Stocks fell Tuesday morning, setting the three major indices up for a third straight session of losses as last week’s tech-led selloff rolled on.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Shares of mega-cap technology stocks extended declines as investors continued to rotate away from the equity leaders of the past several months. Shares of Facebook (FB), Amazon (AMZN), Apple (AAPL) and Netflix (NFLX) were each off by at least 3%. Tesla (TSLA) shares slid by the most since March’s selloff after the company was bypassed for S&P 500 inclusion, and as competitor Nikola (NKLA) inked a strategic partnership with General Motors (GM). The Nasdaq sank 3.3%, or more than 350 points, shortly after the opening bell.” data-reactid=”17″>Shares of mega-cap technology stocks extended declines as investors continued to rotate away from the equity leaders of the past several months. Shares of Facebook (FB), Amazon (AMZN), Apple (AAPL) and Netflix (NFLX) were each off by at least 3%. Tesla (TSLA) shares slid by the most since March’s selloff after the company was bypassed for S&P 500 inclusion, and as competitor Nikola (NKLA) inked a strategic partnership with General Motors (GM). The Nasdaq sank 3.3%, or more than 350 points, shortly after the opening bell.
“The sell-off in risky assets has been concentrated in US Tech and momentum stocks, while credit has been more resilient and outperformed its beta to equity,” according to a note from Goldman Sachs strategists over the weekend. “This is likely due to the unwinding of some of the popular positions into the largest US stocks. In fact, the US equity rally has been very concentrated so far with very low breadth.”
“While aggregate US equity future net length is not very stretched, Nasdaq net equity future positioning is close to historical highs,” the analysts said. They added that an increase in the 10-year Treasury yield off the pandemic-era lows also likely triggered a rotation out of longer-duration stocks, including growth and tech names.
Still, the analysts added they “expect the current bull market to continue as the improved growth outlook coupled with supportive monetary policies should maintain the search for yield elevated and foster a compression of the ERPs [equity risk premiums].”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Elsewhere, investors eyed developments on the Covid-19 vaccine front. Tuesday morning, the CEOs of some of the pharmaceutical companies front-running the race toward creating on a vaccine wrote a public letter vowing to avoid cutting corners in the development process, even as they work with an expedited timeline to try and quickly distribute an inoculation.” data-reactid=”21″>Elsewhere, investors eyed developments on the Covid-19 vaccine front. Tuesday morning, the CEOs of some of the pharmaceutical companies front-running the race toward creating on a vaccine wrote a public letter vowing to avoid cutting corners in the development process, even as they work with an expedited timeline to try and quickly distribute an inoculation.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“In the interest of public health, we pledge to always make the safety and well-being of vaccinated individuals our top priority,” according to the letter, signed by the CEOs of companies including AstraZeneca (AZN), Johnson & Johnson (JNJ) and Moderna (MRNA).” data-reactid=”22″>“In the interest of public health, we pledge to always make the safety and well-being of vaccinated individuals our top priority,” according to the letter, signed by the CEOs of companies including AstraZeneca (AZN), Johnson & Johnson (JNJ) and Moderna (MRNA).
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="In news conference yesterday, President Donald Trump said he believed a Covid-19 vaccine could be approved as soon as October. Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases said seeing a vaccine receive approval by October was “unlikely” but “not impossible,” according to a recent interview with CNN.” data-reactid=”23″>In news conference yesterday, President Donald Trump said he believed a Covid-19 vaccine could be approved as soon as October. Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases said seeing a vaccine receive approval by October was “unlikely” but “not impossible,” according to a recent interview with CNN.
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9:45 a.m. ET: Virgin Galactic shares rise 2% after UBS initiates Buy rating on stock, citing first-mover advantage
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Virgin Galactic (SPCE) shares rose Tuesday morning after UBS initiate coverage on shares of the newly public space tourism company with a Buy rating and $25 price target, implying 57% upside from Friday’s closing prices.” data-reactid=”28″>Virgin Galactic (SPCE) shares rose Tuesday morning after UBS initiate coverage on shares of the newly public space tourism company with a Buy rating and $25 price target, implying 57% upside from Friday’s closing prices.
Shares of Virgin Galactic are up 38% for the year to date, even after falling 29% since the beginning of August.
“We see Virgin Galactic as the only way for consumers to gain entry into the ~560 member astronaut club in the next 5 years,” the analysts said. “There will be competitors, but the curation of the VG product from marketing to life-long brand connection, in addition to an operating model supporting a uniquely high flight-rate, separates the VG experience from the others.”
The analysts added they expected Virgin Galactic to kick off commercial service in 2021, and they see space tourism growing into a $3 billion per-year industry by 2030. An even larger addressable market exists in the transportation industry supersonic flight, which is another area Virgin Galactic is working to tap into, they added.
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9:36 a.m. ET: Tesla shares slide 16% after share sale, S&P 500 exclusion; Competition with Nikola heats up
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Separately, Tesla announced Tuesday that it had completed a $5 billion share sale as of Friday, with settlement of shares sold expected to be completed by Wednesday. The dilution added to the negative sentiment around the stock Tuesday.” data-reactid=”39″>Separately, Tesla announced Tuesday that it had completed a $5 billion share sale as of Friday, with settlement of shares sold expected to be completed by Wednesday. The dilution added to the negative sentiment around the stock Tuesday.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The stock also came under pressure after competitor Nikola (NKLA) announced a strategic partnership with General Motors (GM), giving the latter an 11% stake in the company. Analyst Dan Ives of Wedbush called the partnership “potential game changing deal,” with Nikola “importantly getting access to the GM battery and fuel cell technology/infrastructure to help produce the Badger and its core line of semi trucks over the coming years,” according to a note Tuesday morning.” data-reactid=”40″>The stock also came under pressure after competitor Nikola (NKLA) announced a strategic partnership with General Motors (GM), giving the latter an 11% stake in the company. Analyst Dan Ives of Wedbush called the partnership “potential game changing deal,” with Nikola “importantly getting access to the GM battery and fuel cell technology/infrastructure to help produce the Badger and its core line of semi trucks over the coming years,” according to a note Tuesday morning.
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9:33 a.m. ET: Stocks open lower, Nasdaq sinks 3%
Here were the main moves in markets, as of 9:34 a.m. ET:
S&P 500 (^GSPC): -70.97 points (-2.07%) to 3,355.99
Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on March 11, 2020 in New York. – Wall Street stocks dove deeper into the red in afternoon trading on March 11, 2020, with losses accelerating after the World Health Organization declared the coronavirus a global pandemic. Near 1710 GMT, the Dow Jones Industrial was down more than 1,200 points, or 5.0 percent, at 23,777.17. The broad-based S&P 500 slumped 4.6 percent to 2,749.88, while the tech-rich Nasdaq Composite Index tumbled 4.4 percent to 7,979.15. (Photo by Bryan R. Smith / AFP) (Photo by BRYAN R. SMITH/AFP via Getty Images)
Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.
The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.
Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.
The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.
The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.
The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.
The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.
Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.
In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.
“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.
As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.
Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.
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