By Joyce Yu
Philadelphia, PA–With global equity markets kept hitting new highs, investors are looking for more catalysts to sustain rallies. Wall Street opened lower Wednesday after closing at new records on Tuesday.
“The market is looking for additional fuel to continue the drive higher, whether it comes in the form of earnings or tax reform,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.
Among positive reports is disappointing news from a handful of companies. Stocks of fast food chain Chipotle plummeted nearly 12 percent in premarket trading after the burrito chain posted disappointing sales and earnings. Advanced Micro Devices tanked 10.46 percent after forecasting first revenue decline in seven quarters. U.S. No. 2 wireless carrier AT&T fell 2.32 percent after its quarterly results missed estimates as it lost video subscribers to traditional and online TV competitors.
However, the earnings season has been largely positive, with more than 70 percent of the S&P 500 companies that have reported so far beating profit expectations, according to a Reuter’s report.
“For the most part, I think, you’ll see earnings continue to come in good — and not just earnings, but increases in revenue that look stronger than expected,” Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas told Bloomberg. “The economy is doing great here domestically, the whole world economy is certainly improving, and we’re optimistic that the market is going to continue to go higher because it is earnings-driven.”
With equities at or near records globally, investors are looking hard at earnings and economic data for indications of broadening growth that may keep the rally alive.
“Calling the end of this market at the moment is very, very tricky because interest rates are going to remain low, earnings are OK,” Neil Dwane, global strategist at Allianz Global Investors, said on Bloomberg Television. “‘We are seeing good economic performance out of Europe, but all the equity markets now need earnings to rise.”
Another key diver of the on-going market rally is the expectation of Trump’s tax reform. But an intensifying war of words between the president and Republican U.S. Senator Bob Corker of Tennessee has muddied the prospects for tax reform. Arizona Republican Jeff Flake also announced he wouldn’t seek re-election to his Senate seat.
Investors were also keeping an eye on the nomination of the next Federal Reserve chief. Republican senators were favoring Stanford University economist John Taylor over current Fed Governor Jerome Powell, a source familiar with the matter told Reuters.
