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U.S. stock index futures moved lower in early morning trading on Friday, following a disappointing earnings report from Netflix, building on the major averages’ declines during regular trading.
Futures contracts tied to the Dow Jones Industrial Average fell by 100 points, or 0.3%. S&P 500 futures lost 0.42%, while Nasdaq 100 futures declined 0.78%.
Shares of Netflix tumbled 19% in premarket trading Friday after the company’s fourth-quarter earnings report showed a slowdown in subscriber growth. Its competitors shares also declined, with Dow component Disney, which operates the Disney+ streaming service, off 3.5% premarket.
Peloton, meantime, plunged 23.9% during regular trading after CNBC reported that the company is temporarily halting production of its fitness products.
However, the maker of interactive fitness bicycles and treadmills saw shares rebound 7.3% in Friday’s premarket. Quarterly earnings saw revenue in line with estimates, and CEO John Foley denied the report but acknowledged Peloton is deploying “significant corrective actions” to address slowing demand for at-home exercise. Stifel upgraded the stock, saying it has “over corrected.”
During regular trading Thursday, the Dow shed 313 points, or 0.89%. At one point during the session, the 30-stock benchmark was up more than 450 points. A similar reversal played out for the other major averages. The S&P declined 1.1% after earlier advancing 1.53%. The Nasdaq Composite ended the day with a loss of 1.3%, reversing a prior move that had the tech-heavy index up 2.1%.
“The market has been flashing faulty signals for the past few weeks and it seems as if the broader indices are finally breaking down,” said Scott Redler of T3 Live. The S&P 500 closed below 4,500 on Thursday for the first time since October 18, which Redler said is important from a technical standpoint and “opens the door for a targeted move to at least 4,320, which would take the S&P down 10%.”
Thursday’s slide puts the Nasdaq Composite further in correction territory — more than 10% below its November record — as rising rates pressure technology stocks since future profits begin to look less attractive.
The yield on the benchmark 10-year Treasury touched 1.87% Thursday, ahead of the Federal Reserve’s two-day meeting next week.
“While a handful of rate hikes over the next year or two would represent a shift in Fed policy, we wouldn’t consider policy restrictive and we don’t expect the initial rate increase to derail the economic recovery,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. However, he added that rate hikes will inject volatility into the market.
Both the Dow and S&P 500 are on track for a third straight week of losses. The Nasdaq Composite is down nearly 5% on the week, putting it on track for its fourth-straight losing week and largest weekly loss since Oct. 2020. Small caps have also been hit hard, and the Russell 2000 is on track for its worst week since June 2020.
Amid the sell-off in technology names, some believe there’s value to be had in select stocks.
“With the broader Nasdaq in correction territory, we see opportunities in specific areas of the tech sector, such as semiconductors, cloud stocks and mega-cap stocks,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management. But he was quick to note that he does not see the pullback as a “widespread buy the dip moment.”
On the earnings front, Schlumberger will post results before the market opens on Friday. The economic calendar is light, with exports sales due at 8:30 a.m. ET and the index of leading economic indicators out at 10 a.m.
– CNBC’s Patti Domm contributed reporting.
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