Technology a standout in positive US reporting season

United States President Donald Trump was elected a year ago tomorrow and although he is widely disliked and derided, the US economy has been roaring along under his watch.

This week is the last busy week of the global earnings season for the September quarter. About 50 S&P 500 companies are due to announce results.

Some of the higher-profile names this week include CVS Health, FMC Corporation, Disney and JC Penney.

Craigs Investment Partners broker Chris Timms said yesterday the reporting season was more than 80% complete and of the 406 S&P companies to have reported so far, 67% had exceeded revenue forecasts and 77% had beaten earnings per share (eps) forecasts.

Overall S&P earnings were up 5.9%, a ``very solid result'' compared with expectations of 3% at the end of September.

Six of 11 sectors had earnings growth and five experienced declines.

Eight of 11 had outpaced pre-season expectations.

Energy had posted the strongest gains in earnings, although that was a little misleading due to extreme weakness a year ago, Mr Timms said.

Otherwise, the technology sector was the clear standout. It had the highest beat rate of 90% of companies exceeding estimates, and overall earnings growth of 18.9%, well ahead of forecasts for 8.85%.

Not surprisingly, tech had also been the best-performing sector in terms of returns, having an overall gain of 7.9%, he said.

Two of the highlights on the US economic calendar last week were the ISM manufacturing and non-farm payroll figures, both for October. The ISM index was 58.7, down from the 13-year high of 60.8 in September and weaker than expected, but it was still a strong result.

The jobs report also missed expectations, coming in at 261,000 compared with forecasts for 310,000. However, September was revised up from -33,000 to 18,000, as was August from 169,000 to 208,000.

The unemployment rate also beat forecast forecast, falling to 4.1% compared with expectations for it to be unchanged at 4.2%.

ASB chief economist Nick Tuffley said global equity indices continued to test record highs as the global economic expansion gained momentum.

Supporting market sentiment was Mr Trump's nomination of Jerome Powell as the next chairman of the Federal Reserve.

The pick was seen as maintaining continuity and reinforcing the ``low for longer'' message of current Federal chairwoman Janet Yellen.

Mr Timms said Mr Powell had been a member of the Fed board of governors since May 2012 and during his time had supported many of Dr Yellen's decisions, never once casing a dissenting vote on monetary policy.

Mr Tuffley said equity market sentiment was also bolstered by the release of a $US1.5 trillion ($NZ2.2 trillion) tax reform Bill, proposing income and corporate tax cuts, a simplified tax code but with a smaller number of exemptions, reduced mortgage interest-rate deductions and a new 20% tax on cross-border transactions.

``The Republicans are aiming to pass the Bill in coming months, but this is expected to run into strong opposition.''

Reuters reported European multinationals, some of which at present paid little US tax on US profits thanks to tax treaties and diversion of US earnings to their home countries or other low-tax jurisdictions, could be especially hard hit if the proposed tax became law, according to some tax experts.

Others said the proposal could run afoul of international tax treaties, the World Trade Organisation and other global standards that forbid the double taxation of profits if the new tax did not account for income taxes paid in other countries.

The proposed tax, tucked deep in the 429-page Bill backed by Mr Trump, caught corporate tax strategists by surprise and sent them scrambling to understand its dynamics and goals, as well as whether Congress was likely ever to vote on it.