U.S. stocks closed higher as investors weighed early optimism over a Brexit deal against a mixed batch of corporate earnings results.
A 5.5% decline in shares of IBM (IBM), a Dow component, capped gains in the 30-stock index during Thursday’s session. This came after the tech company reported weaker-than-expected sales results for the fiscal third quarter after market close Wednesday.
Here’s how the markets settled at the end of Thursday’s trading session:
S&P 500 (^GSPC): +0.28%, or 8.26 points
Dow (^DJI): +0.09%, or 23.90 points
Nasdaq (^IXIC): +0.40%, or 32.67 points
Crude oil (CL=F): +1.27% to $54.04 per barrel
Gold (GC=F): +0.10% to $1,495.50 per ounce
Top UK and EU officials said Thursday that they reached a new Brexit deal, completing the agreement just before EU leaders were set to review it in Brussels.
In a Twitter post Thursday, British Prime Minister Boris Johnson said the sides “got a great deal that takes back control,” and indicated that Parliament could get Brexit done as soon as Saturday. EU Commission President Jean-Claude Juncker, for his part, called the deal a “fair and balanced agreement.” The EU is widely expected to approve the deal during its two-day summit in Brussels, which began Thursday.
UK equities and the British pound surged against the dollar (GBPUSD=X) and euro (GBPEUR=X) following the announcements. However, these pared some gains after other lawmakers came out and cast doubt on the prospects of Parliament passing the deal. The Democratic Unionist Party (DUP) issued a statement saying, “As things stand, we could not support what is being suggested on customs and consent issues, and there is a lack of clarity on VAT.”
The backing of the 10 DUP members of Parliament will be instrumental for the deal’s passage, given that Johnson does not have a majority in Parliament, and many Conservative MPs have suggested they will not vote for the agreement in absence of unionist support.
Other geopolitical negotiations have continued to trudge along.
Chinese officials are working on drafting the text of a “phase one” trade agreement with their U.S. counterparts, a Chinese Ministry of Commerce spokesman said during a briefing, according to Bloomberg. Ministry spokesperson Gao Feng said China will increase purchases of American agricultural products “according to domestic needs,” according to Bloomberg’s report and translation, but declined to confirm whether China would hit the $40 to $50 billion in annual purchases that President Donald Trump has previously touted.
The first major week of third-quarter corporate earnings results has so far largely reflected positively on reporting companies, helping to assuage fears of a year-over-year decline in aggregate earnings per share (EPS) for S&P 500 members. Heading into third-quarter results, Wall Street consensus was looking for aggregate EPS to drop around 3% over last year, for the first decline since 2016.
Late Wednesday, Netflix (NFLX) kicked off “FAANG” results with better-than-expected earnings, and slightly topped estimates for international subscriber growth. Operating margins improved 670 bps year-over-year to 18.7%, topping the company’s prior guidance. Netflix also reiterated its negative free cash flow guidance for the fiscal year of -$3.5 billion, and said it is tracking to stem some of its outflow in 2020.
The Street largely shrugged off the light guidance for fourth-quarter earnings and new subscribers, which Netflix said reflected uncertainty around variables including new title launches, subscriber churn and competition from new entrants to the over-the-top streaming arena.
Meanwhile, big bank earnings results continued with Morgan Stanley (MS) before the bell on Thursday. The company beat expectations on nearly every major metric, circumventing the softness analysts had expected to see in big bank earnings this reported quarter as lower rates cut into big bank profitability.
Equities sales and trading revenue was about flat over last year at $1.99 billion, while fixed income trading rose 21% to $1.43 billion. Net interest income rose 30% to $1.22 billion, topping expectations for just $969.8 million on this measure, according to Bloomberg estimates. Overall, firm net revenues of $10.03 billion represented the highest third quarter in the past 10 years.
“We delivered strong quarterly earnings despite the typical summer slowdown and volatile market,” Morgan Stanley CEO James Gorman said in a statement. “Our consistent performance shows the stability of our business model. We remain committed to controlling our expenses and are well positioned to pursue our growth initiatives.”
ECONOMY: Housing starts decline more-than-expected in September
New homebuilding in the U.S. fell more than consensus economists anticipated in September, although this decline was driven by lower construction in the more volatile multi-family segment.
Housing starts fell 9.4% to a seasonally adjusted annual rate (SAAR) of 1.256 million in September from August, the Commerce Department said Thursday. Consensus economists had expected a SAAR of 1.350 million for the month, or down 3.2% from August’s previously reported pace, according to Bloomberg estimates.
Beneath the headline figure, however, single-family homebuilding remained robust. Construction for single-family units, which comprises the largest share of the U.S. housing market, climbed for a fourth consecutive month in September.
August’s already-strong reading was upwardly revised to 1.386 million from 1.364 million to now reflect a 15.1% gain over the month prior.
Building permits, a proxy for future homebuilding, declined less-than-expected for the month. These fell 2.7% over August to a SAAR of 1.387 million, versus just 1.350 million expected. August’s building permits were upwardly revised by six thousand to 1.425 million.
Meanwhile, new unemployment claims rose less-than-expected for the week ended October 12, the Department of Labor said, reflecting ongoing tightness in the labor market.
Initial jobless claims rose by 4,000 to 214,000 for the week, where a gain of 5,000 had been expected over the prior week. Continuing unemployment claims for the week ended October 5 fell slightly less than expected to 1.679 million, from an upwardly revised 1.689 million for the week prior. The previous week’s continuing unemployment claims were revised up by 5,000 to 1.689 million.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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