Wall Street's main indexes fell on Friday, with the Nasdaq set for its fourth straight day of declines after a weak forecast from Netflix sent its shares along with other streaming companies spiraling lower.
Netflix Inc plunged 22.7% after the streaming giant fell short of market forecast for new subscribers at the end of last year and offered a downbeat outlook for early 2022.
Shares of technology and media companies including Walt Disney Co, ViacomCBS and Roku that have invested heavily in streaming also fell between 4.3% and 5.0%.
Seven of the 11 major S&P 500 sectors fell, with communication services down 1.7% at an eight-month low.
Analysts on Thursday raised doubts about business prospects of pandemic market favorites including Netflix and Peloton Interactive.
However, shares of Peloton recovered somewhat from the previous day's fall, gaining 4.2% after its chief executive denied a report that the exercise bike maker was halting some production and raised second-quarter revenue forecast.
Growth bargains, upbeat earnings take Wall Street higher
"The pandemic winners are under pressure and that will likely continue. If everybody already has Netflix, it's hard to improve subscriber growth," said John Lynch, chief investment officer for Comerica Wealth Management in Charlotte, North Carolina.
"Perhaps investors' expectations were a little stretched."
Other megacap growth companies such as Microsoft, Tesla and Apple are scheduled to report earnings next week.
Wall Street's main indexes tracked at least their third straight weekly declines, with the Nasdaq Composite set for its worst week since March 2020. The Nasdaq on Wednesday closed more than 10% below its all-time high hit in November, confirming it was in correction territory.
The tech-heavy index has particularly come under pressure after rising Treasury yields and expectations of a more aggressive Federal Reserve in controlling inflation hit growth shares.
The central bank's policy meeting next week will offer more clarity on its fight against surging inflation, after data earlier this month showed consumer prices rising to its highest level in four decades in December.
"Maybe by the middle of next week if we get some clarity from (Fed Chair Jerome) Powell, some of that pressure on stocks can subside as investors get more comfortable" Lynch added.
At 9:49 a.m. ET, the Dow Jones Industrial Average was down 17.77 points, or 0.05%, at 34,697.62, the S&P 500 was down 21.93 points, or 0.49%, at 4,460.80 and the Nasdaq Composite was down 114.42 points, or 0.81%, at 14,039.60.
Single stock options totaling about $1.28 trillion were set to expire on Friday, potentially driving sharp market movements and impacting stocks that have very large call positions like Apple, Microsoft, Tesla, Amazon, Meta Platforms and Google-parent Alphabet.
Bitcoin fell sharply on Friday, as investors moved away from riskier assets and after Russia proposed a ban on the use and mining of cryptocurrencies, dragging down crypto-linked stocks such as miner Hut 8 Mining Corp and crypto exchange Coinbase Global more than 10%.
Declining issues outnumbered advancers for a 2.44-to-1 ratio on the NYSE and for a 2.61-to-1 ratio on the Nasdaq.
The S&P index recorded four new 52-week highs and 17 new lows, while the Nasdaq recorded four new highs and 624 new lows.
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