U.S. stocks rallied Tuesday, clawing back from a rough start to the week as investors assessed a deluge of earnings reports for clues on how corporate America has fared against a backdrop of war in Eastern Europe and rising inflationary pressures.
[Click here to read what’s moving markets heading into Wednesday, April 20]
The S&P 500 advanced 1.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} to mark its best day in a month, and the Dow Jones Industrial Average closed the session out 500 points higher. The tech-heavy Nasdaq Composite extended gains to 2.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} after settling at a one-month low on Monday along with the S&P 500.
Meanwhile, Treasury yields continued their climb, with the 10-year U.S. benchmark hitting 3{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} for the first time in three years.
“The bond market, you could argue, is way out ahead of the Fed in a way the stock market is playing wait-and-see,” Interactive Brokers’ chief strategist Steve Sosnick told Yahoo Finance Live on Tuesday. “Maybe the stock market is actually, in this case, saying ‘I’m not going to fight the Fed,’ and the bond market in fact is.”
The International Monetary Fund (IMF) said Tuesday that the global economic recovery will “slow significantly” this year due to Russia’s invasion of Ukraine. IMF officials downgraded their forecasts for economic growth, projecting global GDP will rise 3.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in 2022 (a downgrade from January’s projection of 4.4{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) and another 3.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in 2023 (also a downgrade from the last projection of 3.8{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}).
“This crisis unfolds while the global economy was on a mending path but had not yet fully recovered from the COVID-19 pandemic,” said IMF Economic Counsellor Pierre-Olivier Gourinchas.
Quarterly results from 69 companies in the S&P 500 are in the queue for investors to digest through Friday. Big names on the docket of earnings set for release this week include United Airlines (UAL), American Express (AXP) and Tesla (TSLA).
Netflix (NFLX) — the first tech giant to report earnings this week — revealed an unexpected drop in net subscribers, a closely-watched metric for investors, in its results out Tuesday after the bell. The subscriber losses, the first for the company in over a decade, came as Netflix navigated an exit from Russia and an increasingly saturated North American market.
Netflix shares cratered nearly 22{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in post-market trading to $272.40 a piece as of 4:11 p.m. ET.
As of Monday (the latest available data), 53{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of 34 S&P 500 companies (comprising 10{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of index earnings) that have reported so far beat on both sales and earnings per share, Bank of America’s research team pointed out, slightly better than the typical Week 1 beat rate of 47{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} and last quarter’s Week 1 rate of 50{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. The institution expects a first quarter EPS beat of 4{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} but anticipates downside risks to the full year 2022 estimates, which imply earnings accelerating every quarter into next year.
“Pressure on profit margins from higher costs for virtually everything, notably labor, materials, and transportation, made this quarter difficult to navigate,” LPL Financial strategists Jeff Buchbinder and Ryan Detrick said in commentary Monday. “Add spillover from the Russia-Ukraine conflict and intermittent COVID-19 lockdowns in China, and companies’ bottom lines are getting hit from several directions.”
“Despite the tough environment, we believe the odds favor companies beating estimates as they have done historically on the back of double-digit revenue growth,” Buchbinder and Detrick added. “High inflation translates into more revenue so earnings can grow at a solid pace even with some narrowing of profit margins.”
Contrary to BofA, research from FactSet suggests that although analysts have tempered their expectations on first quarter earnings, lowering bottom-up EPS forecasts in aggregate for Q1 by 0.7{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} from $52.21 to $51.83, EPS forecasts for the second, third, and fourth quarters are higher. Earnings estimates for all of 2022 have also risen 2.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} this year to $228.50 per share.
“The number one takeaway for investors should be to watch how your stock reacts more than the news,” Heritage Capital President Paul Schatz told Yahoo Finance Live. “If your stock rallies on bad news, that’s a pretty good sign the markets have absorbed and digested and have priced in the bad news.”
