S&P Hits Record High as 86% of Members Blow Past Wall Street Forecasts

SpaceX isn’t the only company in the solar system to outperform Wall Street’s expectations this summer.

Corporate America has delivered enough stellar second-quarter financial reports to send the S&P 500 to a record high on Tuesday. Some 86% of reporting companies exceeded consensus earnings-per-share estimates as of Friday last week, according to FactSet data, well above the 67% historical average, and investors spread the love far beyond the typical market-carrying names. Still, there are plenty of potential pitfalls that could stop the rollicking party in its tracks.

Strait Flush

Undergirding the rally was belief that the Iran-US war is nearing a conclusion. Treasury Secretary Scott Bessent took to CNBC on Tuesday to declare “we may have a deal today or tomorrow to open the Strait [of Hormuz] and move towards a more normalized position in this conflict.” Yes, that may be the umpteenth time a looming resolution has been floated, but markets were happy to hear it nonetheless. The price of Brent crude, a global benchmark, fell below $80 a barrel for the first time in three weeks following Bessent’s remarks, while bond yields slipped on hopes that easing energy prices could tamp down future inflation.

While gains extended to all corners of the economy, tech led the way: 

• The tech-heavy Nasdaq-100 climbed more than 3% on Tuesday, outpacing the S&P 500’s nearly 1.8% jump. The S&P’s surge was led by the blue-chip index’s tech sector, which leapt more than 4% on Tuesday.
• Still, all 11 major sectors tracked by the index have reported profit growth so far this year, according to FactSet data, and the equal-weight S&P 500 notched a record high on Tuesday, signaling broad-based support. On a more granular level, the same quarter that had future-flung Palantir experiencing “otherworldly” demand also featured furniture-seller Wayfair’s best sales growth in five years.

Traders lowered the odds of a September interest rate hike by the Federal Reserve from 67% to 56% on Tuesday, according to CME’s FedWatch tool, but some experts warn that high energy prices may nonetheless remain sticky for the near future. 

Magnificent Reversal: Meanwhile, the hyperscalers, who entered earnings season facing extreme doubts over soaring capital expenditure plans, are once again feeling the love. Amazon climbed into the $3 trillion market cap club on Monday, while Meta interrupted its worst losing streak in company history the same day. After hemorrhaging nearly 10% in June, the Roundhill Magnificent Seven ETF is now up more than 8% in the past five trading sessions.