Disappointing earnings reports erased $68 billion from shares of Netflix Inc., Microsoft Corp. and Alphabet Inc. and sent the Nasdaq 100 Index to its biggest weekly drop since February.
Netflix saw its stock fall the most among the trio after rattling investors with forecasts for weakening subscriber growth overseas. The Los Gatos, California-based online video provider slid 14%, the largest drop since September. Concerns about a turnaround plan sent Microsoft down 7% while Google’s parent declined 5.4% on margin concerns, Bloomberg reported.
The three stocks accounted for 80% of a 1.5% retreat in the Nasdaq 100, the biggest decrease since it lost 6% in the week ending Feb. 5. The Standard & Poor’s 500 Index added 0.5%.
While earnings at S&P 500 companies are exceeding analyst estimates by 4% on average, the spotty results from mega-cap tech stocks are taking a toll on the broader market. The S&P 500 couldn’t hold 2,100 this week—a level it’s crossed 40 times since the start of 2015 and a key threshold where JPMorgan Chase & Co. says more buyers could step in.
Repeating History
The S&P 500 couldn’t hold 2,100 in November, either, a concern for bulls worried history will repeat. Back then, it jumped 13% from a summer low to peak at 2,109.79 in the span of 10 weeks. This year, the benchmark’s 14% rally since Feb. 11 also occurred in a 10-week period.
Lagging tech stocks are one of the few traits that distinguishes the current rally from the rebound last fall. The Nasdaq has added 13% since Feb. 11, trailing the S&P 500’s advance. That’s the opposite from the August-to-November period, when the Nasdaq index topped the S&P benchmark by 4.5 percentage points.
Signs of trouble started on Monday when Netflix said it expects to add two million new international customers, short of the 3.45 million average of analysts’ estimates compiled by Bloomberg.
Then came announcements from Microsoft and Alphabet, whose shares lost at least 5.4% on Friday. Microsoft stock dipped the most since January 2015, reversing a march toward a historic high, after the software maker reported earnings that fell short of analysts’ estimates.
Earnings in other industries helped mitigate losses in the stock market. Johnson & Johnson exceeded profit expectations and Bank of America Corp. jumped 7.9% this week after saying it slimmed down its costs through pay cuts and employee firings. Energy producers also bolstered the S&P 500 to its weekly gain, rallying 5.2% as the price of crude climbed to a five-month high.”
