Key takeout
- Negotiations over tariffs along with robust corporate earnings have calmed market nerves, pushing stocks to record highs at the start of the week.
- Oppenheimer has increased its year-end price target for the S&P 500, also reviving its outlook for December. Meanwhile, Morgan Stanley suggests that the bullish case is gaining traction.
- Trade dynamics, corporate revenues—especially from major tech firms—and the Federal Reserve’s actions are set to be significant topics in the coming days.
The sentiment on Wall Street feels almost like a sigh of relief after a tough drop.
U.S. stocks are hitting near-record levels as the week begins, buoyed by a mix of positive developments that have caught investors’ attention. Over the weekend, the European Union and the United States formalized an agreement aimed at smoothing over some of the trade tensions that have lingered. With the fog of uncertainty lifting and revenues looking more promising, many analysts are starting to adopt a more optimistic tone.
On Monday, Oppenheimer raised its year-end S&P 500 price target from 5950 to 7100, making it one of the more optimistic projections among major Wall Street firms. This new outlook aligns the target with where it began this year, reflecting an anticipated increase of about 11% from Friday’s close. Morgan Stanley also indicated that the chances of the S&P 500 reaching 7200 by mid-2026 are looking more favorable.
These projections are a far cry from the levels below 5,000 witnessed in April, particularly after the uncertainties sparked by President Trump’s announcement regarding tariffs. The next few days will be crucial in determining whether this optimism holds.
Oppenheimer noted that there’s been a fair amount of anxiety surrounding trade policies and geopolitical issues. However, they suggest that, considering the wide range of possible outcomes, a more rational approach is likely to yield positive results—for now, at least.
Investors turn to the Fed and big technology
The Federal Open Market Committee is set to announce its next interest rate decision on Wednesday, coinciding with earnings reports from tech giants like Microsoft and Meta, both boasting market capitalizations over $10 trillion. Apple and Amazon are scheduled for earnings the following day.
Historically, the Fed tends to keep things predictable. Current indicators from CME FedWatch show only about a 2% likelihood of a rate cut on July 30th. Ed Yadeni and William Pesch from Yadeni Research expressed their expectation that rates will remain steady, although they predict that Chairman Jerome Powell’s post-meeting remarks may hint at the possibility of a cut in September.
As for the earnings landscape, FACTSET reports that S&P 500 companies are on track to achieve revenue growth rates of 6% or more for the first half of the year. With companies like Meta, Microsoft, and Nvidia contributing significantly to S&P 500 profits, how these firms perform will weigh heavily on the earnings results expected this week.
So far this earnings season, results have been somewhat mixed, as noted by FactSet’s John Butters. While around 80% of S&P companies have reported positive surprises—above the averages for the past five and ten years—the extent of those surprises has generally been below historical levels.
Michael Wilson, a strategist from Morgan Stanley, commented on the situation, suggesting that the price action and earnings estimates from April signal the end of a revenue recession that began in 2022. He believes we might be moving toward a more stable recovery phase.
