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
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 DJIA, -0.06% rose 12 points, or 0.1%, at 27,015, while the S&P 500 index SPX, +0.13% advanced 8 points, or 0.3%, to 2,998. The Nasdaq Composite index COMP, +0.14% gained 21 points, or 0.3%, to 8,145.
Stocks ended with small losses 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 GBPUSD, +0.1091% soaring and also lifted European stocks, 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.
The news follows a Wednesday pledge 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 “strong countermeasures” if the bill becomes law.
Despite this potential headwind, 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 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 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, 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, 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 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, +2.46% were in focus after its third-quarter results topped Wall Street forecasts.
Morgan Stanley MS, +2.42% 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, -0.61%, also reported third-quarter results Thursday, announcing that earnings fell less than analysts had anticipated, though revenue rose less than expected.
Shares of Netflix Inc. NFLX, +3.90% were higher 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.
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Shares of International Business Machine Inc. IBM, -6.23% were in focus after it reported less revenue than Wall Street expected after Wednesday’s closing bell.
Rail-based freight company CSX Corp. CSX, +2.29% 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 to 1.751%.
European stocks were on the rise following the news of a tentative Brexit deal, with the FTSE UKX, +0.20% up 0.8% and the Stoxx Europe 600 SXXP, -0.10% advancing 0.2%.
In Asia overnight, stocks closed mostly higher, as the China CSI 300 000300, +0.06% rose 0.1% and Hong Kong’s Hang Seng index HSI, +0.69% added 0.7%. Japan’s Nikkei 225 NIK, -0.09% edged 0.1% lower.
Crude oil prices were falling, with West Texas Intermediate crude for November delivery CLX19, -0.86% down about 27 cents to $53.10 a barrel. Gold prices GCZ19, +0.36% edged higher, 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 DXY, -0.42% .