Oppenheimer analysts raised their rating for the utilities sector and cut the rating for real estate in a wide-ranging note Tuesday, noting the positive earnings growth.
The firm highlighted that eight of the 11 sectors in the S&P 500 are showing earnings growth, with six up double-digit rates.
These include communication services (+41%), utilities (+31%), consumer discretionary (+27%), information technology (+24%), financials (+11%) and real estate (+11%).
"With 96% (481 firms) of the companies in the S&P 500 index having reported Q1 results, earnings are exceeding expectations. Profits are up 7.7% overall on the back of 4.1% revenue growth. Prior to the start of the season, Bloomberg put bottom-up estimates of Q1 earnings growth at 3.9%," said Oppenheimer.
The firm also noted economic data released last week showed a pick-up in US services activity and manufacturing output, suggesting that stickiness in inflation may persist and thus making it likely the Fed could keep its monetary policy on pause for longer than some market participants had been hoping for.
Overall, utilities was upgraded to Perform from Underperform, with Oppenheimer also nudging up its suggested weighting for the sector from 2.5% to 2.7%. The rating on the real estate sector was cut to Underperform from Perform, with the firm leaving its suggested allocation unchanged at 2%