to the slowest pace in nearly two years as higher mortgage rates and already record-high prices discouraged would-be homebuyers.
Russia’s invasion of Ukraine and the ongoing conflict has only added to the worries about rising inflation crimping economic growth. The conflict has pushed energy and commodity prices higher.
U.S. crude oil prices rose 0.2% Wednesday and are up nearly 40% for the year, pushing gasoline prices higher. Wheat prices are up 41% for the year and that has the potential to increase prices for a wide range of food products globally.
Stocks have mostly struggled this year because of the confluence of concerns. Meanwhile virus lockdowns in China are easing. Authorities in Shanghai allowed 4 million people to leave their homes, but the lockdowns have left the Chinese economy damaged.
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