The S&P 500 (GSPC) finished down only 0.4%, while the tech-heavy Nasdaq Composite (IXIC) lost more than 2% of its value.
With a 0.7% gain thanks to banks and a 6% increase from Johnson & Johnson (JNJ), which released solid earnings on Thursday, the Dow Jones Industrial Average (DJI) was an anomaly. The index increased for the seventh day in a row.
Investors were unimpressed by the tech titans’ after-hours earnings reports on Wednesday from Netflix and Tesla, the first to do so among those responsible for the current stock boom. Following a revenue shortfall, Netflix shares fell, and CEO Elon Musk’s suggestion that Tesla will be implementing further price reduction also contributed to the decline.
The second quarter earnings season got off to a strong start with positive reports from Wall Street giants, but it seemed to dash hopes that technologies could increase it.
Results were still expected on Thursday. Shares of Johnson & Johnson increased after the company reported better-than-expected earnings, while American Airlines raised its outlook for annual profit.
‘Unspectacular growth’ is anticipated for the US economy, according to Goldman Sachs.
Jan Hatzius, the head economist of global investment research at Goldman Sachs, defended his company’s view that there is a decreasing likelihood of a recession occurring in the next 12 months during a media roundtable on Thursday.
Hatzius cited a strong labour market, including a drop in unemployment claims on Thursday, as well as rising disposable income and positive housing data through 2023.
He made the important point that Goldman economists do not anticipate extraordinary economic indicators over the coming several months. However, they predict “unspectacular growth.”
Recent economic reports such as a retail sales report from June that showed sluggish 0.2% growth and a jobs report from the same month that showed 209,000 nonfarm payroll additions—a robust clip even though the print missed—come to mind when I hear the phrase.
After dropping 8% right after the announcement of the streaming company’s quarterly earnings, which revealed that second quarter sales and third quarter revenue projections missed consensus estimates, Netflix stock (NFLX) dropped another 9% in early trading on Thursday.
Analysts, however, believe that the outcry is excessive given that the corporation stated that increasing expansion is its “primary objective.”
On the earnings call, executives stated that a combination of pricing, volume, and new revenue sources like ads will grow revenue.
However, Netflix issued a warning that it will take some time for those initiatives, which also include the crackdown on password-sharing, to develop. Just before the findings were announced, the corporation secretly dropped its most affordable ad-free streaming option in the US.
The Wells Fargo analyst Steve Cahall stated on Thursday that patience is a virtue. Although revenue acceleration will take more time, investors were overly enthusiastic about paid sharing, and we believe this provides an entry point for patient, long-term investors. Margins and price increases are forthcoming. We keep our Overweight rating and $500 goal in place.
In a letter to clients on Thursday, Wedbush analysts Alicia Reese and Michael Pachter agreed, stating that “the sharing crackdown and ad-tier have only begun to positively impact results.”
The analysts raised their price objective for the company from $475 to $525 while keeping their Outperform rating on it.
The analysts said: “We believe Netflix is well-positioned in this uncertain market as streamers change their business models and should be regarded as an incredibly lucrative, slow-growth firm. One of the most crucial conclusions from Q2’s numbers is that Netflix is still totally committed to boosting its profitability and free cash flow.
Tim Nollen, senior media tech analyst at Macquarie, kept his $410 price target and Neutral rating, explaining that the share price movement was brought on by increased sentiment before the print:”We believe that the stock essentially advanced into this report.