The S&P 500 notched a fresh intraday high on Friday that left it closing in on its eighth straight quarterly rise.
The benchmark for large-cap US stocks is up 1.6 per cent in September — its sixth straight monthly rise and longest winning streak since May 2013. That has helped push its advance for the quarter to 3.7 per cent, putting it on track to record eight successive quarters of gains for only the fifth time since S&P Dow Jones Indices data began in 1928.
This week’s gains have been propelled by the Republicans unveiling a sweeping tax reform proposal aimed at lowering the corporate tax rate from 35 per cent to 20 per cent. If Congress can pass such a cut, investors are hopeful it will feed through to companies’ bottom lines.
At the same time, investors appear — at least for now — to have moved beyond the geopolitical tensions between the US and North Korea over Pyongyang’s nuclear weapons programme that has limited risk appetite in recent weeks.
On Friday in New York, stock markets continued to add to gains, with the S&P 500 up 0.2 per cent to 2,515 and the Nasdaq Composite 0.5 per cent higher at 6,487. The Dow Jones Industrial Average slipped 0.1 per cent to 22,365.
But having seen tax reform hopes dashed earlier in the year, investors also acknowledge that any legislation will be tricky to pass.
“With great fanfare, the White House and Republican congressional leadership released their long-awaited framework for tax reform, but many politically thorny issues need to be resolved — and quickly — before investors can feel confident that tax reform will materialise in the coming months,” said Libby Cantrill, head of public policy at Pimco.
The gains in the quarter were powered by a 8 per cent rise in the technology sector, which remains this year’s best performer, up 25 per cent. As hopes for an acceleration in US growth dimmed earlier in the year, investors have been willing to pay more for the earnings and revenue growth that tech stocks offer.
The third quarter also saw a resurgence in the energy sector, helped by a sharp rise in the oil price. Brent crude has risen by a fifth to $57.41 for the quarter — its first positive quarter this year. The energy and materials sectors of the S&P 500 are both up 5.6 per cent.
And far as individual stocks go, NRG Energy was the biggest gainer on the benchmark S&P 500, climbing 47 per cent during the quarter. The bullish sentiment towards stocks was also aided by a solid earnings season. More than two-thirds of S&P 500 companies reported second-quarter revenues that exceeded estimates and, overall, they delivered the second straight quarter of double-digit earnings growth. It is the longest streak since 2011, according to FactSet data.
The energy sector reported the highest earnings and revenue growth of all 11 sectors on the S&P 500, thanks to easier comparisons in the year-ago period.
Moreover, a record number of S&P 500 companies have issued positive revenue guidance for the third quarter. Overall, 54 companies in the S&P 500 have issued positive revenue guidance for the third quarter, more than double the five-year average and the highest number since FactSet began tracking the data in 2006.