A Rotation Out of Technology Stocks, Weak Netflix Numbers Weigh On Wall Street

  • Market Overview

Wall Street ended on a sombre note as Netflix (NASDAQ: NFLX ) shares lost over 20% following the release of a disappointing earnings report on Friday, capping a rough week for stocks that saw the S&P 500 and Nasdaq log their sharpest weekly declines in over two years. The streaming giant anticipates weak subscriber growth in the first quarter of 2022 but maintains that even in the face of uncertainty and snowballing competition, long-term growth prospects remain attractive as streaming gradually replaces linear entertainment across the globe.

European stocks fell on Friday, tracking a global equity market sell-off as investors digested monetary policy adjustments by key central banks while assessing the impact of Omicron on the global economic recovery. The US Federal Reserve ( Fed ) will likely accelerate the pace of its stimulus withdrawal and increase key rates, while the European Central Bank is expected to provide more clarity on its tapering plans.

The Hang Seng was among only a handful of winners on Friday after getting a boost from consumer staples and real estate counters, however, sentiment remained volatile amid concerns over China's economic outlook. The People's Bank of China had to trim rates on its lending facility loans effective 17 January 2022 to prop up the cooling economy. Conversely, stocks in Japan weakened following a tech slump as fears of inflation and higher interest rates dampened risk appetite.

The JSE was not spared from a global slump on Friday as uninspiring US corporate earnings and the likelihood of tighter monetary policy weighed on sentiment. The focal point for the markets this week is no longer if, but by how much, the Fed will increase rates to offset inflation, which jumped to a 42-year high in December last year.

In commodities, gold was on track for a second weekly gain as geopolitical risks boosted its safe-haven appeal, while palladium was set for its best week since November 2020 as market focus turns to the Fed’s policy meeting on 25 and 26 January 2022. Brent crude fell for a second consecutive day on Friday, pressured by a surprise increase in US crude and fuel inventories, amid profit-taking as benchmarks flirted with seven-year highs earlier in the week. "With low spare OPEC+ capacity, low inventories and geopolitical tensions rising, we expect to see Brent crude at around $120 a barrel in mid-2022,” analysts at the Bank of America (NYSE: BAC ) told Reuters.

PSG Wealth Daily Investment Update, 24 January 2022

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