Netflix beats, yield curve inversion worries

Show me the money

Netflix shares jumped more than 14% in after-hours trading after it hit 2.4m net subscriber adds in the third quarter, above the guidance offered by the company. But this was in line with analyst expectations – and at the lower end. The company anticipates growing subs by around 4m this quarter from 223m to 227m. Meanwhile Netflix wants to stop giving guidance on subscriber additions and focus on the money. Management don’t expect much spin down to the cheaper ad steam service. Earnings per share hit $3.10 vs $2.13 expected.

Goldman Sachs

Shares in GS followed the positive mood from the big banks this season. Profits fell 43% but topped estimates as the company announced its second major restructuring in four years. EPS at $8.25 beat expectations for $7.69. Revenue fell 12% to $11.98 billion, though again above consensus estimates. Investment banking revenues plunged, and equity trading revenues fell, too, though fixed income was a bright spot with a 41% jump. The company’s four main divisions will be restructured into three - Asset & Wealth Management, Global Banking & Markets, and Platform Solutions. Marcus, the retail bit, will be part of the larger Asset & Wealth division – no longer chasing costly new customers “on a mass scale”. 

United Airlines 

Strong demand, rising costs but keeping control with capacity at 90% of 2019 levels. Keeping supply suppressed helped revenue per available seat mile was up 25% from three years ago. Shares in United Airlines rose 7% in the after-hours trading. 

UK inflation up

Sterling fell in early trade as UK inflation jumped to a 40-year again in September. CPI rose by 10.1% from +9.9% in August and above the 10.0% consensus forecast. The core reading rose to +6.5% from +6.3%. It just heaps more pressure on the government as it tries to wrestle with the ‘cost of living’ crisis. It also increases the chance the Bank of England goes ahead with ‘forceful’ rate hikes – 100bps in November perhaps.  

Because I was inverted

The inversion of the 10yr Treasury yield and 3-month is a pretty good predictor of a recession. Yesterday it inverted for the first time since 2020 with the 3mo yield 3bps higher than the 10yr.  The last eight recessions in the US were all predicted by this 3mo/10yr inversion.