Money and Markets

US stock futures slip as Netflix tumbles 27%, and rising bond yields unnerve investors

Business Insider US
Netflix shed subscribers in the first quarter. Rafael Henrique/SOPA Images/LightRocket via Getty Images
Netflix shed subscribers in the first quarter. Rafael Henrique/SOPA Images/LightRocket via Getty Images
  • US stock futures slipped on Wednesday after Netflix earnings disappointed and as bond yield gains unnerved investors.
  • Netflix said its subscriber numbers fell for the first time in a decade in the first quarter, sending the stock tumbling.
  • The IMF sharply downgraded its predictions for global growth, as the Ukraine war clouds the outlook.
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US stock futures slipped on Wednesday as investors digested downbeat earnings from Netflix and a sharp rise in bond yields.

S&P 500 futures were down 0.06% after paring steeper earlier losses. The benchmark US stock index jumped 1.61% on Tuesday as companies' earnings updates by and large beat estimates.

Dow Jones futures were roughly flat on Wednesday, while futures for the tech-heavy Nasdaq 100 index dropped 0.16%.

Netflix fell 27.58% in premarket trading after it said it had lost subscribers for the first time in a decade.

The streaming media giant also forecast its subscriber count would drop by around two million in the first quarter, with stiff competition and rising living costs weighing on growth. Disney — which has a major streaming service — fell 4.49% premarket as investors fretted about the health of the industry.

Also weighing on investors' minds was a sharp rise in government bond yields, driven by expectations that the Federal Reserve will hike interest rates aggressively this year to tame inflation.

So-call real yields on 10-year government bonds — the amount that an investor will receive when taking inflation into account — briefly turned positive on Tuesday for the first time since 2020. Analysts said positive real yields could weigh considerably on stocks, given that investors can finally make money on bonds again.

The yield on the 10-year US Treasury note was down 4.3 basis points on Wednesday at 2.898%, hovering around its highest level since late 2018.

Also on investors' radar was the International Monetary Fund's downgrade of its global growth predictions on Tuesday. The Fund now thinks the world economy will grow 3.6% this year, compared with a previous 4.4% forecast.

"Global economic prospects have been severely set back, largely because of Russia's invasion of Ukraine," Pierre-Olivier Gourinchas, the IMF's director of research said.

Europe's continent-wide Stoxx 600 stock index rose 0.75% in morning trading after falling on Tuesday. Overnight in Asia, China's CSI 300 lost 1.55%, but Tokyo's Nikkei 225 moved up 0.86%.

Elsewhere in markets, oil prices rose as the market continued to be rocked by uncertainties about the global economy and Russia's war in Ukraine.

Brent crude was up 0.75% at $108.05 a barrel, while WTI crude was 0.81% higher at $103.39 a barrel.

Earnings season continued in the US, with Tesla and Procter & Gamble due to report on Wednesday. Analysts said relatively strong earnings so far had supported stocks in recent days.

"Although still early in the season, there are contrasting factors at play, with an estimated 80% of companies so far exceeding expectations," Richard Hunter, head of markets at trading platform Interactive Investor, said.

"Meanwhile, the general consensus remains rooted to the likelihood of the Federal Reserve ratcheting up the pressure on inflation with higher than expected interest rate rises," he said.

"The country's ability to withstand such increases without derailing the economic recovery remains central to concerns."

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