While U.S. equities and stock ETFs were trading in a relatively subdued session Monday, the markets were on track for their best month since February.
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 flat Monday.
Strong corporate earnings have supported the market push over July, especially in U.S. large-caps as they were on pace to post two consecutive quarters of double-digit profit growth for the first time since 2011, the Wall Street Journal reports.
“Improved earnings have been the main driver of July’s gains,” Michael Arone, chief investment strategist at State Street Global Advisors, told the WSJ. “A lot of other stuff is just noise: the turmoil in D.C., the political events that flare up from time to time.”
However, the market gains were capped by losses in the technology sector after many big names retreated in recent trading, following a record high last week.
“We’ve been in a little bit of pull-back on some of the tech stocks for the last few days. I think it’s just a matter of the fact that they have had a very strong run,” Randy Frederick, vice president of trading and derivatives for Charles Schwab, told Reuters. “The bull market is sort of broadening out and people are taking a few profits off the table on some these stocks that have done exceedingly well.”
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Investors have been betting on earnings to support the relatively loft valuations in U.S. equities, with the S&P 500 trading at about 18 times estimates for the next 12 months, compared to long-term averages of 15 times.
Of the 289 S&P 500 companies that have reported since Friday, 73% beat expectations, compared to to the 71% average over the past year.
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