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US companies hit highest level of earnings beats in 2 years

The S&P 500 (^GSPC) hit an all-time record high on Friday, passing the 5,000-point mark. The index continues to grow as US companies also see the highest level of breadth in corporate earnings beats in two years. With economic data expected out this week amid inflationary headwinds, what are expectations for the stock market going forward?

Yahoo Finance Markets Reporter Josh Schafer joins the Live show to give insight into these record figures and what they could mean for the broader markets ahead.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

BRAD SMITH: The S&P 500 closed above 5,000 for the first time ever on Friday as the index is on pace to report a second straight quarter of earnings growth. Here with more on what Wall Street has to say, let's get to Yahoo Finance's Josh Schafer. Hey, Josh.

JOSH SCHAFER: Brad.

BRAD SMITH: Yeah.

JOSH SCHAFER: We did it.

BRAD SMITH: We did it. We did it.

JOSH SCHAFER: We did it. We did 5,000.

BRAD SMITH: We drew it up, right?

JOSH SCHAFER: Yeah, we talked about it on Friday morning. We talked about it on Thursday morning. We were talking about it all of last week. And we did finally close at that Mark. And I think one important thing to point out with that we had sort of been chatting was, well, there hadn't been a lot of bad news or news that investors wouldn't like to really bring stocks down. I think this week might bring different challenges with that CPI report that we have tomorrow.

It's not really just earnings this week. But it has been over the past week or two really a string of relatively decent earnings. It's been mixed earnings when you think about it broadly. But when you take a look at how the S&P 500 is doing on an average basis, we're over 2% now on earnings growth for the S&P 500. And we're starting to see more breadth for earnings too. That's something strategists are starting to highlight that it's not just the top seven companies.

You see this chart here, this is from Deutsche Bank. That purple line you're looking at is the breadth, the amount of companies we're seeing beat earnings expectations. And the blue line is what the median is. So the US clearly outperforming the rest of the world here, Rachelle, but also outperforming ourselves and what we normally see. And I think that's probably speaks to that strength a little bit.

RACHELLE AKUFFO: And we know that investors have gotten ahead of themselves before this. So then as you look at some of the sentiment that you're seeing about monetary policy, does it hold as to where we should be seeing the S&P heading right now?

JOSH SCHAFER: Yeah. I think it's interesting, right to think about what are the expectations right now right. And I think one thing that is expected is for inflation to keep falling, right? And I think that, Rachelle, maybe is you wonder-- you talk about people potentially maybe getting over their skis, does a slightly hot CPI report shake markets, right? Because it seems like in our-- we're definitely going to have a soft landing narrative everything's fine.

Inflation is just coming down in this straight line now, and the economy keeps doing well. So I think any blip that you see in an inflation print, at least in the short term, is going to mix up the narrative a little bit here right now because it seems like most people consensus has written off all right inflation is higher than the goal, but it's headed in that straight line to the goal I think. Any blip there will be something to watch for sure.

RACHELLE AKUFFO: And I think they thought we were going to see that with those BLS revisions didn't happen. So at least for now--

JOSH SCHAFER: Exactly.

RACHELLE AKUFFO: --keeping some hope alive

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