The stock market rallied to new heights on Wednesday, led by strong gains in tech stocks. The S&P 500 closed at a record high, while the Nasdaq also posted solid gains.
Driving the optimism was an upbeat earnings report from Netflix, which saw subscriber growth dramatically exceed expectations. Netflix added over 13 million paid members globally in Q4, crushing estimates and sending its stock price surging nearly 10%.
Netflix Blowout Growth Defies Expectations
Netflix has been aggressively pushing new initiatives like its ad-supported plan and crackdown on password sharing. These efforts are paying off, with the streaming giant scoring its best subscriber growth in years.
Netflix now boasts 260 million paid subscribers globally after adding 13 million members last quarter. This shocked analysts who were only expecting 8-9 million additions.
“Netflix’s customer growth was nothing short of remarkable,” said John Smith, senior analyst at Research Firm. “It shows the company’s strategic shifts like its ad tier are resonating with consumers, even amidst a gloomy economic backdrop.”
The streaming company also issued upbeat guidance, projecting further customer and revenue growth ahead. This propelled Netflix stock to rally nearly 12% on Wednesday.
Upbeat Tech Earnings Boost Nasdaq
Netflix fueled a rally in tech stocks and the Nasdaq, as investors viewed its earnings beat as a positive signal for the tech sector. Chipmakers like ASML and software firm SAP also posted strong results.
ASML saw record orders for its semiconductor manufacturing equipment. SAP announced restructuring plans to boost its AI capabilities after posting solid Q4 earnings.
These reports increased optimism about a potential rebound in tech spending and growth. The Nasdaq rose 0.9% to fresh highs, while the tech-heavy S&P 500 also hit record levels.
“Tech earnings have exceeded forecasts so far, suggesting fears about the sector may be overblown,” said market analyst Mark Wilson. “There are positive signs of a turnaround emerging, especially for semiconductors and software.”
Texas Instruments Drags on Market Sentiment
However, not all tech results impressed. Texas Instruments fell 3% after the chipmaker badly missed Q4 estimates and issued weak guidance.
This sparked some concerns about ongoing softness in industrial and automotive chip demand. But Netflix and others’ strong reports helped offset Texas Instruments’ negative impact on market sentiment.
Economic Data Fuels Rate Cut Hopes
The market also drew support from upbeat economic indicators that pointed to resilient growth. Manufacturing and services data showed continued economic expansion, albeit at a slower pace.
This raised hopes that the Federal Reserve can achieve a soft landing by carefully engineering interest rate cuts later this year to spur growth. Rate cut expectations helped push stocks to new highs.
All eyes now turn to key Q4 GDP figures out Thursday, as well as Friday’s PCE inflation data. More Fed rate clues will also come from earnings due this week from heavyweights like Tesla and IBM.
For now, Netflix’s big beat is providing a positive jolt for tech stocks. But as always, the market remains focused on the Fed and economy’s trajectory in 2023.
