Bellwether Netflix

Good Afternoon. All major indices closed in the Red for the week. Fed Chair Jerome Powell’s speech was the main reason stocks gave away all their gains on Wednesday, which weighed heavily on the week’s performance. After Powell reaffirmed the Fed’s aggressive stance on inflation in his speech, markets turned volatile. In addition, the chip stocks sell off after Nvidia and AMD both announced earnings were hit due to China restrictions, and poor results from UnitedHealthcare put pressure on the markets overall.

IMF Sees Global Slowdown, No Recession:
IMF chief warned of a global slowdown driven by the US-led trade “reboot,” citing rising protectionism under Trump’s tariff threats as a key drag on productivity and growth. Recession is not in the forecast. The IMF is scheduled to release its World Economic Outlook on Tuesday, which I will cover in next week’s newsletter.

Bellwether Netflix:
Netflix reported another strong quarter this week. With the cheapest plan starting at $7.99, Netflix is well-positioned to serve its largest customer base during the potential downturn. On the earnings call, the company mentioned that they haven’t noticed any significant changes in customer behavior due to the current uncertainty. Rather, the company did not even use the word “Tariff” in its prepared remarks. Netflix is uniquely positioned and a great business, which makes this one of my top picks for the long term.

Hard Data Still Strong:
Hard macro data is still strong. Both retail sales and unemployment claims came in better than expected this week. Consumers have rushed to make purchases before the tariffs kick in, and this is seen in the retail sales numbers.

Powell was Right:
In the last FOMC press conference, Jerome Powell referenced how inflation increased during the last tariff escalation for all products, not just those affected by the tariffs. For example, he mentioned that washers were tariffed, so the washer prices were expected to go up. However, retailers took the opportunity to raise dryer prices and take advantage of the sentiment. I had firsthand experience of retailers using tariffs as an excuse for not giving discounts. Yesterday I went to purchase a kids’ bike for my son. Last time when I purchased two adult bikes of a reputed brand, I got a 15%-20% discount without even me proactively asking. This time, though, the young boy at the bike shop explained how tariffs are making it difficult to give any discount. Finally, he gave me a 5% discount for my son’s 20” bike priced over $600. This shows that the retailers will use tariffs as an excuse to cut down on discounts, at least if they don’t raise item prices.

For the week:

• The S&P 500 is down 1.50%, the Nasdaq is down 0.62%, and the Dow 30 is down 1.14%.

  

  Source: Barchart

  
  

CNN's Fear & Greed Index now stands at 21 (Extreme Fear) out of 100, up 8 points from last week. Details here

The top five trending stocks on Reddit are SPY, Tesla, EU, Nvidia, and UnitedHealth. Read More

Here is a summary of this week’s key economic releases:

Target Rate Probabilities for May 7th FOMC Meeting:

CME FedWatch

Possible China Trade Deal: Trump said he was hesitant to escalate tariffs on China, warning it could stall trade. He claimed Beijing had made repeated overtures to strike a deal. Read

Trump vs. Powell: White House adviser Kevin Hassett said Trump and his team are exploring the option of firing Fed Chair Jerome Powell. This action would carry profound implications for central bank independence and global markets. Read

Discover Cap One Merger: The Fed and OCC have formally cleared Capital One’s $35.3B all-stock acquisition of Discover. Read

Bad News for Google: Google’s antitrust troubles continue to grow as it pivots to an AI-driven future. A federal judge ruled it held illegal monopolies in online ads, marking its second major antitrust setback in less than a year. Read

Nvidia Takes A Hit: Nvidia will take a quarterly charge linked to halted H20 chip exports, after the US imposed new licensing rules on shipments to China and select nations. Read

Trump’s Approval Ratings Fall: President Trump is seeing his lowest economic approval ratings, driven by rising discontent over tariffs, inflation, and fiscal policy, per the latest CNBC All-America Economic Survey. Read

Goldman Sachs Beat: Goldman Sachs beat Q1 estimates as equities trading surged, lifting profit 15% to $4.74B ($14.12/share) on 6% revenue growth. Trading gains offset a slight dip in asset and wealth management revenue. Read

Bank of America Beat: Bank of America beat Q1 estimates as profit rose 11% to $7.4B and revenue grew 5.9% to $27.5B, driven by stronger net interest income and trading. NII hit $14.6B, topping forecasts. Read

Charles Schwab Beat: Charles Schwab reported a 37% jump in Q1 profit, driven by strong trading and asset management. Market volatility from tariff-related uncertainty led investors to reshuffle portfolios, boosting Schwab’s wealth and trading segments. Read

American Express Beat: American Express beat Q1 profit estimates as affluent customers kept spending on travel and entertainment. It reaffirmed its 2025 outlook even as others pulled guidance amid trade policy uncertainty. Read

Netflix Beat: Netflix reaffirmed its revenue outlook and expressed confidence in navigating Trump’s unpredictable tariff moves. Co-CEO Greg Peters noted no major change in consumer behavior, easing concerns about potential pullbacks in streaming spend. Read

United Healthcare Miss: UnitedHealth shares tumbled 22% after it cut its annual profit forecast, citing a surge in medical service demand from older patients that was “far above” expectations. Read