By Joyce Yu
Philadelphia, PA–Optimism has not subsided even after Wall Street’s whopping 20% gain in 2017. U.S. stocks rallied further on Tuesday as investors returned from the holiday weekend with the Dow Jones surpassing the 26,000 milestone. This marks the fastest 1000-point rise for the Dow which ended above 25,000 on Jan. 4.
Positive sentiment is bolstered by high expectations of the fourth quarter earning seasons which already saw several companies released better-than-expected results. The largest U.S. health insurer and also a Dow component UnitedHealth rose 1.47% after reporting results that beat analysts’ estimates and raised its full-year profit forecast. Citigroup jumped 2.7% after the lender reported profit that topped Wall Street expectations. As of now, more than three quarters of the 26 S&P 500 companies that have reported have topped profit estimates, according to Thomson Reuters I/B/E/S.
“Not only is the U.S. coming off a strong quarter, but the new tax reform measures are continuing to provide a boost, with investors keen to hear more about what impact this will have on future earnings,” Craig Erlam, senior market analyst at online foreign exchange broker Oanda, told the Bloomberg.
In its latest monthly market report released this morning, Bank of America Merrill Lynch noted that allocation to equities has climbed to a two-year high, while money devoted to bonds has fallen to a four-year low. Cash allocations were reduced to the lowest level in five years.
Investors’ near-term expectations for stocks are strongly positive with the majority of them extending their timescale forecasts for the equity markets to peak until 2019 or later. Last month the majority of those surveyed by BofA said they anticipated the top to come in the second quarter of this year. Investors are buying into tech, industrials and emerging markets, and shifting out of defensive stocks such as telecoms and utilities, the bank found.
Separately, this week will be dominated by several important economic reports, including U.S. industrial production to be released on Wednesday. On Thursday, U.S. housing report will be out, and all investors will be eyeing on China’s fourth quarter GDP, December industrial production and retail sales data. In the meantime, the Bank of Canada’s interest-rate decision comes Wednesday. Monetary policy announcements are also due in South Korea, South Africa and Turkey this week.
