When Earnings Beat But Stocks Drop: This Week's Market Twist

Hey, Beat the Bell family. Happy Halloween. And listen, this week in the markets was giving more trick than treat, but I am here to break it all down for you. Welcome to Beat the Bell. I'm Dominique Broadway, and if this is your first time here, I have spent over 20 years in finance and helped more than 600,000 people build wealth. And every Friday we do this, we recap the week's financial news and figure out what it actually means for your money, your portfolio, and your financial future. So this week, my friends, we had big tech earnings that sent everybody into a panic. The Fed cut rates but then basically said, "Don't get too comfortable." And Netflix announced a stock split that has people confused about whether that's good or bad. But don't worry, I'm going to clear all of that up for you. And y'all know I keep it real. Halloween might be about the tricks and the treats, But when it comes to your wealth, we're all about strategy and clarity. So let's get into it. Alright, so this week was basically the Super Bowl of earnings— of the earnings season, I should say. Microsoft, Meta, Alphabet, Apple, Amazon, 5 of the Magnificent 7 all reported their numbers. And these companies, well, they represent about a quarter of the entire S&P 500. So, if you have a 401(k), an IRA, or any index funds, you're likely invested in these companies whether you realize it or not. And their performance matters to your money. Now, here's where it starts to get interesting. And I need you to pay attention to this because it's a perfect example of why understanding markets is about more than just looking at headlines. Meta absolutely crushed their earnings. Shout out to them. We're talking $51.2 billion in revenue. When Wall Street only expected $49.5 billion, you guys. And this was just for 3 months, okay? So their earnings per share were $7.25 versus the expected $6.74. That is a true beat, right? But the stock dropped 11%, one of the worst days since October 2022. This is because of 2 words: AI spending. And Mark Zuckerberg and his team said that we're raising our capital expenditure to $70 to $72 billion, and it got investors really nervous. That's billion with the B, you guys. Billion. They're pouring money into artificial intelligence, and Wall Street is basically like, okay, but when are we gonna see the returns on all of this money that you're spending? Now, here's what I want you to understand. This is the tension between present performance and future potential. So Meta's business is making money right now, but they're heavily reinvesting it into what they believe is the future, which kind of makes sense. Microsoft also had the same storyline. They beat expectations, uh, the Azure cloud business is growing at 40%, but they disclosed a $3.1 billion hit from their OpenAI investment, and the stock dropped anyway. Then we had Alphabet, was actually the star this week. Strong cloud growth, strong ad revenue, and the stock went up because Sometimes being third to report means that people's expectations are already lowered. Then we have my boo thang Apple, who beat on earnings, but iPhone sales came in slightly lower than they expected. The stock dipped 2% after hours. And then we had Amazon, who reported Thursday, and the stock jumped 10% on strong results. So what does this mean for you? So if you're invested in these companies, and most of you are through your retirement accounts, here's what I need you to remember. Short-term volatility is normal when companies are making big bets on the future. So think about it. Amazon lost money for years while building AWS. Netflix spent billions on content before it became the streaming giant. The companies that win are usually the ones to invest in what's next, even if Wall Street gets a little nervous in the moment. So what is my advice, you may ask? Well, if you're already invested, don't panic. Don't panic sell. That's how you lock in losses. So, if you're looking to invest, remember these dips can actually be opportunities but only if you're investing money that you won't need for like 5 to 10 years and you're properly diversified. So, remember, we're building wealth here, not trying to time the market perfectly for the long term and that means you have to think long term. Okay, now let's talk about Netflix's announcement this week because I got so many DMs asking, Dominique, is this good? Is this bad? Should I do something? So Netflix— Netflix, I can't even say today— announced a 10-for-1 stock split, and I'm going to break this down in the simplest way possible because stock splits often confuse a lot of people, even people who've been investing for years. So here's what's happening. Netflix closed around $1,089 per share on Thursday. Yes, over $1,000 for one single share. On November 17th, they're doing a 10-for-1 split. So if you own one share worth $1,089 right now, you'll wake up that morning with 10 shares worth about $109 each. And here's the part that trips people up. Your total investment value does not change. It's literally like taking a a $100 bill and getting 10 $10 bills. You still have $100, right? So why do companies do this? Well, Netflix was explicit. They want to make the stock more accessible to employees in their stock option program. So when a stock costs over $1,000, it's psychologically harder for people to buy even one share. At $109, well, that feels a lot more doable, right? Now, does this matter to you? Here's what the research shows. Stock splits don't fundamentally change anything about the company. Same revenue, same profits, same everything. But stocks often perform well after splits are announced. Why, you may ask? Well, one, more people can afford to buy in, which increases demand. Two, companies usually split when they're confident about their future. So it's kind of like a signal. Number 3, it generates media attention. We're talking about it right now and renewed interest in the stock. So Netflix has split before in 2024 and in 2015, and since it IPO'd in 2022, the stock is actually up over 100,000%, y'all, not because of the splits, but because the business grew. So what should you do? If you own Netflix, do nothing. Your shares will automatically split. Enjoy seeing more shares in your account. If you've been wanting to buy Netflix but the price felt a little intimidating, the split makes it more psychologically accessible. But here's what I really want you to hear. In 2025, with fractional shares available on pretty much every platform, splits matter less practically than they used to, but they still matter as a signal of management confidence. And that's the real takeaway. Netflix is confident enough about their future to make this move. So that tells you something. All right. Okay. Now for the big economic news. The Federal Reserve cut interest rates Wednesday by a quarter point, bringing rates to about 3.75% to 4%. This was the second cut of 2025. And initially everybody was like, okay, cool, cheaper borrowing costs, lower mortgages. This is good news. But then Federal Chair Jerome Powell came out and basically said, and I'm paraphrasing here obviously, don't get too comfortable. That December rate cut that everyone's expecting, it's a done— it's not a done deal. It's not a done deal, and it's far from it. And the basic— and the market basically immediately started selling off. So what's going on? The Fed is stuck between two competing forces. On one side, the labor market is weakening, job growth is slowing, unemployment is ticking up, and companies like Amazon and Target are announcing thousands of layoffs. So this says we need to cut rates to support the economy. Now, on the other side, inflation is still running at 3%, above the Fed's 2% target. So tariffs are pushing some prices higher and higher. This says be careful about cutting rates because that could make inflation worse. And to make it even more complicated, the government Shutdown has cut off official economic data, so the Fed is literally making decisions without seeing all the numbers that they would usually rely on. Now, you may be asking, what does that mean for my finances? Well, for borrowers, mortgage rates have already come down from 6.6% to 6.2% since late summer. Credit card rates will start to edge slightly lower, but they're still going to be painfully high. Honestly, we're talking 20% plus APR. So if you're carrying credit card debt, this rate cut barely really moves the needle or affect your budget. Car loans and HELOCs tied to the prime rate should ease a bit. For my savers, high-yield savings accounts are already paying less. The best rates have dropped from 5.5% earlier this year to around 4.45%. So if you're living off of interest income, expect those payments to decrease. And this is the trade-off. Right? When the Fed cuts rates, borrowers benefit but savers lose. So my advice is that if you've been thinking about refinancing or locking in some sort of major purchase, don't wait for perfection. Rates probably won't drop dramatically from here, and Powell's comments suggest that the Fed might start to pump the brakes. So if you're a saver and you haven't already, now is the time to shop for the best high-yield savings rates before they drop even further. And honestly, this is why having multiple income streams matter. You can't rely on one source of money, whether that's your job, your investments, or your savings account interest. You have to diversify how money comes in to you, which actually brings me to something that I want to share with you. So look, one of the biggest lessons from this week is that you cannot put all your financial eggs in one basket, whether it's big tech companies, betting big on AI, or the Fed playing tug of war with rates, or your own personal finances, diversification is and always will be key. And I know that a lot of y'all are sitting there thinking, okay, Dominique, I get it, I need multiple income streams, but how, right? That's exactly why I created the Cash Flow Code Masterclass. This is for anybody who's tired of trading hours for dollars and wants to learn how to build income streams that work even when you yourself are not working. But here's the truth: time is finite. You can only work so many hours in a day. But with the right strategy, your money can work for you 24/7. So, in the Cashflow Code Masterclass, I break down a few things. First, we're going to identify how to— no, actually, how to identify which income stream opportunities are actually worth your time and money. We're going to talk about the exact framework that I use to go from 1 income stream to 6, probably more now. And then how to calculate your ROI before you even invest a single dollar. We're going to talk about the difference between side hustles that drain you