Market Wrap

Morning wrap: Netflix implosion drives tech stocks lower, ASX set to rise

Thu 21 Apr 22, 8:25am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 30 points higher, up 0.39%. 

Netflix shares plunged -35% on a decline in subscribers, triggering a broad-based selloff across tech stocks, US 30-year mortgage rates have almost doubled in the past 12 months and Tesla beat quarterly earnings expectations.

Let’s dive in.

Overnight summary

Wed 20 Apr 22, 10:25pm (AEST)

Name Value Chg %
US Indices
S&P 500 4459.45 -0.06%
Dow Jones 35,161 +0.71%
NASDAQ Comp 13,453 -1.22%
Russell 2000 2,038 +0.37%
Country Indices
Canada 21,998 -0.09%
China 3,151 -1.35%
Germany 14,362 +1.47%
Hong Kong 20,945 -0.40%
India 57,038 +1.02%
Japan 27,218 +0.86%
United Kingdom 7,629 +0.37%
Name Value Chg %
Commodities (USD)
Gold 1,959.50 +0.20%
Iron Ore 154.41 -
Copper 4.668 +0.34%
WTI Oil 102.75 0.00%
Currency
AUD/USD 0.7452 +0.06%
Cryptocurrency
Bitcoin (AUD) 55,675 -0.31%
Ethereum (AUD) 4,137 -1.16%
Miscellaneous
US 10 Yr T-bond 2.84 -2.51%
VIX 20 -4.91%

Stocks

  • The Netflix implosion caused several household US tech stocks like Facebook-parent Meta, Tesla and Zoom to fall at least -3%

  • The blue-chip Dow Jones outperformed thanks to gains from names like IBM, Procter & Gamble, Home Depot and Cisco

  • 8 out of 11 US sectors were positive, indicating that the selloff was mostly isolated to tech stocks

  • Real estate, staples, healthcare and utilities outperformed

  • 58% of US stocks advanced

  • 59% of US stocks trade below their 200-day moving average (61% on Wednesday, 62% a week ago)

  • Other US-listed streaming companies also fell sharply in response to Netflix’s earnings

    • Walt Disney -5.6%

    • Warner Bros -6%

    • Paramount Global -8.6%

  • IBM extended yesterday’s gains, up 7.1% after an upbeat forecast for the rest of 2022. The only headwind was a loss of Russia-related business

  • Procter & Gamble rose 2.7% after beating quarterly revenue and profit expectations, and raised its sales guidance

  • Tesla shares are up 6.1% in after hours, reporting revenue and profit beat for the first-quarter. The EV manufacturer said that chip shortages and covid outbreaks had weighed on its supply chain and factory operations

  • US earnings to watch out for tomorrow: American Airlines, Dow Jones, AT&T and Snapchat

Economy

  • US existing-home sales fell -2.7% on-the-month in March and down -4.5% compared to last year

    • Interestingly, the 30-year mortgage rate in the US has spiked from February 2021 lows of 2.65% to more than 5.0%

  • Canada’s March inflation rate was much hotter-than-expected, up 6.7% year-on-year

Commodities

  • Iron ore prices remained stable, just above US$150 a tonne

  • Oil retreated slightly after downward revisions to economic growth forecast from the International Monetary Fund and World Bank

  • Gold went into freefall on Wednesday, and now trying to stabilise at the US$1,950 level

 

US Sectors

Wed 20 Apr 22, 10:25pm (AEST)

Sector Chg %
Communication Services -4.07%
Consumer Discretionary -1.36%
Consumer Staples +1.46%
Energy +0.41%
Financials +0.69%
Health Care +1.34%
Sector Chg %
Industrials +0.54%
Information Technology -0.13%
Materials +0.69%
Real Estate +1.85%
Utilities +0.80%

Industry ETFs

Wed 20 Apr 22, 10:25pm (AEST)

Description Last Chg %
Commodities
Aluminum 68.22 -0.18%
Copper Miners 46.34 -1.73%
Gold 181.82 +0.49%
Lithium & Battery Tech 73.02 -2.52%
Nickel 45.2 -1.94%
Strategic Metals 111.41 -2.32%
Steel 70.17 -1.23%
Silver 23.24 +0.17%
Uranium 26.86 +3.39%
Industrials
Aerospace & Defense 112.65 -0.06%
Global Jets 22.11 +0.32%
Healthcare
Biotechnology 128.32 +0.53%
Cannabis 4.62 -2.38%
Description Last Chg %
Cryptocurrency
Bitcoin 25.93 -0.73%
Renewables
CleanTech 16.05 -2.49%
Hydrogen 18.55 -0.65%
Solar 73.26 -4.68%
Technology
Cloud Computing 21.5 -3.44%
Cybersecurity 31.71 -0.57%
E-commerce 21.15 -3.40%
Electric Vehicles 25.98 -0.62%
FinTech 30.3 -2.48%
Robotics & AI 26.33 -0.61%
Semiconductor 432.36 -0.22%
Sports Betting/Gaming 18.76 -0.96%
Video Games/eSports 54.51 -2.84%

ASX Sectors to watch

Before we dive into sectors to watch, I want to take a moment to highlight some takeaways from the Netflix plunge. US trader Mark Minervini said that the -35% decline highlights a few key points:

  1. Beware of all stocks in downtrends

  2. All stocks are risky regardless of "quality" or status

  3. If Netflix is dropping -35% in one day after being down -50%, then stocks are nothing more than worthless pieces of paper without a willing buyer

#1 Tech 

The narrative of a single stock driving a sector lower is likely a theme to watch out for during this reporting season.

Notable overnight tech losers include:

  • Block -8.8%

  • PayPal -8.5%

  • Meta-Platforms -7.8%

  • Etsy -6.8%

  • Zoom -6.7%

This means that local Block (ASX: SQ2) shares will slide at open, which could also trigger more weakness for beaten up BNPL names.

The broad-based weakness across fintech, cloud and eCommerce names could flag a challenging session for local peers.

#2 Uranium

The Uranium ETF was one of few standout ETFs in the overnight session.

Uranium spot prices dipped slightly lower, down -0.6% to US$62.89/lb, according to fuel brokers Numerco.

On Wednesday, the Biden administration launched a US$6bn effort to halt premature nuclear reactor closures, citing the need to continue nuclear energy as a carbon-free source of power.

The ETFs rebound and positive newsflow could help local uranium names bounce after a challenging session on Wednesday, where most players fell between -3% to -6%.

See a full list of ASX uranium stocks here.

#3 Graphite

Graphite stocks have started to move after a prolonged period of under appreciation.

“I genuinely think the world got lithium, and the next thing that’s going to come will be the conversation around ‘we forgot about graphite’,” Black Rock Mining chief executive John de Vries said, according to the Sydney Morning Herald.

Perhaps bolstering the outlook for graphite companies was the US$107m loan offered to Syrah Resources (ASX: SYR) from the US Department of Energy.

See a full list of ASX graphite stocks here.

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: PL8

  • Dividends paid: ACL, AOF, ASB, COH, CQE, IAF, IOZ, LOV, NCC, NEC, RIO, VEU

  • Listing: None today

  • Issued shares: AS2, BGA, BPH, COB, DME, DUN, EBO, EL8, FBU, FPH, G79, GTI, IXR, M7T, MDR, MGH, MPA, MRI, N1H, NIM, NZM, PDI, PR1, QBE, RCP, RLF, XAM

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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