dailynewsnblog
Corporate America is reeling in the profits despite sticky inflation and geopolitical jitters.
Big banks have kicked off earnings season with robust results, contributing to a 12% year-over-year earnings growth forecast for the S&P 500 index.
Tom Essaye, founder of Sevens Report Research, told Yahoo Finance that “corporate America is firing on all cylinders.” He notes that S&P 500 earnings per share have climbed from roughly $235 in 2024 to projected estimates of $315 for 2026.
Whether it’s AI or other tech, the strong quarter of earnings growth has been fueled by solid margins, per Essaye. Companies are successfully navigating higher energy and transport costs without letting them dent the bottom line. Despite inflation, customer bases are “broadly good.”
“If anything, there’s upward risk, and that tells you that companies are executing well in an environment where fear is high, but the actual reality is quite good,” Essaye said.
However, Scott Chronert, Citi’s head of US equity strategy, cautioned in a recent note to clients that the “dilemma” is in the details. While the firm expects a “normal positive surprise” for the first quarter, Chronert warns of a looming sector divide.
Tech and semiconductors must “beat and raise” to keep the index moving, as results from other sectors are expected to be mixed. Consumer sectors have already begun showing negative revisions. While Citi’s 2026 S&P 500 EPS consensus has increased to $324, up from $312 at the start of the year, Chronert remains skeptical of the second half of 2026 as “sector storylines will vary.”
That skepticism is why investors are looking for proof to validate the recent market rebound. Keith Lerner, Truist chief investment officer, told Yahoo Finance that the focus is squarely on momentum.
When an investor buys tech, Lerner added, “you want growth, and you want upside to the revisions. You want earnings momentum. That’s why you pay up.”
After a quiet stretch, this season is the chance for Big Tech to reclaim what Lerner described as the “dominant theme” of the bull market: AI and tech spending. For the hyperscalers, the race is on to see when massive AI capital expenditure finally turns a profit.
To navigate this, Lee Munson, president and chief investment officer of Portfolio Wealth Advisors, suggests investors move away from the hype and toward the “backbone” of the economy.
Munson likes Alphabet (GOOGL, GOOG) and Amazon (AMZN), calling them “safe harbors” because they provide the infrastructure and data AI needs to function.
