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Wall Street Opens Lower as Netflix Reinforces Ris Aversion; Dow Down 80 Pts

Published 22/01/2022, 02:24 am
Updated 22/01/2022, 02:24 am
© Reuters.

By Geoffrey Smith 

Investing.com -- U.S. stock markets opened lower on Friday as a warning from Netflix (NASDAQ:NFLX) about slowing subscriber growth sent shockwaves through a tech sector that is already dramatically repricing.

By 9:45 AM ET (1445 GMT), the tech-heavy Nasdaq Composite was down another 151 points, or 1.1%, while the S&P 500 was down 0.6%. The Dow Jones Industrial average was down 80 points, or 0.2%, at 35,636. 

For the Nasdaq, that represents a seven-month low, while the S&P and Dow are at three- and two-month lows, respectively.

For Netflix stock, the morning confirmed the overnight session's worst fears, the streaming giant losing nearly a quarter of its value, or 22.4%, after predicting it will only add a net 2.5 million subscribers worldwide in the current quarter. That's well below both its own previous forecasts, and below the rate at which it was adding subs before the pandemic, something that suggests that the streaming boom of the last two years is over. 

In comparison to some other tech stocks feeling the heat, Netflix at least has some profit to point to. Its earnings of $1.33 a share were comfortably ahead of forecasts. However, they still left the stock trading - as of Thursday's close - at over 45 times trailing 12-month earnings, a painfully high ratio for a company which appears to be having increasing problems with market saturation and competition.

Netflix has now joined the swelling ranks of those companies whose pandemic-era gains have all but completely unwound. The stock hasn't traded this low since April 2020, when streaming appeared to be the one of the biggest beneficiaries from pandemic-driven changes in consumer behavior. 

Those behavior patterns are - to a large degree - starting to revert to normal. Reports on Thursday of a production halt at Peloton Interactive (NASDAQ:PTON) to clear unsold inventory also sent Peloton stock down by a quarter. A clarification from the company, which still points to widespread cost-cutting and the resizing of its ambitions, helped the stock recover 5.0% in early trading on Friday.

There was better news from Intel (NASDAQ:INTC), which announced it will build the first $20 billion stage of what could be a multi-plant facility in Ohio, a move that will shorten its supply chains help remove bottlenecks in the semiconductor industry. The confidence implicit in its decision helped Intel stock to a 2.0% gain.

Elsewhere, Schlumberger (NYSE:SLB) stock also succumbed to some profit-taking despite the oilfield services giant beating expectations with its fourth-quarter earnings and forecasting a "substantial step up" in capital spending this year by oil and gas companies, as high prices rebalance the risk-reward outlook for the sector. Schlumberger stock fell 2.0% but is up over 20% since the start of the year.

Crude oil prices remain close to seven-year highs despite slipping in the last 24 hours after fresh data showing that U.S. gasoline stockpiles continued to rise for a third straight week. That, along with jobless claims data on Thursday, suggested the economy is softening slightly due to the current wave of Omicron-variant Covid-19. Most analysts expect that impact to be temporary: in Europe, where the new variant arrived before it reached the U.S., the U.K., France, Ireland and others are loosening restrictions on social distancing, with most countries judging that they are past the peak for infections.

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