Daily Markets: Netflix Pops, January Flash PMI Data, and More Earnings

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed. Japan’s Nikkei continues to take a break from setting multi-decade highs as the index shed another 0.80% and South Korea’s KOSPI dipped 0.36% by today’s close. Australia’s ASX All Ordinaries (0.08%) and Taiwan’s TAIEX (0.01%) had essentially flat days. China’s Shanghai Composite advanced 1.80%. According to several sources, India recently took the title of the fourth largest global equity market from Hong Kong, although after today’s market action with India’s SENSEX gaining 0.98% and Hong Kong’s Hang Seng closing 3.56% higher in a broad rally led by Communications names, those titles may have flipped back. European markets are up across the board in midday trading and U.S. equity futures are pointing to a positive open.

Stocks are being lifted this morning by upbeat results from Netflix (NFLX), as well as comments from former St. Louis Federal Reserve President James Bullard who thinks interest rate cuts could happen as soon as March before inflation hits the central bank's target of 2%. Despite current Fed officials indicating otherwise in recent days and weeks, Bullard’s comments pushed yields lower, with the U.S. 10-year Treasury yield falling 4 basis points to 4.10%.

Friday’s December PCE Price Index and what it shows about the pace of inflation improvement will be a far better indicator of the Fed’s intentions when it comes to monetary policy. Comments on input and output prices found in today’s January U.S. Flash PMI data out later this morning should be a leading indicator for what is found in the forthcoming January CPI and PPI reports.

Data Download

International Economy

China's central bank will reduce the reserve requirements ratio for all banks by 50 basis points starting February 5. People's Bank of China governor Pan Gongsheng shared that the move is expected to inject 1 trillion yuan (US$140B) of liquidity into the market. The central bank will also decrease re-lending and re-discount interest rates by 25 basis points for small businesses and the rural sector from January 25.

Preliminary estimates showed Japan’s au Jibun Bank Japan Manufacturing PMI was at 48.0 in January, little changed from a final of 47.9 in December and below market forecasts of 48.2. New orders fell sharply, with new export orders shrinking more than in November. The au Jibun Bank Japan Services PMI rose to 52.7 in January from 51.5 in December, marking the 17th straight month of expansion in the service sector and the strongest pace since September.

The Flash HCOB Eurozone Manufacturing PMI rose to 46.6 in January, the highest in ten months and above forecasts of 44.8. Purchasing activity also decreased for the nineteenth straight month, reflecting anticipated lower production needs in the upcoming months, however, selling prices increased, with the steepest rise since May. The preliminary reading for the HCOB Eurozone Services PMI edged down to 48.4 in January from 48.8 in December, missing market estimates of 49. These initial findings point to the sixth consecutive contraction in the currency bloc’s services activity.

The S&P Global UK Manufacturing PMI rose to a 9-month high of 47.3 in January from 46.2 in December, above forecasts of 46.7. Supply chains were affected by longer container freight wait times after the Red Sea crisis. Vendor delivery times saw the steepest lengthening since September 2022, mainly due to longer international shipping times. The S&P Global/CIPS UK Services PMI rose to 53.8 in January from 53.4 in the previous month, firmly above market expectations of 53.2, pointing to the sharpest rate of growth in British services activity in eight months.

Domestic Economy

At 9:45 AM ET, the Flash January U.S. Manufacturing and Services PMIs from S&P Global will be released. The Flash Manufacturing figure is expected to remain steady at 47.9, while the one for the Services sector is forecasted to dip to 51.0 from December’s final reading of 51.4.

In addition to the Flash January PMI data discussed above that will hit the tape at 9:45 AM ET today, we also have the usual weekly Wednesdays that are the latest MBA Mortgage Applications Index and crude oil inventory data from the Energy Information Administration.

Markets

Yesterday’s sector standouts included Communication Services (0.99%) as Verizon (VZ) and Meta Platforms (META) combined to contribute to close to 60% of the sector's results, and Consumer Staples (1.09%) which saw Proctor & Gamble (PG) and PepsiCo (PEP) contribute to close to 70% of the sectors return. The remaining sectors’ returns ranged from -0.54% (Real Estate) to 0.40% (Technology) leading broad indexes to end the day mixed as the Dow fell 0.25%, the Russell 2000 declined 0.36% while the S&P 500 rose 0.29% and the Nasdaq Composite closed 0.43% higher.

In individual names, 3M Company (MMM) saw its shares bid down 11.03% despite the company releasing higher-than-expected quarterly earnings but providing lower-than-expected guidance.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 0.57%
• S&P 500: 1.99%
• Nasdaq Composite: 2.76%
• Russell 2000: -2.51%
• Bitcoin (BTC-USD): -5.29%
• Ether (ETH-USD): -2.43%

Stocks to Watch

Abbott Labs (ABT), ASML (ASML), AT&T (T), Elevance Health (ELV), General Dynamics (GD), Kimberly Clark (KMB), Stifel Financial (SF), and Textron (TXT) are expected to release quarterly earnings before equities begin trading later this morning.

