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Today in the Market (5/18/2023)

Good Evening! On Thursday, the stock market experienced an increase as investors anticipated news regarding the ongoing debt ceiling negotiations. Additionally, Walmart’s (WMT) quarterly results demonstrated the strength of the American consumer.

The S&P 500 experienced a 0.94% increase, while the Dow Jones gained 0.34%. The Nasdaq Composite recorded the highest percentage increase among each of the benchmarks, standing at 1.51%.

ALL ABOUT MARGINS!

As rising inflation and interest rates prevail, investors are focused on gross margins, which have declined over the previous several quarters. But times are changing for some firms! For retailers and manufacturers of consumer products, margins seem to be improving as they have expressed greater optimism in recent weeks about the figures than they did in the previous last quarter.

How so? Recent earnings announcements from U.S. consumer-facing companies like PepsiCo, Coca-Cola, McDonald, and Starbucks showed that lower input costs, inventories, and prolonged price increases are driving a quicker-than-expected profit rebound. By how much though?

  • PepsiCo’s March-quarter margins exhibited a year-over-year increase, and the company reported a 16% rise in its average selling price during the same period.
  • Coca-Cola’s prices increased by 11%, resulting in a decline in quarterly margins compared to last year. However, there was an improvement in margins from the previous quarter.
  • McDonald’s Corp and Starbucks Corp both experienced an improvement in their margins.

The future is bright! Quarterly margins for the consumer discretionary components of the S&P 500 index are anticipated to rise year over year for every quarter this year, according to Refinitiv data.

IS THIS WHAT NETFLIX NEEDED?

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Six months after its launch, Netflix’s (NFLX) ad-supported tier is displaying some indications of growth. During the virtual upfronts presentation, the streaming company disclosed that its ad-based plan, Basic with Ads, has 5 million global monthly active users (MAUs).

According to recent reports, Netflix has a global subscriber base of 232.5 million. The company has observed a significant increase in ad-based users, which has more than doubled since early 2023. In countries where the ads plan is available, over a quarter of Netflix sign-ups are now opting for this plan, which is aiding the growth!

However, there are problems arising for Netflix… Although the business has said it has enough material stockpiled to withstand the shutdown, Netflix is currently dealing with an ongoing writers’ strike, which might have an effect on content expenditure and coming releases. Also, the not-so-favorable decision to crack down on password sharing is making the platform continues to get criticism. It was already stated that the US will experience a crackdown this quarter.

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