Nasdaq leads markets higher, biotech 2% higher
U.S. stocks inched higher on Wednesday as Wall Street celebrated better-than-expected earnings off of a record week of gains for the Dow.
The Dow Jones industrial average hit a new intraday high, with Microsoft adding the most to gains. The S&P rose half of a percent as technology and health care led seven sectors higher. Utilities was the biggest laggard. The Nasdaq composite traded roughly 50 points higher.
“Investors are celebrating Microsoft and Morgan Stanley, which are part of the enthusiasm,” said Jack Ablin, chief investment officer at BMO Private Bank.
Bank results continued to surprise Wednesday, with Morgan Stanley reporting earnings of 75 cents per share versus consensus expectations of 59 cents, according to Thomson Reuters. Morgan Stanley joined Goldman Sachs, Citigroup, JPMorgan Chase, and Bank of America on the list of U.S. financial institutions topping second-quarter profit forecasts.
“This suggests the big banks have been managing global uncertainty pretty well,” Ablin said.
The Dow was led higher by Microsoft, which beat on earnings and revenue as its cloud product Azure saw revenue growth of 102 percent. The Dow Jones industrial average is tracking for a nine-day winning streak after closing at another record high Tuesday.
Sixty four percent of S&P 500 companies that had reported as of Tuesday morning topped earnings estimates, according to Thomson Reuters, compared to a long-term average of 63 percent over the past 22 years.
“Investors are playing the ‘no-alternative’ card, which means since earnings are not terribly disappointing, the rally continues,” said Peter Cardillo, chief market economist at First Standard Financial.
Abbott Labs, American Express, eBay, Intel,Qualcomm, Mattel and United Continental also report Wednesday.
The U.S. dollar is at a four-month high as Fed rate hike talk picks up and economic data continues to strengthen.
U.S. housing starts rose more than expected in June, and Fed funds futures rates showed an uptick in rate hike expectations. According to the CME Group’s FedWatch tool, the rates show investors see a roughly 40 percent chance the Fed will hike rates by its December meeting, compared with less than 20 percent a few weeks ago.
“I think it’s a combination of data, and it’s a safe haven because the geopolitical situation in Turkey certainly is not over,” Cardillo said. “People are just being cautious.”
Markets await an announcement in Turkey for emergency measures in the aftermath of a failed military coup. Turkey’s Borsa Istanbul fell 1.6 percent, near a low of the session. The MSCI Turkey ETF fell near 1.3 percent, near a low of the session.
“Political risk is always a factor when investing in emerging markets, the events in Turkey highlight this,” said William Scholes, investment manager at Aberdeen Asset Management. “Companies in the country are among some of the best in emerging markets, despite the political environment.”
Roughly 50,000 military officers, police, and other Turkish citizens were suspended from work or detained since the military coup in the country, which borders Syria and is a Western ally against Islamic State, Reuters reported.
Sterling moved higher after the Bank of England released its report on economic impact from last month’s Brexit vote. It showed showed no clear evidence of slowing economic activity, with signs that demand for credit was easing and companies did not expect any near-term impact on capital spending, according to Reuters.
“Anything that says Brexit won’t have a significant negative impact, or that it will be contained to the U.K., is a positive for U.S. stocks,” said Kate Warne, investment strategist at Edward Jones. “U.S. stock are taking their cues from the European market in response.”
European stocks traded higher Wednesday after the BOE report. Shares of FTSE 250-listed Man Group tumbled on news that the hedge fund’s chief executive will become CEO of Pimco in November.
The German DAX closed more than 1.6 percent higher. France’s CAC closed up 1.15 percent, while the U.K.’s FTSE 100 finished the day up 0.03 percent.
The pound traded near $1.32 against the dollar. China’s yuan rose as the People’s Bank of China strengthened its reference rate, which limits moves in the currency. The euro traded at $1.10, and earlier hit its lowest level against the dollar since June 27.
U.S. crude oil inventories fell by 2.3 million barrels for the ninth consecutive decline in stockpiles, according to weekly EIA data released Wednesday.
Oil prices turned positive after hitting a two-month low earlier in the session. WTI crude futures fell near to the lowest level since May 10 before recovering to more than $45. Brent Crude traded near $47, up more than 1 percent.
“The report was more positive than expected but the overall outlook will depend on production around the world, as well as how strong demand stays,” Edward Jones’s Warne said.
Yields on U.S. sovereign bonds went higher with expectations of a rate hike. The U.S. 2-year note rose to yield 0.71 percent. The 10-year yield increased to 1.59 percent, while the U.S. 30-year note yielded 2.31 percent.
Gold futures fell near a session low of $1,313, the lowest level since June 29. The VanEck Vectors Gold Miners ETF is down more than 4.1 percent, pacing for its worst day since May 24.
In deal news, Monsanto said Bayer’s $64 billion bid was inadequate, amid speculation the U.S. seed giant will hold out for a $130 per share offer.
The Dow Jones Industrial Average traded near 18,605, up a quarter of one percent, with Microsoft the biggest gainer and Walt Disney Company the biggest laggard.
The S&P 500 was roughly 10 points higher, near 2,175. Information technology and health care led sectors in the green, while energy led four S&P sectors lower.
The Nasdaq rose more than 50 points, near 5,090, helped by biotech. Shares of Nasdaq biotech ETF IBB were up more than 2 percent, erasing yesterday’s losses and pacing for a fourth positive day in five. Facebook shares hit an all-time intraday high after the company announced 1 billion active users on its messenger app.
Celgene and Gilead rose roughly 3 and 1.5 percent respectively. Progenics rose more than 20 percent and Valeant was up more than 4 percent on positive drug licensing news.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.61.The VIX hit its lowest level in nearly a year, back to August of 2015.
Advancers led decliners on the New York Stock Exchange, with an exchange volume of 313.60 million and a composite volume of 1.46 billion.
Source: CNBC
