Before the Bell: No More Red Envelopes From Netflix, Regional Bank Gets Cash Transfusion, Tesla Cuts Prices Again

Premarket action on Wednesday had the three major U.S. indexes trading lower. The Dow Jones industrials were down 0.43%, the S&P 500 down 0.54% and the Nasdaq 0.78% lower.

Six of 11 market sectors closed higher Tuesday. Industrials (0.46%) and energy (0.45%) posted the day’s best gains. Health care (−0.66%) and communications services (−0.65%) lagged. The Dow closed down 0.3%, the S&P 500 up 0.09% and the Nasdaq down 0.04% on Tuesday.

Two-year Treasuries added one basis point to end Tuesday at 4.19%, and 10-year notes slipped by two basis points to close at 3.58%. In Wednesday’s premarket, two-year notes were trading at around 4.28% and 10-year notes at about 3.62%.

Tuesday’s trading volume was slightly below the five-day average. New York Stock Exchange losers outpaced winners by 1,617 to 1,374, while Nasdaq decliners led advancers by about 5 to 4.

The U.S. Energy Information Administration releases its weekly report on petroleum inventories Wednesday morning. Tuesday evening, the American Petroleum Institute reported that U.S. commercial crude oil inventories dropped by 2.7 million barrels last week. Gasoline inventories fell by 1 million barrels, and distillates dropped by 1.9 million barrels.

Tuesday’s best performer among S&P 500 companies was Tyler Technologies Inc. (NYSE: TYL), adding 3.42% to its share price. The company had no news. State Street Corp. (NYSE: STT) rose by 3.05%, after dropping more than 9% on Monday.

Catalent Inc. (NYSE: CTLT) dropped 7.37% to take its five-day loss to more than 35%. The leading cause appears to have been Monday’s announcement that Danaher would no longer seek an acquisition of the drug manufacturer. Analysts at Barclays and Deutsche Bank cut their price targets as a result, and shares were set up to take Tuesday’s beating.

After U.S. markets closed on Tuesday, Netflix Inc. (NASDAQ: NFLX) reported quarterly results that included earnings and revenue that were in line with expectations but missed on expected subscriber growth. Shares fell by 9% until investors got to the part of the report where Netflix said it will launch its so-called paid sharing program in the United States. No longer will subscribers be able to share their passwords with friends or other family members without paying for the privilege.

Netflix said they were “pleased” with the results of the paid sharing programs in four countries that were the first to implement the change.

The June-quarter forecast for revenue and earnings came in below consensus estimates, and that net paid subscriber additions would be roughly the same as in the March quarter. The good news was a forecast for free cash flow of $3.5 billion for the year, more than analysts were expecting. Netflix also intends to speed up its share buyback plan.

Netflix buried Blockbuster when it began mailing DVDs to customers back in the 1990s. Now, the company is going to bury its own DVD business, shutting down the business in September.

While the headline numbers were not all investors would wish for, overall, their reaction to the report was muted. The stock traded down by less than 1% in Wednesday’s premarket.

One of the hardest-hit banks to survive the disaster that unfolded six weeks ago was Western Alliance Bancorp. (NYSE: WAL). Between March 8 and March 13, the stock dropped by nearly 65%. As of Tuesday’s close, the stock was still down 55% since March 8.

When the bank reported quarterly results on Tuesday, it announced that deposits had risen by $2 billion in the first two weeks of April, after dropping by more than 11% in the March quarter. Investors have apparently forgiven all, sending the bank’s stock up more than 18% in Wednesday’s premarket trading.

In premarket action Wednesday, Citizens Financial Group Inc. (NYSE: CFG), Synchrony Financial (NYSE: SYF) and U.S. Bancorp (NYSE: USB) have all missed Wall Street profit and revenue estimates. Share prices have not felt much pain yet, however.

After markets close Wednesday, Tesla Inc. (NASDAQ: TSLA) will report quarterly results. Just to make it even more interesting, the company has once again cut prices on its Model 3 and Model Y vehicles. Is this the fifth or sixth price cut since the beginning of the year? Who’s counting?

The big news is that the sticker price on the Model 3 standard range rear-wheel drive car fell from $41,990 to $39,990, marking the first time that the price of a Tesla vehicle has dipped below $40,000 since 2020. When first introduced in 2016, the Model 3 cost less than $35,000 for a short time before price increases kicked in.

According to Kelley Blue Book, the average price of a new car in the United States in March was just over $48,000.

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