U.S. equities and stock exchange traded funds climbed Monday on renewed risk appetite after the first round of French presidential elections eased concerns about a potential breakup of the Eurozone.
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 up 1.0% Monday.
“Today the market is enjoying a risk-on trade,” Quincy Krosby, a market strategist for Prudential Financial, told the Wall Street Journal.
Results from Sunday polls revealed pro-EU Emmanuel Macron beat right-wing rival Marine Le Pen, assuaging fears of a Eurozone breakdown, especially after the United Kingdom’s Brexit vote last year, reports Yashaswini Swamynathan for Reuters.
“Having seen the results of the French election over the weekend, investors are now taking a disaster-avoided view of markets, so all of the risk-off trades are unwinding and risk-on trades put on,” Art Hogan, chief market strategist at Wunderlich Equity Capital Markets, told Reuters.
While equities rallied, safe-haven or more conservative bets like U.S Treasuries and gold weakened, along with risk hedges like the CBOE Volatility Index, or so-called VIX, which plunged 23.3% Monday.
Moreover, traders were looking forward to the busiest earnings week in at least a decade, with over 190 S&P 500 members, including big industry names like Google (NasdaqGS: GOOGL) and Microsoft (NasdaqGS: MSFT), due to reveal first quarter results.
“Earnings are coming in better than expected and this is for a quarter where estimates were pretty tight. We didn’t see much pullback with estimates in the course of the quarter, so expectations were high and we’re beating them,” Hogan added.
So far, 100 S&P 500 companies have reported earnings and 77% have shown better-than-expected results.
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