The S&P 500 ended lower on Thursday after weekly jobless claims fell to a near 18-month low, allaying fears of a slowing economic recovery, but also stoking worries the Fed could move sooner than expected to scale back its accommodative policies.
Canada’s TSX also closed with losses, with industrials and consumer staples among the biggest decliners. The S&P/TSX composite index closed down 36.52 points to 20,705.27 a day before employment numbers are released for August.
Eight of the 11 major sectors of the TSX lost ground. Staples lost 1.2 per cent as shares of Empire Co. Ltd. lost 3.4 per cent after it reported lower first-quarter profits.
Industrials fell 1.1 per cent as shares of Canada’s two largest railways moved lower. Canadian Pacific Railway Ltd. decreased 3.9 per cent while Canadian National Railway Co. was down 2.1 per cent.
Offsetting the losses was a 2.4 per cent gain by Air Canada even though U.S. airlines tempered investor expectations about earnings over the next number of months because of COVID-19.
Materials was down even though metals prices rose.
The December gold contract was up US$6.50 at US$1,800.00 an ounce and the December copper contract was up 5.25 cents at US$4.29 a pound.
Technology was the leading sector, gaining nearly one per cent as shares of Lightspeed increased 6.2 per cent in a reversal from Wednesday’s movement.
Energy was also higher as natural gas prices moved above US$5 per mmBTU for the first time in more than seven years.
Shares of Tourmaline Oil Corp. increased 1.9 per cent on the natural gas gains while Suncor Energy Inc. rose 1.4 per cent.
The U.S. Labor Department said initial claims for state unemployment benefits dropped 35,000 to a seasonally adjusted 310,000 for the week ended Sept. 4, the lowest level since mid-March 2020. That suggested that job growth could be hindered by labor shortages rather than cooling demand for workers.
Microsoft, Apple and Amazon each declined, all three among the stocks weighing most on the S&P 500 and Nasdaq.
The S&P 500 real estate and healthcare indexes were among the poorest performers of 11 sectors, while financials and materials made modest gains.
JPMorgan, Wells Fargo, Citi Group and Morgan Stanley each rose, tracking a slight rise in benchmark bond yields following the claims data.
“The problem with the market these days is it’s rotating more than it’s moving. Today, because of the jobs claims report, everyone is buying cyclical stocks,” said Jay Hatfield, chief executive of Infrastructure Capital Management in New York. “We see it as a rangebound market, between 4,400 and 4,600 (on the S&P 500).”
Investors have become more worried in recent sessions after a recent monthly jobs report showed a slowdown in U.S. hiring, suggesting the economic recovery may be losing steam faster than expected. Also dragging on sentiment has been uncertainty about when the U.S. Federal Reserve’s will scale back massive measures enacted last year to shield the economy from the coronavirus pandemic.
Unofficially, the Dow Jones Industrial Average fell 147.25 points, or 0.42%, to 34,883.82, the S&P 500 lost 20.44 points, or 0.45%, to 4,493.63 and the Nasdaq Composite dropped 38.17 points, or 0.25%, to 15,248.46.
Lululemon Athletica soared after providing a strong annual forecast, as demand for its yoga pants remains strong despite the easing of coronavirus restrictions.
Reports that Beijing slowed down approval for all new online video games sent shares of U.S.-listed gaming stocks Activision Blizzard Inc, Electronic Art Inc, and Take-Two Interactive Software Inc down more than 1%.
Digital Realty slid after the data center REIT announced a public offering of 6.25 million shares.
Oil prices fell to a two-week low as China rolled out a plan to release state oil reserves, the U.S. weekly crude draw was smaller than expected and U.S. Treasuries rallied as investors sought safer assets.
In volatile trade, Brent futures fell $1.15, or 1.6%, to settle at $71.45 a barrel. U.S. West Texas Intermediate (WTI) crude fell $1.16, or 1.7%, to $68.14. That was the lowest settlement for both since Aug. 26.
“A tremendous auction in the 30-year bond with the lowest interest rate print since January put a significant scare into the (oil) market in what looks like a flight to safety,” said John Kilduff, partner at Again Capital LLC in New York.
After falling over $1 a barrel early in the session, both benchmarks turned positive following reports that a ship was stuck in the Suez Canal. The ship was refloated and caused no delays.
Oil held those gains following a U.S. report showing a much bigger-than-expected gasoline draw and on the continued slow return of U.S. production after Hurricane Ida.
But oil futures fell over $1 a barrel again soon after strong demand in the afternoon $24 billion U.S. 30-year bond auction pushed yields down to 1.91%. Investors sold riskier assets like oil and stocks.
Oil was pressured when China’s state reserves administration said it would release crude reserves in phases via public auction to help domestic refiners control costs.
“China tapping their crude oil reserves is huge news and should provide much relief for domestic refiners and chemical companies,” said Edward Moya, senior market analyst at OANDA.
U.S. crude stockpiles declined by 1.5 million barrels in the week to Sept. 3, according to government data, much less than the 4.6-million barrel draw analysts forecast. [API/S] [EIA/S]
The much bigger-than-expected 7.2 million barrel drop in gasoline inventories provided support for oil prices. Analysts forecast gasoline stocks would decline by just 3.4 million barrels.
