Stocks have been higher since the outset of trading as Netflix (NFLX) and IBM (IBM) headlined another busy night and morning of earnings and the EU and U.K. reached a tentative Brexit deal that now must be approved on both sides.
ECONOMIC EVENTS: In the U.S., initial jobless claims rose 4,000 to 214,000 in the week ended October 12. Housing starts fell 9.4% to a 1.256M rate in September while building permits declined 2.7% to a 1.387M rate. The Philly Fed manufacturing index reading for October fell 6.4 points to 5.6, which was a little weaker than expected. Industrial production declined 0.4% in September, which was weaker than expected, and capacity utilization fell to 77.5%.
In Europe, European Commission President Jean-Claude Juncker tweeted news that a "fair and balanced" Brexit deal has been reached, after which U.K. Prime Minister Boris Johnson tweeted that the United Kingdom has "a great new deal that takes back control." The European Commission has recommended the European Council endorse the agreement reached at negotiator level on the U.K. withdrawal agreement, including a revised protocol on Ireland / Northern Ireland, and approve a revised political declaration on the framework of the future EU-UK relationship. The tentative agreement must allow be approved by the U.K. Parliament, which is not a given.
TOP NEWS: Shares of Netflix (NFLX) advanced as much as 10% in afterhours trading last night following the company's Q3 report, but the stock has been bleeding lower throughout the morning and is up about 4% near noon. On the heels of the report, Macquarie analyst Tim Nollen downgraded Netflix to Neutral from Outperform with a price target of $325, down from $375. It is hard to deny the company's U.S. market is maturing, says the analyst, who contends it will be hard for Netflix to grow much more in the U.S. with competition coming from Disney (DIS) and others. Meanwhile, Huber Research analyst Craig Huber double downgraded Netflix to Underweight from Overweight and put his price target under review following the company's Q3 report, noting this was the second straight quarter where net paid streaming member additions missed guidance. Due to competition, Netflix will likely have to hold off on price hikes through 2021 while programming costs are likely to be rising, Huber added.
IBM (IBM) shares are down 6% at midday after Big Blue's earnings beat, revenue missed and the company backed its fiscal year adjusted EPS outlook. Nomura Instinet analyst Jeffrey Kvaal lowered his price target for IBM to $170 from $175 following the report, saying the company's Global Technology Services outsourcing unit "fared materially worse" in Q3, which brings down Q4 and 2020 estimates. However, these negatives are partially balanced by a Red Hat acceleration, he said.
Morgan Stanley (MS) continued the trend of mostly better than expected reports from the big banks as its Q3 adjusted EPS and revenue beat expectations, sending its shares up 2.5%.
MAJOR MOVERS: Among the noteworthy gainers was Assembly Biosciences (ASMB), which rose 41% after the company released abstract data to be presented at AASLD that Baird analyst Brian Skorney called encouraging. Also higher was Limelight Networks (LLNW), which gained 22% after reporting quarterly results.
Among the notable losers was Syros Pharmaceuticals (SYRS), which fell 32% after it stopped development of intravenous CDK7 inhibitor SY-1365. Also lower was Extraction Oil & Gas (XOG), which fell 7% after Imperial Capital analyst Irene Haas downgraded the stock to Underperform from Outperform with a price target of $2, down from $7.
INDEXES: Near midday, the Dow was up 19.85, or 0.07%, to 27,021.83, the Nasdaq was up 25.58, or 0.31%, to 8,149.76, and the S&P 500 was up 8.96, or 0.3%, to 2,998.65.
Netflix
+11.3 (+3.95%)
IBM
-8.76 (-6.17%)
Morgan Stanley
+1.015 (+2.37%)
Assembly Biosciences
+5.17 (+40.39%)
Ticker changed to EGIO
+0.69 (+22.26%)
Syros Pharmaceuticals
-3.21 (-31.88%)
Extraction Oil & Gas
-0.1799 (-7.20%)