Stock Bull Run Powers On as S&P 500 Hits New Highs: Markets Wrap

(Bloomberg) -- Wall Street is ending the week on a positive note, with stocks hitting fresh all-time highs amid a solid earnings season and hopes for US trade deals. After an uneventful meeting between Donald Trump and Jerome Powell, the dollar climbed and bonds barely budged.

The S&P 500 rose every day this week - approaching 6,400. A gauge of the “Magnificent Seven” megacaps was on track to notch its first record since December. While the equity surge has stoked concerns about inflated share prices that saw a rush to riskier corners and a revival of the meme-stock mania, several traders find it hard to bet against the trend right now.

“If you are a structurally bearish investor, the recent few weeks must have felt like a century,” said Florian Ielpo at Lombard Odier Investment Managers. “Not only are most equity indices advancing in what seems like an endless rally, but their valuations now globally surpass those at the start of the year.”

Progress in trade deals, positive economic data and corporate resilience have offset worries that stocks are overheating. More than 80% of S&P 500 companies have exceeded profit estimates, according to data compiled by Bloomberg Intelligence. That’s on track for the highest share of beats since the second quarter of 2021.

“The pace of earnings so far this month has been positive, economic data has been hanging in there, and we’re even starting to get some sense of clarity on tariffs,” said Bespoke Investment Group. “You can’t fault investors for being optimistic.”

“The market continues its steady climb as many key investor concerns have failed to materialize,” said Mark Hackett at Nationwide. “While institutional investors who were short on an absolute or relative basis have largely capitulated, positioning still shows little sign of excess.”

This suggests that the market momentum has room to build if macro conditions improve or even stabilize, Hackett noted.

The world’s investors are enjoying a confidence boost after months of uncertainty as Trump finally started signing trade deals. Earlier this year, rapidly-shifting tariff policies sent global markets spiraling. But risk assets have rebounded as investors saw signs of progress in negotiations.

“It’s been a very, very active year for retail and just in the past month, I’d say, has been the craziest month that we’ve seen, so it is the return of meme stock rallying, sharp increases in really small companies picked up by Reddit channels and things like that,” said Sam Nofzinger, Public’s general manager of brokerage.

Meantime, Goldman Sachs Group Inc.’s trading desk said on Friday that its clients are growing “more comfortable” betting against shares of unprofitable technology companies, following a resurgence of meme stock mania that has sparked wild rallies in a cohort of smaller names. 

Monday kicks off the earnings season’s busiest week, with Apple Inc., Amazon.com Inc., Microsoft Corp. and Meta Platforms Inc. due to report results.

“We are seeing some divergence in earnings, but for the most part companies are beating expectations and keeping the stock rally going,” said Chris Zaccarelli at Northlight Asset Management. “As long as trade policy and tariff headwinds are minor, the market can keep moving higher.”

The risk of a bubble in stock markets is rising as monetary policy loosens alongside an easing in financial regulation, according to Bank of America Corp. strategists led by Michael Hartnett. From a technical point of view, Craig Johnson at Piper Sandler keeps his bullish view on equities. He cites factors such as improving market breadth and many of the popular averages reaching new highs.

Besides the raft of corporate results, next week will also bring the latest jobs report, the Federal Reserve’s rate decision and a deadline for US trade deals.

The US is preparing a new emergency declaration as a basis for tariffs on Brazil, people familiar with the matter say. Trump’s administration has separately launched a so-called Section 301 investigation, which could ultimately provide legal authority for tariffs. 

European Commission President Ursula von der Leyen said she will travel to Scotland this weekend to meet with Trump, as the two sides aim to conclude a trade deal ahead of an Aug. 1 deadline. Meantime, Trump said talks with Canada are not a focus for his administration right now, and instead of negotiating a deal he may decide to leave import taxes in place.

“We’ve already seen a deal with Japan. A deal with the EU is necessary for the equity rally to continue, in our view, but would not be surprise,” said Paul Christopher at Wells Fargo Investment Institute. “The only surprise would be no deal by Aug. 1.”

“We believe trade negotiations will ultimately lead to moderate policy,” said Mark Haefele at UBS Global Wealth Management. “We would expect a tariff-led economic slowdown to be mild and short-lived, rather than recessionary.”

