Wall Street stumbles on Netflix results, revived US-China trade tensions

By Stephen Culp

NEW YORK (Reuters) -Wall Street moved lower on Wednesday as a wave of mixed earnings, including Netflix’s disappointing results, dampened risk sentiment as investors assessed reports that the Trump administration is considering curbs on exports to China made with U.S. software.

All three major U.S. stock indexes extended their losses after the report, with weakness in tech and communication services stocks weighing the Nasdaq down most.

The new export curbs, which include a wide array of goods ranging from laptops to jet engines, are some of the measures being considered in retaliation against Beijing’s latest round of rare earth export restrictions, and mark yet another escalation of trade tensions between the world’s two largest economies.

“We’re still at near record valuations and in a seasonally weak patch,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “So I think you’re going to have more days like this where there’s just enough headwinds to put a dent in the bullish story.” 

On the earnings front, Netflix slid 9.9% after the streaming company missed quarterly profit expectations, raising concerns about stretched valuation.

Texas Instruments posted lower-than-expected revenue and profit forecasts, dragging the chipmaker’s shares down 8.1%.

The Philadelphia Semiconductor Index, which has outperformed the broader market this year driven by artificial intelligence fervor, tumbled 4.0%. The chip index touched a record high on Monday.

Tesla will be the first of the “Magnificent Seven” group of artificial intelligence-related momentum stocks to post third-quarter earnings when it reports after the closing bell. Collectively, the group accounts for over a third of the S&P 500’s total market capitalization.

Intuitive Surgical jumped 13.4% following the company’s third-quarter earnings beat.

AT&T fell 2.3% even as it added more wireless subscribers than expected for the third quarter.

Third-quarter earnings season is well underway, with 86% of the companies having reported beating Wall Street estimates.

Analysts currently expect third-quarter S&P 500 earnings growth, on aggregate, of 9.3% year-on-year, an improvement over the 8.8% annual growth estimate as of October 1, according to the most recent data from LSEG.

“I don’t think that earnings results, for even the companies that are being tagged today, are all that bad,” Mayfield added. “This is an example of what happens when you see estimates move up across the quarter and you go into an earnings season with a really high bar to be cleared.”

The Dow Jones Industrial Average fell 398.20 points, or 0.85%, to 46,526.54, the S&P 500 lost 63.13 points, or 0.94%, to 6,672.22 and the Nasdaq Composite lost 368.22 points, or 1.60%, to 22,585.44. 

Of the 11 major sectors of the S&P 500, tech was down the most, with consumer staples enjoying the biggest percentage gain.

Beyond Meat’s heavily shorted stock jumped 7.7%, prompted by a wave of buying among retail traders which echoed the meme stock frenzy in recent years.

Declining issues outnumbered advancers by a 1.95-to-1 ratio on the NYSE. There were 109 new highs and 58 new lows on the NYSE.

On the Nasdaq, 1,074 stocks rose and 3,517 fell as declining issues outnumbered advancers by a 3.27-to-1 ratio. 

The S&P 500 posted 13 new 52-week highs and three new lows while the Nasdaq Composite recorded 39 new highs and 104 new lows.

(Reporting by Pranav Kashyap and Twesha Dikshit in Bengaluru; Editing by Marguerita Choy and Shilpi Majumdar)

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