As concerns about inflation, interest rates, and geopolitical risks persist, one force is keeping Wall Street buoyant: corporate earnings. U.S. companies reporting stronger-than-expected profits have triggered significant stock price rallies, indicating that the latest earnings season is offering a much-needed lift to markets, even as doubts loom about the sustainability of the broader equity rally.
Stocks of S&P 500 companies that have posted better-than-anticipated earnings have outpaced the index by an average of 1.5% within a day of reporting, according to data from Bloomberg Intelligence. Though only about 20% of the S&P 500 has reported results so far, if the trend continues, it would mark the best post-earnings stock reactions since 2018.
“You can feel the market sigh in relief with each report that makes an upside case for the 2025 earnings environment,” said Keith Buchanan, senior portfolio manager at GLOBALT Investments.
Notably, Netflix saw a nearly 10% surge after announcing its largest-ever quarterly subscriber increase. Other winners include financial giants JPMorgan Chase & Co. and Goldman Sachs Group Inc., which saw their shares soar on strong earnings reports, while Delta Air Lines Inc. also gained after surpassing analysts’ profit expectations and issuing an optimistic forecast for 2025.
These strong corporate results have been a welcome boost for U.S. stocks, especially after the S&P 500 spent much of January treading water. Wall Street had dialed back its expectations for interest-rate cuts, and concerns about a potential global trade war under President Donald Trump added further uncertainty. This was particularly worrying for tech stocks, which had rallied on high hopes for artificial intelligence, yet still faced sky-high valuations.
While the earnings from some of the largest tech players—Apple, Meta Platforms, Tesla, and Microsoft—have been largely positive, analysts have begun scaling back earnings expectations for the coming quarters. This reflects a broader shift in sentiment on Wall Street, where analysts’ revisions to S&P 500 earnings for the next year have remained negative for 15 consecutive weeks, the longest such streak since early 2023.
Despite this, the latest quarter’s results have largely overshadowed these concerns. The strong earnings reports, coupled with President Trump’s less aggressive rhetoric on tariffs than many had feared, helped push the S&P 500 to its second consecutive weekly gain.
“That’s one thing you can have confidence in when it’s harder to have confidence in where monetary policy is going to be, where inflation is going to be, and where the tariffs are going to be,” said Michael O’Rourke, chief investment strategist at JonesTrading.
Next week will be a crucial test as the busiest period of earnings reports unfolds, with companies representing nearly 40% of the S&P 500’s market capitalization set to report their results. This will likely widen the gap between the winners and losers in the market.
According to data from Citigroup Inc., the average S&P 500 stock has been moving roughly 5.5% in either direction following earnings reports, well above the 3.9% implied by options markets. Bank of America strategists had predicted that U.S. companies could experience their largest earnings swings on record this season.
“Notably, earnings-day volatility has not been simply a factor of higher macro volatility,” noted Vishal Vivek, a strategist at Citigroup. Instead, it reflects investors becoming more selective, creating “an increasingly attractive stock-picking environment.”
As the earnings season progresses, investors will continue to watch closely for any further surprises, with earnings reports providing one of the clearest signals for where the market is headed amid the uncertainty surrounding broader economic factors.
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