Wednesday saw the Nasdaq Composite drop because of Netflix’s announcement of a fall in subscriber numbers. The tech-heavy index suffered, as the streaming giant experienced a fall, as did a number of other high-growth firms, with investors concerned about similar performances post-pandemic. In contrast, the Dow Jones Industrial Average closed higher for the second successive day, as the blue-chip index got a boost from positive earnings reports from IT company IBM Corp and consumer giant Proctor & Gamble. The companies saw a growth of 7.1% and 2.7%, respectively.
As far as Netflix Inc. is concerned, it saw its largest decline in a single day in more than a decade, when it plunged by a whopping 35.1%. The company cited the Ukraine war, rising inflation and increased competition for the decline in its subscriber numbers and also predicted further losses in the future. The ripple effects of this fall were experienced by companies and names in the financial technology sector that had seen their fortunes receive a boost because of the trends during the pandemic, like the lockdown measures. There was a 5.5% drop reported by other streaming companies, including Warner Bros Discovery, Roku and Walt Disney.
Likewise, other stay-at-home favorites, such as Peloton Interactive, Doordash and Zoom Video Communications also witnessed a decline in their shares between 6% and 11.3%. As for financial companies, Block Inc. and PayPal Holdings Inc. both saw their values fall by almost 8.5%. SoFi Technologies Inc. saw a decline of 6.2%, while MarqetaInc. fell by 5.6%. Market experts said that once profits reach their peak, it can be difficult to achieve the next growth milestone, particularly when it is already late in the cycle. The year has seen growth and technology stocks struggle because investors have been worried about the impact on future earnings because of interest rate hikes.
This year, the Nasdaq has already declined by almost 14% till now and there is also a 6.4% decline in the S&P 500 index. However, the earnings season has had a strong start for now. There are 60 companies that are part of the S&P 500 and 80% of the ones that have published their earnings have had profits higher than expectations and 66% managed to beat the estimates. There has been a 4.1% decline in the communication services sector, even though 8 of them reported gains out of the total 11 that are on the S&P 500 index.