By Chris Matthews and William Watts, MarketWatch
Netflix shares rally after third-quarter results
Stocks on Wall Street edged higher Thursday, as investors eyed a
potential Brexit deal between the U.K. and European Union and as
third-quarter U.S. earnings reports continue to roll in.
Read:EU and U.K. leaders say Brexit deal has been agreed
(http://www.marketwatch.com/story/eu-and-uk-leaders-say-brexit-deal-has-been-agreed-2019-10-17)
The tentative Brexit pact, which was hailed by European
Commission President Jean-Claude Juncker and British Prime Minister
Boris Johnson must still be approved by the U.K. parliament and
other EU member states. Johnson has called for a U.K. parliamentary
vote on Saturday.
What are major indexes doing?
The Dow Jones Industrial Average rose 12 points, or 0.1%, at
27,015, while the S&P 500 index advanced 8 points, or 0.3%, to
2,998. The Nasdaq Composite index gained 21 points, or 0.3%, to
8,145.
Stocks ended with small losses
(http://www.marketwatch.com/story/stock-futures-point-slightly-lower-as-worries-remain-over-us-china-deal-2019-10-16)
in a range-bound session on Wednesday. The Dow lost 22.82 points,
or 0.1%, to close at 27,001.98, while the S&P 500 gave up 5.99
points, or 0.2%, to end at 2,989.69. The Nasdaq Composite finished
at 8,124.18, off 24.52 points, or 0.3%.
What's driving the market?
The Brexit headlines sent the British pound soaring and also
lifted European stocks
(http://www.marketwatch.com/story/mixed-corporate-results-from-nestle-and-unilever-keep-european-stocks-to-a-tight-range-2019-10-17),
though analysts cautioned that the agreement could still be
derailed. Northern Ireland's Democratic Unionist Party, a key ally
of U.K. Prime Minister Boris Johnson's Conservative Party, said it
remained opposed to the draft agreement.
"It remains to be seen whether the reaction is short-lived as
the politicians go toe-to-toe again at the weekend, but in the
meantime the very possibility of an agreed outcome to the painful
Brexit saga has resulted in a relief rally, both financial and
psychological," said Richard Hunter, head of markets at Interactive
Investor.
Meanwhile, U.S. stocks have reacted positively overall to the
start of third-quarter earnings reporting season.
"Even though it is very early in the Q3 earnings reporting
period, investors have been encouraged by the better-than-expected
results for the large diversified banks and selected health care
companies," said Sam Stovall, chief investment strategist at CFRA,
in a note.
That enthusiasm was offset Wednesday by weaker-than-expected
September retail sales numbers, while uncertainty around U.S.-China
trade talks continues to cast a cloud over the market. Overall, the
potential for elevated volatility is expected to remain a concern
for investors since October has recorded nearly 40% higher
volatility than the other 11 months since World War 2, Stovall
said, noting CFRA still expects to see share prices end the year
higher on an improvement in earnings per share expectations.
On the trade front, Chinese Ministry of Commerce spokesman U.S.
and Chinese negotiators are still working out the text of a
so-called "phase 1" trade agreement that led to the U.S. postponing
a tariff increase that had been set for Tuesday in exchange for
promises by the Chinese to increase agricultural purchases. The
White House said that the deal would involve agricultural purchases
of between $40 to $50 billion annually, but Gao declined to confirm
that number, according to Bloomberg
(https://www.bloomberg.com/news/articles/2019-10-17/china-says-trade-team-in-close-contact-with-u-s-on-deal-text).
The news follows a Wednesday pledge
(https://www.reuters.com/article/us-hongkong-protests-usa-senate/u-s-senate-foreign-relations-chairman-hopes-hong-kong-bill-will-move-soon-idUSKBN1WV27Y?feedType=RSS&feedName=politicsNews)
by Senator Jim Risch, Chairman of the Senate Foreign Relations
Committee, to take up a bill that passed the U.S. House of
Representatives that would require the State Department to annually
review Hong Kong's autonomy from mainland China and potentially end
Hong Kong's special status that shields it from tariffs, visa
restrictions and other barriers imposed on the rest of China. China
has threatened
(http://www.marketwatch.com/story/china-vows-strong-countermeasures-in-wake-of-us-bill-supporting-hong-kong-protesters-2019-10-16)
"strong countermeasures" if the bill becomes law.
Despite this potential headwind, White House economic adviser
Larry Kudlow said Thursday
(http://www.marketwatch.com/story/kudlow-says-us-china-have-come-further-than-ever-on-trade-deal-2019-10-17)
that the U.S. and China have come "further than we ever have
before" on a trade deal, in an interview with CNBC , noting that
the two sides have seen momentum in reason like financial services
and currency management.
The interview helped boost sentiment, according to Jerry Lucas,
senior trading strategist at UBS Global Wealth Management. "The
chatter out of Washington and Beijing has been positive, so the
odds of a phase one pact being signed next month that the G7 summit
is high," he said. "With that and Brexit progress, the world is
looking like a better place than two weeks ago."
Investors are also digesting a series of U.S. economic reports.
