Stocks Up; Quarterly Results Continue to Top Expectations

U.S. stocks opened higher as expected on Tuesday. The strong opening in the Dow puts the blue chip average in a position to challenge the psychological 22,000 level. Goldman Sachs is leading the market higher in the early go. The S&P 500 Index is being supported by advances in the real estate and financials sector. The NASDAQ Composite is also trading higher, but it’s struggling as investors continue to rotate money out of high-priced technology stocks into other lower-priced sectors.

Investors continue to focus on earnings while ignoring political events in Washington and geopolitical events in North Korea, Russia and Venezuela.

According to data from FactSet over 75 percent of companies reporting topped estimates on both the top and bottom lines. However, The Earnings Scout pointed out before the opening that the overall earnings growth this season is below that of the previous quarter. Some analysts are saying that this likely means earnings will level off the next two quarters.

Tech giant Apple is set to report earnings after the close. This report should have an impact on the Dow Jones Industrial Average and the NASDAQ Composite on Wednesday.

Earlier today, the Core PCE Price Index came in unchanged and as expected at 0.1%.

Personal Spending rose 0.1%, meeting the estimate. The previous month was revised up to 0.2%. Personal income was flat at 0.0%. This was below the estimate. Last month’s number was revised downward to 0.3%.

Final Manufacturing PMI was 53.3, slightly above the 53.2 estimate and previous read. Construction Spending fell unexpectedly by 1.3%. Traders were expecting 0.4%. The previous report was revised upward to 0.3%.

The most important report was the ISM Manufacturing Index. It came in at 56.3, slightly below the 56.5 expected by economists. However, this was not too much of a concern is it remained about 50. Falling below this level would indicate a contraction in the sector.

Low U.S. Treasury yields and expectations the Fed will pass on a third rate hike this year are underpinning stocks. However, strong earnings are driving prices higher as it seems investors aren’t using President Trump’s economic agenda as a key reason to own stocks.

Stocks may be overvalued and may be due for a correction, but this would be considered normal. Low interest rates would prevent a bear market from developing.