The Dow Jones Industrial Average (INDEXDJX:.DJI) and the S&P 500 (INDEXSP:.INX) climbed to record intraday highs on Thursday, buoyed by a batch of better-than-expected earnings, as congressional testimony by Federal Reserve Chairman Ben Bernanke, continued into its second day.

S&P 500

The gains put a new gloss on the U.S. benchmark index, which has been outshining most of its global peers this year, with investors showing more confidence in the underlying economy, corporate earnings and central bank policy.

Benchmark S&P 500 up nearly 15 percent for the year

With the benchmark S&P 500 (INDEXSP:.INX) up nearly 15 percent for the year, investors are alert to any signs of how soon the Federal Reserve will start to wind down the pace of its $85 billion a month in bond purchases, a major driver of the U.S. stock market’s rally this year.

Analysts expect S&P 500 (INDEXSP:.INX) companies’ second-quarter earnings to have grown 3.5 per cent from a year earlier, with revenue up 1.1 per cent, according to Thomson Reuters data.

Of the 81 companies in the S&P 500 (INDEXSP:.INX) that have reported earnings through Thursday so far, 70.4 per cent have reported earnings above analysts’ expectations, while revenue has topped estimates at a 49.4 per cent rate.

Speaking before the House Financial Services Committee on Wednesday, Bernanke stressed that the timeline for winding down the Fed’s stimulus program was not set in stone. As the chairman continued his testimony on Thursday before the Senate Banking Committee, he said economic data since the Fed’s June meeting has been mixed. But it’s too early to make a judgment on the impact for the central bank’s forecasts noted by Stephen Massocca, managing director at Wedbush Equity Management LLC.

“He’s done a good job of navigating the waters,” Massocca said. “He’s got people calmed down about interest rates, but on the other hand, the economy seems to be doing OK.”

S&P 500 gains and the market downturn

The U.S. gains have obliterated the market downturn that alarmed many investors earlier this summer, when the S&P 500 (INDEXSP:.INX) fell as much as 6 per cent by late June. Then, they were reacting to plans from the Federal Reserve to ease-up on its bond-buying program with a belief that this tapering would bring sooner-than-expected interest rate hikes. Fed chairman Ben Bernanke has since made it clear that the central bank was in no rush to withdraw stimulus.

But although large-cap stocks are now slightly above their May highs, the market has not merely reverted to where it was earlier in the year; the index today looks considerably different than it did two months ago. Since the May high close, the S&P 500 (INDEXSP:.INX) is now up nearly 1.4 per cent, as of Thursday in midday trading. But consumer discretionary stocks and financials have done considerably better over this period with a gain of about 3.5 per cent each – or more than double the market.

At the same time, telecom stocks, materials, utilities and energy stocks have underperformed, showing slight declines from the May high.

This suggests that the S&P 500 hasn’t merely snapped back. Instead, investors have moved out of commodity producers and defensive, dividend-generating positions and into stocks that have a tighter association with the U.S. domestic economy.