Stocks closed lower today following a volatile trading session despite a pair of strong earnings “beats.” The Dow, S&P, and Nasdaq Composite all sunk as soaring yields kept bulls from breaking out.
Netflix (NASDAQ: NFLX) got things started today by rallying 15% on huge subscriber growth numbers in its quarterly earnings report. The streaming giant beat on earnings (EPS of $3.10 vs. $2.13 expected) and revenue ($7.93 billion vs. $7.837 billion expected) as well.
Netflix then teased its upcoming ad-supported membership, which should amp up subscriber growth heading into 2023.
“After a challenging first half, we believe we’re on a path to reaccelerate growth,” Netflix said.
“The key is pleasing members. It’s why we’ve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us.”
Spencer Neumann, Netflix’s chief financial officer, said that while Q3’s growth was a positive development for the company, “we’re still not growing as fast as we’d like.”
“We are building momentum, we are pleased with our progress, but we know we still have a lot more work to do,” Neumann added.
That was huge news for NFLX bulls who have been forced to watch the stock plummet over 60% since topping out in November of last year.
Strong United Airlines (NYSE: UAL) quarterly results also pushed futures higher until a Treasury bloodbath spiked yields.
Sentiment nosedived as the 10-year yield climbed above 4.10%, hitting a 14-year high. It was a major breakout past resistance (at 4%) that could see yields go even higher.
Worse yet, 4.00% will serve as support moving forward. That means even if the 10-year yield subsides over the next handful of trading sessions, it could easily rebound as Treasurys get slammed lower once more.
“On the plus side, corporate earnings season may help investor confidence somewhat, just given current oversold conditions and reduced expectations. That should help equities keep their footing, but until we see 2-year and 10-year yields start to decline we think traders and investors should remain wary of expecting too much from this rally,” said DataTrek Research’s Nick Colas.
Citigroup (NYSE: C) shareholders need to be doubly careful. The bank recently reported poor quarterly results, setting a double top. That bodes very poorly for C should the market fail to rally in the coming days.
C also broke its minor bullish trend (yellow trendline) today and the stochastic indicator suggests the stock has plenty of room to fall.
For those reasons, it might make sense to take a bearish position on C with a trade trigger of $42.45, below today’s low, as the general market looks to recover from the yield rally.