U.S. stocks hit fresh all-time highs as a blitz of corporate earnings outweighed the economic drag of a military stalemate with Iran. The S&P 500 rose 29 percent over the last 12 months, fueled by record profits that have so far insulated large-cap companies from soaring energy costs and tanking consumer confidence.
Tech leads the surge
Mega-cap tech companies are driving the bulk of the market’s gains. Alphabet is on track to generate more than $120 billion in profit this year, while Meta reported earnings growth of 61 percent. These results have pushed the average profit margin for S&P 500 companies to its highest level in 15 years. Market heavyweights like Apple and chipmaker TSMC also boosted indexes last week after delivering better-than-expected results.
- 84% of companies in the S&P 500 have topped analysts’ estimates so far this quarter.
- Nvidia is on pace to double its profits from last year.
- The S&P 500 is currently on track to deliver 15% annual profit growth.
Oil remains the bottleneck
While tech thrives, the energy sector is grappling with a double-blockade in the Strait of Hormuz. Hundreds of tankers remain stranded, forcing some producers to shut in production due to a lack of storage. President Trump announced "Project Freedom" to escort ships from the waterway using guided-missile destroyers and 100 aircraft, though Iran has already rejected the plan.
High energy prices are now extracting approximately $4 billion a month from American consumer pockets. Analysts at Citi warned that the market is in the early stages of pricing in stagflation, a condition of high inflation and stalled growth. Despite the record highs, the S&P 500 recently surpassed a price-to-earnings ratio of 30, a threshold that has historically preceded market corrections.
The Pentagon's deployment of 15,000 service members to the Middle East begins Monday.
