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Markets Near Three-Year Highs

Stock price levels are poised near multi-year highs as Wall Street opens another trading week. The Dow Industrial average hit a high for the year last week and is trading near a three-year high. The S&P 500 has moved to the top end of its recent trading range where it is facing resistance at its last high for the year.

This follows last week’s market surge due to a strong batch of earnings reports for US companies. Of the S&P 500 companies that have reported so far, 75 percent beat analysts’ expectations. That is just above the average over the past four quarters. But it is well above the average of 62 percent since 1994, according to Thomson Reuters data.

“The earnings reports from last week were pretty positive,” said John Brady, senior vice president at MF Global in Chicago. “There will be a focus and concentration on earnings here [going forward].”

Earnings growth is now concentrated in industrial, materials, and energy stocks that benefit from strong demand in emerging markets. In addition, the technology sector, as evidenced by Intel’s earnings, has been boosted by robust demand from businesses. Average earnings growth across these sectors amounts to almost 33 percent in the first quarter compared to last year, according to Thomson Reuters.

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