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Talking Points:

  • The S&P 500 climbed 67 points, the Dow 547 and the NASDAQ 264
  • FANG member Netflix beat all earnings forecasts and subsequently climbed 15% in after-hours
  • Strong earnings and renewed optimism look to drive equities higher again on Wednesday

US equities look primed to drive higher as strong performances from all sectors and remarkable earnings from Netflix inject optimism into recently troubled markets. Tuesday saw the Dow close up 547 points or 2.17%, the S&P 500 climbed 67 points for a gain of 2.46%, while the NASDAQ ended up 214 points at 2.89%.

The strong performance marks the largest single-day percentage climb since March 26th for all three indices. Still, they remain in the red for October. With that in mind, positive earnings may generate enough optimism to reverse the trend.

US Equities Price Chart, October

S&P500, Dow, NASDAQ price chart

Looking to learn about FANG? Check out ‘What is the NASDAQ FANG Group and Why Does it Matter?

Netflix Earnings

Although Netflix is a singular stock, the media production company’s inclusion in the FANG group has made it somewhat of a bellwether for tech stocks and the larger equity market. Months of strong earnings and robust gains has seen meaningful contribution to the broader FANG basket and has shown opportunities for growth remain, even after a 10-year bull market.

Third quarter earnings for Netflix were as follows:

  • Earnings Per Share $0.89 versus $0.68 expected
  • Revenue $4 billion versus $4 billion expected
  • Subscriber growth 6.8 million versus 5 million expected
  • 9.4 million in subscriber additions forecasted for the fourth quarter

Netflix Price Chart, October 16th

S&P 500 Posts Best Performance Since March, Netflix Shatters Earnings

Chart provided by Marketwatch

Arguably the most notable data in the earnings report was the surprise in subscriber growth. As the main source of revenue for Netflix, the 1.8 million surprise in new subscribers contributed meaningfully to the after-hours bump reflected in the share price. Following the report, Netflix immediately jumped 15% to trade above $400 before shedding some gains to steady around 13% at $390.

Nikkei 225 Futures Chart 10-Minute, October 16th

Nikkei 225 futures

Already, foreign equity markets look to be headed higher Wednesday as Nikkei 225 futures have the index firmly in the green. Should they maintain their gains throughout the session, US equities may stage another strong performance during their own Wednesday session.

Check out our economic calendar for important data releases this week.

In the upcoming weeks, look for renewed optimism in equity markets if the other FANG members deliver positive earnings results. Amazon and Google earnings are due the 25th with Facebook due on the 30th. Honorary member Apple is scheduled to release their report on November 1st.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.