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Stocks close higher on strong earnings and new Brexit deal

CNBC logo CNBC 10/17/2019 Fred Imbert

Stocks ended higher Thursday after strong earnings results from companies such as Netflix and Morgan Stanley. Investors also assessed news of European Union and the U.K. striking a deal on Brexit.

The Dow closed 23 points higher after rising as much as 110 points earlier in the day. The S&P 500 gained 0.3%, while the Nasdaq added 0.4%.

Netflix shares rose 2.5% after the video streamer posted earnings that topped analyst expectations. The company reported a bigger-than-expected increase in international paid subscribers, which mitigated a big miss in domestic subscriber adds.

“Its differentiated international and film content efforts are kicking in, and investor expectations are now reasonable,” Credit Suisse analyst Douglas Mitchelson said in a note.

Morgan Stanley also got a boost from its quarterly numbers, closing 1% higher. The bank’s results got a boost from stronger-than-anticipated trading and advisory revenues.

Overall, the corporate earnings season is off to a solid start. More than 78% of the S&P 500 companies that have reported have topped analyst earnings expectations, according to FactSet.

“Better than feared earnings have been the story of 2019,” said Nick Raich, the CEO of The Earnings Scout, in a note. “That will continue to be the case this quarter.”

Stocks also rose after U.K. Prime Minister Boris Johnson said “we have a great new Brexit deal” via Twitter. He called on British lawmakers to back the deal when it’s put before Parliament on Saturday. Meanwhile, European Commission President Jean-Claude Juncker tweeted that the deal was a “fair and balanced” one.

This is not a done deal, however. The U.K. Parliament has to approve the deal before it can be implemented.

“At the moment, the parliamentary arithmetic is somewhere between “extremely tight” and ‘no,’” said Constantine Fraser, a political analyst at TS Lombard. But the “main takeaway is that the Conservative party is now committed to this deal, not no-deal, and will campaign for a majority for it.”

Nonetheless, markets rallied on the Brexit reports, as the deal removed some investor uncertainty amid heightened concerns about the health of the global economy. On Wednesday, unexpectedly weak U.S. retail sales data fueled fears about a possible recession.

Global economic data points to slower growth, while the U.S. manufacturing sector is already contracting. Among the greatest of the worries plaguing markets is the ongoing U.S.-China trade war.

China emphasized today that the U.S. must remove tariffs in order for the two countries to reach a final agreement on trade. The two economic giants have been embroiled in a trade dispute for more than a year, with each country applying tariffs on billions of dollars’ worth of goods from the other.

Larry Kudlow, director of the National Economic Council, told CNBC there is “a lot of momentum and there’s agreement on both sides,” referring to the negotiations.

Even with Brexit looking promising and a trade deal with China in the works, some investors have doubts it will be clear sailing for stocks the rest of the year without more help from the Federal Reserve. CNBC’s Steve Liesman reported on Thursday that the Fed may soon pause in its latest rate-cutting cycle, depending on economic data and China trade talks. That pause is more likely to occur after the October meeting.

CNBC’s Sam Meredith contributed to this report.


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