S&P 500 drops below 200DMA for first time since June 2020, nearing 4400 as investors spooked by poor Netflix guidance


  • US equities continued to fall on Friday after downbeat subscriber guidance from Netflix, whose shares dropped over 20%.
  • The S&P 500 dropped another 1.6% towards 4400 after failing to test 4500 earlier in the session.
  • The index is now down 5.4% on the week and has broken below its 200DMA for the first time since June 2020.

US equity markets continued to sell off on Friday, as downbeat earnings from tech giant Netflix weighed on sentiment and its competitors. NFLX shares dropped over 20% on Friday after the company on Thursday issued significantly worse than expected guidance for subscriber growth in Q1 2022. That weighed on other high earnings/value ratio stocks (or so-called “growth” stocks) which are concentrated in the tech sector, though also weighed on the market more broadly as well. The S&P 500 dropped 1.5% towards 4400 having failed an attempt to test the 4500 level again earlier in the session. The index is on course to end this week 5.4% lower and roughly 8.5% below the record highs hit at the start of the year above 4800. With the index on Friday breaking below its 200-day moving average (at 4429) for the first time since June 2020, the S&P 500 bears will now be eyeing a test of Q4 2021 lows in the 4300 area.

The Nasdaq 100, meanwhile, dropped another 2.4% to move below the 14.5K level, having long since let go of the 200DMA at just above 15.0K. That means the index is now down more than 7.0% on the week and is now about 13.5% lower versus its November record highs close to 16.8K. The Dow, meanwhile, was down a more modest 1.2% to underneath 34.3K, taking on the week losses to about 4.5%. The comparatively less growth stock weighted Dow is down just over 7.0% from the record highs it hit in the first week of 2022 near 37.0K. The Dow was weighed on Friday by downside in index heavyweight Disney amid fears the company will issue subscriber growth forecasts for Q1 2022 that are equally as bleak as Netflix.

In terms of the S&P 500 GICS sectors, Communication Services (which contains Netflix) was the worst performer dropping 3.5% and was closely followed by the Consumer Discretionary and Materials Sectors down 3.0% and 2.5% each. Amid the risk-off in stock markets, energy prices fell, weighing on the Energy sector which dropped 2.3%, whilst lower US bond yields (as a result of the safe-haven bid) hurt the Financials sector, which dropped 2.2%. Information Technology was down 1.6%, Health Care was down 1.1% and Industrials were down 0.9%. Lower yields helped the Real Estate hold its ground, with the sector down just 0.2% on the day. The classically defensive Utilities and Consumer Staples sectors, meanwhile, were down 0.2% and up 0.1% respectively.

Investors will fear that further underwhelming earnings might spur further broad selling pressure in US equities next week. Apple, Tesla and Microsoft are the biggest names that will be reporting. Otherwise, the Fed meeting on Wednesday will be the most important event, with traders keen to judge the tone of the meeting for signals as to how fast the bank might lift rates in the coming years. Some analysts have noted that if equities continue to aggressively sell-off, this could eventually dissuade Fed policymakers from hiking quite so aggressively, with market drops having forced the Fed’s hand before (think the end of 2018/early 2019). But amid much higher inflation than back then, the “line in the sand” in terms of equity market downside will be larger than in the past. In other words, where a 10% drop in the S&P 500 might have caused concern at the Fed in the past, given current inflation, a drop somewhere closer to 20% or more might be needed to turn heads at the Fed.

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD retreats toward 1.0550 as dollar rebounds

EUR/USD retreats toward 1.0550 as dollar rebounds

EUR/USD has lost its traction in the American session and retreated to the 1.0550 area. In the absence of high-tier macroeconomic data releases, the dollar is staging a rebound with the US Dollar Index rising above 103.00 and forcing the pair to edge lower.

EUR/USD News

GBP/USD consolidates its weekly gains below 1.2500

GBP/USD consolidates its weekly gains below 1.2500

GBP/USD has extended its sideways grind below 1.2500 into the second half of the day on Friday with the dollar staying resilient against its rivals. Nevertheless, the pair remains on track to snap a four-week losing streak.

GBP/USD News

Gold loses traction, drops below $1,840

Gold loses traction, drops below $1,840

Gold came under modest bearish pressure in the American session on Friday and dropped below $1,840. The benchmark 10-year US Treasury bond yield stays quiet above 2.8%, helping XAU/USD limit its losses ahead of the weekend.

Gold News

Bitcoin price will bounce to $36,000, but what happens next will leave you shocked

Bitcoin price will bounce to $36,000, but what happens next will leave you shocked

A brief technical and on-chain analysis on Bitcoin price. Here, analysts evaluate where BTC could be heading next. Does the possibility for a cat bounce make sense?

Read more

PANW shows bullish reversal chart pattern after earnings beat

PANW shows bullish reversal chart pattern after earnings beat

PANW stock benefits from continued strong revenue growth. Palo Alto Networks now nearly services half of the Global 2000. PANW stock is showing a bullish reversal pattern on its daily chart.

Read more

Forex MAJORS

Cryptocurrencies

Signatures