U.S. stocks have been steady in recent times, driven by encouraging economic data and a wave of robust corporate earnings. On July 18, 2025, the S&P 500 closed just below its all-time high, having set seven new records over the past 15 trading sessions. Investor confidence has been bolstered by stronger-than-expected earnings results across several sectors.
Overall, this earnings season has topped expectations, with approximately 50 S&P 500 companies having reported so far. Of those, a notable 88% have surpassed Wall Street estimates, according to data from FactSet, signaling broad-based corporate strength, as quoted on CNBC.
Economic Data Highlights Resilience
The Labor Department reported that initial jobless claims for the week ending July 12 fell to 221,000, down 7,000 from the previous week, suggesting continued strength in the labor market. Meanwhile, retail sales data from the U.S. Census Bureau showed a better-than-expected 0.6% increase in June, compared to a 0.2% rise forecast by economists surveyed by Dow Jones. These positive figures suggest that consumer activity remains robust despite tariff fears.
Analysts See Consumer Strength as a Key Driver
Commenting on the latest data, Bret Kenwell, investment analyst at eToro U.S., noted that the strong retail sales numbers came at an ideal time, with the earnings season gaining momentum. According to Kenwell, if companies continue to report upbeat results and management remains optimistic about consumer behavior, markets may continue to climb, as quoted on CNBC.
Valuations Limit Market Upside
With stock valuations currently elevated, much of the positive news appears to be baked into market prices. Greg Taylor, chief investment officer at PenderFund Capital Management Ltd., commented that the market is now in a phase where "all the good news is priced in," making it harder for stocks to climb without extremely upbeat earnings results, as quoted on Bloomberg.
Muted Market Response to Impressive Financial Results
Financial companies, in particular, have delivered outstanding earnings. According to Bloomberg Intelligence, financials have exceeded second-quarter earnings expectations at an impressive 94.4% rate. However, their stock prices saw only modest gains, as the market had largely anticipated such performance. Gina Martin Adams and Michael Casper, strategists at Bloomberg Intelligence, noted that the muted reaction indicated limited surprise factor.
Missing Estimates Amid High Valuation: A Threat
Despite the mixed reactions to earnings, the S&P 500 Index continues to hover near record levels. The index is currently trading at 22 times expected 12-month profits, nearing the valuation levels seen in February.
Hence, Bloomberg Intelligence revealed that stocks of the companies falling short of expectations are being punished more harshly than at any point in nearly three years. Missing estimates when valuations are high may not be forgiven by investors.
ETFs in Focus
Against this mixed backdrop, investors may closely track S&P 500 ETFs like Vanguard S&P 500 ETF VOO, iShares Core S&P 500 ETF IVV, SPDR S&P 500 ETF Trust SPY.If you fear any downside risks, you can play SPDR Portfolio S&P 500 High Dividend ETF Fund SPYD and SPDR Portfolio S&P 500 Value ETF SPYV.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
SPDR S&P 500 ETF (SPY): ETF Research Reports Vanguard S&P 500 ETF (VOO): ETF Research Reports SPDR Portfolio S&P 500 High Dividend ETF (SPYD): ETF Research Reports iShares Core S&P 500 ETF (IVV): ETF Research Reports SPDR Portfolio S&P 500 Value ETF (SPYV): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
