Markets Today: Stocks Fall on Disappointing Earnings from Netflix and Tesla
Stock indexes this morning are lower as some disappointing quarterly earnings results weigh on technology stocks. Netflix is down more than -7% in pre-market trading after projecting weaker-than-expected Q3 revenue, and Tesla is down more than -4% after reporting lower-than-expected Q3 gross margins. A jump in bond yields is also weighing on stocks on signs of U.S. labor market strength after weekly jobless claims unexpectedly fell to a 2-month low.
U.S. weekly initial unemployment claims unexpectedly fell -9,000 to a 2-month low of 228,000, showing a stronger labor market than expectations of an increase to 240,000.
The U.S. July Philadelphia Fed business outlook survey rose +0.2 to -13.5, weaker than expectations of -10.0.
The markets are discounting the odds at 96% for a +25 bp rate hike at the next FOMC meeting on July 25-26. The markets are anticipating a peak funds rate of 5.42% by November, which is +34 bp higher than the current effective federal funds rate of 5.08%.
Global bond yields are higher. The 10-year T-note yield is up +6.3 bp at 3.811%. The 10-year German bund yield is up +1.4 bp at 2.453%. The 10-year UK Gilt yield is up +0.9 bp at 4.224%.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.05%. China’s Shanghai Composite Index today closed down -0.92%. Japan’s Nikkei Stock Index closed down -1.23%.
The Euro Stoxx 50 today fell to a 1-week low and is modestly lower. Weakness in European chipmakers is leading the overall market lower after Taiwan Semiconductor Manufacturing Co cut its 2023 revenue projections and warned that the global electronics slump may persist for some time despite a boom in AI development. Losses were limited as mining stocks rose, led by a +4% jump in Anglo American Plc after it reported stronger-than-expected Q2 production. Also, easing price pressures in Germany were supportive for stocks after German June producer prices rose at the smallest pace in 2-1/2 years.
German Jun PPI eased to +0.1% y/y from +1.0% y/y in May, the smallest increase in 2-1/2 years.
China’s Shanghai Composite today tumbled to a 3-week low and closed moderately lower. Skepticism that government policies can revive the economy weighed on stocks today even after the government pledged to improve conditions for private businesses. Late Wednesday, the Communist Party and the government issued a rare joint statement that included 31 measures to improve conditions for businesses, including pledges to treat private companies the same as state-owned enterprises and to consult more with entrepreneurs before drafting policies. The markets were disappointed that the plans did not include more specific stimulus measures such as loosening property policies or more fiscal spending.
Japan’s Nikkei Stock Index today closed moderately lower. A slide in some mega-cap U.S. technology stocks in extended trading Wednesday evening weighed on Japanese technology stocks as Netflix and Tesla declined on disappointing quarterly earnings results. Also, Japanese chipmakers retreated after Taiwan Semiconductor Manufacturing Co cut its full-year revenue outlook and projected a 10% fall in sales this year, versus previous guidance for a single-digit decline. In addition, exporter stocks moved lower as the yen rose against the dollar today after the Japanese government raised its overall inflation forecast to 2.6% for the current fiscal year from a previous forecast of 1.7% ahead of next week’s BOJ meeting. Finally, weaker-than-expected Japanese trade news for June weighed on stocks.
Japan June machine tool orders were revised upward by +0.6 to -21.1% y/y from the initially reported -21.7% y/y.
Japan trade data was weaker than expected as Jun exports rose +1.5% y/y, weaker than expectations of +2.4% y/y. Also, Jun imports fell -12.9% y/y, weaker than expectations of -11.3% y/y and the largest decline in 2-3/4 years.
Pre-Market U.S. Stock Movers
Netflix (NFLX) dropped more than -7% in pre-market trading after reporting Q2 revenue of $8.19 billion, weaker than the consensus of $8.30 billion, and forecast Q3 revenue of $8.50 billion, below the consensus of $8.67 billion.
Tesla (TSLA) tumbled more than -4% in pre-market trading after reporting Q3 gross margins of 18.2%, below the consensus of 18.8%, and forecast full-year vehicle production of 1.80 million vehicles, below the consensus of 1.88 million.
Discover Financial Services (DFS) plunged more than -12% in pre-market trading after it said it would suspend share buybacks and that it was in discussion with regulators over how it misclassified some of its credit cards.
Equifax (EFX) tumbled more than -6% in pre-market trading after reporting Q2 operating revenue of $1.32 billion, below the consensus of $1.33 billion, and forecast Q3 revenue of $1.32 billion-$1.34 billion, weaker than the consensus of $1.35 billion.
International Business Machines (IBM) slid more than -1% in pre-market trading after reporting Q2 revenue of $15.48 billion, weaker than the consensus of $15.54 billion.
Crown Castle (CCI) dropped more than -5% in pre-market trading after cutting its full-year FFO estimate to $3.30 billion-$3.33 billion from a previous estimate of $3.35 billion-$3.40 billion, below the consensus of $3.36 billion.
Catalent (CTLT) jumped more than +8% in pre-market trading after Bloomberg News reported that Elliot Investment Management had built a significant stake in the company and is pushing for changes to the company’s board of directors.
DR Horton (DHI) climbed more than +4% in pre-market trading after reporting Q3 revenue of $9.73 billion, well above the consensus of $8.36 billion, and raised its full-year revenue forecast to $34.7 billion-$35.1 billion from a prior estimate of $31.5 billion-$33.0 billion.
United Airlines Holdings (UAL) rose more than +3% in pre-market trading after reporting Q2 adjusted EPS of $5.03, better than the consensus of $3.99, and raised its full-year adjusted EPS forecast to $11-$12 from $10-$12, stronger than the consensus of $9.80.
Zions Bancorp (ZION) jumped more than +4% in pre-market trading after reporting Q2 total deposits of $74.32 billion, well above the consensus of $68.49 billion.
Johnson & Johnson (JNJ) rose more than +2% in pre-market trading after reporting Q2 sales of $25.53 billion, better than the consensus of $24.67 billion, and raising its full-year sales forecast to $98.9 billion-$99.8 billion from a prior view of $97.9 billion-$98.9 billion.
Today’s U.S. Earnings Reports (7/20/2023)
Abbott Laboratories (ABT), American Airlines Group Inc (AAL), Capital One Financial Corp (COF), CSX Corp (CSX), DR Horton Inc (DHI), Fifth Third Bancorp (FITB), Freeport-McMoRan Inc (FCX), Genuine Parts Co (GPC), Intuitive Surgical Inc (ISRG), Johnson & Johnson (JNJ), KeyCorp (KEY), MarketAxess Holdings Inc (MKTX), Marsh & McLennan Cos Inc (MMC), Newmont Corp (NEM), Philip Morris International In (PM), Pool Corp (POOL), PPG Industries Inc (PPG), Snap-on Inc (SNA), Travelers Cos Inc/The (TRV), Truist Financial Corp (TFC), W R Berkley Corp (WRB).
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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