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4:12 p.m. ET: Netflix reports subscriber loss for first time in more than 10 years
Streaming giant Netflix (NFLX) reported an unexpected drop in first-quarter net subscribers, a closely-watched metric for investors. The subscriber losses — the first for the company in over a decade — came as Netflix navigated an exit from Russia and an increasingly saturated North American market.
Netflix shares cratered nearly 22{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in post-market trading to $272.40 a piece as of 4:11 p.m. ET.
The drop in new users came as a surprise to Wall Street, with analysts looking for a slowdown but still positive growth in subscriptions during the fiscal first quarter. Subscribers grew by nearly 4 million in the same quarter last year. And in total, Netflix had more than 220 million global subscribers as of the end of last quarter.
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4:00 p.m. ET: S&P 500, Dow, and Nasdaq gain as earnings season ramps up
Here’s how the major indexes capped the trading session following an up day on Wall Street:
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S&P 500 (^GSPC): +70.79 (+1.61{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 4,462.48
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Dow (^DJI): +501.19 (+1.46{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 34,912.88
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Nasdaq (^IXIC): +287.30 (+2.15{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 13,619.66
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Crude (CL=F): -$5.53 (-5.11{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $102.68 a barrel
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Gold (GC=F): -$36.60 (-1.84{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $1,949.80 per ounce
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10-year Treasury (^TNX): +5.1 bps to yield 2.9130{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}
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3:16 p.m. ET: Johnson & Johnson rescinds vax sales forecast amid lower demand
Johnson & Johnson (JNJ) dialed back its forecast for COVID-19 vaccine sales due to a glut of supply over hesitancy in low income countries.
The company previously projected sales of up to $3.5 billion on the single-dose shot in 2022, but demand has waned.
Use of the shot has been weak in high-income countries, hurt by reports of rare, potentially deadly blood clots, production issues, including an accidental mix-up of ingredients by a contract manufacturer, and concerns about efficacy.
Shares of Johnson & Johnson were up 3.3{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} to $183.45 a piece as of 3:15 p.m. ET.
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1:49 p.m. ET: All three major indexes advance more than 1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} with earnings underway
Here were the main moves in markets during intraday trading:
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S&P 500 (^GSPC): +51.23 (+1.17{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 4,442.92
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Dow (^DJI): +368.87 (+1.07{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 34,780.56
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Nasdaq (^IXIC): +220.18 (+1.65{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 13,552.54
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Crude (CL=F): -$5.14 (-4.75{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $103.07 a barrel
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Gold (GC=F): -$28.70 (-1.44{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $1,957.70 per ounce
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10-year Treasury (^TNX): +4.1 bps to yield 2.9030{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}
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11:16 a.m. ET: Investors await earnings report from Netflix after the bell
Netflix (NFLX) is set to report quarterly after market close. Investors are bracing for a further growth slowdown amid the company’s exit from Russia and as its key North American market grows increasingly saturated.
Wall Street expects Netflix will report revenue of $7.95 billion for the fiscal first quarter, earnings per share of $2.91, and net subscriber additions of 2.51 million.
If realized, new subscribers of 2.51 million would represent the smallest quarterly addition for Netflix since the second quarter of 2021. Subscribers grew by nearly 4 million in the same quarter last year, and in total, Netflix had more than 220 million global subscribers as of the end of last quarter.
Netflix has been grappling with slowing user growth for much of the past year, with new users slowing to a trickle after a pandemic-fueled surge in sign-ups. But further exacerbating this slowdown will be Netflix’s exit from Russia in early March, which came following the country’s invasion of Ukraine earlier this year. Cowen analyst John Blackledge estimated Russia comprised about 1 million subscribers for Netflix.
Shares of Netflix were up 3{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} during intraday trading to $347.99 per share as of 11:16 a.m. ET.
