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Stocks close higher as Morgan Stanley boosts banks

CNBC logo CNBC 7/18/2018 Fred Imbert and Sam Meredith

Stocks ended mostly higher Wednesday as a jump in Morgan Stanley shares led the rest of the banking sector higher.

The Dow rose 79 points, with UnitedHealth and American Express outperforming. The S&P 500 climbed 0.2 percent as financials advanced. The Nasdaq finished flat. 

Morgan Stanley shares rose nearly 3 percent after the company reported better-than-expected earnings and revenue for the previous quarter, boosted by strong trading and investment banking revenue. Bank of America, Citigroup, J.P. Morgan Chase and Goldman Sachs all traded higher as well.

Transports CSX and United Continental also posted stronger-than-forecast profits and sales, sending their shares higher by 5.6 percent and 8 percent, respectively. Their gains propelled the industrials sector to a 1.3 percent gain and sent the Dow Transports up by 2.6 percent. 

American Express, eBay and IBM were among the companies scheduled to report earnings after the close.

Wall Street has high hopes for this earnings season, with analysts at FactSet expecting S&P 500 earnings to have grown by 20 percent in the second quarter. With just over 9 percent of S&P 500 companies having released their latest quarterly results, earnings have grown 22.1 percent. 

The gains in banks and industrials offset a mixed performance by some of the popular large-cap tech names. Netflix fell for a second day in a row after posting weaker-than-expected subscriber growth for the previous quarter. Amazon shares fell 0.2 percent after Prime Day concluded.

U.S. housing starts fell 12 percent in June to a nine-month low, the Commerce Department said. The percentage drop was also the biggest since November 2016. According to Bespoke Investment Group, it was the biggest miss relative to expectations since January 2007. Mortgage applications also fell 2.5 percent last week, the Mortgage Bankers Association said. 

Homebuilding stocks fell on the back of the data. The iShares U.S. Home Construction exchange-traded fund dropped 0.7 percent, as KB Home and Lennar fell 2.2 percent and 1 percent, respectively.

Housing starts “missed substantially,” said Peter Cardillo, a chief market economist at Spartan Capital Securities. “Does it change the overall picture in the housing market? Not yet, but if we see the numbers getting worse, then that could impact the market.” 

The data come after an upbeat assessment on the U.S. economy from Federal Reserve Chairman Jerome Powell. The head of America’s central bank also downplayed the impact of global trade risks on the outlook for future rate hikes.

Larry Kudlow, President Donald Trump's top economic adviser, said Wednesday at CNBC's Delivering Alpha conference that economic growth could reach 4 percent "for a quarter or two."


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