Nearly 90% of S&P 500 companies have now reported second-quarter results, with earnings surprises running well above historical averages even before accounting for outsized gains at Alphabet and Amazon.
The S&P 500 closed above 7,700 points for the first time ever in early August, capping a second straight week of gains for the broader market as corporate earnings continued to come in stronger than expected. The index advanced 3.6% over the two-week stretch, while the Nasdaq Composite climbed 5.2%, helped by a rebound in chip stocks.
A Standout Earnings Season
With 88% of S&P 500 companies having reported second-quarter results, the index is on pace for its highest year-over-year earnings growth rate since the second quarter of 2021. Of the companies that have reported, 86% posted earnings per share above analyst estimates, well above both the five-year average of 78% and the ten-year average of 76%. If that figure holds through the rest of the reporting season, it would mark the highest share of positive earnings surprises since the second quarter of 2021, when 87% of companies beat expectations.
Much of the surprise has been driven by a handful of outsized results. Alphabet and Amazon both posted earnings per share far above what analysts had projected, with Alphabet’s actual figure of $9.11 dwarfing the $2.88 estimate and Amazon’s $5.75 result running well past the $1.82 consensus. Alphabet’s number included a $98 billion gain in other income tied largely to unrealized gains on equity securities, while Amazon’s figure reflected a $53.4 billion gain connected to its investments in Anthropic. Even stripping out those two companies, the earnings surprise percentage for the S&P 500 would still sit at 10.9%, above both the five-year and ten-year historical averages.
What Drove the Latest Rally
The most recent leg higher came after a Friday jobs report showed an unexpected loss of jobs in July, a reading traders interpreted as reducing the odds that the Federal Reserve would need to raise interest rates in the near term. The S&P 500 rose 0.62% that day to a record close of 7,757.64, while the Nasdaq Composite climbed 1.3% to 26,690.62 and the Dow Jones Industrial Average added roughly 152 points to close at 54,036.93.
Earlier in the week, strong corporate earnings combined with a decline in oil prices, driven by hopes that the Strait of Hormuz could reopen to shipping, pushed both the S&P 500 and the Dow to fresh record highs in a single session. Palantir Technologies was a standout that day, surging 29% after reporting better-than-expected results, in what was the stock’s best single-day performance since February 2024. Caterpillar also rallied more than 5% to a new intraday record, while broader gains extended across the financials, materials and industrials sectors.
Not every earnings report matched the market’s overall momentum. Ride-hailing company Lyft posted second-quarter revenue of $1.84 billion, ahead of consensus estimates, but earnings per share of 13 cents fell short of the 14 cents analysts had expected. DraftKings, meanwhile, missed on both revenue and earnings, reporting a quarterly loss even as the company reaffirmed its full-year guidance on adjusted profitability and revenue.
Where Wall Street Sees Things Going From Here
Major investment banks have offered a range of targets for how far the rally could extend through the rest of the year, with several pointing to continued strength in AI-related spending as a key driver alongside a shift toward looser Federal Reserve policy. Forecasts for full-year S&P 500 earnings growth in the low-to-mid teens have become common across Wall Street research desks, though analysts note that non-technology sectors could underperform if inflation and unemployment both remain elevated, and that midterm election years have historically produced weaker average returns for U.S. equities.
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