Mixed Earnings Reactions: AT&T Falls, Johnson & Johnson Holds Ground, Proctor & Gamble Sees a Pricing Boost and Texas Instruments Faces AI Challenges

Netflix broke its subscription record and Inked a $5 billion WEE deal, propelling stock up 9% in premarket trading

• Netflix signs up record number of subscribers and makes a strategic WWE deal, driving a robust 9% premarket surge.
• Mixed earnings reactions: AT&T falters, Johnson & Johnson remains steady and Proctor & Gamble boosts sales.
• Tesla comes into focus with an anticipated a 10% stock move, and China’s economy stabilizes amid challenges.

The S&P 500 reached yet another record high yesterday, advancing by 0.3%, while the Nasdaq Composite saw a 0.4% increase. The S&P 500 has gained 2% for the month, and the Nasdaq is up by 2.8% after rebounding from a negative start for the month.

With earnings season in full swing, the market is poised to determine whether corporate earnings will act as a catalyst for continued growth or a reason for caution.

Netflix (NFLX), a major player in the streaming industry, reported earnings after yesterday’s market close that exceeded expectations. The company witnessed its strongest fourth quarter ever for net additions, with over 13 million new subscribers, marking a significant increase from the 7.7 million added during the same period in 2022. Total subscribers grew by 13% year-over-year, and the introduction of Netflix's new ad-supported tier contributed to 40% of all sign-ups where available. The company's announcement of a 10-year, $5 billion deal with World Wrestling Entertainment (WWE) also indicates a strategic move into live streaming, a sector that has yet to be fully explored. In premarket trading, Netflix shares rose by 9%.

Earnings season highlights

Several other companies reported their earnings after hours and in premarket trading. AT&T (T) fell short of expectations and revised its forward-looking guidance downward, resulting in a nearly 4% decline in premarket trading.

Johnson & Johnson (JNJ) exceeded earnings and sales forecasts, maintaining its outlook, while also announcing a $700 million settlement related to talcum baby powder and its alleged connection to ovarian cancer.

Proctor & Gamble (PG) missed sales estimates but surpassed earnings, citing pricing as the primary driver of sales growth.

Texas Instruments (TXN), reporting lukewarm earnings and outlook, stands out for its lack of participation in the artificial intelligence (AI) business, a sector that has often boosted stock prices in recent times. The chip manufacturer's stock dropped by 3.5% in premarket trading.

Later in the day, IBM (IBM) and Tesla (TSLA) are scheduled to report earnings, with Tesla expected to attract significant attention. Options market data for Tesla suggests an anticipated 10% stock movement for the remainder of the week.

In other news, eBay (EBAY) announced a workforce reduction of 1,000 employees, equating to around 9% of its workforce.

China seeks economic stability

China, grappling with economic challenges, implemented measures to enhance stability, including a reduction in reserve requirements for banks. The country's economic struggles, particularly youth unemployment, raise questions about the outflow of intellectual capital and civil unrest among younger people.

The recent launch of spot exchange-traded Funds (ETFs )has brought changes to the cryptocurrency market, particularly at Bitcoin, which has experienced selling pressure. The anticipation surrounding ETFs led to a "buy the rumor, sell the news" scenario, with retail investors capitalizing on the pre-launch hype. Observers are now keen to see how Bitcoin responds in the aftermath and whether the new ETFs will contribute to decreased volatility for cryptocurrency.

As drama continues to unfold in the markets, traders are keeping a watchful eye on whether the recent gains will be sustained. Historical patterns suggest markets often rally in the days following options expiration, only to reverse course midweek.

Additionally, I'd note that many companies reporting earnings this quarter have seen a decline in stock prices the day after announcements. Hence, attention is directed towardsNetflix to see if it can maintain its premarket gains and whether this reflects broader market stability.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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