Investing.com -- Netflix will be in the spotlight Friday, after the streaming giant beat expectations of net subscriber additions but issued a cautious revenue guidance. Donald Trump accepted the Republican Party presidential nomination, while Wall Street looks set to end the week lower with a sectorial rotation under way.
1. Netflix net adds ahead, revenue guidance cautious
Netflix’s third-quarter revenue guidance fell short of expectations, even as the streaming giant reported better-than-expected second-quarter results amid blowout subscriber additions, driven by a strong content slate and an ongoing crackdown on password sharing.
The mixed nature of these results, released after the market close Thursday, has resulted in Netflix (NASDAQ:NFLX) stock trading largely unchanged premarket Friday. The stock has surged nearly a third so far this year.
Netflix reported second-quarter earnings of $4.88 a share on revenue of $9.56 billion, topping estimates of $4.74 on revenue of $9.53 billion.
The streaming giant also raked in 8 million additional users in the quarter, well above the 4.8 million estimated, but below the 9.3 million seen in the previous three months.
The company had guided for lower net subscriber additions in the second quarter as it is facing saturation in the United States and plans to stop regularly reporting new subscriber additions next year.
On the flip side, the company guided for third-quarter revenue of $9.37 billion, missing estimates of $9.81 billion, and said its advertising business would not become a primary driver of revenue growth until at least 2026.
Investors have been looking at the company's relatively new advertising business as a potential source of growth.
2. Futures slip amid a weekly rotation
U.S. stock futures slipped lower Friday, continuing the previous session’s weakness as the quarterly earnings season marches on.
By 04:15 ET (08:15 GMT), the Dow futures contract was 75 points, or 0.2%, lower, S&P 500 futures dropped 9 points, or 0.2%, and Nasdaq 100 futures fell by 60 points, or 0.3%.
All three major indices fell on Thursday, with the blue-chip Dow Jones Industrial Average dropping more than 500 points, ending a six-day winning run.
Looking at the week as a whole, a market rotation appears to be taking place, with the tech-dominated Nasdaq Composite down almost 3% and the S&P 500 1.3% lower, while the DJIA is up 1.7%.
The earnings continue to flow Friday, with results due from the likes of American Express (NYSE:AXP), Travelers (NYSE:TRV) and Comerica (NYSE:CMA) before the opening bell.
Investors will also have comments from Fed policymakers John Williams and Raphael Bostic to digest for clues about the future path of the central bank’s monetary policy.
3. Trump accepts nomination as Biden doubts rise
Donald Trump formally accepted his nomination as the Republican Party’s presidential candidate at the Republican National Congress in Milwaukee, Wisconsin on Thursday.
His nomination as the GOP candidate now sets him up for a potential rematch with President Joe Biden, who had beaten Trump in the 2020 elections.
Trump was seen gaining a large boost in popularity after the assassination attempt last week.
In contrast, Biden was facing growing calls from the Democratic party members and donors to pull out of the presidential race after his weak performance in last month’s debate with Trump.
Critics of Biden have argued that his advanced age and tenuous health make him unfit to run for a second term.
Biden is likely to drop his bid for reelection, TD (TSX:TD) analysts said in a note, adding that the Republican party had now realigned around Trump, and the Democrats could potentially lose the Senate.
“While the decision ultimately rests with Biden, we see him dropping his re-election bid as a question of when, not if,” TD said.
“Should Trump win in a GOP sweep (House & Senate), we suspect he would read that as a MAGA mandate for his American First policies… we expect (a) potential 2nd Term to be all gas, no brake.”
4. Crowdstrike, Microsoft suffers major outages
Cybersecurity firm CrowdStrike (NASDAQ:CRWD) has suffered a major outage on Friday, affecting business all around the world, and tech giant Microsoft (NASDAQ:MSFT) has also experienced an outage, resulting in at least two low-cost U.S. airlines grounding flights.
Crowdstrike said its outage resulted from an issue with the latest update, and the company is now in the process of rolling back that update globally.
“CrowdStrike is aware of reports of crashes on Windows hosts related to the Falcon Sensor,” the company said in a recorded message.
Microsoft reported an outage in its Azure cloud computing platform late-Thursday, with a note on the company’s website attributing the Azure outage to a “configuration change in a portion of our Azure backend workloads, caused interruption between storage and compute resources which resulted in connectivity failures that affected downstream Microsoft 365 services dependent on these connections.”
The company’s service health status website showed its 365 service was also experiencing “degradation,” and that users will be unable to access several Microsoft 365 apps and services.
5. Crude heads for weekly loss
Crude prices fell Friday, heading for a weekly loss as a strong dollar and concerns about Chinese economic weakness weighed on investor sentiment.
By 04:15 ET, the U.S. crude futures (WTI) dropped 0.5% to $80.91 a barrel, while the Brent contract fell 0.3% to $84.89 a barrel.
Both benchmarks are set for minor losses this week, their second consecutive losing week, after the dollar strengthened for the second consecutive session, hitting demand for dollar-denominated oil from investors holding other currencies.
Concerns over sluggish demand in China, the world’s biggest oil importer, remained front and center, following softer-than-expected growth figures for the second quarter.
The readings came after data last week showed a decline in China’s oil imports in June.
Limiting the week’s losses this week has been the U.S. government reporting a bigger-than-expected weekly decline in oil stockpiles, suggesting consistent demand during the summer driving season.