UPDATE: Wall Street has just dipped sharply as investors react to Netflix’s alarming earnings report, raising concerns during this critical reporting season. The streaming giant’s shares plummeted by 7.8 percent on Wednesday, following a disappointing fourth-quarter revenue outlook that failed to meet expectations.
As of early trading on October 18, 2023, the Dow Jones Industrial Average fell by 59.20 points, or 0.13 percent, to 46,865.54. Meanwhile, the S&P 500 lost 0.67 points, or 0.01 percent, settling at 6,734.68. The Nasdaq Composite experienced a decline of 48.89 points, or 0.21 percent, bringing it to 22,904.77.
Adding to the downward pressure, Texas Instruments saw its shares tumble 7.7 percent after releasing lower-than-expected revenue and profit forecasts. Other semiconductor companies, including Microchip Technology and ON Semiconductor, also faced losses, with stocks dropping between 2.3 percent and 4.5 percent.
The Philadelphia Semiconductor Index fell nearly 1.0 percent after hitting an all-time high just a few days earlier. Investors are on edge, as equities hover near record highs, leaving them seeking clarity amidst stretched valuations. “We need more than earnings beats to justify these lofty prices,” remarked Alex Coffey, a senior trading strategist at Charles Schwab.
All eyes are now on Tesla, which is set to kick off the highly anticipated “Magnificent Seven” earnings lineup after the market closes today. This group of major tech companies represents close to 35 percent of the S&P 500’s total market capitalization, making their performance crucial for market sentiment. “The big question is whether their earnings will mirror Netflix’s disappointment or provide a more positive outlook,” Coffey added.
In other corporate news, AT&T reported adding more wireless subscribers than expected in the third quarter, yet its shares dropped 3.0 percent. To date, 78 S&P 500 companies have reported earnings, with 87 percent surpassing estimates according to LSEG data. Analysts anticipate a year-on-year earnings growth of 9.2 percent for the third quarter, an increase from 8.8 percent earlier this month.
Geopolitical tensions are further complicating the market landscape. A planned summit between US President Donald Trump and Russian President Vladimir Putin has been postponed amid uncertainty surrounding a meeting with Chinese President Xi Jinping. Despite recent signs of easing tensions between the US and China, Trump cast doubts this week, stating the meeting with Xi “maybe won’t happen.”
The ongoing government shutdown complicates matters for the Federal Reserve, limiting access to crucial economic data. Friday’s report, with core CPI anticipated to hold steady at 3.1 percent, may be the Fed’s only clear insight on inflation ahead of next week’s policy meeting.
Meanwhile, Intuitive Surgical shares surged 15.5 percent after beating third-quarter earnings estimates, while Amphenol saw its shares rise 6.6 percent on a positive forecast for the fourth quarter. Conversely, Mattel shares fell 3.8 percent after missing Wall Street’s revenue and profit expectations.
As trading continues, advancing issues outnumber decliners by a ratio of 1.25-to-1 on the NYSE and 1.53-to-1 on the Nasdaq. The S&P 500 recorded six new 52-week highs and one new low, while the Nasdaq Composite noted 16 new highs and 26 new lows.
Stay tuned as we continue to monitor these developing stories and their potential impact on the market.