The yield on 10-year Treasury notes was down 4.3 basis points at 1.297%, after hitting a daily low of 1.287%, its lowest since Sept. 3.
The yield on the 30-year Treasury bond was down 5.4 basis points at 1.898% after falling to 1.885%, its lowest since Aug. 31.
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Netflix (NFLX) stock slid as much as 9.6% Friday after the company gave a second quarter revenue forecast that missed estimates and announced it would stop reporting quarterly subscriber metrics closely watched by Wall Street.
On Thursday, Netflix guided to second quarter revenue of $9.49 billion, a miss compared to consensus estimates of $9.51 billion.
The company said it will stop reporting quarterly membership numbers starting next year, along with average revenue per member, or ARM.
“As we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the company said.
Netflix reported first quarter earnings that beat across the board on Thursday, with another 9 million-plus subscribers added in the quarter.
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Subscriber additions of 9.3 million beat expectations of 4.8 million and followed the 13 million net additions the streamer added in the fourth quarter. The company added 1.7 million paying users in Q1 2023.
Revenue beat Bloomberg consensus estimates of $9.27 billion to hit $9.37 billion in the quarter, an increase of 14.8% compared to the same period last year as the streamer leaned on revenue initiatives like its crackdown on password-sharing and ad-supported tier, in addition to the recent price hikes on certain subscription plans.
Netflix’s stock has been on a tear in recent months, with shares currently trading near the high end of its 52-week range. Wall Street analysts had warned that high expectations heading into the print could serve as an inherent risk to the stock price.
Earnings per share (EPS) beat estimates in the quarter, with the company reporting EPS of $5.28, well above consensus expectations of $4.52 and nearly double the $2.88 EPS figure it reported in the year-ago period. Netflix guided to second quarter EPS of $4.68, ahead of consensus calls for $4.54.
Profitability metrics also came in strong, with operating margins sitting at 28.1% for the first quarter compared to 21% in the same period last year.
The company previously guided to full-year 2024 operating margins of 24% after the metric grew to 21% from 18% in 2023. Netflix expects margins to tick down slightly in Q2 to 26.6%.
Free cash flow came in at $2.14 billion in the quarter, above consensus calls of $1.9 billion.
Meanwhile, ARM ticked up 1% year over year — matching the fourth quarter results. Wall Street analysts expect ARM to pick up later this year as both the ad-tier impact and price hike effects take hold.
On the ads front, ad-tier memberships increased 65% quarter over quarter after rising nearly 70% sequentially in Q3 2023 and Q4 2023. The ads plan now accounts for over 40% of all Netflix sign-ups in the markets it’s offered in.
Netflix reported first quarter earnings after the bell on Thursday. REUTERS/Dado Ruvic/File Photo (REUTERS / Reuters)
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Oil prices initially spiked on Friday due to unconfirmed reports of an Israeli missile strike on Iran.
Prices briefly reached above $90 per barrel before falling back as Iran denied the attack.
Iranian media reported activating their air defense systems, not an Israeli strike.
Oil prices gave up nearly all of early Friday’s gains after an Iranian official told Reuters that there hadn’t been a missile attack against Iran.
Oil surged by as much as $3 per barrel in Asian trade early on Friday after a U.S. official told ABC News today that Israel launched missile strikes against Iran in the early morning hours today. After briefly spiking to above $90 per barrel early on Friday in Asian trade, Brent fell back to $87.10 per barrel in the morning in Europe.
The news was later confirmed by Iranian media, which said the country’s air defense system took down three drones over the city of Isfahan, according to Al Jazeera. Flights to three cities including Tehran and Isfahan were suspended, Iranian media also reported.
Israel’s retaliation for Iran’s missile strikes last week was seen by most as a guarantee of escalation of the Middle East conflict since Iran had warned Tel Aviv that if it retaliates, so will Tehran in its turn and that retaliation would be on a greater scale than the missile strikes from last week. These developments were naturally seen as strongly bullish for oil prices.
However, hours after unconfirmed reports of an Israeli attack first emerged, Reuters quoted an Iranian official as saying that there was no missile strike carried out against Iran. The explosions that were heard in the large Iranian city of Isfahan were the result of the activation of the air defense systems of Iran, the official told Reuters.
Overall, Iran appears to downplay the event, with most official comments and news reports not mentioning Israel, Reuters notes.
The International Atomic Energy Agency (IAEA) said that “there is no damage to Iran’s nuclear sites,” confirming Iranian reports on the matter.
The Isfahan province is home to Iran’s nuclear site for uranium enrichment.
“Brent briefly soared back above $90 before reversing lower after Iranian media downplayed a retaliatory strike by Israel,” Saxo Bank said in a Friday note.
The $5 a barrel trading range in oil prices over the past week has been driven by traders attempting to “quantify the level of risk premium needed to reflect heightened tensions but with no impact on supply,” the bank said, adding “Expect prices to bid ahead of the weekend.”
At the time of writing Brent was trading at $87.34 and WTI at $83.14.
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