Dow Ends Higher As Netflix Takes Wall Street By Surprise

Stocks edged mostly higher in afternoon trading on Wall Street Wednesday but were held back by streaming entertainment giant Netflix, which lost more than a third of its value after reporting its first subscriber loss in more than a decade and predicting more grim times ahead.

US stock indexes posted a mixed finish Wednesday, with the Dow Jones Industrial Average lifted after solid earnings, while a plunge for shares of streaming giant Netflix Inc. drags down the Nasdaq as the S&P 500 ends with a small loss.

Dow buoyed by earnings as IBM shares surges by 7%. Netflix unexpectedly lost 200,000 subscribers in first quarter, however, on Tuesday, stocks finished sharply higher across the board, with major indexes bouncing after consecutive losing sessions.

Health care stocks made some of the biggest gains. CVS rose 2.8% and medical device maker Boston Scientific added 2.9%. Banks and a mix of household product makers also helped lift the market. Bank of America rose 0.5%.

Big technology companies did some of the heavy lifting after helping to power the market higher a day earlier. IBM rose 7% after reporting solid financial results. Cisco rose 2.5%. Netflix slumped 36.4%. The company suffered its first subscriber loss in more than a decade and expects a steeper decline during the current quarter. It is also considering changes that it has long resisted, including minimizing password sharing and creating a low-cost subscription supported by advertising. Netflix stock is now down about 68% from the all-time high it reached in November.

Investors continue focusing on the latest round of corporate earnings as they try to determine how companies are dealing with rising inflation and cost pressures. Railroad operator CSX, electric vehicle maker Tesla and United Airlines will report their results later Wednesday. American Airlines and Union Pacific will report results on Thursday.

Inflation has been putting increasing pressure on a wide range of industries and increasingly squeezing consumers. Rising prices have prompted the Federal Reserve and other central banks to raise interest rates in order to help temper inflation’s impact. The Fed has already announced a quarter-percentage point rate hike and Wall Street expects a half-percentage rate hike at its next meeting in two weeks.

The market knows the Fed’s going to hike rates a bunch. But, the market is feeling pretty good that once we get to neutral, then in 2023 maybe you don’t go a lot further.
Interest rates are considered “neutral” when they neither push nor restrict economic growth. Currently, investors expect rate hikes to increase the benchmark interest rate to a range between 2.75% and 3% by the end of the year.