As the Market Hovers Near Record Highs, Tesla and Alphabet Highlight Earnings Rushes

U.S. stock markets, particularly the S&P 500 and Nasdaq Composite, remain near record highs despite rising trade tensions and an increasingly active debate over monetary policy. Investors appear largely unfazed by new tariffs and speculation around the Federal Reserve’s next move, with the Nasdaq leading gains last week and the S&P 500 also notching a solid advance.

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Over the past week, the Nasdaq Composite gained more than 1.6%, while the S&P 500 rose by about 0.7%. The Dow Jones Industrial Average was relatively flat by comparison, barely moving higher. The Nasdaq’s strong showing continues its trend of tech-driven outperformance in 2025.

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Looking ahead, markets will be closely watching earnings season as 112 companies in the S&P 500 prepare to report their quarterly results. Notable names on deck include Alphabet, Tesla, and Chipotle, all of which are expected to offer key insights into corporate performance and consumer demand. At the same time, the economic calendar is light, with the focus shifting to reports on activity in the services and manufacturing sectors.

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Meanwhile, the Federal Reserve enters its pre-meeting blackout period ahead of its July 29-30 policy decision.

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The discussion around interest rates intensified last week after Federal Reserve Governor Christopher Waller gave his clearest endorsement yet for a rate cut. Speaking in New York, Waller argued that current inflation levels are close to the Fed’s target, and the risks of higher inflation are minimal.

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He said waiting for job market deterioration before easing policy would be a mistake. Waller emphasized that the federal funds rate is over one percentage point above where it should be and suggested a cut in July would be appropriate.

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However, investor sentiment doesn’t fully align with Waller’s call. Recent economic indicators have made markets less confident about a near-term rate cut. In particular, June’s strong retail sales figures and sticky inflation data, combined with stable weekly jobless claims, have led traders to temper their expectations. According to the CME FedWatch Tool, markets are currently pricing in just a 5% chance of a July rate cut, down from 13% a month ago.

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Still, some economists believe a rate cut could arrive soon. Citi’s chief U.S. economist Andrew Hollenhorst said in a recent note that he expects the Fed to reach a consensus for a cut in September. He cited signs of a weakening labor market and the absence of inflation spillover from tariffs as reasons for this view.

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On the earnings front, the season started on a strong note. Large banks posted better-than-expected results, and Netflix surprised investors with a solid report that included raised full-year revenue guidance. These results reinforced the idea that U.S. consumers remain resilient despite higher interest rates and inflation concerns.

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Overall, earnings growth for the S&P 500 is now tracking at 5.6% for the second quarter compared to the same period last year, according to FactSet. That’s an improvement from the 4.8% forecasted just a week earlier. However, some companies that saw big stock rallies heading into earnings season have failed to maintain momentum after posting strong results.

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For instance, Netflix’s shares dropped nearly 5% following its earnings release, even though the company raised its guidance. The stock had nearly doubled over the past year before the report.

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William Blair analyst Ralph Schackart remarked that while Netflix delivered a “good” quarter, high expectations meant that even strong results weren’t enough to satisfy the market. His note, titled “Good Quarter, but Tough to Surpass High Expectations,” captures the broader challenge facing high-performing stocks.

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As the S&P 500 trades at elevated levels, Wall Street strategists are expressing concern about market valuations. Julian Emanuel of Evercore ISI pointed out that after a 30% surge since April, the market is now trading at 24.7 times trailing twelve-month earnings. In this environment, even strong earnings results may only sustain current price levels, while slight disappointments could lead to sharp pullbacks.

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All eyes are now on Big Tech, especially members of the “Magnificent Seven,” such as Alphabet and Tesla, as they begin to report. These stocks are expected to once again drive most of the S&P 500’s earnings growth. For the second quarter, this elite group is forecasted to post a 14.1% year-over-year increase in profits, far outpacing the 3.4% growth expected from the rest of the index.

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Still, some on Wall Street are hopeful that earnings growth will begin to “broaden” beyond Big Tech. A shift toward more balanced earnings contributions across sectors would be welcomed by many strategists, who argue that such a trend is necessary for a healthier, more sustainable market rally. Citi strategist Scott Chronert emphasized the importance of corporate commentary this quarter, noting that positive signals from cyclical sectors could spark earnings revisions and drive a wider rally.

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However, he also expressed caution, warning that the market appears to be moving ahead of fundamentals. “Sentiment is elevated, and implicit growth expectations are high,” Chronert wrote. “The issue is the setup.”

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