Pre-market breadth is healthy today as 235 names in the S&P 500 have traded hands so far this morning with 186 gainers and 49 decliners. Shares of Texas Instruments (TXN) are coming under some pressure this morning following the company’s later earnings release (more below) while traders are bidding up shares of Netflix following earnings (more below). Other companies catching a bid this morning include Intuitive Surgical (ISRG) (more below) and Western Digital Corporation (WDC).

Shares of Netflix popped after the company added 13.12 million global streaming net paid accounts during the December quarter and issued upside guidance, overshadowing mixed December quarter financial results. EPS for the quarter came in below consensus expectations, while revenue rose 12.5% YoY to $8.83 billion, ahead of the $8.72 billion consensus. For the current quarter, Netflix sees EPS of $4.49 vs. the $4.10 consensus forecast. Its management shared it is not interested in acquiring linear assets, nor do they believe further M&A among will change the competitive environment given all the consolidation that has already happened over the last decade. Netflix expects the streaming industry to remain highly competitive but in its shareholder letter laid out plans to increase its content amortization by a “high single-digit percentage year over year."

SAP SE (SAP) reported mixed December quarter results, but the company’s shares are moving higher this morning after revealing plans to restructure 8,000 jobs to boost artificial intelligence growth. The restructuring will affect over 7% of SAP's 108,000 full-time workforce, though the headcount will remain constant at year-end. SAP will focus on strategic growth areas, particularly Business AI, and transform its operational setup to capture organizational synergies and AI-driven efficiencies. For 2024, SAP sees cloud and software revenue of €29.0-29.5 billion up 8%-10% YoY in constant currencies.

Shares of Texas Instruments fell in aftermarket trading last night after the company’s 4Q 2023 results and guidance missed expectations by a significant margin. The company expects current quarter sales to be between $3.45- $3.75 billion, below analysts' expectations of $4.09 billion. EPS for the quarter is forecasted to be between $0.96- $1.16 compared to the $1.42 consensus. In issuing its weaker-than-expected outlooks, TXN cited weakness across industrial and automotive sectors.

December quarter results reported by Intuitive Surgical topped expectations as worldwide da Vinci procedures grew approximately 21% YoY. During the quarter, the company placed 415 da Vinci surgical systems, compared with 369 in the fourth quarter of 2022. For 2024, Intuitive sees procedure growth growing 13%-16% YoY with procedure seasonality following normalized historical patterns, resulting in a tough comparison for the first half of 2024.

Steel Dynamics (STLD) missed December quarter consensus expectations even though its revenue matched the consensus forecast of $4.2 billion, down 12.3% YoY. Looking ahead, the management team shared that “the continued onshoring of manufacturing businesses, combined with the expectation of significant fixed asset investment to be derived from public funding related to the U.S. Infrastructure, Inflation Reduction Act, and Department of Energy programs, will competitively position the domestic steel industry.”

Inter Parfums (IPAR) issued upside guidance for its 4Q 2024 revenue of $329 million vs. the $323.83 million consensus. For the period, the company’s European product sales rose 2% YoY while its U.S. product sales climbed 13% YoY.

Southwest Airlines (LUV) flight attendants voted nearly unanimously in favor of a strike authorization. The union representing Southwest flight attendants, Transport Workers Union Local 556, said that if an agreement cannot be reached with the airline, the union could request a 30-day cooling-off period, after which 21, 000 Southwest Airlines flight attendants would be free to strike.

IPOs

CG Oncology (CGON) upsized its proposed initial public offering again, this time to 17 million shares with a target range of $16-$18, up from 11.8 million shares last week.

The CEO of Swedish fintech company Klarna shared he sees a U.S. IPO as that transaction window re-opens.

The newly launched Nasdaq IPO Pulse Index, which suggests an upswing in potential IPO activity when it is in an uptrend, is now at its highest level since 2021.

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Ameriprise Financial (AMP), CACI International (CACI), Celestica (CLS), Crown Castle (CCI), CSX (CSX), Ethan Allen (ETD), IBM (IBM), Lam Research (LRCX), Las Vegas Sands (LVS), Tesla (TSLA), United Rentals (URI), and Waste Connections (WCN) are expected to report quarterly results after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Thursday, January 25

• Eurozone: European Central Bank Interest Rate Decision
• US: Weekly Initial & Continuing Jobless Claims
• US: Durable Orders – December
• US: GDP – 4Q 2023
• US: New Home Sales – December
• US: Weekly EIA Natural Gas Inventories

Friday, January 26

• Japan: Tokyo CPI – January
• Japan: Leading Economic Index (Final) – November
• US: Personal Income & Spending, PCE Prices – December
• US: Pending Home Sales – December

Thought for the Day

“It's not earnings changes that cause stock price changes, but earnings changes that come as a surprise.” ~Howard Marks

Disclosures

• Crown Castle (CCI) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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