"As contrarians, we currently still like this trend, and there's enough negativity about the market so we do remain positive—1700 looks very likely a number we will go through based on the momentum that's in this market," said John Stoltzfus, chief market strategist at Oppenheimer. "It's an overall decent earnings season, with plenty of positive surprises."
Gary Thayer, chief macro strategist at Wells Fargo Advisors, has a year-end S&P 500 target of 1650 to 1700.
"I think it's an important milestone. I think it gets people to look back and see how far the market's run this year. It may be something that may temper some enthusiasm," said Thayer. "The 1700 level, I don't think, is significant by itself. … It shows that we've clearly passed a lot of hurdles over the last few years and faced down many challenges, but overall the economy is moving ahead, although it's done it slowly."
The S&P finished off 3 points Tuesday at 1692, and the Dow finished up 22 points at 15,567, a new record.
Piper Jaffrey technical market strategist Craig Johnson said the S&P could sail right through 1700, even though it is his official target for now.
"1700 is meaningful to me. It is the second mile marker we were looking for in the market call we made a year ago," he said. "It was the initial spot we thought this market would run to in 2013, and we'd see some consolidation. But now that we made 1700, I'm looking around at the breadth and the strength we've seen. I don't think the market's done. I think there's more upside."
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Stoltzfus said he thinks the market and the economy will withstand higher interest rates even though the economy is slow-growing.
"I think the economy is good enough that we would expect the Fed to begin tapering at the end of the year, if not at the beginning of next year, but at the same time we don't expect the Fed to eliminate [quantitative easing]," he said. The Fed could slowly reduce its $85 billion monthly bond purchases and could retain the bonds it has been buying on its balance sheet, he added.
The Fed has signaled that it will probably begin to slow its purchases of Treasury and mortgage securities before the end of the year. The so-called quantitative easing program has been seen as a positive for stocks and supportive of bond prices. Interest rates rose quickly and stocks were initially shaken as the Fed began talking about ratcheting back the purchases, but rates have moved off highs as officials emphasized that trimming does not mean they will be moving to raise short term rates anytime soon.
Stoltzfus said U.S. stocks have another advantage, in that the economy is seen to be rebounding, compared with other developed markets and the emerging world.
"The global vote is in, and at least for now, the U.S. is the best place to invest," he said. As for the market, "it probably has its sights on 1700 and is likely to go through that number sooner than bears would suspect—and it might even surprise skeptical bulls."
If the economy does not pick up speed as expected in the second half, some analysts say the lack of corporate revenue growth could hold back stocks. The economy in the second quarter is expected to have grown at just above 1 percent, but expectations are that the third and fourth quarters will grow at 2 percent or more.
Without signs that the economy is improving, 1700 may come and go in a flash, as fleeting as a red cape waved before a charging bull.
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Thayer said the earnings season has been somewhat encouraging, however, in that companies are reporting higher earnings at a rate of three-to-one.
Second-quarter earnings so far have been delivering far more positive than negative surprises, but revenues have been disappointing. As of Tuesday morning, 26 percent of the S&P 500 companies had reported, with 64 percent having beaten earnings estimates. But 52 percent have missed revenue estimates, according to Thomson Reuters data.
"We're right at the high end of our [S&P] target right now. It could go above it, but we don't think it would go a lot above it before the end of the year. After the big gains we've had this year, we're concerned about some volatility and price risk over the next few months as we go through the fall. Practically any unexpected event after a run-up like this makes the market more vulnerable to any unexpected news," Thayer said.
He pointed to continued fiscal problems in Europe, concerns about a global economic slowdown, and unrest and violence in the Middle East. On top of that, he said, the debt ceiling debate in Washington could rattle markets again later in the year.