Martin Gamble on US markets: Ceasefire bounce and Netflix preview

Wall Street enjoyed a healthy bounce following the announcement of a temporary ceasefire in the Middle East. The technology-led Nasdaq Composite and smaller companies-focused Russell 2000 index led the gains.

These interest rate sensitive parts are of the market were buoyed by a fall in 10-year government bond yields.  

The odds of interest rate cuts by the year end implied by market prices jumped to 65% immediately following the ceasefire but have since dropped back to around 25%.

Computer chip and flash memory stocks led by Intel jumped after the SIA (Semiconductor Industry Association) reported global sales increased by 61.8% year-on-year in February.

CEO of the SIA John Neuffer says: “Strong global demand is expected to persist during the remainder of the year, with annual sales projected to reach roughly $1 trillion globally

On the other side of the performance ledger software stocks tumbled on fears of disruptions from the rapid advancement of AI following the announcement of a new frontier model, Claude Mythos from Anthropic.

Netflix growth strategy in focus after failed Warner Bros bid

The world’s biggest streaming company is scheduled release first quarter earnings on 16 April after the market close.  

The shares have seen a good recovery since Netflix walked away from its attempt to buy Warner Bros Discovery in late February, gaining 25% to $100, leaving the shares around 24% below the all-time high.

While Netflix deserves some credit for showing financial discipline there will naturally be questions to be answered over its future growth plans without Warner Bros.

In the meantime, the company will pocket a $2.8 billion termination fee, which investors will be hoping will be spent on share buybacks rather than another pricey acquisition.

One area of focus will be on advertising revenues which are expected to double in full year 2026 to $3 billion. Although still a relatively small proportion of total subscription revenues, investors will be looking for confirmation of continued momentum.

Netflix raised prices in the US by approximately 11% across all tiers in on 26 March, so investors will be keen to see how much of the incremental revenue is pulled through to profit.

Delta Air Lines reveals $2 billion jet fuel hit

With jet fuel prices nearly doubling since late February, there was a lot of anticipation ahead of earnings from Delta Air Lines as the first major carrier to report since war in the Middle East.

While first quarter revenues and earnings came in ahead of analysts’ forecasts, the airline said it plans to ‘materially reduce’ capacity growth in the near term.

Delta forecast second quarter adjusted earnings per share in a range of $1 to $1.50, falling short of consensus estimates of $1.41.

Although the company did not give a full year outlook, CEO Ed Bastians said he was not walking back prior projections of ‘potentially record earnings’ the company had projected in January.

“As we gain more knowledge of the impact of the duration of the fuel spike over the course of the next couple months, we’ll be in a better position,” explained Bastian.

Bastian said the company expects to recover 40% to 50% of higher fuel costs by raising fares.  

Constellation Brands withdraws 2028 guidance

You could hardly stay the stars had aligned for beer company Constellation Brands but its latest numbers at least delivered a measure of reassurance to investors.

Fourth-quarter sales and earnings were marginally ahead of expectations, albeit lower year-on-year. Net sales fell 11% to $1.92 billion but beat the $1.84 billion pencilled in by analysts.  

This was underpinned by decent demand for its portfolio of beer brands including Corona. Earnings per share came in at $1.90, again below last year's number but ahead of the $1.68 which had been forecast. 

Perhaps unsurprisingly in the current circumstances and with incoming CEO Nicholas Fink set to take over on 13 April, the company has rebased expectations. The outlook for the current financial year has been trimmed and guidance for 2028 has been withdrawn entirely.  

This should give Fink some breathing space to reshape the business with speculation the company might exit the wine business entirely having already divested some brands to focus on its higher-end products.