By Geoffrey Smith
Investing.com -- Technology stocks rise as Alphabet announces big job cuts and Netflix returns to the kind of subscriber growth that investors had thought was gone forever. Netflix founder Reed Hastings is also ascending to executive chairman position, with COO Greg Peters replacing him as co-CEO. Existing home sales data for December are due and are unlikely to break the flow of gloomy economic data this week. Western defense ministers meet to agree on more arms shipments to Ukraine, with a new German defense minister under pressure to let the country's main battle tank join the fighting. And crypto lender Genesis files for bankruptcy with debts of more than $3.8 billion. Here's what you need to know in financial markets on Friday, 20th January.
1. Alphabet announces job cuts
Google parent Alphabet (NASDAQ:GOOGL) said it will cut 12,000 jobs, in an effort to restore profitability as its growth slows.
The cuts, the latest in a series of mass culls of excess staff by Big Tech, will be spread across the group’s business lines and geographies. They come only days after a similar move by Microsoft (NASDAQ:MSFT).
CEO Sundar Pichai said in a memo to staff that: “Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.”
Alphabet stock rose 1.6% in premarket in response.
2. Netflix subscriber growth roars back
There was upheaval, too, at another of the previously untouchable “FAANGs” group. Netflix (NASDAQ:NFLX) co-founder said he will leave his position as co-CEO to become chairman of the streaming giant, allowing chief operating officer Greg Peters to step up alongside programming chief Ted Sarandos.
Netflix also handsomely beat its own forecasts – and the market’s for subscriber growth in the three months through December, reviving faith in the sustainability of its model after a miserable year for streaming companies.
Net subscribers rose by 7.7M, well above the 4.5M it had guided for. Netflix stock rose nearly 6% in premarket in response.
3. Stocks mixed as tech outperforms; existing home sales, earnings in focus
U.S. stocks are set to open mixed later, with Netflix and Alphabet news supporting technology stocks more broadly.
However, the disappointing economic data seen this week continue to cast a shadow, while comments from Federal Reserve vice-chair Lael Brainard and New York Fed President John Williams on Thursday were a reminder that the central bank is still far from being ready to cut interest rates. Existing Home Sales data are the only economic figures of note due Friday.
By 06:30 ET (11:30 GMT), Dow Jones futures were down 23 points or less than 0.1%, while S&P 500 futures were up by a similar amount. Only Nasdaq 100 futures were clearly moving, up 0.4%. The main three cash indices all lost between 0.7% and 1% on Thursday and are set for their worst weekly loss in three.
Other stocks likely to be in focus later include Schlumberger (NYSE:SLB) and State Street (NYSE:STT), which both report earnings, and T-Mobile (NASDAQ:TMUS), which admitted to a major data breach late on Thursday.
4. Tanks but no tanks
U.S. and European defense ministers are set to meet for discussions over increasing military aid to Ukraine, aiming to give it the means to recapture lost territory from Russia when the winter is over.
Central to the discussions will be the issue of tanks, where Germany is under increasing pressure both to send its Leopard 2 main battle tank to Ukraine and allow its NATO partners such as Poland to send their Leopards too. Chancellor Olaf Scholz earlier this week said he wouldn’t agree to offer Leopards until the U.S. offered its main battle tank, the Abrams M1. The U.S. has also held back from that step, arguing that Leopards dispatched from Europe would have a bigger and faster impact. The U.K. has already approved sending its main battle tank, the Challenger 2.
The U.S. approved another $2.5B of military aid this week, hinting heavily that it is now more relaxed about Ukrainian ambitions to retake the province of Crimea, which Russia annexed in 2014.
5. Genesis files for bankruptcy
Crypto lender Genesis finally bowed to the inevitable and filed for bankruptcy, two months after it was forced to suspend client withdrawals due to massive losses on its exposure to FTX.
The move effectively puts a court in charge of the biggest fight going on in crypto land right now, between the Winklevoss twins and Barry Silbert’s Digital Currency Group, Genesis’ ultimate owner. It will have to decide which of Genesis’ creditors get paid first, and who – if anyone – will make whole over 340,000 customers of the Winklevoss investment platform Gemini.
Both Gemini and Genesis have been charged by the Securities and Exchanges Commission with illegally offering securities in the U.S. Both the SEC investigation and the bankruptcy process raise the specter of a largely forced liquidation of some of the world’s largest holdings of crypto assets.
According to its filing, Genesis owes its 50 biggest creditors some $3.8B, a little more than anecdotal reports had suggested earlier.