Stocks close flat as Netflix shares drop, S&P 500 rises for the week

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Netflix sinks after earnings miss—Four experts on what they're watching now
Netflix sinks after earnings miss—Four experts on what they're watching now

Stocks closed Friday mostly along the flatline as traders concluded a volatile week while a steep decline in Netflix kept other big tech shares in check. 

The Dow Jones Industrial Average dipped 62.76 points, or 0.2%, to close at 26,671.95. The S&P 500 gained 0.3% to end the day at 3,224.73. The Nasdaq Composite advanced 0.3% to 10,503.19. The Dow and S&P 500 posted weekly gains while the Nasdaq closed lower over that time period.

Netflix reported second-quarter earnings that missed analyst expectations, pushing the stock down 6.5%. The company's weak guidance for third-quarter subscriber growth — a key metric for the streaming giant — also contributed to the steep sell-off in the stock.

"These earnings are lava," Evercore ISI analyst Lee Horowitz wrote in a note. Horowitz added those results were "not good enough relative to exuberant expectations heading into the print which drove NFLX shares to all-time highs."

Shares of other major tech companies also struggled Friday. Amazon pulled back by 1.2%. Microsoft dipped 0.5% and Apple slid 0.2%.

Netflix's decline came during a tough week for the major tech names. Facebook, Alphabet and Microsoft were all down week to date. Amazon posted its first weekly decline in 11 weeks, dropping more than 7%. It was also Amazon's worst one-week performance since the week ending Feb. 28.

Tech's struggle this week led to a pronounced divergence between the Nasdaq and two other major indexes, the Dow and S&P 500. The S&P 500 and the Dow were up 1.3% and 2.3% this week respectively, posting their third straight weekly gain. However, the tech-heavy Nasdaq fell 1.1% for its first weekly loss in three.

"This is more of a necessary pause in some of these segments," said Michael Hans, CIO at Clarfeld Citizens Private Wealth. "I would say the market action this week has been fairly healthy with the rotation we've seen. You want better market breadth, you want more participation."

The Russell 1000 Value index — which has been getting crushed this year — outperformed its growth counterpart this week, rising 3.5%. The Russell 1000 Growth index fell 0.8% this week. 

Friday's moves followed a volatile session that snapped a four-day winning streak for the Dow. Those losses came amid a mixed batch of U.S. economic data and surging coronavirus cases. 

The U.S. reported 77,200 coronavirus cases on Thursday, a record, according to Johns Hopkins University. That spike brought the total number of confirmed U.S. infections to more than 3.57 million. Covid-related deaths are up to more than 138,000.

"We're rolling into this period of coronavirus cases increasing and we've had some shutdowns," said Gregory Faranello, head of U.S. rates trading at AmeriVet Securities. "So, there's definitely a sense of nervousness in the market."

— CNBC's Yun Li contributed reporting.

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