In the second busiest period of earnings releases, 119 S&P 500 companies reported earnings last week. 73% of S&P 500 firms reported better-than-expected earnings for the quarter. With 184 S&P 500 companies scheduled to report this week, it is the busiest week of the reporting season. In addition to earnings, the economic calendar is packed with impactful data, like first-quarter US GDP and the monthly jobs report.
Earnings At A Glance
The communications services sector contributed most positively to last week’s earnings growth improvement. According to FactSet data, Alphabet (GOOGL) was the most significant contributor to the increase in earnings for the communications services sector, which rose to 23.3% from 4.4%.
Combining actual results with consensus estimates for companies yet to report, the S&P 500’s blended earnings growth rate for the quarter is 10.1% year-over-year, above the 7.2% expectations at the end of the quarter. Notably, the calendar year 2025 expected earnings and sales growth rates have declined despite the better-than-expected first-quarter results so far.
Market Performance
Comments from the Trump administration about some negotiations on Chinese tariffs and rumors of impending trade deals with India and Japan boosted stocks. The better tariff news combined with strong earnings sent stocks soaring by 4.6% last week. After this week’s rally, the S&P 500 sits 10% below its mid-February high. The Magnificent 7, consisting of Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN), Apple (AAPL), NVIDIA (NVDA), Alphabet (GOOGL), and Tesla (TSLA), outperformed by a wide margin last week. The group exited bear market territory but is 19.8% below the mid-December all-time high.
10-Year US Treasury Yield
After the concern a few weeks ago about the yield on the 10-year US Treasury rising instead of falling during the tariff-related stock weakness, yields have been drifting lower since April 11. At the time, several less frightening factors seemed to be more likely causes of the increase in yields than some mass exodus from US dollar-based assets, and yields even moved lower last week despite the robust rally in risk assets.
The 10-year Treasury yield has been down 25 basis points since April 11, with most of the decline in yields due to a decrease in the real, after-inflation yield demanded by investors. This means investors are demanding less compensation for owning US Treasuries. This usually happens when expectations for economic growth decrease and investors are more interested in safety versus risk assets like stocks.
Dollar Strength
The US dollar has rebounded from its April 21 low, despite concerns among some that it might be falling out of favor as the global reserve currency. A look at the dollar’s longer-term history shows that it has been weaker than its current level most of the time since 1999, so it wouldn’t be surprising if the administration might welcome some depreciation of the dollar to boost exports.
Magnificent 7
Because these companies are critical drivers of earnings growth and account for a significant percentage of the S&P 500’s market capitalization, the Magnificent 7 remains the group to watch this earnings season. Tesla (TSLA) and Alphabet (GOOGL) reported last week, and they provided a mixed bag. Tesla earnings were below expectations, but the stock rallied on the news that Elon Musk would soon be curtailing his government activities and returning to company management. Alphabet’s results were impressive, showing strong growth in cloud services and better monetization of its artificial intelligence (AI) offerings.
Four of the Magnificent 7 are scheduled to report results this week: Microsoft (MSFT) and Meta Platforms (META) on Wednesday; Apple (AAPL) and Amazon.com (AMZN) on Thursday.
Beyond the Magnificent 7, the busiest week of the reporting season, has many notable companies scheduled, including Pfizer (PFE), Mastercard (MA), Domino’s Pizza (DPZ), Chevron (CVX), Exxon Mobil (XOM), McDonald’s (MCD), Coca-Cola (KO), and Berkshire Hathway (BRK/A, BRK/B).
Earnings Insights By Sector
According to FactSet data, Alphabet (GOOGL), Netflix (NFLX), and Comcast (CMCSA) were the most significant contributors to the increase in earnings for the communication services sector. Healthcare, industrials, and technology sectors also saw better earnings growth rates last week.
The healthcare sector benefited from easy comparisons for Bristol Myers Squibb (BMY) and Gilead Sciences (GILD), which both swung from losses in the same quarter last year to better-than-expected profits this quarter. The previous losses were due to the accounting treatment of pharma company acquisitions.
The energy sector is predicted to show the most significant decline in year-over-year earnings due to lower oil prices.
Revenue Results By Sector
Sales growth is closely tied to nominal GDP growth, which combines after-inflation economic growth (real GDP) with inflation. At this early point in the earnings season, sales growth at 4.6% is above the 4.4% expectations. The technology sector is expected to provide the most robust revenue growth.
What To Watch This Week
Markets will remain very attuned to newsflow around the tariffs, since the size and duration of the tariffs impact the extent of economic growth headwind.
In addition to a packed earnings calendar, some top-tier economic releases this week could impact markets. Though it is backward-looking, the first quarter GDP report should provide some clues as to how much momentum the US had at the start of the year. Care will need to be taken when looking at the GDP data, since there are some unique factors due to the tariff announcements.
Because the data is messy and its current forecast calls for a 2.5% contraction in first-quarter GDP, the Atlanta Fed even produced an alternative forecast that adjusts for the import and export of gold, which is at a more reasonable -0.4%. Consensus estimates from economists are currently at +0.4%.
A negative first-quarter GDP print could prompt many people to argue that the economy is already in recession. While the simple definition of recession has been two consecutive quarters of GDP decline, the National Bureau of Economic Research (NBER) has historically been the final arbiter of dating the business cycle. The NBER uses many factors and typically takes a significant period before an official verdict, so it isn’t invaluable in the moment. Given that the threat of tariffs likely caused a substantial increase in imports to front-run the additional costs, which would decrease headline GDP, final sales to private domestic purchases will be a better measure to watch. This measure excludes the impacts of trade, inventories, and government spending, so it does a better job of measuring the activity of the U.S. private sector.
For example, in 2022, the initial estimate of second-quarter GDP contracted, completing the second decline in a row. While the second quarter GDP was eventually revised away, the continued growth of final sales to private domestic purchases at the time would lead a sensible person to conclude that it remained a soft patch but not yet a recession. The disruptions aren’t the same in 2025, but the 2022 economic data was also subject to significant noise after the pandemic.
The monthly jobs report is likely even more critical than GDP since jobs are crucial to allowing US consumers to continue spending to support economic growth. The job market has been softening this year, but is still adding jobs, which is not a recessionary characteristic. Consensus estimates point to modest nonfarm payroll growth of 130,000 in April and the unemployment rate holding steady at 4.2%.
Investors must work hard to cut through the tariff noise in the economic and earnings releases this week. While a recession signal is unlikely, there should be some signs of an economy continuing to lose some steam. The Berkshire Hathaway annual meeting and first quarter earnings release are this weekend. While Warren Buffett has avoided discussing politics recently, he might be willing to provide some insights into the expected impact on Berkshire’s diversified group of businesses.
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