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9:33 a.m. ET: Stocks flat as investors digest earnings, downgraded IMF forecast
Here’s where the main indexes were trading during Tuesday’s opening bell:
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S&P 500 (^GSPC): +3.54 (+0.08{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 4,395.23
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Dow (^DJI): +92.77 (+0.27{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 34,504.46
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Nasdaq (^IXIC): -18.72 (-0.14{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 13,332.36
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Crude (CL=F): -$3.38 (-3.12{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $104.83 a barrel
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Gold (GC=F): -$22.50 (-1.13{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $1,963.90 per ounce
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10-year Treasury (^TNX): +4.3 bps to yield 2.9050{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}
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9:08 a.m. ET: IMF says Russia-Ukraine war will cause global economy to ‘slow significantly’
The International Monetary Fund (IMF) said the global economic recovery will “slow significantly” this year due to Russia’s invasion of Ukraine.
The IMF downgraded growth prospects in Eastern European countries but also warned that countries around the world will be affected by the disruption to commodities markets as a result of the war. The international body now expects global GDP, a measure of economic growth, to rise 3.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in 2022 (a downgrade from January’s projection of 4.4{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) and another 3.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in 2023 (also a downgrade from the last projection of 3.8{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}).
“This crisis unfolds while the global economy was on a mending path but had not yet fully recovered from the COVID-19 pandemic,” said IMF Economic Counsellor Pierre-Olivier Gourinchas.
Russia saw the largest downgrade in the IMF report, with the country’s economy now expected to contract by 8.5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} this year (compared to the 2.8{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} growth it had projected prior to the invasion).
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8:58 a.m. ET: Housing starts rise, building permits increase in March
U.S. homebuilding activity picked up unexpectedly last month, but starts for single-family housing fell amid rising mortgage rates.
The Commerce Department reported housing starts registered an increase of 0.3{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in March to a seasonally adjusted annual rate of 1.793 million units last month. February data was revised higher to a rate of 1.788 million units from the previously reported 1.769 million units. Bloomberg economists had forecast starts slipping to a rate of 1.740 million units.
Permits for future homebuilding increased 0.4{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} to a rate of 1.873 million units last month.
The 30-year fixed-rate mortgage averaged 5.0{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} during the week ended April 14, the highest since February 2011, up from 4.72{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in the prior week, per mortgage finance agency Freddie Mac. Further increases are expected as the Federal Reserve moves forward on its monetary tightening plans.
“Mortgage rates are flying ever higher, but residential construction of single-family homes started this month are solid and home builders are not heading for the exits yet,” FWDBONDS chief economist Christopher S. Rupkey said in a note. “At some point, housing starts will fall this year as the market is on a collision course for buyers with rising prices and higher costs of borrowing.”
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7:10 a.m. ET: Stock futures near breakeven, Treasury yield grazes 2.9{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}
Here’s how the main benchmarks fared in pre-market trading Tuesday:
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S&P 500 futures (ES=F): -2.75 points (-0.06{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 4,384.00
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Dow futures (YM=F): -2.00 points (-0.01{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 34,311.00
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Nasdaq futures (NQ=F): -18.25 points (-0.13{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 13,889.50
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Crude (CL=F): -$1.59 (-1.47{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $106.62 a barrel
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Gold (GC=F): -$5.00 (-0.25{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $1,981.40 per ounce
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10-year Treasury (^TNX): +0.00 bps to yield 2.8620{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}
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6:13 p.m. ET Monday: Futures jump as earnings season sets into full swing
Here were the main moves in markets heading into overnight futures trading Monday:
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S&P 500 futures (ES=F): +14.25 points (+0.32{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 4,401.00
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Dow futures (YM=F): +104.00 points (+0.30{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 34,417.00
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Nasdaq futures (NQ=F): +59.50 points (+0.43{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to 13,967.25
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Crude (CL=F): -$0.77 (-0.71{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $107.44 a barrel
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Gold (GC=F): -$4.90 (-0.25{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}) to $1,981.50 per ounce
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10-year Treasury (^TNX): +3.4 bps to yield 2.8620{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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