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Strong Earnings Propel Stocks into Unchartered Waters

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Strong earnings growth

Last week, US stocks closed the week on a very strong note mainly driven by strong earnings growth. According to FactSet, the companies in the S&P 500 that have reported their earnings posted blended earnings growth of 12% in 4Q17. All 11 sectors in the S&P 500 reported positive earnings growth.

The S&P 500 Index (SPX-INDEX) (SPY) rose 2.2% and closed at 2,872.87, while the NASDAQ Composite (COMP-INDEX) (QQQ) rose 2.3% and closed at 7,505.77. The Dow Jones Industrial Average (DJI-INDEX) (DIA) rose 2.0% to 26,616.71.

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S&P 500 financial index crossed 500 points

According to FactSet, the financial sector reported an earnings growth rate of 14.6% in 4Q17. In financials, the insurance industry reported the highest earnings growth rate of 36% followed by consumer finance (15%), banks (11%), and capital markets (10%).

Buoyed by healthy earnings growth, the S&P 500 financial index rose 2.2% and closed the week at 501.29. Goldman Sachs (GS) was the biggest winner with a gain of 4.7% followed by JPMorgan Chase (JPM), U.S. Bancorp (USB), and Wells Fargo (WFC) with respective gains of 2.93%, 2.92%, and 2.7%.

The S&P Insurance Select Industry Index rose 3.4%—mainly driven by a 5.1% jump in AIG (AIG).

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