and income streams that actually build wealth. You guys, I've been where you are. I've worked 60+ hour weeks. I've had that moment where I realized, "Oh my god, that if I got sick or if I couldn't work, the money would stop." And I made a decision to change that. Now, I have income coming in from multiple sources, and most of it doesn't require me to be present for every single dollar. So that's not luck, that's strategy, and it's exactly what I'm going to be teaching in the Cashflow Code Masterclass. So click the link, it should be somewhere in the show notes, and you can learn more about it, and it's free. So please make sure that you join us, because the best time to build additional income streams isn't just when you desperately need them, it's when you're thinking strategically about your future and what you want that to look like. All right, so let's keep it moving. Okay, so community question time, and I want to hear from you on this one. If you could only invest in one of the Magnificent Seven tech companies for the next decade, and I mean a full 10-year hold, which one would you choose and why? Now I want you to think about this seriously, okay? Would you ride with Meta despite the whole AI spending drama? Because I'm with them. Maybe you're thinking about Microsoft for enterprise dominance. I'm with them too. Apple for that ecosystem lock-in. Y'all know I love some Apple. We got Amazon for diversification, Alphabet for search and AI, Tesla for electric vehicles, Nvidia for AI chips. So drop your answer on Instagram, TikTok, or Threads, hashtag Beat the Bell, and let me know. Okay, I'm in all of these. But you can also text me directly at 202-217-1035 and I will answer your questions or email me because I read every single one. And here's why this question matters. So, the investors who actually build wealth aren't the ones trading in and out every single week, right? Some of them, but most of them aren't. They're the ones who pick quality companies, do their research, and give those investments time to compound and grow. And that is truly how wealth is built, not necessarily by always chasing the hot stock, but by making informed decisions and being patient. And I know we all like to be patient. So I'm going to read your best answers on Monday's episode and share which one you'd pick. This should be fun. And let me give you your 3 key takeaways from this week, okay? So the things you need to remember: number 1, great earnings don't always equal stock gains, okay? Meta and Microsoft beat expectations, but their stocks still dropped. Why? Because the market is forward-looking. It's not just about how you did last quarter. It's about whether investors believe in your future strategy. So, those AI investments might be brilliant, and I'm sure they are, but the market wants to see proof because these are future gains. Remember this when you're looking at your own portfolio. Focus on the business fundamentals, not just one quarter's stock movement. Number 2, stock splits are psychological, not always fundamental. So Netflix's split doesn't change the company's value at all. It's just breaking the shares into little smaller pieces, but it does change accessibility and perception. And in a world where fractional shares exist, splits are really more about signaling confidence than practical necessity. So if you see a stock split announcement, view it as a management— as management saying we are very optimistic about our future, okay? Number 3: the Fed is walking a tightrope, and that does affect you, okay? So we've got a rate cut this week, but Powell threw cold water on expectations for December. The Fed is caught between weak job data and sticky inflation. So for you, this means that rates are coming down slowly but not quickly, which you may have anticipated. So plan accordingly, whether that's your mortgage, your savings account, or your investment strategy. Don't wait for rates to hit some magical perfect number, okay? Make strategic moves right now. So that's our show for this week. What a ride it has been, y'all. Big tech drama, a little surprise from Netflix, and the Fed just keeps us guessing. So a quick preview for Monday. We're looking ahead at next week's economic calendar, talking about what sectors typically perform well during the final 2 months of the year, and I'm sharing my answer to that Magnificent Seven question. Plus, I'll be reading some of your responses. So make sure you hit me up with #BeatTheBell or text me at 202-217-1035. Before I let you go, if this episode added any value to your life, please share it with someone who needs to hear it. Financial literacy is how we build wealth and sharing knowledge is how we lift up our entire community. And if you're serious about creating multiple streams and finally breaking free from trading hours for dollars, don't sleep on the Cashflow Code Masterclass. Click the link below in the show notes and I will see you all in the masterclass. And remember, I designed this specifically for people who are ready to make their money work as hard as they did to earn it themselves. And remember, you can always text me your questions, 202-217-1035. I'm here to support you on your wealth-building journey. Happy Halloween, enjoy the holidays, stay invested, stay informed, and remember, the scariest thing you can do with your money is nothing at all. Until Monday, beat the bell. See you then.