U.S. Stocks Advance Despite Netflix Drag on Communication Sector; Bitcoin Gets a Hail Mary
The Dow lagged the broader U.S. stock market on Thursday, as disappointing quarterly results from Netflix (NASDAQ:NFLX) dampened investors’ appetite for communication stocks. The roller coaster cryptocurrency market was riding another high after bitcoin short-sellers were squeezed out of the market.
Dow Slumps; S&P 500, Nasdaq Gain
Stocks turned higher in afternoon trading after struggling for most of the morning. The Dow Jones Industrial Average was down by as much as 151 points before paring losses to settle flat at 27,222.97.
The broad S&P 500 Index of large-cap stocks advanced 0.4% to 2,995.11, with most sectors reporting gains. The consumer staples and financials categories were the best performers, followed closely by utilities. On the opposite side of the ledger, communication stocks declined sharply.
A strong performance in information technology propelled the Nasdaq Composite Index to gains of 0.3% where it closed at 8,207.24.
Netflix Under Fire as Subscriptions Fall
Shares of Netflix plunged more than 11% on Thursday after the streaming giant said it lost paid domestic subscribers for the first time since 2011.
In a quarterly earnings call late Wednesday, the Los Gatos, California-based company said it lost 126,000 U.S. subscribers in Q2, confounding expectations for a 352,000 gain. The company missed its own projections for global subscriber growth by 2.3 million.
After dominating the video streaming market for the last decade, Netflix must now contend with growing competition from the likes of Amazon, Hulu, HBO and Disney. During the most recent quarter, Netflix said competition wasn’t to blame for the weak subscriber numbers because “competitive intensity and our penetration varied across regions.”
Netflix instituted another price hike at the beginning of the year, with U.S. customers now paying $13 per month for HD streaming compared with $11 previously. The basic plan increased to $9 from $8.
Bitcoin Leads Crypto Recovery
The price of bitcoin catapulted higher on Thursday, triggering an equally large rally across the cryptocurrency market in the ensuing hours.
Bitcoin’s price rallied $1,000 in the span of 30 minutes and eventually peaked at $10,673 on Bitstamp. The largest cryptocurrency is up 8% on the day, bringing its total market cap to $188 billion.
While there was no immediate catalyst for the price surge, cryptocurrency trader Alex Kruger suggested that another short-squeeze was likely responsible. A short-squeeze occurs when the value of an asset rises sharply, forcing a large number of opposing short-sellers to close out their positions. When this happens, the price goes even higher.
No technical analysis could have predicted that squeeze until it was already half way under way. Bears were fully in control until slightly past 10:30 EST.
— Alex Krüger (@krugermacro) July 18, 2019
This isn’t the first time bitcoin’s rally has been attributed to a short-squeeze. Something similar happened back in early June. Read more here.
All of the top-ten coins reported sizable increases, with Litecoin and Tron posting double-digit gains. The total market cap of all cryptocurrencies is now worth $286 billion, up nearly $40 billion from the most recent low.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Charts via Stockcharts.com and CoinMarketCap.