Strong earnings reports across all sectors have contributed to market strength. Amgen (AMGN) and Coca-Cola (KO) recently beat earnings, lifting biotechnology and consumer staples sectors.
As of last Friday, the blended estimate for S&P 500 earnings growth this quarter was 7.2 percent, up from 6.6 percent on June 30.
Financials jumped on Tuesday following a sharp rebound in the 10-year yield.
Smaller and regional banks enjoyed the greatest gains and SPDR Financials (XLF) hit a new 52-week high.
SPDR S&P Insurance (KIE) and iShares U.S. Broker Dealers (IAI) are up double digits year-to-date. Banks have seen less dramatic gains, but are poised to catch up as long-term interest rates rebound.
Investment-grade, corporate and government bonds slipped in response to rising interest rates, while high-yield bonds and floating-rate funds prospered.
Floating-rate funds moved higher following the latest jump in interest rates.
The U.S. Dollar Index remains in a trading range and could test its multi-year low below 93. A rebound appears likely, however, given the build-up in bearish sentiment.
SPDR Energy (XLE), Energy Services (XES), and Exploration & Production (XOP) had been repelled by their 50-day moving average for much of 2017, but XLE and XOP broke above this week. First Trust ISE-Revere Natural Gas (FCG) has also shown a similar pattern. Crude oil, however, doesn’t look as bullish.
Some materials sectors have improved in recent weeks. Copper is approaching $3 per pound and coal stocks are nearing their 52-week high.
The Senate voted to move forward on a repeal of the Affordable Care Act on Tuesday. The bill allows the Senate to move into conference with the House to produce a final bill. Healthcare stocks remain near all-time highs.