The number of unemployed workers who applied for jobless benefits
(http://www.marketwatch.com/story/jobless-claims-rise-slightly-to-214000-in-mid-october-but-remain-near-a-50-year-low-2019-10-17)in
the second week of October rose slightly, but layoffs nationwide
remained near a 50-year low and showed no sign of rising despite a
slowdown in the U.S. economy.
U.S. new home construction fell 9% in September
(http://www.marketwatch.com/story/housing-starts-fall-9-in-september-but-high-permits-low-mortgage-rates-suggest-construction-slowdown-is-temporary-2019-10-17)
from the month before, declining to an annual rate of 1.26 million
from a revised 1.39 million in August. Economists polled by
MarketWatch had expected housing starts to reach 1.32 million.
Permits for new housing construction were issued at a rate of 1.39
million homes, a 3% decline and below the 1.38 million consensus
expectations.
Industrial production fell 0.4% in September
(http://www.marketwatch.com/story/industrial-output-falls-by-most-in-five-months-pushed-lower-by-gm-strike-2019-10-17),
the largest one-month drop since April, and below the 0.2% expected
by economists, according to a MarketWatch survey. Industrial
capacity in use slumped to 77.5 in September from 77.9 in the prior
month. Economists had expected a reading of 77.7%. An index of
manufacturing activity
(http://www.marketwatch.com/story/philly-fed-manufacturing-index-stumbles-in-october-2019-10-17)
in Pennsylvania, Delaware and New Jersey fell to 5.6 in September
from 12.0 in August, below the 7.1 expected, according to
Econoday.
Federal Reserve Board Gov. Michelle Bowman is scheduled to
deliver remarks at an event in Chicago at 2 p.m. New York Fed
President John Williams is due to deliver a speech and take part in
a discussion in Manhattan at 4:20 p.m.
What companies are in focus?
Overall, the U.S corporate earnings season is off to a good
start. More than 76% of the S&P 500 index companies that have
reported so far have topped analyst earnings expectations,
according to FactSet.
Shares of Honeywell International Inc.(HON) were in focus after
its third-quarter results topped Wall Street forecasts
(http://www.marketwatch.com/story/honeywells-stock-drops-after-profit-beat-and-guidance-raised-but-sales-fall-shy-2019-10-17).
Morgan Stanley(MS) shares rose at the start of trade Thursday
after the investment bank reported third-quarter profits and sales
that beat Wall Street expectations.
Philip Morris International Inc.(PM), also reported
third-quarter results Thursday
(http://www.marketwatch.com/story/philip-morris-profit-tops-estimates-in-q3-but-sales-fall-short-lowers-full-year-eps-guidance-2019-10-17),
announcing that earnings fell less than analysts had anticipated,
though revenue rose less than expected.
Shares of Netflix Inc.(NFLX) were higher Thursday after it
reported third-quarter results
(http://www.marketwatch.com/story/netflix-stock-spikes-after-subscriber-growth-bounces-back-but-executives-admit-competition-will-hurt-the-rest-of-the-year-2019-10-16)
late Wednesday. The streaming service said it added 6.77 million
new paying subscribers in the quarter, with only 500,000 coming
from the U.S.
Opinion:Netflix finally admits the obvious: Competition from
Apple and Disney will hurt
(http://www.marketwatch.com/story/netflix-finally-admits-the-obvious-competition-from-apple-and-disney-will-hurt-2019-10-16)
Shares of International Business Machine Inc.(IBM) were in focus
after it reported less revenue than Wall Street expected
(http://www.marketwatch.com/story/ibm-stock-slips-after-revenue-misses-street-view-2019-10-16)
after Wednesday's closing bell.
Rail-based freight company CSX Corp. (CSX) also reported
earnings after the close of trade Wednesday. Third-quarter profits
unexpectedly rose and revenue fell in line with analyst
forecasts.
How are other markets trading?
The yield on the 10-year U.S. Treasury note rose about one basis
point
(http://www.marketwatch.com/story/treasury-yields-climb-after-uk-strikes-tentative-brexit-deal-with-eu-2019-10-17)
to 1.751%.
European stocks were on the rise following the news of a
tentative Brexit deal, with the FTSE up 0.8% and the Stoxx Europe
600 advancing 0.2%.
In Asia overnight, stocks closed mostly higher, as the China CSI
300 rose 0.1% and Hong Kong's Hang Seng index added 0.7%. Japan's
Nikkei 225 edged 0.1% lower.
Crude oil prices were falling
(http://www.marketwatch.com/story/oil-lower-on-fears-of-us-crude-inventory-rise-2019-10-17),
with West Texas Intermediate crude for November delivery down about
27 cents to $53.10 a barrel. Gold prices edged higher
(http://www.marketwatch.com/story/gold-prices-bounce-around-as-investors-weigh-tentative-brexit-pact-2019-10-17),
up $2.20 to $1,496.10 an ounce on Comex and the U.S. dollar fell
0.3%, according to the ICE U.S. dollar index .
(END) Dow Jones Newswires
October 17, 2019 11:26 ET (15:26 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.