US open: Stocks mostly higher as Morgan Stanley rallies on earnings
US stocks were mostly a little higher in early trade on Wednesday, with Morgan Stanley boosted by solid second-quarter earnings, as investors digested the latest testimony from Federal Reserve chairman Jerome Powell and some disappointing data on housing starts.
At 1630 BST, the Dow Jones Industrial Average was up 0.3% to 25,189.43, the S&P 500 was 0.1% firmer at 2,812.82 and the Nasdaq was 0.1% lower at 7,850.06.
Appearing before the House Financial Services Committee for the second day in a row, Powell reaffirmed the Fed's plans to lift interest rates gradually "for now".
Michael Hewson, chief market analyst at CMC Markets, said: "Fed chair Jerome Powell’s second day of testimony didn’t provide too much in the way of surprises in the wake of yesterday’s positive comments, as investors look ahead to tonight’s June Beige Book, which after today’s disappointing housing starts and building permits data will be examined for other areas of possible weakness."
Figures released earlier by the Commerce Department showed US housing starts dropped to a nine-month low in June.
Housing starts fell 12.3% to a seasonally-adjusted annual rate of 1.173m, versus expectations for a smaller drop to 1.320m and marking the biggest monthly drop since November 2016. Meanwhile, the May rate was revised to 1.337m from 1.350m.
Single-family housing starts were down 9.1% to 858,000 from the previous month's figure, which was revised to 944,000. This was the slowest rate since December.
Permits for new construction were down 2.2% from May to a seasonally-adjusted annual rate of 1.273m, falling short of consensus expectations of 1.330m.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The headline numbers look terrible, but the details are much less bad, with the most important number in the report, single-family permits, rising by 0.8%. The headline starts and permits number were both pulled down by big drops in the volatile multi-family sector, falling 19.8% and 7.6% respectively. Single-family starts dropped too, but the May reading always looked unsustainable and a correction was in the cards.
"Stepping back from the monthly noise, the key point here is that core single-family construction tends to move in line with new home sales; the trends in both have been about flat, more or less, since last fall. Higher mortgage rates and slightly higher lending standards appear to be offsetting the favourable impact of rising employment. We expect no change in this story over the next few months. Housing market activity - sales and construction - likely has peaked for this cycle."
On the corporate front, Morgan Stanley pushed higher after its second-quarter results surpassed analysts' expectations. Profit rose 39% from the same period a year ago to $2.44bn, beating forecasts of $2bn, while earnings per share came in at $1.30 versus expectations of $1.11 and revenue increased 12% to $10.6bn, which was about $500m above what was pencilled in.
Elsewhere, Google owner Alphabet was a touch weaker as it emerged that the EU will hit Google with a €4.3bn fine over how its Android operating system works.
United Continental Holdings surged higher after its second-quarter earnings late on Tuesday beat estimates.
American Express, eBay and IBM are slated to report earnings after the close of markets.