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Investors short Disney after it streams Q2 print

 

Thursday, May 12, 2022

The news shaping the markets today

The US House of Representatives approved further aid of over $40 billion for Ukraine. However, the RUB/USD forex pair rose after the news.


Japan’s current account surplus widened to ¥2,549.3 billion in March, from ¥1,648.3 billion a month ago. The latest reading also came in above market estimates of ¥1,752.3 billion, sending the JPY/USD pair higher in forex trading this morning.


New Zealand’s food price inflation eased to 6.4% year-over-year in April, compared to a 10-year high of 7.6% a month earlier. However, the NZD/USD forex pair eased this morning, after rising sharply in the previous session.


Australia’s building permits fell by 18.5% to 15,183 units in March. However, the AUD/USD pair rose in forex trading this morning.


The Philippines reported GDP growth of 8.3% year-over-year in the first quarter, accelerating from a 7.8% expansion in the earlier period. However, the PHP/USD forex pair remained under pressure.

 

What’s happening: Shares of The Walt Disney Company fell in extended trading on Wednesday, after the company reported downbeat results for its fiscal second quarter.

 What happened: Disney’s theme parks in the western countries continued to see a strong recovery in footfall after the easing of covid-19 restrictions.

However, the closure of parks in Asia due to the resurgence of infections could hurt the company’s operating income in the ongoing quarter.

 How were the results: The Burbank, California-based company reported growth in sales and adjusted earnings for its fiscal second quarter, but the numbers fell short of market views.

  • Revenues climbed 23% to $19.2 billion, but missed the consensus estimate of $20.03 billion.
  • Adjusted earnings grew 37% to $1.08, falling short of the Street expectations of $1.19 per share.

Why it matters: The entertainment giant added more Disney+ customers during the quarter, which provided some relief to investors, especially after Netflix reported a decline in subscribers last month. Walt Disney added 7.9 million new Disney+ customers from January through March, versus market expectations of 5.3 million adds. About 50% of these additions came from India’s Disney+ Hotstar service, which was launched in the country in November 2019.

Total subscriptions for Disney’s streaming service rose to 137.7 million. The company’s subscriber growth has remained volatile, with Disney+ adding 11.7 million subscribers during the first quarter and only 2 million customers during the fourth quarter of 2021.

Management expects Disney+ to reach between 230 million and 260 million subscribers by the end of September 2024. To reach this goal, the company needs to added around 9.1 million new subscribers every quarter.

The company’s theme parks business continued to grow, following the easing of restrictions in several parts of the world. Operating income from the parks jumped 50% year-over-year to $3.7 billion. However, the resurgence of infections in Asia has resulted in the closure of theme parks in the region, which is projected to lower the company’s operating income by up to $350 million during the fiscal third quarter.

Revenue from the Media and Entertainment segment grew 9% year-over-year to $13.6 billion, while direct-to-consumer revenues within the segment jumped 23% to $4.9 billion.

 How shares responded: Disney’s shares declined by 3.2% to $101.80 in after-hours trading, following the release of quarterly results. The stock has tumbled around 33% year to date.

 What to watch: Investors will keep an eye on the spread of covid-19 infections in Asia and other parts of the world.

The markets today

US stocks will be in focus today, ahead of major economic reports

 

Context: Wall Street settled lower in another volatile trading session on Wednesday, following the release of inflation data.

 Details: Economic data released on Wednesday showed the consumer price index rising 8.3% year-over-year in April, compared to expert estimates of 8.1%. However, the latest reading still came in below the 8.5% recorded in March.

Core CPI accelerated to 6.2%, versus market expectations of 6%, while the headline CPI rose 0.3% on a monthly basis.

Several analyst reports suggested that the latest inflation report could pressure the US Federal Reserve to announcing more aggressive monetary policy tightening.

Several companies reported results through the week. Coinbase Global’s stock tanked more than 26% on Wednesday after the crypto exchange posted weaker-than-expected Q1 sales. Shares of Electronic Arts jumped around 8% after upbeat quarterly earnings.

Tech stocks remained under pressure, taking the Nasdaq 100 lower by 3.06% to close at 11,967.56. Shares of Meta Platforms and Netflix lost more than 4% and 6%, respectively, with investors continuing to short growth stocks.

The energy sector recorded sharp gains on Wednesday, with Chevron being the top performing stock on the Dow Jones index. Despite this, the Dow Jones index lost around 327 points to close at 31,834.11, while the S&P 500 shed 1.65% to reach 3,935.18.

What to watch: Investors await the release of data on producer prices and jobless claims data today. The number of persons filing new claims for jobless benefits had risen by 19,000 to 200,000 in the week ending April 30. The figure is projected to decline to 195,000 in the latest week. Analysts expect producer prices to rise 10.7% in April, following an 11.20% increase in March.

Markets will also keep an eye on the ongoing war in Ukraine and surging covid-19 cases in some parts of the world.

 Other Markets: European trading indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 1.44%, 2.17%, 2.50% and 1.74%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0521 and 1.0528 Positive
AUD/USD – 0.6933 and 0.6953 Positive
Dow Jones – 31753.21 and 31968.02 Positive
Nasdaq 100 – 11927.17 and 12024.16 Positive
Silver – 21.539 and 21.621 Negative

Market snapshot

What else to watch today

UK’s GDP growth rate, business investment, industrial production, factory output, construction output, balance of trade and goods trade balance, South Africa’s mining production, gold production, manufacturing production and SACCI monthly business confidence index, Germany’s current account, Mexico’s industrial production and central bank interest rate decision, Turkey’s foreign exchange reserves, India’s inflation rate, manufacturing production, central government budget value and industrial production, Brazil’s industry confidence indicator, US natural gas stocks change, China’s New yuan loans, outstanding yuan loan growth, total social financing and money supply M2, as well as Argentina’s inflation rate.

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