Wall Street Finishes Q3 At Record High: Top 5 Gainers

Hurricanes, tensions with North Korea and even the high-profile cyber thefts at Equifax (NYSE:EFX) and the Securities and Exchange Commission failed to rein in the equity market’s nine-year Bull Run. U.S. stocks, in fact, wrapped up third quarter on a high note, with most of the major indices scaling fresh intraday highs.

Solid second-quarter earnings results on steady economic growth helped stocks rally higher. The economy expanded after stable jobs growth encouraged households to spend more. Small-caps, in the meantime, bounced back on renewed optimism that President Trump will reach a deal to significantly slash U.S. corporate taxes by the end of the year. Persistent bickering in Washington had earlier weighed on reform hopes.

Banking on such bullish trends, it seems prudent to take a look at the best performers of the third quarter. Such stocks are fundamentally strong enough to gain further in the final quarter of this year.

Major Indices Post Solid Quarterly Gains

The 30-stock Dow Jones industrial average rallied 1,055 points or 4.9% in the July-through-September quarter. Such gains helped the blue-chip index post its first eight-quarter winning streak in 20 years. The current streak commenced during the first three months of 2015 and gained momentum after last fall’s Presidential election.

The S&P 500, a broad stock index made up of some of the large-cap U.S. stocks, gained 3.7% in the quarter. This helped the S&P 500 register eight consecutive quarters of gains for only the fifth time since inception. Almost all the sectors of the benchmark index ended in the green. The gains were powered by an 8% rise in the technology sector. In fact, the sector remains this year’s best performer, up 25%. Investors were willing to pay more for earnings and revenue growth that tech stocks primarily offer. Needless to say, as tech investors were rewarded, the Nasdaq composite continued its market leadership role with a 5.8% quarterly rise. The tech-laden index posted its fifth straight positive quarter since 2015.

The third quarter also saw resurgence in the energy group that rose 6% in the quarter, boosted by a sharp rise in oil prices. Brent crude, in particular, has risen by a fifth to $57.41 in the quarter, its first positive quarter this year. Oil prices gained traction as both OPEC and non-OPEC members including Russia agreed to cut production.

Financial stocks also roared back to life, climbing 4.8% in the quarter. Banks, lately, have benefitted from rise in long-term Treasury yields and hopes that the Federal Reserve will hike rates in December. The Fed is widely expected to start reducing its massive portfolio of Treasuries and mortgage-backed securities after its two-day policy meeting that ended on Sep 20. The bond sell-off drove the long-term Treasury yields higher. The 10-year Treasury yield traded near 2.33% on Sep 29, its highest level since Jul 13.

Earnings Season Solid, Economic Growth Revised Up

Largely, bullish sentiments toward stocks were aided by upbeat second-quarter earnings results. Total Q2 earnings for the S&P 500 index were up 11.1% from the same period last year on 5.5% higher revenues. This marked the second straight quarter of double-digit growth. Earnings growth is also expected to turn positive in Q3. Total Q3 earnings are poised to be up 3.2% from the same period last year on 5% higher revenues (read more: Zacks Investment Research

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Written By: Zacks Investment Research