Equities have been boosted this year by optimism in the U.S. economy and expectations for a strong earnings season. Thus far, the earnings season is off to a good start.
Of the S&P 500 companies that had reported as of Wednesday morning, 78 percent have surpassed earnings-per-share estimates while 89 percent have beaten expectations on the top line, according to Nick Raich, CEO of The Earnings Scout.
Morgan Stanley and BB&T Corp. both reported better-than-expected earnings and revenue on Thursday. Their shares rose in early trading.
“In our view, the market has not adjusted expectations up enough to reflect the current tailwinds for economic and EPS growth, especially given the recent tax legislation,” Tony Dwyer, chief market strategist at Canaccord Genuity, said in a note Wednesday. Dwyer was referring to the tax bill signed by President Donald Trump last month, which cuts the corporate tax rate to 21 percent from 35 percent.
But the possibility of a government shutdown loomed on investors’ minds on Thursday. Congress needs to pass a spending bill by the end of Friday to avoid a government shutdown. Historically, a government shutdown has led to a short-term pullback in the stock market.
Elsewhere in corporate news, Amazon announced it narrowed the list of cities for its new headquarters to 20.
