Here are five things you must know for Wednesday, April 20:
1. -- Stock Futures Mixed As Treasury Yields Rise, Earnings Underwhelm
U.S. equity futures traded mixed Wednesday, while Treasury bond yields crept modestly higher and oil prices jumped, as investors kept risk appetite in check amid a bumpy start to the first quarter earnings season and ongoing concerns over the impact of a hawkish Federal Reserve.
Tech stocks were also on the move, with the Nasdaq called modestly lower, after a grim first quarter earnings report and outlook from Netflix (NFLX) that more than offset an optimistic set of numbers this morning from ASML NV (ASML), which noted robust demand for its extreme ultraviolet lithography systems, or EUV, machines, which design complex chips used by, sector titans such as Samsung Electronics, Intel (INTC) and Taiwan Semiconductor (TSM) and cost as much as €100 million each
The focus on tech stocks was paired with another significant move in the bond market, where benchmark 10-year note yields held at 2.90% after turning their first "real yield" in late Tuesday trading -- a move that occurs when the yield remains positive after subtracting for inflation expectations -- for the first time in more than two years.
Such a move makes stocks less attractive than risk-free government bonds, and comes during a disappointing start to the first quarter earnings season, where collective S&P 500 profits are only likely to grow 6.1% from last year to a share-weighted total of $432.2 billion, according to Refinitiv data, a pace that would be down sharply from the 32.1% clip recoded over the final three months of last year.
Elsewhere, global oil prices added to recent gains in overnight trading, with WTI crude futures for June delivery rising 95 cents to $103.00 per barrel, ahead of today's Energy Department data on domestic stockpiles. Last night, the American Petroleum Institute said U.S. inventories fell by 4.5 million barrels over the week ending April 15.
In Europe, the region-wide Stoxx 600 was marked 0.58% higher in early Frankfurt trading as a series of solid earnings, a well as a weaker euro, provided initial support, while the MSCI ex-Japan benchmark ended its session with a modest 0.25% advance.
On Wall Street, futures contacts tied to the Dow Jones Industrial Average indicating a modest 45 point opening bell gain while those linked the S&P 500, which is down 1.5% for the month, are priced for a 1 point dip. Futures linked to the tech-focused Nasdaq are looking at a 5 point opening bell move to the downside.
2. -- Netflix Shares Pummeled As Subscriber Exodus Prompts Advertising Re-Think
Netflix (NFLX) were marked sharply lower in pre-market trading after the online streaming service posted the first decline in annual subscriber growth in more than a decade late Tuesday, clouding a stronger-than-expected first quarter earnings report.
The group said it lost 200,000 global subscribers over the period, missing the Street estimate of 2.5 million gain, and taking the overall total to 221.64 million. Around 700 million of those were the result of cutting its service in Russia.
The company said it will lose another 2 million global net paid additions over the three months ending in June, compared to a consensus market forecast of 2.7 million.
To stem the flow of departing customers, CEO Reed Hastings said Netflix would, for the first time, consider offering a lower-priced version of the service that would displays ads during programming.
"Those who have followed Netflix know that I've been against the complexity of advertising, and a big fan of the simplicity of subscription," Hastings told investors on a conference call late Tuesday. "But, as much as I'm a fan of that, I'm a bigger fan of consumer choice."
Netflix shares were marked 26% lower in pre-market trading to indicate an opening bell price of $258.00 each, the lowest since October of 2019.
3. -- IBM Shares Rise After Solid Earnings, Robust Cloud Revenue Outlook
International Business Machines (IBM) shares moved higher in pre-market trading after the cloud-computing focused tech giant posted stronger-than-expected first quarter earnings
IBM said revenues for the three months ending in March fell 20% from last year to $14.2 billion, but topped the Street consensus forecast of $13.85 billion, thanks to double-digit gains for its software and consulting segments. IBM shed its legacy infrastructure business to focus on cloud computing growth last year, so the comparable revenue gain was around 8% when the infrastructure business is excluded. Adjusted earnings of $1.40 per share also beat Street forecasts by around 2 cents.
Looking ahead, IBM said revenue growth will likely hit the upper end of its "high single digit" growth forecast, even while taking a hit of a "few hundred million" from the suspension of its services in Russia, with free cash flow generation in the region of $10 billion to $10.5 billion.
"IBM’s revenue results were better than we anticipated, particularly consulting revenues, though we thought margins were disappointing," said BMO Capital Markets analyst Keith Bachman, who carries a 'market perform rating with a $152 price target on the stock. "We continue to harbor concerns on the durability of Software growth."
IBM shares were marked 1.9% higher in pre-market trading to indicate an opening bell price of $131.50 each.
4. -- Tesla Q1 Earnings On Deck With Margins, Outlook In Focus
Tesla (TSLA) shares edged lower in pre-market trading ahead of the clean-energy carmaker's first quarter earnings after the close of trading Wednesday with investors focused on the group's profit margins following record deliveries and rising input costs.
Tesla's main Shanghai factory has been closed for several weeks amid China's ongoing Covid surge, and is only now getting back to its full output capacity, while rising costs for everything from battery components to shipping rates is likely to trim automotive margins over the three months ending in March, although series of Tesla price hikes may help mitigate some of those input cost increases.
Analysts are looking for Tesla to post a bottom line of $2.26 per share on record revenues of $17.76 billion, but the impact of the Shanghai closure, delays in getting its Berlin factory online and slumping China demand will very likely weigh on the group's second quarter outlook.
"While we think price increases will help to blunt the impact of cost inflation in 2022, we nevertheless expect a net negative, especially given the timing lag of price increases," said Credit Suisse analyst Dan Levy, who has a $1,125 price target with an 'outperform' rating on Tesla.
"We believe the stock may trade near-term on margin dynamics – to the extent raw materials dent the margin story beyond expectations, the stock could be negatively impacted," he added.
Tesla shares were marked 0.45% lower in pre-market trading to indicate an opening bell price of $1,023.50 each.
5. -- Twitter Shares Jump As Musk Drops Another 'Tender' Hint
Twitter (TWTR) shares moved higher again in pre-market trading after billionaire Tesla CEO Elon Musk dropped yet another hint that he plans to take his $43 billion takeover bid for the social media group directly to investors.
After Tweeting the words "Love me Tender" to his 81 million followers last week, Musk again alluded to the word 'tender' in a Tweet channeling F. Scott Fitzgerald's 1934 novel 'Tender is the Night'.
The New York Post reported Tuesday that Musk is prepared to put up between $10 billion and $15 billion of his estimated $300 billion fortune to buy Twitter, which he has said is worth $54.20 per share, but is facing difficulty in convincing other investment partners to fund his acquisition.
Earlier media reports suggested that Apollo Global Management has expressed willingness to use its credit investment platform to support any move to buy the micro-blogging website, including Musk's unsolicited $43 billion take-private proposal.
Twitter shares were marked 1.2% higher in pre-market trading to indicate an opening bell price of $46.70 each.
