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Oh Netflix.
NFLX isn’t part of the Mag 7 but it certainly qualifies as a spotlight stock and a megacap, which makes it important for broad market narratives. Last night they reported and disappointed. Shareholders weren’t pleased and the stock traded off 6% in after-hours trading and traded off about 10% in regular trading today. Yuck. S&P 500 futures were surprisingly resilient to the Netflix flop overnight and in the premarket. The S&P opened flat. Sellers took over the tape around 10:15 AM and Netflix chatter provided the headline for risk-off trades in US stocks. The index dropped as much as 80 points by the afternoon before the dip-buyers repaired some damage. Yields fell small across the curve today, perhaps in reaction to the stock market drop, but it wasn’t a big move in bonds. Capital flow was higher today, 118%.
Netflix didn’t burst the bubble but it definitely dampened the mood. For the special batch of megacap stocks that garner extra attention, Netflix deflated the notion that this group of stocks was going to turbocharge the earnings season rally. These spotlight stocks were supposed to be sure things. Now the thinking is that they are closer to 50/50s. They will still drive the broader index because of their significance but the upside result doesn’t appear assured.
We won’t have to wait long. Tesla reports tonight. Barring a geopolitical event, we’ll be speculating about the rest of the Mag 7 for the rest of the month and those speculations will move the tape.
I still think the longs have the advantage but maybe it’s too small to pile into?
At some point, the FOMC decision will come into play but it’s been priced as a near-certainty for so long, it’s going to take a very surprising press conference to shake up markets. I don’t see Powell doing that, nor does the rest of the market.
See you tomorrow.
-Mike
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