Stocks rose just above flatline on Thursday, rebounding from losses as U.S. Treasury yields rose and investors awaited a speech from Federal Reserve Chairman Jerome Powell.
The Dow Jones Industrial Average (^DJI) was just above flatline, and the benchmark S&P 500 (^GSPC) rose 0.1%. The Nasdaq Composite Index (^IXIC), which has a high proportion of high-tech stocks, led the rise, rising 0.2%.
U.S. Treasury yields rose for a fourth day in a row, keeping stock prices under pressure as investors remained wary of developments in the Middle East conflict.
The benchmark 10-year bond yield (^TNX) approached 5% for the first time in 16 years, but the 2-year bond yield, which is a guide to interest rate expectations, soared to about 5.24%, the highest level since 2006. .
With the U.S. economy showing resilience, Powell’s comments Thursday will be scrutinized for any signs the Fed intends to raise rates again this year. This has led some strategists to question whether it is time for the central bank to raise its inflation target.
Read more: What the Fed’s rate hike pause means for bank accounts, CDs, loans, and credit cards
Investors are also keeping an eye on the potential impact of rising interest rates on corporate earnings as third-quarter earnings season begins.
Tesla (TSLA) CEO Elon Musk said Wednesday that higher borrowing costs may prevent customers from buying the company’s electric vehicles after the company’s profit fell short of expectations. He said he was concerned. Tesla shares were down about 8% in early trading.
Meanwhile, Netflix (NFLX) stock rose about 14% at the opening bell after the streamer posted a surge in subscribers and announced price hikes in the United States.
Shares of American Airlines (AAL) rose on Thursday morning’s earnings release, after the airline reported record third-quarter earnings. AT&T (T) stock soared after the company added more wireless subscribers than Wall Street expected.
The U.S. labor market continues to show strength, with economic data showing weekly jobless claims at their lowest level since January.
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JUnemployment claims hit the lowest level since January, adding to strong economic data
The number of people filing unemployment claims can fluctuate based on weekly unemployment claims numbers.
But overall, this data point tells a clear story that the labor market has remained strong since January and that any weakness has not been caused by layoffs.
The number of jobless claims filed last week was 198,000, lower than economists’ consensus estimate of 210,000 claims and the lowest level since January. Nancy Vanden Houten, chief U.S. economist at Oxford Economics, said this is just one of several economic indicators that could tip the Federal Reserve into raising interest rates again.
“Our current expectations are no further rate hikes and we believe that a rate hike at the November 1 meeting is unlikely,” Vanden Houten said in a note on Thursday. “Recent economic data on strength in September jobs and retail sales increases the likelihood of additional rate hikes at subsequent meetings, raising the possibility that the Fed will begin cutting rates later than expected next year. The Fed will need to see labor market conditions soften further to convince them that inflation is back on a sustainable path to 2% before cutting rates. ”
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Netflix stock soars as profit margins increase and prices rise
Netflix stock soared more than 15% in morning trading after a rough quarter for the streaming giant.
Yahoo Finance’s Alexandra Canal reports:
Netflix (NFLX) said it has more room in its operating margins as the company focuses on initiatives such as cracking down on password sharing, cheaper ad-supported slots and newly announced price hikes. .
“We don’t think we’re close to the upper end of our margins,” Netflix Chief Financial Officer Spencer Newman said on the company’s third-quarter earnings call Wednesday. There is a way to go.”
Operating margin, a key measure of profitability, reached 22.4% in the quarter, slightly above Netflix’s own expectations of 22.2%. The company said it expects full-year operating margins to reach 20%, which is on the high end of previous expectations of 18% to 20%.
The update is an encouraging sign for investors who have been paying close attention to Neuman’s profit margin outlook since the company doubled its full-year profit margin last month to a range of 18% to 20%. The consensus forecast is just under 20% for the full year 2023.
Starting Wednesday, Netflix announced that its basic and premium plans in the U.S. will cost $11.99 and $22.99, respectively. This is an increase from the previous price range of $9.99 and $19.99. Netflix’s $6.99 ad-supported plan and $15.49 standard plan remain the same price.
Management said the increase, along with other metrics such as operating margin, will lead to improvement in average revenue per member (ARM), which declined 1% year-over-year in the quarter.
