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Stock futures pointed to a sharply higher open Monday morning, with the three major indexes looking to kick off May on a high note.
Contracts on the S&P 500 added about 0.5%. On Friday, the index ended lower, but still closed out its best month since November with a monthly advance of more than 5%. In April, the communication services and consumer discretionary sectors led gains in the S&P 500, returning to a leadership position after lagging earlier in 2021 amid a rotation into cyclical and “reopening” stocks. However, growth names pared some gains last week, with Federal Reserve Chair Jerome Powell highlighting that some asset valuations appeared “frothy.”
Still, a wave of stronger-than-expected earnings results from companies across industries helped fuel the latest move higher in the broader market, with corporate profits rebounding alongside the pick-up in economic activity. As of Friday, 86% of S&P 500 companies had beaten first-quarter earnings expectations, according to FactSet data. This would mark the highest proportion since at least 2008, if it holds through the end of first-quarter earnings season. Companies including Uber (UBER), Lyft (LYFT), Square (SQ), Peloton (PTON) and Pfizer (PFE) are poised to report results later this week.
Underpinning the economic recovery has been the strong pace of vaccinations in the U.S., which has in turn enabled more business across the country to reopen and bolstered consumers’ confidence in a return to a semblance of normalcy. As of Sunday, more than 104 million Americans were fully vaccinated, according to data from the Centers for Disease Control and Prevention, to comprise nearly one-third of the country’s total population.
However, some strategists cautioned investors about getting complacent, with the ample good news on the recovery now well priced into the markets.
“I think the market is priced almost to perfection, right? We’ve priced in a good vaccine rollout. We’ve priced in a strong reopening to the economy. I’m a little concerned about the second half of the year,” Allan Boomer, Momentum Advisors Chief Investment Officer, told Yahoo Finance. “I think it’s possible that in the short term, earnings have basically peaked and … this is a great quarter, but I don’t know that the rest of the year will be quite as strong.”
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