Marketbites: Earnings Push Markets Higher, Netflix & Lockheed Soar
Portfolio Manager Commentary:
Stocks had a volatile trading day yesterday before ending the day in the green. Tech stocks had the biggest swings as shown with the Nasdaq climbing 2.7% to start the day, at one point turning negative, and then climbing back up again to finish up 0.90%. The S&P and Dow each rose 1.1% on Tuesday. Many large companies gave earnings reports yesterday; including Netflix, JNJ, and Lockheed Martin.
Netflix was able to add 2.4 million new subscribers, more than doubling expectations. This is a strong rebound for Netflix coming off two quarters with a net loss in subscribers. The strongest growth came from Asia where it added 1.43 million new subscribers. Netflix gained roughly 10% after hours.
JNJ was also able to beat earnings estimates with an EPS of $2.55 as opposed to an expected EPS of $2.48. They did, however, narrow their earnings outlook as they maintain caution due to the strong dollar. Additionally, the company discussed plans to spin off its Consumer Health division as a stand-alone company under the name Kenvue next year.
Lockheed Martin’s results were fairly on par with expectations and investors still sent the stock soaring up 9% on the day. A stock buyback of $4 billion was announced to bring the amount for this year to $8 billion. The buyback paired with fine guidance and Lockheed’s exposure to the defense industry were ultimately what brought the stock up so much.
Chart of the Day:
Many banks are reporting third quarter investment banking revenue that has decreased significantly from a year ago. Goldman Sachs, for example, is an investment banking and trading powerhouse who has long been able to generate massive profits in times when markets reward risk taking, yet, they reported a 57% drop in investment-banking revenue. These bad results come mainly from this battered economy which has created a risk-off environment. The sharp drop in deal making marks a contrast from the boom of the pandemic, when a surging stock market encouraged companies to go public or buy their rivals.