U.S. equities and stock exchange traded funds regained their footing Friday, strengthening on the fourth quarter earnings outlook, with financial shares rising after three of the largest American lenders revealed results.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.2% higher Friday.
The financial sector pared back some of its losses this week, with the Financial Select Sector SPDR (NYSEArca: XLF) up 0.6% Friday.
Supporting market gains, shares of J.P. Morgan (NYSE: JPM), Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) advanced after the banks reported fourth quarter results. JPM rose 0.2% on better-than-expected Q4 results. BAC still managed to eke out a 0.3% rise despite revenue coming in below expectations. WFC also returned 0.9% even after a drop in the bank’s fourth quarter earnings.
Financials have been among the best performers since the elections as traders speculated that higher U.S. interest rates and potential rollback of financial downturn-era regulations would bolster the sector. However, the financial sector, along with the broader market, has been stuck within range in recent weeks after the record run up.
“I think the market had been giving President-elect [Donald] Trump a lot of the benefit of the doubt that his pro-business ideas or plans are going to be ultimately enacted but that antibusiness things such as border walls and trade wars will probably not happen,” Randy Frederick, vice president of trading and derivatives at Schwab, told the Wall Street Journal.
“The market is in a wait-and-see mode” between now and the January 20 presidential inauguration of Donald Trump as investors wait for more clarity on the incoming administration’s most pressing matters and potential policy changes, Frederick added.
“Since Trump was elected expectations were set very high,” Andrzej Pioch, a money manager at Legal & General Investment Management Ltd in London, told Bloomberg. “Now we need to see some evidence in the hard data to support that. We expect the earnings to be modestly up but a lot of positive news is already priced in.”
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