Wall Street extends losses at open as Netflix falls
Wall Street’s main indexes opened lower on Friday and were on course for their third straight week of declines as Netflix‘s disappointing first-quarter subscriber growth outlook sent shockwaves through the tech sector.
The technology-heavy Nasdaq (^IXIC) dropped 1.7% to 13,932 as investors positioned themselves for the likelihood that the Federal Reserve will tighten monetary policy more aggressively to stave off inflation.
“The Fed this time will be far more prudent about quantitative tightening especially given high leverage in the system,” according to Sebastien Galy, senior macro strategist at Nordea Asset Management.
Craig Erlam, senior market analyst, UK & EMEA, OANDA, commented: “The banks didn’t give us much to cheer about and if the Netflix results are anything to go by, big tech may also underwhelm.
“The subscriber numbers were a real blow and investors are being forced to adjust to the reality that there is nowhere near the momentum that the last couple of years was expected to generate. Immense competition in the space and higher costs are also major headwinds”.
US Treasury yields were slightly lower along the curve on Friday, having risen sharply earlier in the week.
Yields on benchmark 10-year notes were at 1.7470%, their lowest in a week, having hit a two-year high of 1.902% on Wednesday.
Shares have declined in Europe and Asia after the sell-off wiped out gains for stocks on Wall Street
The London benchmark has dropped 98 points to around 7500 points, the lowest in over a week.
Scottish Mortgage Investment Trust (SMT), one of the main avenues for UK investors to tap into the US tech sector, dropped over 4%.
Victoria Scholar, head of investment at interactive investor, said: “Risk-off sentiment and a sell-off on Wall Street are sending shockwaves across global markets with main European markets shedding more than 1% each on the final trading session of the week.
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“The FTSE 100 is flirting with critical support at 7,500 with a break below potentially paving the way for further declines. Just a handful of stocks in the UK basket are trading in the green while the miners such as BHP Group, Rio Tinto and Anglo American languish at the bottom.”
The London benchmark was also pulled down by heavyweight mining stocks with BHP (BHP.L) being among the top losers as it prepares to exit the index next week.
Asian markets finished lower with shares in China leading the region. The Shanghai Composite Composite (000001.SS) is down 0.91% while Japan’s Nikkei 225 (^N225) is off 0.90% and Hong Kong’s Hang Seng (^HSI) is lower by 0.12%.
Meanwhile, oil dropped as OPEC+ struggled to meet its scheduled increases in production targets and the spectre of Russia invading Ukraine sent jitters through global markets.
Brent crude oil (BZ=F) lost almost 2% to $86.77 a barrel and the US crude (CL=F) fell 0.7% to $84.95 per barrel on Friday.
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“More gloom is descending as investors digest some major earnings disappointments, adding to concerns of an accelerating monetary tightening schedule,” Richard Hunter, head of markets at interactive investor, said.