US stocks cap off weekly gain as strong bank earnings offset Netflix disappointment

Reuters
  • US stocks closed mixed on Friday as traders weighed disappointing quarterly figures from Netflix and gloomy consumer sentiment data.
  • Both the S&P 500 and Dow Jones industrial average finished the week with gains exceeding 1%.
  • Netflix missed estimates for second-quarter profits and third-quarter subscriber additions.
  • A preliminary July reading of the University of Michigan’s consumer sentiment index fell to 73.2 from 78.1, reversing recent gains as spiking virus cases weighed on economic optimism.
  • Oil fell as investors braced for rising virus cases to keep demand near historic lows. West Texas Intermediate crude declined as much as 1.8%, to $US40.02 per barrel.
  • Watch major indexes update live here.

US equities closed mixed on Friday as investors digested Netflix’s disappointing earnings report and dire consumer sentiment data. Both the S&P 500 and Dow Jones industrial average finished the week with gains exceeding 1%.

Netflix tumbled after its second-quarter profits and third-quarter guidance fell below expectations. Earnings per share of $US1.59 missed the $US1.81 estimate mostly because of a one-time tax-credit charge in California.

The company added 10 million subscribers in the second quarter, beating expectations. But its forecast of 2.5 million new subscribers in the third quarter fell well below Wall Street’s hopes for 5.1 million additions. Weak subscriber-growth guidance could worsen if economies recover faster than anticipated, Credit Suisse said.

“Investor interest in Netflix as a stay-at-home ‘winner’ might taper off with countries reopening,” the firm’s analysts wrote in a Friday note.

Here’s where US indexes stood at the 4 p.m. ET market close on Friday:


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Netflix’s lacklustre report set a gloomy tone the tech-heavy Nasdaq composite. The index has largely outperformed its two peers through recent months as investors bet on tech giants to ride out looming coronavirus risks.

Still, investors found some hope in largely positive bank earnings. Wall Street giants including Goldman Sachs, Morgan Stanley, and JPMorgan all surprised to the upside earlier in the week as strong trading desk revenues overshadowed profit declines.

Amazon is set to report earnings next week, with Apple,Alphabet, and Facebook releasing figures at the end of the month.

Investors also found bad news in the University of Michigan’s consumer sentiment index. A preliminary reading for July showed the gauge sliding to 73.2 from 78.1, erasing recent gains amid a resurgence in coronavirus cases. Economists surveyed by Bloomberg had expected a slight increase to 79.


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“Consumer sentiment retreated in the first half of July due to the widespread resurgence of the coronavirus,” Richard Curtin, the chief economist for the Surveys of Consumers, said, adding “declines are more likely in the months ahead” as the virus spreads.

Cruise stocks including Royal Caribbean, Carnival, and Norwegian Cruise Line slumped for the second straight day after the Centres for Disease Control and Prevention extended its no-sail order through September 30. The order had been set to expire on July 24. In its decision, the CDC cited ongoing COVID-19 outbreaks aboard ships.

Oil futures fell slightly for the second day in a row. West Texas Intermediate crude fell as much as 1.8%, to $US40.02 per barrel. Brent crude, oil’s international standard, dropped 1.7% at intraday lows, to $US42.64.


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The S&P 500 snapped a two-day winning streak on Thursday. Stocks sank as major tech names fell and labour-market data missed expectations.

Jobless claims totaled 1.3 million in the week that ended on Saturday, the Labour Department announced on Thursday. Economists surveyed by Bloomberg had expected claims to fall to 1.25 million for the week. The reading was also the smallest decline since March, suggesting that claims could stay elevated for longer than anticipated.


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