The Dow Jones average suffered its worst beating since October 2020 on Friday, capping a fourth straight weekly decline, as mostly positive earnings reports failed to ease worries about rising inflation. Major indexes dropped after speech by Fed Chairman Jerome Powell on Thursday that signaled support for 0.5% rate hike is very much on the table since taming inflation is “absolutely essential.” Rates jumped on Powell’s remarks before the benchmark 10-year yield eased slightly on Friday to about 2.9%. In the week just concluded, the Dow finished down 1.9% in its ninth losing week of the last 11, while the S&P 500 fell 2.8% and the Nasdaq sank 3.8%.
Corporate news:
- Twitter says it’s being acquired by Elon Musk for $44 billion: Twitter (TWTR) announced on Monday that it has entered into a deal to be acquired by Tesla CEO, Elon Musk, for $44 billion. Twitter shareholders will receive $54.20 per share, and when the deal is finalized the social network will become a privately held company. However it might be just the beginning of wave of acquisitions by activist billionaire investors and other large cap companies, so it might be good time to start looking for companies that fell in value recently and might be targets for acquisitions.
- Changes in Streaming Industry: Netflix (NFLX) lost more than a third of its value this week, shedding more than $50bn in market capitalization. The day after earnings, shares tumbled 35%. The stumble in the long-time dominant force in streaming may open the door for competitors to take the lead. But Wall Street is cautious, with other major streaming stocks all tumbling last week as well. Walt Disney (DIS), HBO Max parent Warner Bros. Discovery (WBD) and Paramount (PARA) all fell more than 5% yesterday. However, if any of these streaming companies manages to present high growth during their earnings calls, they might be able to steal a lot of investors who were betting on NFLX before.
- Meta (FB) investors brace for a difficult quarter: Meta lost a record $230bn in market value after a disappointing earnings report in February, in which it revealed Facebook had recorded its first-ever drop in daily user numbers. Reaching Trillion-dollar market cap just few months ago Meta is down to around $532 billion. While investors will be eagerly watching Meta’s first quarter report on Wednesday for signs of recovery, a “full turnaround is not expected”, said Debra Williamson, principal analyst at market research firm Insider Intelligence. Meta is still facing many problems: Mark Zuckerberg has already warned that new privacy rules from Apple could cost the company $10bn in lost sales this year. Meta also faces strong competition from TikTok. Being banned in Russia could also hurt the company. Stock price is down more than 12% in the last week alone, so if the management does not surprise investors during the earnings call this Wednesday, we could see FB stock struggle further.
Earnings:
Tuesday, April 26 – Centene (CNC), Alphabet (GOOG), General Motors (GM), Chipotle (CMG), Microsoft (MSFT), UPS (UPS), PepsiCo (PEP), General Electric (GE) and Visa (V).
Wednesday, April 27 – Boeing (BA), Humana (HUM), T-Mobile US (TMUS), Ford Motor (F), Meta Platforms (FB), Kraft Heinz (KHC), and Amgen (AMGN).
Thursday, April 28 – Twitter (TWTR), Comcast (CMCSA), Merck (MRK), Caterpillar (CAT), Northrop Grumman (NOC), Amazon (AMZN), Apple (AAPL), Intel (INTC), Altria (MO), Domino’s Pizza (DPZ) and PayPal (PYPL).
Friday, April 29 – AbbVie (ABBV), Bristol-Myers Squibb Company (BMY), Exxon Mobil (XOM), Chevron (CVX), Phillips 66 (PSX) and AbbVie (ABBV).
