Tesla, Netflix drag down S&P 500, Nasdaq

By Bansari Mayur Kamdar and Johann M Cherian

(Reuters) – The S&P 500 and Nasdaq fell on Thursday, as Tesla CEO’s hints about more price cuts deepened investor concerns, while Netflix slid on quarterly revenue miss.

Tesla CEO Elon Musk on Wednesday signalled that he would cut prices again on electric vehicles to boost demand in “turbulent times”, even as his all-out price war squeezes the company’s margins.

Shares of the electric car maker slid 4.6% after Musk’s comments, even as Tesla beat quarterly profit estimates.

“Markets were hoping the bulk of markdowns had been made in the first half and that margins would actually start recovering in the second half, but that is now in doubt,” said Joshua Warner, market analyst at City index.

The tech-heavy Nasdaq has advanced 36.7% so far this year, supported by a scorching rally in megacap growth and technology stocks on optimism over artificial intelligence, a resilient U.S. economy and hopes that the U.S. Federal Reserve was nearing the end of its aggressive rate-hike cycle.

Netflix fell 7.6%, on track for its worst percentage drop in seven months, after the streaming video company’s quarterly revenue forecast also fell short of estimates, while analysts said its new money-making ventures will take time to bring in returns.

“Netflix’s stock has historically been driven by narrative and sentiment rather than fundamentals, but for those who pay attention to fundamentals, one thing is clear: Netflix is highly overvalued and a very risky investment,” said David Trainer, CEO of New Constructs.

Five of top 11 S&P 500 sectors declined, led by losses in consumer discretionary stocks, down 1.3%.

At 9:43 a.m. ET, the Dow Jones Industrial Average was up 159.63 points, or 0.46%, at 35,220.84, the S&P 500 was down 3.38 points, or 0.07%, at 4,562.34, and the Nasdaq Composite was down 55.32 points, or 0.39%, at 14,302.70.

The Dow is on course for its ninth day of gains, after registering its longest winning streak in almost four years on Wednesday as investors gauged Goldman Sachs earnings, while major U.S regional banks jumped as their deposits mostly stabilized after a banking crisis earlier this year.

Leading gains on the Dow, Johnson & Johnson climbed 4.4% after the healthcare conglomerate raised its annual profit forecast, banking on the strength of its medical devices business and demand for its cancer drugs.

United Airlines advanced 2.6% after lifting its full-year profit outlook and posted the highest ever quarterly earnings on booming demand for international travel.

U.S.-listed shares of Taiwanese chipmaker TSMC fell 3.0% after warning of a 10% drop in 2023 sales.

Blackstone fell 2.0% after the asset manager said its quarterly distributable profits slumped nearly 40%, owing to a sharp drop in asset sales mostly from its real estate and credit businesses.

Overall earnings across industries are expected to decline 8.2% for the second quarter, according to Refinitiv data on Wednesday.

Declining issues outnumbered advancers for a 1.46-to-1 ratio on the NYSE and a 1.54-to-1 ratio on the Nasdaq.

The S&P index recorded 15 new 52-week highs and two new lows, while the Nasdaq recorded 34 new highs and 18 new lows.

(Reporting by Bansari Mayur Kamdar and Johann M Cherian in Bengaluru; Editing by Shinjini Ganguli)