Before the bell: Good Friday

Netflix and Eli Lilly perform strongly, while UnitedHealth and Novo Nordisk tumble. Tokyo posts gains, but most markets remain closed.

The European Central Bank lowered interest rates by 25 basis points on Thursday, as expected. The deposit rate now stands at 2.25%, down from 4% in June last year. Savers earn less, giving them yet another reason to consider investing. Of course, selecting the right investments remains crucial. Passive investors made no gains yesterday, as indices in both the U.S. and Europe closed in the red. The S&P 500 managed a modest 0.1% increase, but the Dow Jones dropped 1.3%. That sharp drop in the Dow was largely due to the steep fall of UnitedHealth Group (-22%), which reported disappointing results and issued a profit warning for the full year. Because UnitedHealth has a high share price—585.04 dollars at Wednesday’s close—it carries heavy weight in the Dow Jones, which doesn’t adjust for price. That’s why we often reference the S&P 500 instead of the Dow.

Investors holding Netflix and Eli Lilly had a much better day. Eli Lilly surged 14.3% after announcing promising research results indicating the pharma giant is making real progress toward an anti-obesity pill. That’s bad news for market leader Novo Nordisk, which dropped 7.6% on Wall Street. Netflix’s stock was already up 1.2% during the trading session and added another 3.4% after hours on the back of strong quarterly results. Meanwhile, stocks of wind turbine park developers like DEME (-4.4%) and Sif (-7.6%) fell after Donald Trump halted the construction of a large offshore wind project.

Japanese investors didn’t seem fazed by the lackluster performance of Western markets. The Topix rose 0.9% this morning. Japan’s inflation figures came in as expected: headline inflation was 3.6%, and core inflation (which includes energy but excludes fresh food) stood at 3.2%. That means inflation in Japan has now remained above the central bank’s 2% target for three years. The Hong Kong stock exchange is closed today, as are European and U.S. markets for Good Friday. U.S. markets will reopen on Easter Monday, but Euronext will remain closed. Regardless, you’ll still receive a fresh “Voor de bel” newsletter on Monday.

TV is Dead, Netflix is the Future

A savvy investor tries to be forward-looking. “But we don’t have a crystal ball,” people often say. Fair enough—but it doesn’t take much to spot certain long-term trends. One of them? We’re watching less traditional TV and streaming more. We want to choose what to watch and when. There’s one company that’s perfectly positioned to ride this trend: Netflix—the king of streaming. Yesterday after the bell, the company released another stellar set of results. It no longer discloses subscriber numbers (we already knew that), but revenue came in at 10.5 billion dollars (+12.5%) and net profit hit 2.9 billion dollars (+24%), both far exceeding expectations. After a price hike, Americans are still happy to pay 24.99 dollars per month for their subscription. Want it cheaper? That’s possible too—for 7.99 dollars. That budget tier is helping Netflix rake in growing ad revenues. A top-tier company, no doubt.

Beware the “Safe” Blue Chips

“Come home in the evening and find out another ‘safe’ stock has tanked.” That’s how many investors likely felt after UnitedHealth Group’s nosedive yesterday. What surprised me most was how well the stock had been doing recently. On February 24, it was trading at 461 dollars. By Wednesday evening, it had climbed to 585 dollars. By Thursday’s close, it had dropped back to 454.11 dollars. Technically, the stock is now sitting on a support line, which might offer hope to those still holding it. Personally, I’m not a buyer. Since the murder of UnitedHealth’s CEO on December 4 last year, I’ve read numerous reports from Americans who feel the company unfairly denies medical treatments. True or not, it reminds me of the backlash French nursing home operators faced. That’s why I’m steering clear of UnitedHealth. I hope I’m wrong and that the company recovers. But for me, there are better stocks to own.

Did you know…

that the Bank of Japan will meet at the end of this month to review its benchmark interest rate? The central bankers face a tough choice: on one hand, inflation is too high, calling for a rate hike. But on the other hand, raising rates could stifle economic growth.

This article was translated from Dutch and was originally published on Spaarvarkens.be.