U.S. equities and stock exchange traded funds turned positive Monday, with the energy sector leading the charge on increased uncertainty in the Middle East, and traders looked ahead to the financial sector to kick off the corporate earnings season.
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 0.2% Monday.
The Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, increased 1.1% Monday, testing its short-term 50-day simple moving average as crude oil futures jumped in the latest among a string of gains linked to last week’s U.S. airstrike in Syria and ongoing civil conflict in the oil-rich Libya.
Investors were also waiting on the corporate earnings season, with J.P. Morgan (NYSE: JPM), Citigroup (NYSE: C) and Wells Fargo (NYSE: N) scheduled to reveal first quarter results on Thursday, which may help shed light on the U.S. banking industry’s health amid a rally in financial shares since the election, reports Yashaswini Swamynathan for Reuters.
The Financial Select Sector SPDR (NYSEArca: XLF) was 0.1% higher Monday.
Financial sector stocks, though, have weakened in recent weeks as investors grow concerned over the high valuations and President Donald Trump’s ability to introduce pro-growth policy changes, like deregulation and corporate tax cuts, following his failed attempt at replacing Obamacare.
“The financial sector has been a darling performer since the election and we’ve seen some of that performance retreat in the last couple of weeks,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. “So, what the banks report and what their guidance is will be the primary driver for equity prices over the next week or two.”
Moreover, markets remained on edge as political risks mount, especially in the wake of increased U.S. military action.
“Geopolitics trumps economics as the main market driver, with strained U.S.-Russian relations and the dispatch of a U.S. aircraft carrier towards the Korean peninsula making the headlines,” Kit Juckes, a global strategist at Societe Generale, wrote in a note, according to Bloomberg. “This week, it will be geopolitics and events outside the U.S. which drive markets.”
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