US S&P 500 Index

We’re now around 60% through US earnings season and the S&P 500’s 2Q earnings have been exceptionally strong, with around 85% of companies beating EPS expectations, the highest beat rate in five years, however, despite the strength, the market reaction has been muted, with the median stock underperforming the broader index following its results – simply expectations have often been too high.

Winners: US financials have dominated the reporting season, with Morgan Stanley, Citigroup, BlackRock and Capital One all delivering strong beats on the back of resilient capital markets activity and improving credit trends. JB Hunt (Transport) rallied to a record high after beating earnings and revenue expectations, while SLB (oilfield services) and Intel (tech) also exceeded forecasts, although Intel’s shares fell as investors questioned the pace of its contract chip manufacturer (foundry) turnaround despite stronger guidance.

Losers: The biggest disappointments came from Tesla, which posted the largest EPS miss in the Consumer Discretionary sector, and Alphabet, where stronger-than-expected AI capital expenditure overshadowed another solid quarter. GE Vernova (Energy equipment) and Northrop Grumman (defence & aerospace) also traded lower, with investors underwhelmed by modest guidance upgrades and the quality of earnings despite headline beats.

The key theme this earnings season is that simply beating expectations is no longer enough. With the S&P 500 up more than 10% in 2026 before reporting season, in many cases strong results are already priced in, changing investor focus to earnings quality, forward guidance and AI capital expenditure. Companies signalling higher AI spending have generally underperformed despite beating expectations, while those demonstrating capital discipline have been rewarded. This week will feature Amazon, Apple, Meta and Microsoft, which will be a key test of whether concerns around AI investment become a broader de-rating catalyst for the sector.

• We can see the S&P 500 punching higher towards 8000 into Christmas, but oil remains a major hurdle.