By Peter Nurse
Investing.com -- Netflix disappointed with the extent of its subscriber additions in the first quarter, while Fox settled its defamation lawsuit by Dominion, taking a hefty financial hit in the process. Tesla earnings are due after the close, while U.K. inflation is proving to be particularly sticky.
1. Netflix disappoints with guidance, subscriber adds
The new earnings season received results from Netflix (NASDAQ:NFLX) after the close Tuesday, and while the streaming giant’s first quarter earnings topped estimates, its guidance fell short of expectations even after the launch of its ad-supported tier.
Netflix also added 1.75 million users, compared with a loss of 200,000 in the same period last year, but that missed estimates of over 2M net adds. It also forecast that second quarter paid net adds were expected to be “roughly similar to Q1 ’23.”
The company serves as a bellwether for the streaming industry, in which growth has slowed as competition has intensified. Its stock fell 1% in after-hours trading.
There are more earnings to digest Wednesday, including major lender Morgan Stanley (NYSE:MS) before the open and electric vehicle giant Tesla (NASDAQ:TSLA) after the closing bell.
2. Fox settles Dominion lawsuit
Fox Corp. (NASDAQ:FOXA), the owner of Fox News, has settled a defamation lawsuit by Dominion Voting Systems for $787.5 million, the largest ever settlement struck by an American media company.
Dominion had sought $1.6 billion in damages in the lawsuit filed in 2021 over the media giant’s coverage of false vote-rigging claims in the 2020 U.S. election.
As expensive as this settlement is, Fox’s lawyers must have thought it still represented a good deal given that alongside the $1.6B, Dominion was also seeking punitive damages in any amount jurors see fit.
Additionally, the deal spared a number of well-known Fox employees, including the company’s 92-year-old chairman Rupert Murdoch, from having to answer potentially embarrassing questions.
While this agreement ends this particular lawsuit, another U.S. voting company, Smartmatic, is seeking $2.7B from Fox in a similar lawsuit pending in New York County Supreme Court.
The fact Fox chose to settle is likely to provide Smartmatic with confidence of a similar result.
Fox stock fell 1.5% in premarket trading.
3. Futures lower; Tesla earnings in focus
U.S. futures traded lower Wednesday, as investors digested mixed earnings reports from a number of major companies.
At 05:00 ET (09:00 GMT), the Dow futures contract dropped 110 points or 0.3%, S&P 500 futures fell 18 points or 0.4%, and Nasdaq 100 futures retreated 75 points or 0.6%.
While Bank of America (NYSE:BAC) and Johnson & Johnson (NYSE:JNJ) beat expectations Tuesday, other big companies such as Goldman Sachs (NYSE:GS) and Netflix [see above] fell short on some measures.
Tesla leads the earnings schedule Wednesday after the close, and investors will also pay attention to the release of the Fed’s Beige Book later in the session as it could provide more color for investors on the economic conditions around the country.
4. U.K. inflation remains particularly sticky
The U.K. received another nasty inflation surprise Wednesday, as its March CPI remained in double figures, western Europe's highest rate of consumer price inflation.
Data released earlier Wednesday showed CPI came in at 10.1% in March, a small drop from February's 10.4%, and above the forecast 9.8%.
This elevated level was largely driven by prices of food and non-alcoholic drinks rising by 19.1% in annual terms in March - the biggest such increase since August 1977.
Last month the Bank of England said it expected inflation to "fall significantly" in the second quarter, forecasting March inflation of 9.2%, and thus this number is likely to prompt the central bank to raise interest rates next month once more.
Sterling rose as a result, with GBP/USD up 0.2% to 1.2435.
The final iteration of the Eurozone’s March consumer price index was also released earlier Wednesday, with the CPI rising 0.9% on the month in March, an annual rise of 6.9%, a drop from the 8.5% seen in February.
5. Oil prices drop on fears of slowing U.S. growth
Crude prices weakened Wednesday, weighed by concerns that another hike by the U.S. Federal Reserve will hit economic activity in the world’s largest economy and major oil consumer.
By 09:00 ET, U.S. crude futures were down 1.8% at $79.40 a barrel, while the Brent contract fell 1.8% to $83.25 per barrel.
Federal Reserve Bank of St. Louis President James Bullard called Tuesday for continued interest rate hikes to counter persistent inflation, while his colleague Atlanta Federal Reserve President Raphael Bostic suggested one more interest rate rise of 25 basis points was likely in May.
There was some good news Tuesday, as an industry report from the American Petroleum Institute showed U.S. crude stocks fell about 2.68M barrels last week.
The official inventory report by the Energy Information Administration is due to be released at 10:30 ET.