What do KPop Demon Hunters, SUVs, Scotch tape, and protein shakes all have in common? At first glance not all that much, except they suggest consumer spending is holding up and that’s fueling the stock market.
Netflix, General Motors, 3M, and Coca-Cola all reported strong earnings on Tuesday. They operate in very different areas and that’s a healthy sign of a broadening market. It’s hard to suggest those results can be attributed to artificial intelligence powering a bubble.
For skeptics still attached to the idea of AI investment masking wider weakness, maybe data from banks are more convincing. Western Alliance Bancorp shook off worries about bad loans to post a higher profit, as did fellow regional lender Zions Bancorp. Capital One felt so good about how borrowers are paying back credit cards and auto loans that it released $760 million it had been holding back to cover potential losses.
There are still concerns about tariff headwinds, a weakening labor market, and pressure on lower-income consumers. Earnings from the likes of budget airline Southwest and toy company Hasbro should give a fuller picture, but right now corporate reports suggest the U.S. economy is still healthy as the Federal Reserve lowers interest rates. That means
areas other than technology could be undervalued, such as the lagging consumer sector.
It’s a bit too early to be looking for an awkward acronym for a new set of stock market champions in the style of the FAANG
(Facebook, Amazon, Apple, Netflix and Google) grouping, but there are hints of a rotation.
The Magnificent Seven megacap stocks still rule the S&P 500, with the tech-heavy group expected to report 14% growth for the third quarter, ahead of the 7.8% forecast for the rest of the index’s constituents. But the
gap looks to be closing and that’s probably a good thing.
—Adam Clark
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CONTENT FROM: COLUMBIA THREADNEEDLE INVESTMENTS
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Spreads are tight, but yields are (still) alright
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In our quarterly update, we delve into the impact of recent fiscal and monetary policy changes on a resilient bond market. Learn more about how we're positioning portfolios in this environment to capitalize on opportunities and manage risks.
Learn More
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Netflix Revenue Is Rising. Its Outlook Beat Expectations.
While falling short of third-quarter profit expectations, Netflix turned in revenue and earnings gains and offered a better-than-expected outlook, with results driven by growth in membership, rising
ad revenue, and price increases to its media streaming options.
- Netflix expects fourth-quarter revenue to rise 17% from the year-earlier period. While it no longer reports its subscriber numbers, it said it hit its highest quarterly view share ever in the U.S. and U.K., which has grown 15% and 22%, respectively since the
fourth quarter of 2022.
- Third-quarter adjusted earnings of $5.87 a share fell short of expectations because of a dispute with Brazilian tax authorities that hadn’t been factored into estimates. Revenue was $11.51 billion, up 17% from a year ago.
- Some Netflix investors have worried about growth following years of strong subscriber and revenue gains. Netflix has cracked down on password sharing and introduced lower priced ad-tiers. These initiatives helped boost growth. But now it has to find new ways to keep existing customers interested and attract new ones.
- Netflix has shifted its focus to bringing on new content, including live events, family games, video podcasts, and, Netflix originals, to help keep growth accelerating. It has scored big with K-Pop Demon Hunters, which boosted revenue and led to deals with Mattel and Hasbro for licensed toys and merchandise.
What’s Next: Rival streaming firm Warner Bros.
Discovery, which is raising prices across the board for its HBO Max platform, is an M&A target. It has initiated a review of strategic alternatives in light of interest it has received from multiple parties, but it wouldn’t be more specific.
—Angela Palumbo
Jobs Data Is Delayed, But the Hiring Trends Are Emerging
Although September employment data has been delayed during the government shutdown, employers are hiring fewer workers than needed to keep the unemployment rate steady. From January to April, employers added an average of 123,000 jobs a month, but that dropped to just 22,000 jobs added in August.
- Goldman Sachs economist Elsie Peng said the biggest factors behind this hiring stagnation are declining immigration, government cuts, the growing use of artificial intelligence, and uncertainty around tariff policy and economic risks.
- White House spokesman Kush Desai said
Trump’s economic agenda has t
