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U.S. stock futures tumble as 10-year Treasury yield tops 5%

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U.S. stock futures pointed to a cautious start on Monday, on the heels of a rough week for equities, as the 10-year Treasury yield pushed past the psychologically important level of 5% for the first time since 2007.

Investors are facing a crucial earnings week, with big tech names due to report.

How stock futures are trading

  • S&P 500 futures
    ES00,
    -0.53%

    fell 27 points or 0.6%, to 4,221.25
  • Dow Jones Industrial Average futures
    YM00,
    -0.56%

    dropped 203 points, or 0.6%, to 33,054
  • Nasdaq-100 futures
    NQ00,
    -0.56%

    fell 112 basis points, or 0.7%, to 14,551

On Friday, The Dow Jones Industrial Average
DJIA
fell 286.89 points, or 0.9%, to close at 33,127.28. The S&P 500
SPX
shed 53.84 points, or 1.3%, to finish at 4,224.16. The Nasdaq Composite
COMP
dropped 202.37 points, or 1.5%, to end at 12,983.81.

What’s driving markets

The 10-year yield
BX:TMUBMUSD10Y
jumped 9 basis points to push past the crucial 5% level on Monday, last trading at 5.013%. That’s the highest level in 16 years.

The 10-year yield finished last week with the biggest weekly rise since April, climbing to near the psychologically important level of 5% as Middle East tensions drove some haven purchases.

“Higher for longer has been hitting home of late, with the back end of the yield curve on the rise in response to shifting expectations around the timing of a Fed rate cut. With energy prices on the rise in the face of a potentially drawn out conflict in the Middle East, there is a strong chance that we see inflation continue to push higher,” said Joshua Mahony, chief market analyst at Scope Markets, in emailed comments.

“With interest rates expected to remain elevated for some time yet, the US treasury will also be facing a rapidly inflating debt that questions whether US bonds are truly the reliable haven they have always been perceived to be,” he said.

Last week saw all three major benchmarks record their largest percentage drops since the week ended Sept. 22, with the Nasdaq sinking 3.2% and the S&P 500 dropping 2.4%, pressured by the bond yield climb and worries about an expanding Israel-Hamas war.

Two Israeli hostages were released over the weekend and some initial aid got through to Gaza, with signs a ground invasion by Israel has been delayed. Oil prices
CL.1,
-0.67%

BRN00,
-0.50%

were flat.

Rising yields have also surrounded worries that another interest rate hike is en route, following comments from Chairman Jerome Powell last week. The data calendar is empty for Monday, but the week will bring updates on the housing market, growth, but also the Fed’s preferred inflation gauge, the personal consumption expenditures price index, due Friday.

On the earnings front, an important batch of results is rolling out this week that could determine the course of the remaining third-quarter earnings season, with Microsoft Corp.
MSFT,
-1.40%

and Google parent Alphabet Inc.
GOOGL,
-1.56%

reporting Tuesday, Meta Platforms Inc.
META,
-1.33%

reporting Wednesday and Amazon.com Inc.
AMZN,
-2.52%

on Thursday. Market optimism has wavered following mixed bank earnings.

Read: Big-tech results will decide ‘where we go from here’ amid investor caution. They would fall if it weren’t for this one company

And then there are the technical factors for investors to fret about, with the S&P 500 closing below the 200-day moving average, seen by many Wall Street chartists as the dividing line between longer-term uptrends and downtrends.

“The index is now just 1% away from falling below the bull boundary around 4,190,” Michael Kramer, found of Mott Capital Management, told clients in a note. He said the next stop for the index could be 4,183.

 

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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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.

The Canadian Press. All rights reserved.

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All Magic Spells (TM) : Top Converting Magic Spell eCommerce Store

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