S&P 500 holds above 4,450 while Nasdaq 100 underperforms as Netflix shares take post-earnings battering

• US equities were mixed on Wednesday, with the Nasdaq 100 weighed by over 35% drop in Netflix shares post-earnings.
• The S&P 500 was flat above 4,450 and the Dow advanced back above 35,000 amid strong earnings elsewhere.
• The weaker US dollar and lower long-term yields also made for a more favourable backdrop for equities.

US equity markets were mixed on Wednesday, with a steep more than 35% drop in Netflix shares weighing on the Nasdaq 100 index and tech stocks more broadly after the company reported a surprise drop in subscribers. The company blamed its first decline in subscribers in decades on the Russo-Ukraine war and competition from rivals such as Disney+, though analysts also noted the global post-pandemic “reopening” effect also taking its toll.

The Nasdaq 100 index was last trading lower by about 1.4% and flirting with the 14,000 level, with the 50-Day Moving Average at 14,250 having acted as a ceiling to the price action throughout this week. In terms of the other major US indices; the S&P 500 was last trading flat just above the 4,450 level, having failed an earlier attempt to test its 21DMA in the 4,490s, while the Dow was last up about 0.6%, and trading above its 200DMA just above 35,000.

Decent earnings from consumer staples giant Procter & Gamble and IT giant IBM helped lift cyclical and value equity market sectors which are disproportionately represented in the Dow. The S&P 500 GICS Consumer Staples sector was last up 1.4%, Real Estate was last up 1.8% and Health Care was last up 1.2%.

Profit-taking induced weakness in the US dollar and a retracement back from recent highs in US yields, particularly at the long end of the curve, made for a positive backdrop for equity markets. Fed speak on Wednesday was hawkish, but this is what markets have come to expect at this point. The latest Fed’s Beige Book also pointed to still very elevated inflationary pressures, but this didn’t unnerve investors.

Looking ahead, the main focus for investors on Thursday will be on remarks from Fed Chair Jerome Powell, who is expected to signal 50 bps rates hikes at the next few Fed meetings (as other policymakers have given the nod to in recent days). There will also be some tier two economic data releases, including weekly jobless claims and the April Philly Fed Manufacturing survey.

Most immediately, however, Tesla is scheduled to post earnings after the bell on Wednesday and investors will be praying that there isn't a repeat of what happened to Netflix’s share price.