Blockbuster Earnings Bolster Stocks’ Record Run
Results have helped ease worries about AI spending and inflationary pressures
By Shradha Dinesh, The Wall Street Journal, Aug. 8, 2026
- Strong corporate earnings are driving major U.S. stock indexes to new highs, easing some concerns about AI spending.
- Among S&P 500 companies reporting second-quarter earnings, 86% beat estimates, putting the index on track for another quarter of double-digit growth.
- Alphabet and Amazon alone account for about 71% of the increase in S&P 500 blended earnings since July.
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Companies in the S&P 500 have posted a roughly 50% jump in blended earnings growth, according to FactSet data, the most since the stimulus-fueled pandemic recovery in 2021. For energy companies, it has been more than 147%, and around 117% and 92% for communication-services and consumer-discretionary sectors, respectively. For tech, it has been 70%…
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Alphabet and Amazon alone account for about 71% of the increase in S&P 500 blended earnings since July. If excluded, the growth rate would fall from around 50% to 32%, according to FactSet analyst John Butters… [end quote]
What a pretty picture! Happy days are here again!
The stock indexes are at record highs. Earnings are growing incredibly fast. So fast it makes my head spin. Multiples are based on earnings growth that can’t possibly compound at this rate.
Optimism has broken out.
The Fear & Greed Index is in Greed. The trade suddenly leaped to risk-on. Volatility dropped.
The Atlanta Fed’s Third-Quarter GDPNow Estimate for 2026:Q3, Updated: August 06, 2026, is 5.8% growth. Zowie!
The Cleveland Fed’s Inflation Nowcast for 3Q26 shows CPI below the Fed’s 2% target.
The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, shows very loose stable conditions.
The July 2026 ISM® Manufacturing PMI® Report shows New Orders Growing, Production Growing, Employment Growing, Supplier Deliveries Slowing, Raw Materials Inventories Growing; Customers’ Inventories Too Low. Prices Increasing; Imports Growing; Exports Growing. Economic activity in the manufacturing sector expanded in July for the seventh consecutive month, say the nation’s supply executives in the latest ISM® Manufacturing PMI® Report. The Manufacturing PMI® registered 55.6 percent in July, 2.3 percentage points above the June figure and the highest reading since May 2022 (55.9 percent). The overall economy continued in expansion for the 21st month in a row.
The July 2026 ISM® Services PMI® Report shows Business Activity Index at 59.1%, New Orders Index at 57.2%. Economic activity in the services sector continued to expand in July, say the nation’s purchasing and supply executives in the latest ISM® Services PMI® Report. The Services PMI® registered 54.1 percent, the 25th consecutive month in expansion territory.
Treasury yields stabilized.
Copper soared as the AI hardware build out requires a lot of copper. Gold and silver rose. Natgas fell. Oil stabilized. USD fell slightly which keeps it in its channel.
The employment news last week was disappointing. Both nonfarm payroll employment (-23,000) and the unemployment rate (4.1 percent) changed little in July, the U.S. Bureau of Labor Statistics reported.
This article shows that drops in the unemployment rate, especially long-term unemployed, may be due to people giving up on looking for a job. Evidence suggests workers have become disillusioned by the difficulty of finding a job in the current “low hire” labor market and are dropping their job search altogether, economists said.
Such workers aren’t counted as unemployed, since unemployment is a measure of the people who are jobless and also looking for work. All else equal, this makes the unemployment rate look artificially low.[end quote]
It doesn’t take many employees to build data centers and generate huge capital expenditures.
The spending on AI is circular in the AI ecosystem. Real end-user income is only a tiny fraction of the spending. Only time will tell if AI will improve productivity enough that actual customers will feel justified in spending enough money on AI services to support the build-out investments.
The METAR for next week is sunny.
Wendy