U.S. stocks turned positive in afternoon trading on Thursday as corporate earnings continue to roll in, with trade and growth concerns lingering in the background.
Earnings continue to draw considerable attention from market participants, many of whom headed into the season expecting S&P 500 companies to report a contraction in aggregate earnings per share over last year.
But results have so far been more sanguine. As of Thursday morning, companies comprising 15.3% of the S&P 500’s market capitalization reported second-quarter results, with 81% of such companies exceeding their earnings estimates, according to an analysis from Credit Suisse analyst Jonathan Golub. This compares to 71% of companies topping their bottom-line estimates over the past three years.
Big banks and big tech have been a focal point for earnings this week.
Netflix (NFLX), which reported after-the-bell Wednesday, sharply missed consensus expectations for quarterly global net subscriber additions. The miss sparked concerns over the entertainment giant’s growth prospects as newer entrants gear up to launch their own streaming platforms, sending shares about 11% lower in pre-market trading, even as the company beat expectations on the bottom-line.
Meanwhile, Morgan Stanley (MS) posted a 14% decline in equities trading revenue for the second quarter, missing expectations and marking the steepest decline by this measure among Wall Street firms. The bank also posted a year-over-year decline in fixed income trading, and brought in less in investment banking revenue as a result of fewer deals compared to last year. However, wealth management and investment management revenues came in ahead of expectations.
Legacy tech giant Microsoft (MSFT) is set to report results after market close Thursday, with analysts eyeing the company’s cloud sales after a blowout first quarter. Newly public companies Chewy (CHWY), an online pet e-commerce retailer, and CrowdStrike (CRWD), a cybersecurity company, are also poised to report results after market close.
Elsewhere, markets on Thursday priced in a higher probability of a 50 basis point cut to key interest rates after the Federal Open Market Committee’s July meeting, after two global banks cut their own key borrowing rates. Government bond yields in the U.S., U.K. and Germany stabilized after falling earlier in the session.
South Korea’s Bank of Korea (BOK) unexpectedly cut its benchmark interest rate for the first time since 2016, with central bank officials noting in a statement that “the pace of global economic growth has continued to slow as trade contracted mainly due to the U.S.-China trade dispute.”
“Looking ahead, the Board sees global economic growth and the global financial markets as likely to be affected by factors such as the degree of the spread of trade protectionism, the changes in the monetary policies of major countries, and geopolitical risks,” the statement continued.
Indonesia’s central bank also cut its benchmark interest rate Thursday, the country’s first in about two years. Central bankers from both South Korea and Indonesia suggested further easing to monetary policy could be rolled out in future to continue to support economic activity.
The Philadelphia Federal Reserve’s newly released gauge of regional business activity jumped in July to the highest level in a year, rebounding from a four-month low in May and pointing to a marked improvement the region’s manufacturing sector.
The index clocked in at 21.8, far exceeding consensus economist expectations for a reading of 5.0, and May’s print of 0.3. Readings above 0 point to an improvement in business conditions.
The better-than-expected report from the Philadelphia Fed comes after an analogous survey from the New York Fed improved between June and July.
June’s estimate-missing Philadelphia Fed survey “was conducted during the week in which President Trump threatened to impose tariffs on imports from Mexico, and in the wake of the increase in tariffs on $200B-worth of Chinese imports. A July rebound, therefore, was always likely but this is a gratifyingly big increase,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in an email Thursday.
While the survey tends to be volatile, “this report is unambiguously good news from a sector which spent the first half of the year in recession,” Shepherdson added.
Meanwhile, new unemployment claims rose just slightly for the week ending July 13, matching expectations, while continuing unemployment claims unexpectedly fell for the week prior.
Initial jobless claims through last Friday rose by 8,000 from the previous week’s revised level to a seasonally adjusted 216,000, the Department of Labor reported Thursday. The print matched consensus economists’ expectations, and the four-week average was unchanged at 219,000.
Continuing jobless claims for the week ending July 6 fell to 1.686 million, down from the previous week’s upwardly revised level of 1.728 million. Consensus economists expected continuing unemployment claims to register at 1.7 million for the week.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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