Expectations for Netflix had gone so bad that the company could surprise with 970’000 less subscriptions last quarter. The smaller drop in subscriptions combined with higher fees increased the profit by 7% compared to the same time last year, despite near $340 mio the company lost due to a stronger US dollar. The share price jumped 8% in the afterhours trading, on top of 5% added during the session.
And most technology stocks had a good day yesterday. Nasdaq jumped 3%, while the S&P500 had its best day since three weeks, with a 2.76% gain. The motivation behind yesterday’s equity rally was rather obscure. A softer US dollar certainly helped boosting optimism about the earnings season.
Yet, the predictability and the visibility remain low, and any rebound could be considered as a bear market rebound, until we have proof that gains could be sustainable. Earnings will show how resilient the US company earnings are to the tightening Fed, and the soaring dollar. Any bad news could rapidly hammer the positive mood.
Tesla reports
Today, Tesla will release its latest quarterly earnings after the bell. Analysts expect around 2.5% revenue drop in the second quarter as a result of the factory shutdown in Shanghai due to the strict Chinese rules to achieve a zero Covid policy. The net adjusted income, and profit may have dropped up to 10%. Tesla will likely maintain its yearly delivery growth target, but that would imply acceleration of deliveries in the second half.
Next! Twitter marked the first goal in the lawsuit against Elon Musk, as a Delaware judged allowed the company to accelerate the procedure. The trial is now set to take place as early as October, while Elon Musk’s legal team was considering a timeline like 3-4 years.
October is sure too early for Elon Musk, but arguments that waiting too much would harm Twitter’s business, and would delay important operational and investment decisions are more convincing than the need for 4 years to dig into Twitter accounts to find out how many of them are fake.
Twitter shares are back to $40 on hope that Elon Musk could be forced to buy Twitter for $54 a share.
UK inflation hits 9.4%
Energy and commodities rallied yesterday, as well. American crude extended gains past the $103 level, while copper futures jumped 2%.
Firmer oil and commodity prices sent the FTSE 1% higher yesterday, but the prospects for FTSE for the second half are much weakened due to the recession fears that could hurt demand and hit the energy and mining companies’ earnings.
Then, there is a higher political uncertainty in the UK following Johnson’s resignation.
And, the macroeconomic environment is not ideal. The UK revealed that inflation advanced to 9.4% in June, from 9.1% printed a month earlier and 9.3% penciled in by analysts. This means that the Bank of England’s (BoE) tightening efforts don’t do much to tame inflation and that it must further tighten the monetary conditions.
Cable bounced back above the 1.20 mark on the back of a softer US dollar. As it is the case for the EURUSD, Cable could extend gains against the US dollar, if the dollar loses some of its strength, of course. At the current levels, the dollar is expected to correct to the downside, but the dollar bulls are waiting in ambush before the upcoming Fed decision.
