(Bloomberg) -- Good things come to those who wait.
Such was the mantra of equity bulls that watched week after week of a stellar earnings season go by without any appreciable reaction in share prices. After almost a month of anticipation, the patience finally paid off.
Amid a relative scarcity of news, the S&P 500 Index rallied the most in two months. As has been the case since mid-April, companies posted good earnings, while politics and economic concerns weighed on sentiment. But rather than sit still, tech and semiconductors jumped -- possibly because investors had time to digest the magnitude of positive results as the drama of the earnings season receded.
“More than 70 percent of the S&P companies reported revenue growth that beat estimates -- that is the biggest number I’ve seen in my career,” said Walter Todd III, chief investment officer of Greenwood Capital Associates. “Investors took their time to look back on what has transpired and realize that they don’t see numbers like this every day.”
The S&P 500 advanced 2.4 percent as the gauge jumped above the 50-day moving average on Wednesday and then rose past the 100-day support line on Thursday. Semiconductors advanced the most in four weeks, while the NYSE FANG Index closed within 1.5 percent of a record.
The market darlings last year, the stocks are back in vogue after concerns ranging from data privacy to slowing iPhone demand knocked them down in March. Facebook Inc.’s stock had its best week since January as shorts headed for the exit after the firm reported earnings results. Micron Technology Inc. rallied the most in eight weeks, while Align Technology Inc. jumped to a record.
Options traders are also bullish: the cost of hedging against a 10 percent drop in the PowerShares QQQ Trust Series ETF is hovering near the lowest since March.
Now that about 90 percent of S&P 500 companies have reported earnings, investors are shifting their attention to tensions in the Middle East and trade negotiations with China as they resume in Washington next week.
“It’s important not to become too complacent, as developments in Washington may instantaneously shift market sentiment,” said Ian Winer, managing director at Wedbush Securities. “You can have the risk return very quickly, and it’s important to not read too much into one weekly rally.”
While bears point to the end of an earnings-related buyback blackout as a driver behind the stocks’ advance, bulls say investors are finally giving an overdue nod to the S&P 500 firms posting a 24 percent earnings growth. U.S. companies posted earnings that on average came in 7.3 percent above analysts’ expectations. Despite that, the S&P 500 firms have seen their shares fall by 0.3 percent on average the day after reporting results.
“Part of the rally is a delayed reaction to earnings, and part of that is the realization that some of the concerns investors had are probably not going to materialize,” said Matt Maley, an equity strategist at Miller Tabak & Co. “What is also important for the sentiment is the fact that semiconductors rallied past the 50-day moving average and the FANGs are trading near a record high. Everyone will probably focus on sings to prove that this week’s momentum will last.”
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