By Avantika Chilkoti and Michael Wursthorn
The S&P 500 rose Thursday, stoked by solid earnings reports from Netflix, Morgan Stanley and others, as well as a preliminary Brexit deal that has the potential to remove a major obstacle facing investors.
More than a tenth of the companies in the S&P 500 have reported results so far and numbers are mostly coming in ahead of analysts' expectations. That gave the stock market some support a day after weak retail sales data raised concerns that a major component of the economy, American consumers, were slowing their spending.
"We're seeing some encouraging news come through earnings," said David Page, head of macroeconomic research at AXA Investment Managers. "It's been more encouraging than the bleak assessments the market was originally making."
Investor sentiment in the U.S. and Europe also got a boost after U.K. and European Union negotiators reached an agreement on a new Brexit deal. However, mounting concerns about U.K. lawmakers' support for the accord tempered the market's reaction and led to some reversals.
The combination of better-than-expected earnings and a possible resolution to a long-running global issue helped push more than half of the stocks in the S&P 500 up on Thursday, giving the broad index a 0.3% gain in recent trading.
The Nasdaq Composite also rose, adding 0.3%. The Dow Jones Industrial Average, meanwhile, struggled to maintain a gain and fluctuated between gains and losses after International Business Machines, a Dow component, reported lackluster earnings late Wednesday. The blue-chip index was recently up 21 points, or 0.1%, to 27023.
Among the biggest gainers Thursday, shares of Netflix climbed 4.1% after the online video-streaming service posted solid earnings late Wednesday and expanded its subscriber base domestically and abroad, although growth fell short of its own target.
Morgan Stanley added 2.6% after it handily topped analysts' profit forecasts.
Dover also notched a big gain, rising 4% after the industrial conglomerate raised the low end of its guidance and reported better-than-expected quarterly profits and revenue.
Of the 64 companies in the S&P 500 to post results so far, 52 have topped estimates, according to FactSet. Companies have a lower bar to beat, however, after analysts cut profit estimates in recent months. They lowered expectations across all 11 sectors of the S&P 500 to account for waning global growth and the U.S.'s prolonged trade fight with China.
The companies in the index are still on track to report a 4.7% decline in profits from a year earlier, the biggest profit pullback of the year, according to FactSet.
In Europe, assets ranging from the British pound and the euro to European stocks initially surged on the draft Brexit deal being struck. But most of those assets gave up their gains following signs the deal will face some opposition in the U.K. Parliament.
The pound fluctuated between gains and losses against the dollar and was recently up 0.2%. The U.K.'s FTSE 250 index, a gauge that includes local companies with significant domestic operations, pared back gains to 0.2%. The broader Stoxx 600 closed down 0.1%.
"There is still a huge amount of uncertainty; there is the question of whether the prime minister can get any deal through Parliament," said William Dinning, head of investment strategy and communications at Waverton Investment Management.
AXA's Mr. Page added that assets in Europe, and to some degree in the U.S., could continue to fluctuate as investors assess the likelihood of the deal passing. He believes the deal will pass, which could help stocks around the world start next week on solid footing.
"We think a deal squeaks through and continues a trend of buying risk-on assets," he said.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
October 17, 2019 13:41 ET (17:41 GMT)
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