While many traders kept bets muted with banks set to kick off the earnings season Friday, the strengthening tech segment helped push U.S. equities and stock exchange traded funds toward record heights.
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 Thursday.
Technology companies in the S&P 500 were also up 0.4% and higher for the fifth consecutive session.
The growth sector was leading the charge yet again as analysts largely expect the S&P 500 to post another quarter of earnings growth. According to FactSet, while growth is expected to be slower compared to the first quarter, broad strength across sectors will help U.S. markets maintain its momentum, the Wall Street Journal reports.
“Earnings are the single greatest support for this market,” David Donabedian, chief investment officer at CIBC Atlantic Trust Private Wealth Management, told the WSJ. “Expecting to get bailed out by massive fiscal stimulus isn’t a good strategy. It’s all about the earnings now.”
U.S. markets were also supported by a risk-on sentiment after Federal Reserve Chair Janet Yellen signaled a more gradual tightening of monetary policy.
Yellen argued the U.S. economy is healthy enough for the Fed to raise rates and begin trimming back its massive bond portfolio, though low inflation and a low neutral rate may leave the central bank with diminished leeway, Reuters reports.
“Yesterday’s move was in response to Yellen comments that should inflation remain below the 2 percent target rate, the central bank will be less aggressive in their tightening program,” Sam Stovall, chief investment strategist at CFRA Research, told Reuters. “Today, the market is saying that’s old news and let’s focus on the matter at hand, which is earnings that will be coming out in earnest this week.”
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Quarterly earnings will start with big U.S. banks like JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) reporting second quarter results on Friday.
According to Thomson Reuters, second quarter earnings are anticipated to rise 7.8% year-over-year after the first-quarter earnings revealed their best performance since 2011.
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