Tech Earnings Help Maintain Momentum in Growth Stock ETFs

Growth stock exchange traded funds continued to push higher on Wednesday after Microsoft’s positive outlook helped bolster optimism for the third quarter earnings season.

Microsoft Corp pointed to a strong end to the calendar year, highlighting its booming cloud business, Reuters reports. Google-owned Alphabet Inc. also revealed a record quarterly profit on a surge in ad sales.

“Markets were in a lock-step higher and a lock-step lower phase and we now see signs of healthy markets with interest for individual companies based on their earnings rather than market wide moves right now,” said Anthony Denier, chief executive officer of trading platform Webull.

“We see tech as a clear leader on strong earnings and due to supply chain and inflation issues affecting other sectors,” Denier added.

An upbeat third quarter earnings season has so far helped lift the S&P 500 and the Dow Jones Industrial Average to all-time highs this week as traders gauged how companies were dealing with ongoing supply chain bottlenecks, labor shortages, and rising prices.

“Investors got fairly gloomy in September, clearly against the backdrop of all sorts of macro concerns,” Paul O’Connor, head of the multiasset team at Janus Henderson Investors, told the Wall Street Journal. “The broader story from results is that companies are managing these dynamics pretty well, and also managing expectations fairly well.”

S&P 500 company profits are projected to grow 37.6% year-over-year for the third quarter. Of the 192 companies that have reported earnings so far, 82.8% have beaten expectations, according to Refinitiv IBES data.

Investors interested in the growth style can turn to targeted strategies like the American Century Focused Dynamic Growth ETF (FDG). FDG is a high-conviction strategy that invests in early-stage, rapid-growth companies with a competitive advantage and high profitability, growth, and scalability.

Additionally, investors can look to the American Century STOXX U.S. Quality Growth ETF (NYSEArca: QGRO). QGRO’s stock selection process is broken down into high-growth stocks based on sales, earnings, cash flow, and operating income, along with stable-growth stocks based on growth, profitability, and valuation metrics.

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