Netflix (NFLX) is trading down sharply in pre-market trading after reporting Q2 earnings after the close yesterday.  (Here’s a snapshot of a report we sent subscribers last week noting that Q2 earnings are typically weak for NFLX.)  The stock is set to open lower by 11% when markets open for trading this morning.  Big gaps up or down of 10%+ are nothing new for NFLX.  Since the company went public, this will be the 14th time that NFLX has gapped down 10%+ in reaction to earnings.  When looking at how the stock might trade from the open to the close today following its gap lower, note that in the past the stock has traded higher from the open to the close 8 out of 13 times.  As shown below, this same reaction happened a year ago when NFLX reported its Q2 2018 numbers.  The stock opened down 13.37% on July 17th last year, but traders that bought at the open that day saw a huge gain of 9.38% from the open to the close.

A total of 46 stocks have reported earnings since the close yesterday.  Of those 46 stocks, 67% posted better than expected EPS, while just 56% posted better than expected sales.

Below we show the stocks that reported earnings since yesterday’s close that are trading up in the pre-market.  Novartis (NVS) is set to open higher by 5.5% after beating on both the top and bottom line.  eBay (EBAY) is set to open up the second most this AM with an expected gap higher of 4.74%.  Philip Morris International (PM) is trading up 3.33% pre-market following big beats on EPS and revenues.  If PM opens up more than 3%, it will be its biggest gap up on earnings since its April 2015 report when it opened up more than 5%.  Other notables on the list of earnings winners ahead of the open include Blackstone (BX), Honeywell (HON), and Danahar (DHR).  (Note that this is a snapshot of where stocks were trading pre-market at 8:30 AM ET, so prices could still change quite a bit before the 9:30 AM ET open.)

While Netflix (NFLX) is the most notable loser on earnings this morning, Limelight Networks (LLNW) is actually set to open down even more with an expected gap of -16.36%.  LLNW reported a reverse earnings triple play by missing EPS estimates, missing revenue estimates, and lowering guidance.

United Rentals (URI), SAP, Crown (CCK), and Alcoa (AA) are other notable stocks set to open down this morning following earnings reports.  Need earnings info for stocks you care about most?  Start using our Earnings Explorer tool now with a two-week free trial to Bespoke Institutional.

Along with Netflix (NFLX), both eBay (EBAY) and IBM are also reporting Q2 earnings after the close of trading this evening.  If you’re interested in our analysis of Netflix earnings, start a two-week free trial to Bespoke Premium and read our recent BIG Tips report on the subject.  Below are snapshots of both eBay and IBM from our popular Earnings Explorer tool that’s fully available to Bespoke Institutional subscribers.

As shown, eBay has historically beaten consensus analyst EPS estimates 81% of the time, while it has beaten sales estimates slightly less at 77%.  In terms of eBay’s stock price reaction to earnings, the stock has gained on the first trading day following quarterly earnings just a notch above half the time.  The likelihood that EBAY will rise or fall in price in reaction to earnings has basically been a coin flip throughout the stock’s history.  Be sure to check out some of the other stats included in the snapshot of eBay.  You can find this same info for nearly every publicly traded US stock in our Earnings Explorer tool.

At 82%, IBM has an even stronger EPS beat rate than EBAY, but its sales beat rate is much weaker at just 49%.  And IBM’s stock price has only posted gains on its earnings reaction days 44% of the time since 2002.  Notice the slowdown in sales that IBM has seen over the last few years in the top right chart below.

When you look up an individual stock in our Earnings Explorer tool, we also provide detailed info for every single quarterly earnings report that each company has posted over the last 17+ years.  Users can break the reports up by quarter so that we can look specifically at IBM’s historical Q2 reports for example.  Below is a snapshot of IBM’s historical Q2 reports.  We’ve highlighted the stock’s one-day price reaction to the earnings reports as well.  As shown, when IBM reported earnings last July, the stock gained 3.27%.  But the stock fell on its Q2 earnings day in each of the three prior years.

Overall, however, IBM has actually averaged a gain of more than 1% on its Q2 earnings reaction day when you look at all of its reports since 2002.

Need earnings info for stocks you care about most?  Start using our Earnings Explorer tool now with a two-week free trial to Bespoke Institutional.

Yesterday’s session did little to create any major changes in the overbought and oversold levels of the major US index ETFs.  As shown in our Trend Analyzer tool below, most of the major index ETFs have very small or no tails indicating little movement in respect to each ETF’s trading range over the past week. Large-cap indices continue to outperform small-caps with the Dow (DIA) having risen the most over the past five days.  DIA has risen 2.08% while the Nasdaq (QQQ) has been the second-best performer rising 1.31%. With these changes, DIA and QQQ have both moved the most within their respective trading ranges in the past week.  DIA, while still the most overbought, is actually in better shape than it was earlier in the week when it was sitting at extremely overbought levels.  Meanwhile, the Micro-Cap ETF (IWC) and Russell 2000 (IWM) are both lower over the past few days. Alongside the Core S&P Small-Cap ETF (IJR), these ETFs are also the only ones to be neutral and in sideways trends.

Looking at the various industry groups, there has been an interesting divergence between Healthcare industries over the past few weeks following headlines reporting the Trump administration’s proposal of reforms including an executive order pushing for more transparent pricing in late June.  Pharmaceuticals (PPH) and Biotech (IBB) have been taking a beating so far in July after a jump to extremely overbought levels at the start of the month. In the past week, PPH and IBB have fallen 3.05% and 3.1%, respectively.  These have been the two worst-performing industry ETFs in the past week and have rapidly pulled back to their 50-DMAs. Meanwhile, US Healthcare Providers (IHF) has been the best-performing industry ETF with a 5.34% gain, thanks to a large gap up last week on more headlines from the White House regarding a rebate plan.  This has sent the ETF surging into extremely overbought territory. IHF is not alone at extreme levels though as the Retail ETF (RTH) and Brokers and Exchanges (IAI) also both sit at elevated levels.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Remember back on July 5th after the stronger than expected employment report when the probability of a July 50 basis point (bps) rate cut plunged from 29% all the way down to 5%?  Of course, you don’t!  It was a summer Friday between July 4th and the weekend.  The following Monday, though, market expectations for a 50 bps cut continued to fall, even falling below 3% early that week.  Ever since that knee-jerk reaction to the employment report, though, probabilities for a 50 bps cut have been back on the rise and are higher now than they were right before the release of the June employment report.  At over 34% now, the market is pricing in better than a 1 in 3 chance of a 50 bps cut at the July 31st meeting.

While there have been some weaker than expected data points since the employment report (Industrial Production, Capacity Utilization, Housing Starts, and Building Permits), there have been many more better than expected reports.  Small Business Sentiment, Jobless Claims, Empire Manufacturing, Homebuilder Sentiment, Retail Sales, CPI, and PPI are all reports that have come in better than expected since July 5th.  While not all the readings have been particularly strong, it’s puzzling to see probabilities of more aggressive easing rise even as the pace of better than expected reports improves.  Start a two-week free trial to one of Bespoke’s premium equity market research services.