Wall Street dragged lower by Netflix

  • 20/07/2016

Netflix has plunged thirteen percent in value, following a disappointing earnings report.

The streaming giant surprised investors by reporting slower-than-expected subscriber numbers.

It added 160,000 US memberships, compared to forecasts of 500,000.

Netflix's international subscribers rose by 1.52 million. That was below its own forecast of two million, issued back in April.

The company's share price fell thirteen percent to US$85.84.

That was in stark contrast to Japanese company Nintendo.

It rose another 13 percent in value yesterday on the Tokyo market, thanks to the excitement around Pokémon Go.

Nintendo's share price has doubled since the release of the game earlier this month. It is now valued at around US$40 billion (NZ$57 billion).

Netflix's disappointing quarterly results weighed on the S&P 500 and the Nasdaq.

The S&P 500 lost 3.11 points, or 0.14 percent, to 2,163.78 and the Nasdaq Composite dropped 19.41 points, or 0.38 percent, to 5,036.37.

The Dow Jones industrial average rose 25.96 points, or 0.14 percent, to 18,559.01, setting another closing record.

The Dow's eighth straight session of gains marked its longest winning streak since March 2013.

Johnson and Johnson rose two percent after beating estimates for its quarterly sales.

Goldman Sachs dropped 1.2 percent, with most of its businesses under pressure even as the Wall Street bank reported a higher quarterly profit.

After the market closed, Microsoft shares rose four per cent following results, showing sales of its cloud products have doubled.

The International Monetary Fund cut its global growth forecasts for the next two years, citing uncertainty over Britain's looming exit from the European Union.

Even with the economic concerns triggered by Britain's recent vote, the S&P 500 and Dow have hit record highs in the past week.

But investors are closely watching US corporate earnings for signs of whether the momentum for equities can be maintained.

"There's enough uncertainty out there in a market that's done pretty well as of late to cause people to take some money off the table today," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Eight of 10 S&P sectors finished lower.

Materials and energy shares lagged as a rise in the US dollar put pressure on oil and other commodities denominated in the currency.

Second-quarter earnings for S&P 500 companies are expected to fall by 4.3 per cent, according to Thomson Reuters I/B/E/S, as reporting season kicks into gear this week.

"If you see a lot of disappointment and disappointing outlooks, or confusion over Brexit and what that's going to mean to some companies, you could see the market pull in and take some profits," said Tim Ghriskey, chief investment officer of Solaris Asset Management in New York.

Shares of health insurers were stung by reports that US antitrust officials plan to block Anthem's acquisition of Cigna and Aetna's takeover of Humana.

Declining issues outnumbered advancing ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.87-to-1 ratio favoured decliners.

The S&P 500 posted 23 new 52-week highs and one new low; the Nasdaq Composite recorded 70 new highs and 28 new lows.

About 5.6 billion shares changed hands in US exchanges, well below the 7.5 billion daily average over the past 20 sessions.