Corporate earnings are giving the U.S. stock rally a wider foundation just as the major indexes trade near record levels. Results from the second-quarter reporting season suggest that profit growth is extending beyond the small group of artificial-intelligence leaders that powered much of the market’s earlier advance.
About 86% of the more than 440 S&P 500 companies that had reported results beat analysts’ estimates, according to FactSet data cited by Investing.com. The index is heading for a seventh consecutive quarter of double-digit earnings growth.
Palantir, Caterpillar and Walt Disney were among the companies whose results helped major benchmarks post their strongest weekly gains since April. Blended S&P 500 earnings have risen roughly 50%, the fastest pace since the stimulus-led rebound of 2021.
Energy produced the largest sector increase, with earnings up more than 147% as higher oil prices linked to the Iran war lifted producers. Exxon Mobil’s profit more than doubled to its highest level since 2022, while Chevron reported record quarterly earnings.
Artificial-intelligence spending remains another important driver. Amazon shares gained 15% in one session after growth accelerated in its cloud-computing business. Microsoft added a record $450 billion in market value after its results eased concerns about whether heavy investment in data centres and chips would generate sufficient returns. Demand for generators and construction machinery used in data centres also helped Caterpillar lift sales and revenue by 24%.
The gains are not evenly distributed, however. Alphabet and Amazon accounted for about 71% of the increase in blended S&P 500 earnings since July. Removing those two companies would reduce the overall growth rate from roughly 50% to 32%.
Valuation is the other caution. The S&P 500 traded at about 28 times trailing earnings last week. That was below the level above 29 reached in May, but well above the 10-year average of 22.5.
Investors will now watch results from Cisco and Applied Materials as well as the next U.S. consumer inflation report. Those releases may determine whether broadening profit growth can keep supporting stocks at historically expensive levels.
