Stock indexes on Thursday lost steam in the final minutes of trade but finished near records, booking slight gains as investors drew optimism from a Brexit draft agreement and upbeat third-quarter results from U.S. companies such as Netflix and Morgan Stanley.
How did major indexes perform?
The Dow Jones Industrial Average (DOW:DJIA) rose 23.90 points, or 0.1%, to 27,025.88, while the S&P 500 index (S&P:SPX) advanced 8.26 points, or 0.3%, to 2,997.95. The Nasdaq Composite Index (AMERICAN:COMP) gained 32.67 points, or 0.4%, to 8,156.85.
Thursday’s trade put the Dow about 1.2% from its July 15 closing record at 27,359.16, the S&P 500 finished about 0.9% from its July 26 closing record at 3,025.86, while the Nasdaq ended the session 2.1% from its all-time closing high at 8,330.21 hit July 26.
What drove the market?
U.S. stocks reacted positively overall to the start of third-quarter earnings reports and news that Britain was closing in on ending a nearly four-year-old divorce saga with the EU.
“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.
Overall, the U.S. corporate earnings season is off to a good start. More than 78% of the S&P 500 index companies that have reported so far have topped analyst earnings expectations, according to FactSet.
Headlines pointing to a tentative Brexit deal helped to set the stage for U.S. equity indexes and sent the British pound (XTUP:GBPUSD) higher, while also lifting European stocks.
However 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.
Investors also digested a series of downbeat U.S. economic reports though. The number of unemployed workers who applied for jobless benefits 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 from the month before, while 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, the largest one-month drop since April. Industrial capacity usage slumped to 77.5 in September from 77.9 in the prior month. An index of manufacturing activity 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.
White House economic adviser Larry Kudlow said Thursday 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 chatter out of Washington and Beijing has been positive, so the odds of a phase one pact being signed next month at the G7 summit is high,” said Jerry Lucas, senior trading strategist at UBS Global Wealth Management. “With that and Brexit progress, the world is looking like a better place than two weeks ago.”
New York Fed President John Williams was due to deliver a speech and take part in a discussion in Manhattan at 4:20 p.m.
What companies were in focus?
Morgan Stanley (NYS:MS) shares rose 1.5% Thursday after the investment bank reported third-quarter profits and sales that beat Wall Street expectations.
Shares of Honeywell International Inc. (NYS:HON) gained 2.4% after its third-quarter results topped Wall Street forecasts.
Philip Morris International Inc. ’s stock (NYS:PM) rose 1% as it reported third-quarter results Thursday, announcing that earnings fell less than analysts had anticipated, though revenue rose less than expected.
Shares of Netflix Inc. (NAS:NFLX) added 2.5% on Thursday after it reported third-quarter results 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.
Shares of International Business Machine Inc. (NYS:IBM) tumbled 5.5% though after it reported less revenue than Wall Street expected after Wednesday’s closing bell.
Rail-based freight company CSX Corp . (NAS:CSX) managed to closed up 1.1% following its report late-Wednesday, which showed that third-quarter profits unexpectedly rose and revenue fell in line with analyst forecasts.
How did other markets trade?
The yield on the 10-year U.S. Treasury note (XTUP:BX:TMUBMUSD10Y) was up 0.7 basis point to 1.757%.
European stocks ended little changed after rising initially following the news of a tentative Brexit deal, with the FTSE (FTSE:UK:UKX) up 0.2% and the Stoxx Europe 600 (STOXX:XX:SXXP) off 0.1% at 393.08.
Oil futures finished higher Thursday, as the U.S. and Turkey reached a cease-fire pact in Syria, temporarily easing Middle East tensions, and a tentative Brexit deal fueled appetite for assets perceived as risk, despite a rise in U.S. crude inventories. West Texas Intermediate crude for November delivery gained 57 cents to $53.93 a barrel.
Gold prices ended at the highest price in a week, up $4.30 at $1,498.30 an ounce on Comex and the U.S. dollar fell 0.4%, according to the ICE U.S. dollar index (IFUS:DXY) .