Investing.com – Wall Street looked set to bounce back on Thursday after battering the technology sector during the previous session. TSMC has reported strong results, while Netflix is due to release its latest numbers after the close. The European Central Bank is expected to take a stand at its latest policy-setting meeting.
1. Futures bounce back after tech battering
U.S. stock futures traded higher on Thursday, rebounding after the Nasdaq Composite’s worst session since 2022 as investors grew wary of the valuations of big tech stocks.
At 04:30 ET (08:30 GMT), the contract was 20 points, or 0.1%, lower, while it was up 12 points, or 0.2%, and up 90 points, or 0.5%.
Slump 2.8% on Wednesday, the worst day since December 2022, while it fell 1.4%. Blue-chip, however, gained 0.6%, closing above 41,000 for the first time ever.
All eyes will remain on the tech sector, although strong results from TSMC (see below) can generate some confidence.
There are more earnings for Digest Wednesday, including from Domino’s Pizza (NYSE: ) and Alaska Air (NYSE: ) before the open, while streaming giant Netflix (NASDAQ: ) is expected to post results after the close (see below).
On the economic front, for the week ending July 13 due later in the session, as investors look for clues about the health of the country’s labor market with the Federal Reserve seeking more guidance before cutting interest rates.
2. TSMC posted a strong rise in Q2 net profit
Taiwan Semiconductor Manufacturing (NYSE: ) may be facing choppy waters ahead, but there’s no doubt that Taiwan’s chipmaker is thriving.
The world’s largest contract chip maker posted a 36% jump in second-quarter net profit on Thursday, riding on demand for semiconductors used in artificial intelligence applications.
TSMC posted a net profit of T$247.85 billion ($7.6 billion), compared to Reuters expectations for a profit of T$236.1 billion.
It is the world’s leading producer of advanced chips found in everything from smartphones to AI applications, counting companies like Apple (NASDAQ: ) and Nvidia (NASDAQ: ) among its clients.
A surge in demand for AI over the past year, as many tech giants race to launch their own offerings following the success of OpenAI’s ChatGPT, has pushed the company’s American Depositary Receipts to reach a total market capitalization of more than $1 trillion.
The company is considered a bellwether for the global chipmaking industry, as it has the highest capacity to produce advanced chips in the industry.
That said, TSMC shares fell on Wednesday amid heightened geopolitical tensions, after Republican presidential candidate Donald Trump said Taiwan should pay the US for defense supplies, putting a spotlight on the island’s most important company.
On top of this, reports emerged that the Biden administration is considering more export curbs on China, especially in chipmaking technology, which could lead to lower sales in China, which is a major consumer of chips.
3. Netflix net add set to contract
Netflix released its latest results after Thursday, with the streaming giant having guided for lower net subscriber additions in the second quarter than in the first three months of the year.
LSEG estimates that the company will add about 4.82 million customers in the second quarter, which would be the lowest addition since the first quarter of 2023 and about half of the 9.3 million added in the previous three months.
This decline follows sharp gains following a crackdown on password sharing and as viewers’ attention shifts to summer sporting events including the European Championship football tournament.
The company added about 4.82 million subscribers in the second quarter, according to LSEG data. That would be the lowest addition since the first quarter of 2023 and about half of the 9.3 million added in the past three months.
That said, JPMorgan believes that Netflix may be in for a bigger surprise boost, fueled by excellent content, price increases and continued gains from efforts to crack down on password-sharing.
“We remain positive on Netflix shares heading into 2Q earnings, analysts at JPMorgan said, in a note published last week, “while also recognizing high expectations.”
Industry data shows rising demand, JPMorgan said, citing Sensor Tower data showing global downloads and good daily active user trends in 2Q.
4. The ECB is set to hold rates steady
The holds the latest policy-setting meeting later in the session, and is expected to keep interest rates unchanged after lowering rates from a record high last month.
The focus, therefore, may be on the press conference accompanied by ECB President Christine Lagarde, with investors looking for clues about the future path of interest rates.
Lagarde will likely try to create a balance, admitting that regional growth is weak, but domestic inflation and wage growth remain stubbornly high.
The market is pricing in almost two rate cuts for the rest of the year, with the next step lower in September.
“The ECB will keep rates on hold in July,” analysts at Morgan Stanley said in a note. “From my perspective, more data is needed to confirm (and project) the timely return of inflation to the target.”
5. Warner Bros. Discovery to split?
Warner Bros Discovery (NASDAQ: ) has discussed plans to split its digital streaming and studio businesses from its legacy TV networks, the Financial Times reported on Thursday, as it looks to generate greater value for shareholders.
The report said CEO David Zaslav is reviewing a number of strategic options for the media and entertainment conglomerate, ranging from selling assets to splitting up film studio Warner Bros. and streaming service Max into a new company.
Warner Bros. shares have fallen nearly 27% so far this year, and nearly 70% since the merger between Discovery and AT&T (NYSE: ) Warner Media in 2022.
In May, the company reported a bigger-than-expected quarterly loss due to declining advertising sales in its cable TV unit and as its studio segment grappled with the fallout from last year’s Hollywood strike.
“While some of the financial assumptions behind the combination of Warner Media and Discovery have not materialized, we still believe some of WBD’s assets are best-in-class with unknown value,” analysts at Bank of America said in a note earlier this week.
The company can create more value for shareholders if it explores strategic options, including a potential sale, the bank added.
