US stocks have moved higher after a slow start as comments from New York Fed President John Williams helped cement expectations for an interest rate cut from the US central bank at the end of the month.
Williams said that when rates and inflation are low, policymakers cannot afford to keep their “powder dry” and wait for potential economic problems to materialise.
Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina, said Williams’ comments pointed to a future interest rate cut.
“He’s toeing the party line at the Fed, basically implying that an insurance rate cut is the right thing to do for the economy at this point in time,” Zaccarelli said.
Before Williams’ comments, stocks had been lower as shares of Netflix tumbled 10.3 per cent after the company’s quarterly results, which missed targets for new subscribers overseas.
Losses in Netflix triggered a 0.9 per cent fall in the communication services sector, which has been one of the best-performing S&P sectors so far this year.
Jack Ablin, founding partner and chief investment officer at Cresset Asset Management in Chicago, said the Netflix results had taken investors by surprise.
“I think there was this assumption that no matter what happened globally that people would sit at home and watch television and tune in to Netflix,” he said.
“I think that investors have viewed these large-cap growth technology companies as somewhat defensive.”
The Dow Jones Industrial Average rose 3.12 points, or 0.01 per cent, to 27,222.97 on Thursday, the S&P 500 gained 10.69 points, or 0.36 per cent, to 2995.11 and the Nasdaq Composite added 22.04 points, or 0.27 per cent, to 8207.24.
Among positive earnings reports, shares of Philip Morris International climbed 8.2 per cent after the tobacco company raised its full-year profit outlook.
Railway operator Union Pacific jumped 5.9 per cent after the company’s profit came in ahead of expectations.
International Business Machines rose 4.6 per cent as the company’s quarterly profit beat on strong growth in its high-margin cloud business.
Morgan Stanley shares rose 1.5 per cent after the bank posted a better-than-expected quarterly profit.
The S&P 500 banks index was up 0.9 per cent after three days of losses.
Ablin expectations had been fairly low coming into this season’s earnings.
“Analysts had expected a negative decline in profit year over year and so right now it looks like the earnings results themselves are better than expected,” he said.
UnitedHealth Group shares slipped 2.3 per cent as the insurer said on its conference call that 2019 revenue would not hit its original target.
Profits for S&P 500 companies are expected to rise 0.6 per cent for the second quarter of 2019, according to Refinitiv IBES data.
Until Wednesday, there were expectations of a dip in earnings.
Advancing issues outnumbered declining ones on the NYSE by a 1.22-to-1 ratio; on Nasdaq, a 1.23-to-1 ratio favoured advancers.
The S&P 500 posted 36 new 52-week highs and four new lows; the Nasdaq Composite recorded 61 new highs and 101 new lows.
Volume on US exchanges was 6.68 billion shares, compared with the 6.67 billion average for the full session over the last 20 trading days.