By David French
(Reuters) - The tech-heavy Nasdaq dropped on Wednesday as Netflix's surprise decline in subscribers weighed on both the streaming giant and other high-growth companies, which investors feared may face similar post-pandemic performance issues.
By contrast, the blue-chip Dow was driven to a second-successive higher close by positive earnings from consumer giant Procter & Gamble and IT firm IBM Corp. The duo rose 2.7 and 7.1% respectively.
Netflix Inc plunged 35.1%, its largest one-day fall in over a decade, after it blamed inflation, the Ukraine war and fierce competition for the subscriber decline and predicted deeper losses ahead.
The ripple effects were felt both by financial technology names and companies whose fortunes were seen to have been boosted by pandemic trends such as lockdown measures.
Streaming peers Walt Disney, Roku and Warner Bros Discovery all dropped more than 5.5%, while stay-at-home darlings Zoom Video Communications, Doordash and Peloton Interactive saw their shares fall between 6% and 11.3%.
Suffering financials included PayPal Holdings Inc and Block Inc, which both fell more than 8.5%. Marqeta Inc and SoFi Technologies Inc declined 5.6% and 6.2% respectively.
"Once profits move so far, it becomes harder to get that next little bit of growth, and it's harder to obtain it in the late cycle," said Jason Pride, chief investment officer of private wealth at Glenmede.
"I think the market is beginning to comprehend that, and will need to comprehend that as we go through the year."
Market-leading technology and growth stocks have struggled this year as investors worry that rising interest rates will dent their future earnings. The Nasdaq is down nearly 14% so far this year, while the benchmark S&P 500 is down 6.4%.
Overall, the earnings season has started on a strong note. Of the 60 companies in the S&P 500 index that have reported results so far, 80% exceeded profit expectations, as per Refinitiv data. Typically, 66% beat estimates.
The Dow Jones Industrial Average rose 249.59 points, or 0.71%, to 35,160.79, the S&P 500 lost 2.76 points, or 0.06%, to 4,459.45 and the Nasdaq Composite dropped 166.59 points, or 1.22%, to 13,453.07.
The communication services sector declined 4.1%, although eight of the 11 major S&P 500 sectors gained, led by the real estate index which posted its best finish since Jan. 4. The consumer staples benchmark was just behind it, climbing to a second-straight record close.
Meanwhile, the latest data points on the Federal Reserve's monetary policy tightening plans were released in the afternoon.
Its "Beige Book" showed the U.S. economy expanded at a moderate pace from February through early April, while San Francisco Federal Reserve President Mary Daly said she believes the case for a half-percentage-point interest rate hike next month is "complete".
The yield on 10-year Treasury note receded to 2.85% after a blistering rally that pushed it close to the key 3% level earlier in the session. [US/]
Tesla Inc fell 5%, but was trading higher after posting record deliveries and higher revenue in its first-quarter results after the close.
Investors had been concerned about the electric automaker's ability to meet its ambitious 2022 delivery target after its biggest factory in Shanghai was shut as part of the city's COVID-19 lockdown.
United Airlines Holdings Inc gained 1.2%, helping the S&P 1500 Airlines index to a sixth advance in the past seven sessions. United's shares dipped marginally after it reported earnings after the closing bell.
The volume on U.S. exchanges was 10.85 billion shares, compared with the 11.61 billion average for the full session over the last 20 trading days.
The S&P 500 posted 70 new 52-week highs and three new lows; the Nasdaq Composite recorded 88 new highs and 164 new lows.
(Reporting by Bansari Mayur Kamdar, Sruthi Shankar and Amruta Khandekar in Bengaluru and David French in New York; Editing by Marguerita Choy and Aditya Soni)