New Highs for the S&P 500 Ahead of 'Peak' Earnings Week

Wall Street wrapped up the week on a high note as major stock indexes climbed to record-breaking levels, thanks to strong corporate earnings and increasing optimism surrounding U.S. trade agreements. Despite a largely uneventful meeting between former President Donald Trump and Federal Reserve Chair Jerome Powell, there was little movement in the Treasury market. Meanwhile, the U.S. dollar gained ground.

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The S&P 500 extended its winning streak to five consecutive sessions, nearing the 6,400 mark as investors geared up for what is expected to be the busiest week for corporate earnings this quarter.

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Although concerns about high valuations and speculative activity have surfaced—particularly as meme stocks show signs of returning—the market's bullish momentum remains hard to counter. The Cboe Volatility Index, known as the VIX and often considered a “fear gauge,” dropped below 15, signaling calm among investors.

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“If you’re someone with a long-term bearish view, the last few weeks have likely felt never-ending,” said Florian Ielpo of Lombard Odier Investment Managers. “Not only are global equities steadily rising, but valuations now exceed where they started the year.”

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Solid economic indicators, resilient corporate performance, and developments on the trade front have helped overshadow worries of an overheated market. Bloomberg Intelligence reported that over 80% of companies in the S&P 500 have beaten analysts’ earnings forecasts, putting this quarter on track to record the highest percentage of earnings beats since 2021.

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“Earnings momentum has been strong this month, economic indicators remain steady, and we’re starting to see some clarity on tariffs,” noted Bespoke Investment Group. “Investors have every reason to be optimistic.”

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Looking ahead, markets are anticipating key events, including the monthly jobs report, the Federal Reserve’s policy decision, and progress on U.S. trade negotiations. European Commission President Ursula von der Leyen is scheduled to travel to Scotland to meet with Trump in a bid to finalize a deal before the August 1 deadline.

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“The market has been climbing steadily, and many of the concerns that had previously kept investors cautious simply haven’t played out,” said Mark Hackett of Nationwide. He added that although many institutional investors have stopped betting against the market, overall positioning remains restrained, indicating that further gains could materialize if macroeconomic conditions improve or even just remain stable.

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Retail trading has also surged. “It’s been an incredibly active year for retail investors, and the past month has been particularly wild,” said Sam Nofzinger, head of brokerage at Public. “We’re seeing a revival in meme-stock activity, with smaller, often overlooked companies gaining traction through social media platforms like Reddit.”

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Goldman Sachs’ trading desk has observed a growing willingness among clients to short unprofitable tech firms again, even as some of these stocks have rallied due to renewed meme-stock interest. Daniel Skelly of Morgan Stanley warned that falling volatility and rising markets could tempt investors into complacency or lead them to chase performance.

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Bank of America’s Michael Hartnett voiced concerns about a potential market bubble forming as monetary policy becomes looser and financial regulations are eased. On the technical side, Piper Sandler’s Craig Johnson remains bullish, citing widening market participation and numerous major indexes reaching new highs.

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The coming week will see more than 40% of the S&P 500 report earnings, including megacap names like Apple, Amazon, Microsoft, and Meta. “Earnings have been uneven, but the majority of companies are surpassing expectations and helping sustain the market rally,” said Chris Zaccarelli of Northlight Asset Management. “As long as trade concerns remain manageable, there’s room for stocks to climb further.”

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After months of uncertainty, global investors appear to be regaining confidence, particularly as the U.S. administration moves forward with trade deals. Earlier instability caused by shifting tariffs had rattled markets, but sentiment has improved as progress emerges. “We’ve already secured an agreement with Japan,” said Paul Christopher of Wells Fargo Investment Institute. “An EU deal would support the rally, and the only real surprise now would be if nothing materializes by August 1.”

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UBS Global Wealth Management’s Mark Haefele expects moderate trade policies to emerge, even if economic headwinds appear. “Any slowdown due to tariffs should be limited and short-lived, not recessionary,” he said.

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Trump also addressed the dollar, stating he would never intentionally weaken it, even as he acknowledged that a lower currency could benefit U.S. manufacturing. While July marked the dollar’s worst weekly performance, it’s on pace to close out its best month of 2025.

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The Federal Reserve issued a brief note thanking Trump and Republican lawmakers for touring the Fed’s renovation site. During the visit, Trump refrained from direct criticism but pushed Powell several times to lower interest rates. Following the meeting, Trump expressed optimism that the Fed might be considering a rate cut.

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According to Quasar Elizundia at Pepperstone, policymakers are likely to keep rates steady while signaling that they’re closely watching trade dynamics and investment trends. JPMorgan’s Michael Feroli echoed that view, pointing out that inflation remains elevated and the labor market remains tight, making a strong case for maintaining current policy.

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Still, Chris Low at FHN Financial said that while the Fed should cut rates next week, it likely won’t. Instead, Powell might use his press conference to prepare markets for a possible cut in September. BNP Paribas analysts James Egelhof and Guneet Dhingra added that although Powell will likely keep his options open, current inflation and job data support staying on hold for now—and possibly through the end of the year.

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