S&P 500 rises before earnings as SK Hynix debuts
In the final stretch of a week of gains for equities, the S&P 500 approaches record highs
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WALL Street traders drove stocks higher in the countdown to the earnings season, with SK Hynix jumping in its debut and the market parsing the latest geopolitical developments.
In the final stretch of a week of gains for equities, the S&P 500 came closer to record highs.
American depositary receipts of the South Korean memory chipmaker surged 13 per cent above their offering price after a blockbuster share sale.
Oil briefly climbed when US President Donald Trump said the US considers the ceasefire with Iran to be over, but fell as he noted talks would continue.
“The muted reaction to the re-escalation of Iran tensions this week is prime evidence that the market is looking past geopolitical tensions,” said Clark Bellin at Bellwether Wealth.
“While the stock market is gearing up for another strong earnings season, expectations are higher.” Despite the stock advance, major benchmarks saw mild moves Friday (Jul 10).
The earnings backdrop remains supportive, but some are concerned that expectations have become elevated and will likely wait for confirmation before pushing the market sustainably higher, according to Mark Hackett at Nationwide.
“While there are pockets of the market exhibiting lottery-like behavior, the broader market remains sober and skeptical,” Hackett said.
“It is far from the kind of complacency that typically leads to a sustained drawdown.”
The earnings season will be about justifying the premium valuations investors have already assigned to the companies, according to Kenny Polcari at SlateStone Wealth.
“The street has priced in exceptional earnings growth, and now management teams have to prove those expectations were warranted,” he said.
What is interesting about the quarter, Polcari noted, is that we have not seen the usual wave of warnings. In fact, more S&P 500 companies have issued positive than negative guidance – a departure from the historical pattern.
“That tells me management teams are either genuinely confident or confident enough not to reset expectations ahead of reporting,” he said.
Another aspect of the upcoming results is that expectations are elevated, but concentrated, noted Nicole Inui at HSBC.
Most of the expected earnings growth comes from a handful of sectors where visibility is high, she said. “Despite lofty expectations, we are not worried,” Inui added.
Among the main moves in markets, the S&P 500 rose 0.4 per cent as of 4 pm New York time. The Nasdaq 100 rose 0.3 per cent and the Dow Jones Industrial Average rose 0.3 per cent. BLOOMBERG
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