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Day Ahead : Top 3 Things to Watch

Investing.com - Here's a preview of the top 3 things that could rock markets tomorrow.

1. Netflix and IBM Get Big Tech Earnings Underway

Netflix (NASDAQ:NFLX) and IBM (NYSE:IBM) roll out earnings tomorrow after the closing bell.

With the streaming wars gathering pace, analysts are keen to get a sense of whether Netflix can revive its subscriber growth following weaker-than-expected numbers in the second quarter.

For the third quarter, Netflix said it expected to add 7 million subscribers, above the 6.1 million reported a year earlier, with 800,000 net new subscribers in the U.S.

Netflix is expected to report earnings of $1.03 per share on revenue of $5.25 billion.

As well as earnings and subscriber numbers, guidance will also come under added scrutiny, with Apple (NASDAQ:AAPL) and Walt Disney (NYSE:DIS) set to release their streaming services next month.

Against the backdrop of rising competition, Wedbush said it expects upside to total subscriber guidance “appears likely given the solid slate of new content that debuted in Q3, which should help dampen domestic churn.”

The competition question has definitely hurt the stock. It was up 33.2% in the first quarter but lost almost all of that gain a big third-quarter slump. It's now up 6.2% on the year.

IBM (NYSE:IBM) is expected to report earnings of $2.67 a share on revenue of $18.23 billion.

To step up its shift into the higher-margined cloud computing sector, IBM acquired open-source software giant Red Hat in July. Many on Wall Street are now eagerly awaiting the report to gauge the impact of the acquisition.

The aggressive M&A activity, however, has kept a lid on free cash flow and profit growth and will likely continue to do so, according to Wedbush.

"We believe IBM’s results will continue to be impacted by structural headwinds taking place at the company’s services and software segments, as well as by weak free cash flow generation and profitability given the company’s aggressive M&A activity," Wedbush said in a note.

IBM shares are up nearly 26% this year, with most of the gain coming in the first quarter as stocks recovered from 2018 end-of-year slump.

2. Bank of America Earnings Due

Before the bell on Wednesday, Bank of America (NYSE:BAC) brings the curtain down on earnings for big Wall Street banks following reports from JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC).

Like that of its peers, Bank of America’s earnings will likely reflect the bittersweet impact of Fed rate cuts, which has tended to hurt interest income growth while boosting loan growth.

Bank of America is expected to report earnings of 55 cents on revenue of $22.6 billion. Shares are up 20.7% this year.

3. Retail Sales, Beige Book Eyed

Retail sales data will give traders another opportunity to gauge the strength of the U.S. consumer, one of key drivers keeping the U.S economy from succumbing to the slowdown in global growth.

The Commerce Department will release the numbers for September at 8:30 AM ET (12:30 GMT).

Economists expect that retail sales rose 0.3% last month, down from a 0.4% rise the month before, while core retail sales, which exclude automobile sales, rose 0.2% from flat the previous month.

Meanwhile, the Federal Reserve’s Beige Book report, due at 2:00 PM ET (18:00 GMT), will also come under the spotlight ahead of the Federal Open Market Committee's two-day rate meeting at the end of the month.

The report is an anecdotal description of the state of the domestic economy compiled by staffs at the 12 Federal Reserve Banks.

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