Trump also noted he would never back a weak dollar while also touting the economic benefits a low currency would bring, particularly for the country’s manufacturing sector.

The Fed released a statement Friday thanking Trump and Republican lawmakers for visiting the central bank’s renovation project on Thursday. During his visit, Trump offered little criticism of the project, but urged Fed Chair Powell several times to lower interest rates.

Trump says he had a good meeting with Powell, leading the US President to believe the Fed might cut borrowing costs.

The Fed “should cut rates next week, but we don’t think it will,” said FHN Financial’s Chris Low and his colleagues. “Instead, watch for Chair Powell to use the press conference to prep markets for a cut in September.”

At Pepperstone, Quasar Elizundia says policymakers are expected to hold steady while signaling sensitivity to global trade conditions and softening investment trends.

“The case for leaving policy on hold has been made by several Fed speakers: inflation remains above target, inflation risks still pervade, and the labor market is near full employment,” said Michael Feroli at JPMorgan Chase & Co.

Corporate Highlights:

• Intel Corp. sank as Chief Executive Officer Lip-Bu Tan sparked concerns that he was more focused on cost cutting than restoring the chipmaker’s technological edge.
• Microsoft Corp. is investigating whether a leak from its early alert system for cybersecurity companies allowed Chinese hackers to exploit flaws in its SharePoint service before they were patched, according to people familiar with the matter.
• Paramount Global’s merger with Skydance Media was approved by the US Federal Communications Commission.
• Pinnacle Financial Partners Inc. agreed to acquire Synovus Financial Corp. in an all-stock transaction valued at $8.6 billion, combining two sizable players in the US Southeastern market ahead of a potential wave of banking M&A.
• Charter Communications Inc. reported it lost more internet customers than expected during the second quarter amid increased pressure from mobile companies’ 5G and fiber home internet offerings.
• Fuzzy Ugg boots and chunky Hoka running shoes saw big sales gains last quarter, bolstering financial results for parent company Deckers Outdoor Corp.
• Centene Corp. issued fresh annual guidance and laid out a plan to address problems in its Affordable Care Act business, offering investors a ray of hope in a year when insurers across the industry have struggled to cope with rising costs and changing government policies.
• Sarepta Therapeutics Inc. shares plunged after European regulators rejected its gene therapy Elevidys, intensifying scrutiny on the drugmaker after it was pressured to halt shipments of its treatment in the US.
• Bristol-Myers Squibb Co.’s chief medical officer is stepping down from his role after six years at the company, a surprise move as the drugmaker races to find its next hit to reverse its declining fortunes.
• Eli Lilly & Co. won the backing of European Union regulators for its Alzheimer’s disease drug Kisunla in a specific group of patients, potentially paving the way for it to become the second drug in the region to slow the most common cause of dementia in the elderly.
• Newmont Corp. has made progress getting its costs under control, helping the world’s top gold miner beat expectations on earnings at a time when a rally for the precious metal is underpinning the industry.
• Phillips 66 is maximizing diesel production to take advantage of strong demand and would consider investing in projects that give its refineries the flexibility to make more of the fuel.
• Lyft Inc. is partnering with Benteler Group, an Austria-based manufacturer, to deploy autonomous shuttles in the US in late 2026, trying to catch up with rival Uber Technologies Inc. in offering driverless rides.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5% as of 2:35 p.m. New York time
• The Nasdaq 100 rose 0.4%
• The Dow Jones Industrial Average rose 0.5%
• The MSCI World Index rose 0.1%
• Bloomberg Magnificent 7 Total Return Index rose 0.7%
• The Russell 2000 Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro was little changed at $1.1738
• The British pound fell 0.6% to $1.3428
• The Japanese yen fell 0.4% to 147.64 per dollar

Cryptocurrencies

• Bitcoin fell 2% to $116,413.48
• Ether fell 2.4% to $3,647.48

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.38%
• Germany’s 10-year yield advanced two basis points to 2.72%
• Britain’s 10-year yield advanced one basis point to 4.64%
• The yield on 30-year Treasuries declined one basis point to 4.93%
• The yield on 2-year Treasuries was little changed at 3.91%

Commodities

• West Texas Intermediate crude fell 1.4% to $65.09 a barrel
• Spot gold fell 0.9% to $3,338.46 an ounce

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