Wall Street advanced on Thursday as investor sentiment was buoyed by a string of corporate earnings beats and encouraging geopolitical developments. A broad-based rally led all three major US stock averages to moderate gains.
Britain and the European Union agreed to a severance deal, moving closer toward wrapping up three years of uncertainties after Britons voted to leave the bloc. Upbeat statements from Beijing and Washington fuelled hopes that a phased agreement could ease the long-running US-China trade war that has rattled markets for months.
And Turkey agreed to pause its Syria assault to allow for the withdrawal of Kurdish forces. “The Turkish cease fire is viewed positively,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco. “Good news for Trump is good news for the market. From an investment perspective, the market likes the Trump agenda,” Massocca added.
Analysts now see third-quarter S&P 500 earnings falling by 2.9 per cent, according to Refinitiv I/B/E/S, marking the first contraction since the earnings recession that ended mid-2016. But of the 63 companies in the S&P 500 that have reported so far, 82.5 per cent have come in above estimates. “(Results have) been good, but we haven’t really gotten enough data points yet to see how earnings will be versus expectations,” Massocca said. “Bring on Google, bring on Amazon, bring on Facebook, bring on Deere.”
Morgan Stanley rounded out big bank earnings with better-than-expected third-quarter profits, driven by bond trading and M&A advisory strength, sending its shares up 1.5 per cent. Streaming pioneer Netflix Inc advanced 2.5 per cent after the company reported a rebound in subscribers in the third quarter.
The Dow Jones Industrial Average rose 24.18 points, or 0.09 per cent, to 27,026.16, the S&P 500 gained 8.28 points, or 0.28 per cent, to 2,997.97 and the Nasdaq Composite added 32.67 points, or 0.4 per cent, to 8,156.85. Of the 11 major sectors in the S&P 500, all but technology closed in the black, with healthcare, real estate and communications services enjoying the largest percentage gains.
In other earnings news, shares of International Business Machines Corp were the biggest drag on the blue-chip Dow, sinking 5.5 per cent after missing quarterly revenue estimates. Honeywell International Inc’s quarterly results fell short of analyst expectations, but positive geopolitical developments helped the international conglomerate gain 2.4 per cent.
On the economic front, a spate of underwhelming data supported the notion that the longest period of expansion is US history could be running out of steam. Housing starts, industrial production and mid-Atlantic factory output all fell short of economist expectations.
Advancing issues outnumbered declining ones on the NYSE by a 2.10-to-1 ratio; on Nasdaq, a 1.90-to-1 ratio favored advancers. The S&P 500 posted 36 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 60 new highs and 60 new lows. Volume on US exchanges was 6.01 billion shares, compared with the 6.79 billion average over the last 20 trading days.