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U.S. EARNING GROWTH LEAD BY TECH AND FINANCE COMPANIES

U.S. companies are leaping above expectations on first-quarter earnings. However, Stocks have had little reaction to results overall so far. The S&P 500 is up more than 11% since Dec. 31. The index is up less than 2% since mid-April when the earnings period kicked in to high gear, but remains near record highs.

Earnings also are raising some fresh questions in the debate over growth versus value. After a decade of steadily under-performing the overall market, value has been a favourite among some investors as a bet on the reopening of the economy. A big piece of that growth is coming once again from technology and growth companies, which suggests greater durability in companies that underperformed more economically focused value names for months. Growth in earning giving investors stronger confirmation that profit growth will be able to support the market this year.

Earnings are rebounding from last year's pandemic-fuelled lows. With results in from more than half of the S&P 500 companies, earnings are now expected to have risen 46% in the first quarter from the previous year, compared with forecasts of 24% growth at the start of the month. About 87% of reports have come in ahead of analysts' estimates for earnings per share, putting the quarter on track to have the highest beat rate on record going back to 1994.Some strategists say the stronger-than-expected earnings could drive a richly valued market higher still. The benchmark S&P 500 (.SPX) is trading at about 23 times forward earnings, above the long-average of about 15.Investors will be watching reports in the weeks ahead to see if the trend continues. Technology-related companies as well as banks - value trade favourites - have had the largest percentage point contribution to estimated first-quarter S&P 500 earnings, with JPMorgan Chase & Co (JPM.N) and Apple Inc (AAPL.O) at the top of the list. Tech (.SPLRCT) is also among the strongest sectors for year-over-year sales growth for the quarter..

While the risks of higher inflation and possibly higher taxes have given some investors reason to become more cautious on growth shares, earnings may make them think twice about avoiding the group.







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