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Midday Market Update

Stocks Modestly Lower After Tech Earnings

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U.S. Market    
Stocks were modestly lower this morning after tech earnings.

Housing starts rose a larger-than-expected 4.8% in June from the previous months. Building permits were up 1.5%.

At midday the DowS&P 500 and Nasdaq were down 0.1%, 0.3% and 0.4% respectively.

Stocks on the Move
Shares of  Netflix (NFLX) tumbled nearly 15% this morning after reporting disappointing second-quarter subscriber adds in both the international (1.52 million net adds, versus guidance of 2.00 million) and U.S. segments (0.16 million net adds, versus guidance of 0.50 million) in part because of the price increases to older, previously grandfathered accounts. The company also issued weak subscriber guidance for the third quarter (0.30 million in the United States) and management expects some continued impact from grandfathering and from the Olympics.

 IBM's (IBM) second-quarter fiscal 2016 results largely reflected the firm’s continued push into growth markets associated with “strategic imperatives” (analytics, cloud, mobile, security, and social related work). On a trailing 12-month basis, strategic imperatives accounted for 38% of IBM’s revenue, or $30.7 billion, ahead of the firm’s expected run rate. For the quarter, reported revenue declined 2.8% year over year to $20.2 billion (fell 2.6% in constant currency). Shares were off around 0.5% at midday.

Driven largely by outperformance in its drug group,  Johnson & Johnson (JNJ) reported second-quarter results  exceeding both our and consensus expectations, and we plan to slightly raise our fair value estimate. Further helping support the bottom line, cost-reduction programs in consumer and device divisions should lead to almost 500 basis points of margin expansion for the company. J&J shares were up 1.2% on the news.

Shares of  Goldman Sachs (GS) slipped 1.5% this morning despite reporting better-than-expected results. The firm’s trading operations were a bright spot in the quarter and expenses were down by over 25% as legal fees eased. 

Foreign Markets
European markets were mostly lower. The FTSE 100 was flat while the Paris CAC and Germany’s DAX were down 0.6% and 0.8% respectively.

Asian shares were mixed. The Shanghai Composite was off 0.2%, the Hang Seng was down 0.6% while the Nikkei 225 was up 1.4%.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.