Markets closed modestly higher Thursday, as the Standard & Poor’s 500 had its seventh day of gains.
Consumer discretionary names were notable outperformers, given strength in retail and autos.
Energy was the biggest underperformer, as West Texas Intermediate crude oil prices ended the day down 1.1 percent.
Meanwhile, the 10-year Treasury yield continued its grind higher, now at 1.67 percent levels, which also put some pressure on the utilities sector.
The price of crude oil was down 79 cents at $82.63 a barrel, and the spot price of gold was up 60 cents to $1,785.50.
The VIX volatility index, also referred to as the “fear index,” remains relatively optimistic, back down to 15 levels, indicating that market jitters also remain contained.
Analysts said they are seeing this play out as markets continue to climb multiple walls of worry heading into year-end.
Third-quarter earnings season in the U.S. is now underway, with about 10 percent of S&P 500 companies having reported earnings.
Thus far, 80 percent of companies have reported a positive earnings-per-share surprise, and earnings growth is on track for an impressive 30 percent gain year-over-year.
This is above last month’s expectation for a 27.5 percent growth rate for the third quarter.
Investors are listening carefully for signals around supply-chain and cost pressures, which many companies are indicating could last through mid-2022.
On the other hand, consumer demand and corporate balance sheets both remain robust, driving the stronger earnings growth we have seen thus far.
Edward Jones analysts believe markets in the next 12 months will be driven more by earnings growth than multiple expansion, and expectations are for about 9.0 percent S&P earnings growth in 2022 thus far.
Meanwhile, eyes remain in Washington, as the Democrats continue to negotiate toward a social spending package.
The outlook seems to have improved in the last few days, as the latest headlines indicate parties coming together around a bill that will likely be below $2 trillion.
Most recently, the debate seems centered around corporate tax increases as well as personal and capital gains taxes, and whether there may be alternative methods to increase tax revenues.
On the margin, analysts believe that if Democrats can pass a spending bill without pursuing higher corporate or personal taxes, this will be well received by risk markets.