“Although price increases have mostly paused with the rollout of paid sharing, our overall approach remains the same. As we address a wide range of needs with a wide range of prices and plans, we offer more value to our members. , from time to time we ask our members to: Pay us a little more,” the company said in a letter to shareholders.
“Our starting price is very competitive compared to other streamers, such as $6.99 per month in the US, which is much lower than the average price of a single movie ticket,” the letter continued.
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Tesla stock falls after third-quarter earnings announcement
Tesla (TSLA) stock fell more than 8% on Thursday after the company released its latest quarterly results.
Yahoo Finance’s Pras Subramanian reports:
The electric vehicle maker missed out on both sales and profits, but the company revealed that Cybertruck deliveries are on schedule on November 30 of this year.
Regarding the quarter, Tesla reports $23.4 billion in sales, which fell short of analysts’ expectations of $24.06 billion. However, revenue increased 13% year over year. From a profitability perspective, Tesla reported adjusted earnings per share (EPS) of $0.66 versus expectations of $0.74 and adjusted net income of $2.3 billion versus expectations of $2.56 billion.
The decline in profitability could be attributed to expected downward pressure on margins since Tesla began cost-cutting efforts late last year. Tesla reported a third-quarter gross profit margin of 17.9%, slightly below Wall Street’s expectations of 18.0%. Last quarter, Tesla’s gross margin was 18.2%.
“The quarter itself delivered cars [gross margin] (ex-credit) is 16.3% and the Street is 17.6%, so margins should be stable over the next few quarters, but Tesla hasn’t committed to ending its price cuts, which could be a big problem for the stock in the near term. Yes, there is an overhang. ” Wedbush analyst Dan Ives wrote in a note issued Thursday morning. Wedbush lowered Tesla’s price target from $350 to $310 following third-quarter results.
Looking to future products, Tesla has revealed that Cybertruck deliveries are on track for later this year. Distribution starts from November 30th. On the conference call, Musk said it would take 1 to 18 months for the Cybertruck to become cash flow positive, and predicted production would reach an annual production rate of 250,000 vehicles by 2025. Musk added that Tesla will face “significant challenges” in reaching mass production of the Cybertruck.
“Given the company’s comments that the current macro environment and rising interest rates could limit its growth (including the speed at which it operates its factories), and that the initial launch of the Cybertruck may be delayed, , we believe the third-quarter report will further heighten medium-term investors’ concerns,” Goldman analyst Mark Delaney wrote in a note to investors. Following the third-quarter report, Delaney lowered Tesla’s price target from $265 to $235.
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Stock prices start rising
Stocks rose at market open on Thursday as investors digested mixed earnings results from big tech companies and awaited a major speech from Federal Reserve Chairman Jerome Powell.
The Dow Jones Industrial Average (^DJI) was just above flatline, and the benchmark S&P 500 (^GSPC) rose 0.1%. The Nasdaq Composite Index (^IXIC), which has a high proportion of high-tech stocks, led the rise, rising 0.2%.
Government bond yields rose. The 30-year Treasury yield (^TYX) is above 5% and the 10-year Treasury yield (^TNX) is above 4.9%, hovering near their highest levels since 2006.
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Netflix, AT&T, Peloton: Trending stocks in pre-market trading
Below are some of the stocks leading Yahoo Finance’s trending ticker page in Thursday’s pre-market trading.
Netflix (NFLX): Shares rose 13% in premarket Thursday after the company said it added nearly 9 million subscribers in the third quarter.
AT&T Inc. (T): Shares rose 4% premarket after the company raised its full-year free cash flow forecast and reported better-than-expected quarterly subscriber growth.
Peloton (PTON): The stock price fell more than 5%. The fitness group announced Wednesday a partnership with the NBA and WNBA for next season.
Nokia Oyj (NOK): Nokia stock fell 4% on Thursday. Nokia announced that it will cut up to 14,000 jobs to cut costs.
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KStock futures little changed ahead of Powell speech
U.S. stock futures hovered above the flatline on Thursday as U.S. Treasury yields continued to rise, pushing up profits as investors looked forward to comments from Federal Reserve Chief Jerome Powell.
Dow Jones Industrial Average (^DJI) futures rose 0.03% (11 points) and S&P 500 (^GSPC) futures rose 0.06%. The tech-heavy Nasdaq 100 (^NDX) contract rose 0.21%.
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