U.S Stocks Extend Gains on Strong Earnings

U.S. stocks edged higher Monday as optimism over potential Federal Reserve interest-rate cuts and a wave of strong corporate earnings lifted major technology names.

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The S&P 500 and Nasdaq 100 each gained 0.2% in early New York trading, while the Dow Jones Industrial Average advanced 0.3%. The modest rally follows last week’s weaker-than-expected jobs report, which fueled expectations that the Fed could begin cutting rates as early as next month. Investor sentiment also got a boost from upbeat earnings reports across several sectors.

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Among notable movers, Palantir Technologies Inc. surged 8.5% after the company reported a 48% jump in revenue, crediting the “astonishing impact” of artificial intelligence on its business operations. Vimeo Inc. also saw its shares climb 7.1% after the video platform raised its 2025 forecast for adjusted EBITDA, signaling improved profitability ahead.

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The healthcare space painted a mixed picture. Hims & Hers Health Inc. dropped 7.5% after its second-quarter revenue missed analysts’ expectations, with Wall Street pointing to sluggish sales of its weight-loss drugs as a drag on performance. Conversely, Pfizer Inc. gained ground after the pharmaceutical giant raised its full-year profit outlook. Ongoing cost-cutting initiatives helped offset slower sales growth, providing reassurance to investors.

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According to Gina Martin Adams, chief equity strategist, earnings for S&P 500 companies have far exceeded forecasts. “Second-quarter results are up 9.1%—triple the pre-season expectations and the strongest earnings beat rate since 2021,” Adams noted in a recent briefing. However, she also cautioned that with stocks near record highs, the sustainability of this recovery remains in question.

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Despite solid earnings reports, performance has been uneven. Bloomberg Intelligence data shows that companies missing earnings estimates are facing steep share price declines, while firms exceeding expectations are seeing only modest stock gains.

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Even as some Wall Street analysts warn of a potential market pullback, U.S. equities remain close to record levels. Scott Rubner, head of equity and equity derivatives strategy at Citadel Securities, highlighted corporate share repurchase programs as a possible catalyst for near-term market strength.

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“As U.S. corporates exit the post-earnings blackout period, I expect to see increased buyback activity, particularly through August,” Rubner said in a note to clients. Historically, data spanning the last century shows that the S&P 500 often finishes August near its highs, suggesting further upside potential.

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On the strategy front, HSBC strategists raised their year-end target for the S&P 500 to 6,400 points from 5,600, citing stronger-than-expected corporate earnings and easing policy uncertainties as key drivers of the revised outlook.

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Beyond earnings, traders are closely watching signals from the Federal Reserve following last week’s weak employment report. San Francisco Fed President Mary Daly told Reuters that the time is approaching for rate cuts, pointing to growing evidence of a softening labor market and the absence of persistent tariff-driven inflation pressures.

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Trade policy developments also weighed on investor sentiment. President Donald Trump announced plans to “substantially raise” tariffs on Indian exports to the U.S., citing India’s continued purchases of Russian oil. New Delhi quickly denounced the move as unjustified, escalating tensions between the two countries.

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Additionally, Trump indicated that new tariffs targeting semiconductor and pharmaceutical imports would be revealed “within the next week or so.” These measures, aimed at reshaping global trade dynamics, could have significant implications for technology and healthcare supply chains.

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With stocks hovering near all-time highs, investors face a balancing act. On one hand, strong corporate earnings and the prospect of rate cuts offer support for equities. On the other, heightened trade tensions and uneven earnings reactions could spark bouts of volatility.

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Looking ahead, market participants will be monitoring upcoming Fed communications and tariff announcements, as well as the pace of corporate buybacks, to gauge whether this summer rally has room to extend.

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