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Stocks have had many reasons to sell off.
Tensions in Syria and North Korea, the announcement of a surprise U.K. general election, worries about this weekend’s presidential elections in France, and reports of delayed tax reform in the U.S. are all factors that stock investors generally fear.
But stocks have stayed resilient thanks to better-than-expected earnings, largely from the financial sector following solid earnings from Bank of America (BAC) , JPMorgan Chase (JPM) and Morgan Stanley (MS) .
Jay Jacobs, vice president of research at Global X Funds, said earnings growth expectations for financials were very high — roughly 15% year over year.
“If you look at the bulge bracket banks, five our of six of them beat earnings expectations, so strong earnings are giving people a lot of confidence.”
Jacobs said a weaker-than-expected earnings season is the biggest threat to the market.
“Given how high valuations are, if we were to come in anywhere below the 9% earnings growth expectations for first quarter, that’s going to be tough for the market to swallow.”
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