U.S. equities and stock exchange traded funds popped Wednesday, with financial stocks leading a broad market rally.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca:SPY), iShares Core S&P 500 ETF (NYSEArca:IVV) and Vanguard 500 Index (NYSEArca:VOO), were 0.9% higher Wednesday.
Leading the charge Wednesday, financial companies in the S&P 500 increased 1.6% as the yield between five-year notes and 30-year bonds steepened after dipping to their lowest level since late 2007, reports Tanya Agrawal for Reuters.
Further adding to the positive turn, Technology companies in the S&P 500 also gained 1.1% and were testing their short-term 50-day simple moving average. Tech stocks have come under fire as the extended bull run raised questions over lofty valuations, especially in growth-oriented technology names that have led the post-election Trump rally.
“Everybody remembers the [year] 2000 slipping of the tech sector. But I have no concerns about tech valuations,” Jae Yoon, chief investment officer at New York Life Investment Management, told the Wall Street Journal, noting that in terms of price-to-earnings metrics, the sector is trading much closer in line to the S&P 500 than it did at its peak.
The S&P 500 is currently trading at around 18 times forward earnings estimates, compared to its long-term average of 15 times, which has many fearful of a short-term correction, especially in a seasonally weak period for equities. However, some market observers argued that as long as we continue to see strong earnings come out of U.S. companies, the market’s run may still have legs.
“Valuations are certainly a little bit elevated and they are a bit of a concern,” Randy Frederick, vice president of trading and derivatives for Charles Schwab, told Reuters. “We saw valuations run up in the first quarter but then when earnings came out they were pretty solid so ultimately if earnings continue at the rate we’ve seen recently, then those valuations will be fine.”
For more information on the markets and U.S. Stock ETFs, visit our S&P 500 category.